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How California skims federal Medicaid payments to fund a powerful union

CONNECTED: Democratic presidential candidate Hillary Clinton and Service Employees International Union (SEIU) president Mary Kay Henry (left). The politically powerful union has worked a deal with several states, including California, to skim dues from Medicaid-paid workers. (AP Photo / Carlos Osorio)

By Sam Han and Will Swaim

Home caregivers serving Medicaid patients in California are being shortchanged and, chances are they don’t even know it.

Medicaid pays for elderly and disabled individuals who need support with activities of daily living to receive support at home from a caregiver. But California and 10 other states deduct union dues from caregivers’ Medicaid payments, in many cases without the knowledge or approval of patients and their caregivers. Given the fact that many caregivers work in their own homes caring for loved ones and relatives, unions typically have little role to play in exchange for the dues they collect.

In this way, unions skim an estimated $200 million each year in dues from Medicaid payments before those checks ever reach the patients they were intended to help. In short, dues skimming takes funds meant to provide care for our country’s most vulnerable people — the elderly, sick, poor, and disabled — and sends it to a politically favored special interest group that provides no services to the needy.

Federal reports filed by SEIU 2015, one of the two unions representing Medicaid caregivers in California, indicate that nearly 60 percent of the funds it collects in dues are spent on political work and other activity unrelated to representing caregivers.

Some caregivers — often parents looking after their disabled children or family members taking care of other relatives — have challenged the legality of forcing in-home providers to pay union dues just so they can care for a loved one. Illinois caregiver Pam Harris took her case all the way to the U.S. Supreme Court. Ruling in Harris’ favor, the Court called dues skimming a “scheme” and said unions couldn’t force caregivers to pay dues.

Unfortunately, unions have found ways to get around the decision and keep home caregivers paying dues. Often, they impose onerous hoops caregivers must jump through to resign, or they enact confusing and arbitrary rules intended to keep the dues money flowing. For instance, Oregon caregivers who belong to SEIU 503 may leave the union only during a 15-day annual period that varies by member. California caregivers are subjected to a half-hour-long union membership pitch before they’re allowed to work. Caregivers in Minnesota have alleged the union forged signatures on membership cards.

This piecemeal approach isn’t working for caregivers, and it’s time for Washington to finally put a stop to dues skimming so caregivers can focus on serving their patients, not overcoming hurdles to get out of the union. The U.S. Department of Health and Human Services could fix the issue by clarifying administrative rules to prevent states from diverting Medicaid dollars to unions. Congress could also act to stop this abuse.

Getting states out of the union dues collecting business would help protect the integrity of Medicaid for current and future patients while also upholding the rights of caregivers who don’t want to join a union. Most importantly, it would ensure the funds are spent on providing services to the needy, as originally intended. At the same time, nothing would prevent caregivers who desire to remain union members from paying union dues on their own.

California has an estimated 300,000 or more in-home caregivers serving Medicaid clients. Many, if not most, of these people are unaware they belong to a union and are having hundreds of dollars per year skimmed off their Medicaid payments for union dues, but that doesn’t make dues skimming right.

Medicaid patients are among the most vulnerable around us. Let’s not allow them to continue to be victimized by unions.

Samuel Han is the California Director of the national Freedom Foundation. Will Swaim is president of the California Policy Center. Both organizations work to advance free-market and limited-government principles. This commentary appeared first in the Orange County Register.

50th Anniversary of Federal Government’s Failed War on Poverty

Part 1 of 2:

Fifty years after President Johnson launched his “war on poverty,” it is time to stop pretending and start doing something real for the poor.

Mitt Romney said during the 2012 presidential campaign: “I’m not concerned about the very poor. We have a safety net there. If it needs repair, I’ll fix it.”

Can there really be any doubt that it needs fixing?

Don’t expect the government to provide any reliable numbers. The biggest federal poverty program, the Earned Income Tax Credit (EITC) pays 27 million taxpayers $60 billion in cash. But like Section 8 housing vouchers and Medicaid, EITC payments are excluded when the government totes up who is poor and who is not.

It is obvious that the ranks of the poor swelled during and after the Crash of 2008. Average income fell during the Crash and has since fallen more. Paul Krugman is right to call it a “rich man’s recovery.”

Both the poor and the middle class are still in recession. Indeed if unemployment figures were calculated using the same methodology used in the 1930’s, public officials could no longer deny that we are in an ongoing depression.

