Medicaid/Medicare Fraud Reveals Incentive Problems

Following up on what Holly presented this morning, I've produced a short video with the Cato Institute's Michael F. Cannon detailing some of the particularly nasty aspects of Medicaid/Medicare fraud.



One of the issues that makes Medicaid/Medicare fraud so intractable is that the lawmakers who approve the programs' spending have muted incentives to crack down on fraud since any antifraud program would impose costs on constituents. If you haven't yet, read John Garen's report on Medicaid in Kentucky.

Kentucky's pension promises: worse than you think

The Pew Center on the States noted recently that Kentucky was at the bottom when it came to state-issued funding for its pension systems. In 2009, Pew noted that Kentucky put just 58% of the actuarially-recommended amount of money into the state's pension funds. In 2010, Kentucky again put just 58% of the actuarially-recommended sum. That put Kentucky at the bottom of the pension funding list.

First of all, this is a terrible turn of events that, far from being unforeseeable, was largely predictable. After all, lawmakers run for office every two or four years. Funding pensions properly during the good times is a challenge when reelection prospects might be shored up by funding a local arena project instead of making appropriate contributions to the pension funds. During the 2000s, Kentucky lawmakers put aside a small fraction of the recommended contributions into the Kentucky pension funds and the economy was doing reasonably well over the same period. What everyone should recognize is this: Kentucky's pension plans were underfunded before the financial crisis.

And it should come as no surprise that funding pensions during tight budgetary times is even more difficult. In tight budgetary times, it's easier to cut funding to pension programs than it is to social programs. Wise stewardship of government workers' pensions seems to always come second to some other priority in good times and bad.

This is not to say that funding social programs should or should not be a higher priority than funding state pensions. It's just to point out that what supposedly took lawmakers by surprise in 2008 and 2009 was as predictable as the tides.