Lee Elci: Here we go. 38 minutes after 8:00. It’s always a pleasure and an honor to bring on our next guest. Red, Good morning. How are you today?
Red Jahncke: Hey, I’m good. Lee, how are you?
Lee Elci: I’m doing okay. I’m doing okay. So, you know, I don’t know. Where do you want to go today? I want to go big. We haven’t really talked about what we’re doing today. What do you want to do today?
Red Jahncke: Well, we’ve kind of covered the ground. Fortunately, the ground we’ve been covering prospective developments are now in place as actual accomplishments. The Big Beautiful Bill is now law. We’ve talked about the key provision in there, that I’ve been banging the drum about since 2017, that’s the hospital tax. It’s now being reformed. It’s not an idea, proposal or anything like that. It’s now law.
The US House originated the bill and put a moratorium on hospital taxes. That means no states can increase their tax rate. And there’s one state that does not tax its hospitals, Alaska. And under the moratorium, Alaska can’t start. They’re called formally provider taxes. If you’re a state that is not yet taxing nursing homes, under the moratorium, you can’t start now.
So that’s what the House did; the Senate went further. There’s an existing limit, shall we say, a ceiling on the level of these taxes that states can impose on their hospitals, 6% of net patient revenue. The Senate version is reducing that by a half percent per year over five years, from 6% down to 3.5%. And that will be a substantial improvement over the current state of affairs, because the states have been using this tax as a scheme to siphon money from Uncle Sam. And we covered that ground, right?
Lee Elci: Right. Yeah. Oh yeah. And it’s it’s like a shell game. It’s like a three card monte, if you will, just moving stuff around. But, you know, it’s it reminds me, Red, everyone sort of says, well, it’s a the feds are paying for it. Like, if you’re building a school and, well, we only have to put up 20 million the feds to put up with the other 100 million. But those kinds of things are going on in every town around the country. So really we’re just paying for these things ourself. But through this filter that we want to pretend it’s the federal government, but it’s really our tax dollars. So we’re just ripping ourselves off, right?
Red Jahncke: Yeah. Exactly. This day and age, you know, Uncle Sam is like this money tree in the sky and everybody’s mind. If, the federal government is paying for it, you know, there’s no skin off our nose. But yeah, it’s a skin off our nose.
Let’s reclassify the Medicaid “cuts,” so-called by the Democrats and the progressives and the radicals. They’re not cuts at all. They’re shifting the responsibility, financial responsibility, back to the states. As we discussed last time Medicaid began as a program for the poor, and it was a 50-50 partnership of the federal government and the states. The feds paid 50%. The states paid 50%. Right?
Well, under Obamacare, that was distorted with Uncle Sam paying 90%, the state’s 10%. If somebody else is paying 90%, Oh, why don’t I start this up? Why don’t I start that add up? Oh, isn’t that a good idea?
So, the Big Beautiful yanks that back in a couple of areas. 14 states have free health care for illegals. And if you want to continue that, the Big Beautiful says, we’re not going to give you $0.90 on the dollar. We’re going to give you $0.80. In other words, if you want to do that, spend your own money.
Right, right. And the reform on the the provider taxes applies to what are called the expansion states that, under Obamacare, expanded the coverage of Medicaid beyond the poor. There are 37 million Americans who are poor, live below the poverty line. Well, Medicaid now covers 70 to 80 million Americans. So all of a sudden, this program covers the “near-poor.” So, if you want to cover the near poor, you’re going to have to do it out of your own state dollars. That’s, again, just returning the program to its original concept of a partnership, originally 50-50. Right. The reforms are getting nowhere near 5050, but they’re pushing in that direction. So it’s just a shift of responsibility back to where it was from the get go.
That is not cutting them, cutting the program. There’s no band in the Big Beautiful Bill forbidding states from covering illegals. It just said, if you want to cover illegals, you want to be a sanctuary state, be our guest, but you’re going to do it with your own dollars. We’re not going to tax people in Texas that is not a sanctuary state to send money to Connecticut to cover illegals.