But for believable numbers about who is poor and who is not, don’t look to the government.

The government is also confusing, it would seem intentionally confusing, about how much it spends in total on the poor. A Senate subcommittee struggled to estimate total spending on the poor and came up with a number of $61,194 per impoverished household per year.

This number is misleading because it includes people who are not really poor, such as students using federal Pell grants for their education, but is still almost three times the federally defined poverty threshold for a family of four. If we take medical spending out, it is still twice the poverty threshold.

Since all this money is clearly not going to the poor, where is it going? A lot of it is presumably supporting well paid federal workers, or indirectly state and local workers, all of whom are in turn protected by powerful public unions.

If we take all federal transfer payments, not just those specifically earmarked for poverty programs, only 36% of the money is reaching the bottom 20% of households by income and even less is reaching the truly poor. And even these figures do not count all the federal subsidies for corporations or the rich.

Almost all the numbers we get from the federal government are either poorly designed, or are well designed to confuse and hide the truth about what is going on. Even as the president rails against economic inequality, he is using figures that are inherently bogus, a subject that we will explore further later in this series.

It’s not that we don’t have economic inequality as well as poverty. We do. And common sense tells us that it is getting worse, in large part because of the president’s policies and those of the Federal Reserve. But it would help to have believable, not intentionally misleading numbers.

Looking behind all the smokescreens, one thing is obvious about all federal poverty programs. They not only create disincentives to work. They actually tax work at horrific rates.

As economist Thomas Sowell has explained: “ Someone who is trying to climb out of poverty by working their way up can easily reach a point where a $10,000 increase [ in pay] can cost them $15,000 in lost benefits they no longer qualify for. That amounts to a marginal tax rate of 150 percent—far more than millionaires pay.”

This outrageous tax on the poor has been made even worse by ObamaCare. A worker can earn just a few dollars more, and find that more than $10,000 in medical insurance subsidy has vanished. ObamaCare also in effect adds $2.28- $5.89 to the cost of hiring a minimum wage worker, thereby creating another major barrier to work, another subject we will explore further later in the series.

Has the war on poverty been a success? No. Does the safety net for the poor desperately need fixing? Yes.

Leading policy analyst John Goodman of Southern Methodist University has estimated that “ if there had never been a welfare state [ in the US], economic growth alone should have virtually eliminated poverty by now.”

Goodman also adds an interesting note about how progressives who designed and expanded this welfare state have become increasingly reactionary in the face of failure:

“If you are one of the folks who voted[ as a progressive] in the [2012] election, what did you vote for?… Here are three things for starters: (1) no reform of the public schools, (2) no reform of the welfare systems, and (3) no reform of labor market institutions that erect barriers between new entrants and good jobs.”

If voters really want to help the poor, they will have to start by admitting that we need some new ideas.

About the Author: Hunter Lewis is co-founder of AgainstCronyCapitalism.org. He is co-founder and former CEO of global investment firm Cambridge Associates, LLC and author of 8 books on moral philosophy, psychology, and economics, including the widely acclaimed Are the Rich Necessary? (“Highly provocative and highly pleasurable.”—New York Times) He has contributed to the New York Times, the Times of London, the Washing­ton Post, and the Atlantic Monthly, as well as numerous websites such as Forbes.com and RealClearMarkets.com.

Lowering the Cost of Living is Better than Raising the Minimum Wage

Editor’s Note:  This post by Michael Shedlock explains quite well why significantly increasing the minimum wage is a terrible idea. If the union’s new “Fight for Fifteen” (dollars per hour) campaign were successful, it would increase unemployment, and unleash a round of price inflation that would in-turn require government entitlement payments to increase. This is not news to anyone with common sense. But Shedlock makes two additional points worth emphasizing. First, he notes that lowering the cost of living is more useful than raising wages, a point that cannot be made enough, because that is the win-win solution that opponents of government austerity fail to recognize. In addition to raising the standard of living for everyone, regardless of how much or how little they make, lower prices free capital to reduce debt and invest in innovation. “Better-faster-cheaper” is more than the mantra of the Silicon Valley’s tech geniuses, it is a perennial and core factor in the advance of civilization. Second, Shedlock identifies the anti-competitive forces who benefit from statist overreach, of which imposing excessively high minimum wages is just one aspect. He writes: “We do not need higher wages, we need lower prices. With productivity advancements we would have just that, absent of course the socialist fools, the progressives, the war mongers, and the central bankers.”

