Lee Elci: Red Jahncke is joining us. Red. Good morning. How are you, sir?
Red Jahncke: I’m good, Lee.
Lee Elci: So, you want to talk about federalism today?
Red Jahncke: Yeah. We had Roe [vs Wade]. Sent the authority on abortion to the states. It’s now a state decision, not a federal decision. We live in a federal republic. Some things are handled nationally. Some things are handled state by state. That’s the American model. Many people are upset. They think the abortion decision was wrong. It wasn’t really a decision. It was a shift of who was making the decision.
The same thing is what we ought to take a look at financially.
You come to what we’ve talked about a great deal, which is the hospital tax. So, it has been exploited and abused horrendously by the states, where they have been syphoning money out of Uncle Sam’s coffers using this tax.
And now the Big Beautiful Bill is bringing that to an end. It has a moratorium. No new such taxes can be created. The tax rates cannot be increased. And furthermore, the exemption [upper limit], it’s called the safe harbor limit of 6% is being reduced down to 3.5% by 2032.
Let me sum it up in terms of Connecticut, which is the worst abuser of this scheme of all 50 states. If Connecticut wants to overpay its state employees, it cannot siphon money from Uncle Sam to do so. That game is ending.
The hospitals are in writing with a public release saying that no other state in the nation abuses its hospitals as badly as the state of Connecticut does. And that’s why they lodged suit five, six years ago against the state. And there was a settlement. Federalism calls for states to live within their means. States need to afford the policies that they want to adopt.
Lee Elci: I remember the day you actually told me about this. It was a shock to me. And it should be a shock to everybody else that this sort of a it’s almost like a, a shell game is going on in the state of Connecticut, right?
Red Jahncke: Yeah. The state, taxes hospitals about $800 million and sends most of the $800, but not all, back to the hospitals. Let’s say $600 goes back — just relabelled. Remember, we’re just moving money around. The hospitals move $800 to the state. The state immediately sends $600 back. And presto! The state calls up Uncle Sam and says, I want $400 million. That’s the federal match for the $600 just sent to the hospitals. It’s phantom land. And that’s ended, right?
Lee Elci: Hey. Right. Joining me, actually in the studio is a great friend of mine, and he’s been on the show for, I think about 20 years now. Right, Doc? So Doctor John Foley is with us here in the studio. What better person to bring on to have a little bit of a quick conversation with you. My friend Doctor John Foley. So you’re on. Good morning. You’re on with Red.
Dr. John Foley: So, not to cut into the segment, because I’m really enjoying it. I think you put this in about as straightforward and logically as I’ve seen it. It doesn’t make a whole lot of sense. In reality. But, this really is it’s an unpredictable tax that and that’s part of the problem. And the money is taken, but then people are waiting for it to come back. Connecticut always sort of threatens that, you know, the hospitals aren’t going to get what they thought they were going to be getting. And that’s money that in many ways is mentally and physically spent. So this is really becoming a burden. That is, you know, potentially threatening the function of some of our health systems yet.
Red Jahncke: The import is the state has to shoulder what is properly the state’s responsibility. As we both know, the lion’s share of of the state’s health care spending is Medicaid, right?
Dr. John Foley: Yep.
Red Jahncke: Medicaid was started as a 50/50 financial partnership between Uncle Sam and the states. This state, is now up to a 67% draw from Uncle Sam. And the increase results from the expansion of Medicaid to 90% federal funding. So all the Big Beautiful Bill does is shift it back toward the original and intended 50%.
If the state wants to spend more on health care, it’s got to come up with its own resources to do so. And the state needs to make a decision whether they’re going to pay state employees the second highest compensation in the nation. We are only behind California in terms of the robust pay that is paid to state employees.
Lee Elci: As always, great breakdown and people can read this on the-red-line.com. It’s still up there, correct?
Red Jahncke: Yes, sir.
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.