Lee Elci: Right? So when you say they have to cover it. So, now if Connecticut wants to cover illegals, they grab that money from what pot?
Red Jahncke: Out of the citizens pockets and wallets and pocketbooks.
Lee Elci: So, not a penny, though, from Uncle Sam on that one? No. All right.
Red Jahncke: I mean, you get into a tracing dollars, operation here, right? I don’t think there’s anything that Big Beautiful Bill that forces the Center for Medicare and Medicaid Services to track the money.
Lee Elci: But. But technically, it’s fungible money, right? Can Connecticut stash it into the general fund and then dip into that?
Red Jahncke: That’s what’s been going on forever.
Lee Elci: Yeah. But can they still do that or. No.
Red Jahncke: I think that still can be done. But, in this state, the hospital tax is $900 million. So, the rough numbers are Connecticut gets the $900 million out of the hospitals, sends $600 right back, labels the $600 “Supplemental Medicaid Payment.” So labelled, it’s entitled to a federal match. The state gets $450 million. So, if they send the $300 that they haven’t yet sent back to the hospitals, back to the hospitals, the hospitals are whole.
What you’ve got is this tax shell game where nothing real has happened. No activity, no government service has been rendered. Just shifting around this tax money and $450 million appears from Uncle Sam.
This state is not going to be able to be operating at $900 million. By the end of the five years, it’ll be down to $500 million. Right. And a whole lot less coming from Uncle Sam. So, this state is looking at some hard financial times.
How did Ned Lamont react to the House moratorium? He increased the hospital tax from $900 million to $1.2 billion next fiscal year in an attempt to beat the effectiveness date of the moratorium. Who knows whether we’re going to beat that? I’m very skeptical, but it shows the impulse on the side of Deep Blue states that they want to do anything and everything to create an ideal world, but they want Uncle Sam to pay for it, of course.
Lee Elci: Red Jahncke is his name. His website, the-red-line.com. His latest column is in the Wall Street Journal. I think you can find it there as well, which talks essentially about what we have been talking about here for the past couple of weeks.
I was talking with an economics professor yesterday. Some sentiment out there is that the money raised through tariffs can offset some of the potential debt that’s going to be accumulated through the Big Beautiful Bill, that projected three point some odd trillion dollar of deficit that’s going to be added to this thing by the time it’s all done. Won’t be so massive.
Red Jahncke: Absolutely. You’ve been talking to economists, one of whom you’re talking to now. Last week we talked about this.
Lee Elci: I know, I know. Well, the economist I talked to wasn’t as optimistic as you are as far as this goes.
Red Jahncke: Well, listen, I’m just going to stick to the facts, okay? Now, the bill is law, and the score of it is $3.4 trillion addition to deficits going forward. That’s by one scoring method; let’s not go back about methodology involved, but just stay with that number. Nowhere in the mainstream media have you seen any real coverage of the CBO scoring of tariff revenue over the next ten years.
Senator Chuck Schumer, Senator Ron Wyden and a third Democrat senator requested the score. Tariff revenue will amount to $3 trillion. We can debate whether CBO is right, but the discussion on the national scene always references CBO as the official score keeper. So you’ve got 3.0 trillion of revenue offsetting 3.4 trillion. They [CBO] score both. The net is $400 billion over ten years. That’s 40 billion a year. That’s chump change. So Trump has a plan. Those economists who pooh-pooh tariffs and say they’re a tax are walking right into the argument that we’re making right now. He cut income taxes and raised [tariff] taxes on the American people. Net revenue neutral.
Lee Elci: All right. Listen, I like the way that sounds. I could live with that. And if you sort of factor in the potential growth of this, this becomes a lot more palatable. So maybe, in the end, it ends up being a real win. Red, I got to go. But thank you as always.
Red Jahncke: Hey, yeah, always a pleasure, Lee.
Lee Elci: Have a good day. I appreciate you
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.