Michael Tanner at the Cato Institute notes Welfare Pays Better than Work in 33 states.

The federal government funds 126 separate programs targeted towards low-income people, 72 of which provide either cash or in-kind benefits to individuals. (The rest fund community-wide programs for low-income neighborhoods, with no direct benefits to individuals.) State and local governments operate more welfare programs.Of course, no individual or family gets benefits from all 72 programs, but many do get aid from a number of them at any point in time.

In the Empire State, a family receiving Temporary Assistance for Needy Families, Medicaid, food stamps, WIC, public housing, utility assistance and free commodities (like milk and cheese) would have a package of benefits worth $38,004, the seventh-highest in the nation.

Welfare is slightly more generous in Connecticut, where benefits are worth $38,761; a person leaving welfare for work would have to earn $21.33 per hour to be better off. And in New Jersey, a worker would have to make $20.89 to beat welfare.

Nationwide, our study found that the wage-equivalent value of benefits for a mother and two children ranged from a high of $60,590 in Hawaii to a low of $11,150 in Idaho. In 33 states and the District of Columbia, welfare pays more than an $8-an-hour job. In 12 states and DC, the welfare package is more generous than a $15-an-hour job.

People Aren’t That Stupid

While it’s beneficial to have a job, assuming there is hope of advancement, for those with no special skills there is little to no hope of advancement.

Moreover, wages are taxed, welfare benefits are not. And what about day-care costs for single mothers? What about transportation costs? What about the value of extra leisure time?

Add it all up and it makes perfect sense for many to remain on welfare for as long as they can.

Minimum Wage Fallacy

Given welfare benefits exceed minimum wage, it should not be surprising to find socialists arguing for higher minimum wages. And they are.

In Seattle, a Campaign Seeks to Push Minimum Wage to $15.

How successful would that be?

Not very.

The higher the minimum wage, the more incentive businesses have to get rid of employees and use hardware and software robots. And with the Fed suppressing interest rates, companies can borrow with miniscule interest rates and do just that.

Should minimum wages rise, the recipient workers would benefit, but at the expense of millions of others who would lose a job or not get one.

Then when prices rose in response, the socialists would ask for increased welfare benefits to keep up with the rising cost of living!

More Minimum Wage Nonsense

The socialists are out in force. Heidi Moore on the Guardian writes How low can you get: the minimum wage scam.

 Wonder why benefit spending is rising? Simple: corporations get away with crappy wages, so government has to make up the rest.

The grim irony of minimum-wage America is that many who work in the fast-food industry need food stamps to get by.

You’d think the exceptionally low minimum-wage – $7.25 an hour – would be the shame of a country like the United States that prides itself on its economic leadership. Half of minimum-wage jobs are held by adults over 25 years old, and asking adults to live on $7.25, or $14,500 a year, doesn’t leave them with enough to rent an apartment, commute to work, raise a child and participate in society in any meaningful way.

No Heidi, the sad state of affairs is that socialist fools have no idea what is going on. As Michael Tanner at the Cato Institute points out, it does not pay to work. So people don’t.

Don’t blame low wages, blame high prices.

The Fed, the ECB, the Bank of England, and the central bank in China are all printing money hand over fist hoping to spur job growth. Instead, they fueled another stock market bubble, a bond market bubble, and revived the property bubble.

Congress enacted hundreds of affordable housing programs. The one and only thing those programs did was create a housing bubble.

When prices crashed, government and the Fed stepped in with attempts to reblow the housing bubble (proving of course no one really wanted affordable housing in the first place). Rather, the Fed wanted a stock-market party and Congress wanted a vote-buying party).

Is Low Minimum Wage the Problem?

Perceived low wages are a symptom of the problem, not the problem.

The problem is socialist fools, progressives, and war mongers sloshing other peoples’ money around. For that, place the blame where it precisely belongs: on central bankers, on fractional reserve lending, and on government bureaucrats who interfere in the free market.

We do not need higher wages, we need lower prices. With productivity advancements we would have just that, absent of course the socialist fools, the progressives, the war mongers, and the central bankers.

About the Author:  Mike Shedlock is the editor of the top-rated global economics blog Mish’s Global Economic Trend Analysis, offering insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education. Every Thursday he does a podcast on HoweStreet and on an ad hoc basis he contributes to many other websites, including UnionWatch.