Lee Elci: We’re joined on Wednesday by our friend Red Jahncke. You can find out everything that Red writes at The-Red-Line.com. Red, Good morning. How are you, sir?
Red Jahncke: Hey I’m good. Lee. How are you?
Lee Elci: We talked last week. Your latest column that came out, I think, is a bombshell, if you will. Pension spiking in Connecticut with state employees retiring on pensions 38% higher than their salaries. How did this practice become so entrenched?
Red Jahncke: It’s been a practice [since] the 1980s, but most states have begun to rein it in. It’s been the most dramatically abused in the blue states with heavy public sector unionization. California, Illinois, New York, New Jersey, Connecticut, all the usual suspects. But, what’s going on in our state is jaw dropping, even to people who know this game. The idea that people are retiring with beginning pensions far in excess of their last salary is just an eye popping and astounding condition.
Lee Elci: Why do you think Connecticut, this little state, is the second most unionized state?
Red Jahncke: Well, it’s the northeast. It’s New Jersey, New York, Connecticut, Massachusetts, Rhode Island. This is traditionally a heavily unionized section of the country, right? If you go further out west into the industrial Midwest, of course, you’ve got traditional manufacturing unionization. Detroit, of course. But the private unions, I have no real problem with the private sector. And, a lot of manufacturing has left the traditional heartland and gone south where there’s very little unionization. Of course, in the public sector, you can’t move. We’re stuck with this right?
Lee Elci: Right. But the real big bombshell. The big bombshell was states are using Medicaid as a slush fund. So can you go over that one more time for everybody?
Red Jahncke: Yeah. This is how the deep state, the bureaucracy, operates and really runs the country in many ways. So Connecticut and 49 states tax their hospitals and other Medicare medical providers. Your first reaction is, why are we taxing nonprofits? Half of hospitals are nonprofits. Why are we doing that? Isn’t that just going to elevate our health care costs? The other half of hospitals are, of course, incorporated businesses, and they’re already paying corporate income tax. So why are we doubling down and taxing them again? So, this is a head scratcher from the get go.
So the way this works is — and these are actual numbers in Connecticut –Connecticut taxes the hospitals about $900 million a year. It sends back immediately $600. But when it sends the $600 back, that $600 is labeled a “Supplemental Medicaid Payment.” As such, it is matched by the federal government under the Medicaid system, and Connecticut gets about $450 million.
Now, let’s just tote those numbers up. We take out $900, send back $600 immediately. The state is ahead $300. The hospitals are behind $300. Uncle Sam ponies up $450 to the state. Let’s say the state sends $300 to the hospitals. The hospitals are whole. The state is ahead $450 million. Nothing has happened other than the state has siphoned $450 million out of the federal treasury.
So this has little to do with health care. It is all about states financing themselves off the federal government. And we all lose because as I conclude in my column, if a state fails, the other 49 states can survive. The nation can survive. If the nation fails because of this kind of behavior, we’re all in trouble.
Lee Elci: Yeah. I’m just I’m sitting here in stunned disbelief that you had exposed this last week. And I’m curious why this isn’t a national story. This is essentially state government stealing. And, it’s another something that’s unsustainable long term for our nation. And so, I’m still sort of sitting here in shocked disbelief as to why this isn’t a story that everybody’s talking about. Right?
Red Jahncke: Yeah. I first wrote about this in the Wall Street Journal in 2017. For humor purposes, we should really quote, when he was asked” why are we taxing hospitals?,” Ben Barnes responded with wonderful candor. He said, because that’s where the money is. He did his best impression of Willie Sutton.
Lee Elci: Right.
Red Jahncke: Why do you rob banks? That’s where the money is. One of the reasons it is not clamped down upon is the oversight agency in Washington is the Center for Medicaid and Medicare Services, so-called CMS, has never gathered and published the actual data on hospital taxes. We don’t know to this day how much money flows through this scam in aggregate or state by state. Now, perhaps people in their individual states know what’s going on. I know what’s going on in Connecticut. I have not undertaken to research 49 other states. Nor have the major health care research outfits. The Kaiser Family Foundation has traditionally been one of the most, comprehensive and well respected trackers of everything health care in this country. They don’t have the data.
What’s going on here is CMS doesn’t really want to know what’s going on. They, of course, do know what’s going on. They don’t want anyone else to know what’s going on. If people saw what was going on, they’d be aghast. But we don’t see what’s going on. So you can’t actually identify misuse and abuse. You can’t hold anyone accountable or culpable.
Lee Elci: So this is essentially a state scam, but it’s it’s one that they’re just scamming the federal government, correct? I mean, it’s 50 states doing it. We just don’t know how the state is doing it. Right.
Red Jahncke: The only state sitting it out is Alaska. You can understand when a regulatory body gets too close and cozy with the industry or whatever that it’s regulating. Yeah. That coziness winds up with regulation turning it to promotion and advocacy. The people at CMS obviously want to see more and more dollars shoveled into health care. I don’t think that we can sustain this kind of behavior. One thing is the lack of transparency just invites waste, fraud and abuse.
Here’s the final nugget on this. So the One Big Beautiful Bill, the GOP reconciliation bill, working its way through Congress has a reform on these taxes. And the reform holds that no state can increase their tax rate on any of these taxes that they have in place now. And no state can start a new provider tax. So at this point, Alaska cannot jump into the game.
Lee Elci: Gotcha.
Red Jahncke: According to the bill, but no increases. So what did Ned Lamont do ten days ago? He announced a 30% increase in Connecticut’s hospital tax. It’s going from $900 million to $1.2 billion. Talk about flouting federal law. It’s astounding that this state, knowing that there’s a moratorium written into the bill, is increasing the hospital tax 30%. I think they must think that they’re going to beat the imposition of the moratorium. The feeling of impunity that is, is manifest in announcing a 30% increase in the teeth of pending federal legislation that says no increases will be allowed is just mind boggling.
Lee Elci: Right. Incredible. Unfortunately, we’re out of time. But I will talk to you again next week. Everyone go. The-red-line.com. If you haven’t read it, read it. I’ll, repost it up on our socials and a little later on. You know, Red always tapes all of our conversations. We’ll post that back up on our social medias as well. Right. Thanks. I’ll talk to you next time.
Red Jahncke is a nationally recognized columnist, who writes about politics and policy. His columns appear in numerous national publications, such as The Wall Street Journal, Bloomberg, USA Today, The Hill, Issues & Insights and National Review as well as many Connecticut newspapers.