CHIP – Is it Good for Children?


What’s the best healthcare system for low-income children? The recent GOP tax reform bill extended the Children’s Health Insurance Program (CHIP) for another six years. Is this a good thing?

John C. Goodman, healthcare economist, writing in Forbes, thinks it is not.

CHIP covers roughly 9 million children. It is a government-run healthcare system administered by the states. State governments choose the benefits and dictate the prices paid to the providers. The money parents receive cannot be used to purchase private health insurance or enroll their children in an employer-sponsored plan.

This is single-payer healthcare for kids. If you follow this blog regularly, you know how I feel about single-payer healthcare systems, like Canada. If you’re not a regular reader, please see my archives under “single-payer.”

Goodman says there are two ways to insure children in low and moderate income families:

  • Offer a tax break to parents – who provide insurance for the children but leave them free to choose the type of insurance: employer plan, public program (Medicaid) or private insurance from the marketplace
  • Offer a public plan – directly funded by the government


CHIP is widely supported by the public, especially Democrats, because they believe it is the answer for universal coverage. But it was actually created by the Republican-controlled Congress of 1997 under the Clinton presidency. This bipartisan plan called CHIP was created mainly for low and moderate income families who earned too much for Medicaid eligibility.

Goodman says the problem is there was no requirement made for parents to insure their children in order to claim the tax credit. Parents may be financially better off but the children are not necessarily insured nor does this money make the economy larger.

The tax credit has been extended in the new tax reform bill from $1000 to $2000, with $1400 refundable (not based on taxes paid). But this is still not contingent upon the children receiving health insurance. Moreover, there has been no reform of CHIP. CHIP funds still cannot be used for private insurance, and Health Savings Accounts (HSAs) have not been expanded.

All of the limitations of single-payer healthcare still apply to the children, as well. Costs are controlled by delays in treatment and the government controls all treatment decisions. If it doesn’t work well for adults, why do we think it will work any better for children?

Medicaid and the Opioid Crisis


There is an opioid crisis in America. That much is clear. Now we are learning what is contributing to this crisis.

Recent evidence is pointing the finger at the expansion of Medicaid. Senator Ron Johnson (R – WI) released a report this month from the Senate Homeland Security and Governmental Affairs Committee that connects the dots between Medicaid and the opioid epidemic. That’s the conclusion of the report as reported by The Wall Street Journal editorial board.

Contributing to this problem are several factors:

  • Too many opioid prescriptions – especially in the Medicaid population
  • Drug marketing – by pharmaceutical companies
  • Profits from the resale of opioids – on the black market


According to the Centers for Disease Control and Prevention (CDC), the opioid epidemic kills on average 115 Americans per day. About 40% of overdose deaths in the U.S. involve a prescription opioid.

Medicaid offers cheap access to astronomical quantities of pills that can be resold on the black market. For as little as a $1 co-pay, Medicaid beneficiaries can get up to 240 oxycodone pills that can be resold for $4,000, according to the report. Since 2010 more than 1,000 people across the country have been charged or convicted of improper use of Medicaid to obtain prescription opioids.

Where there is the potential for big profits, there is certain to be criminal behavior. The report gives case examples including a Connecticut drug dealer who “preyed on” Medicaid beneficiaries who were “down on their luck” according to a detective interviewed by the committee. The drug ring leader would pay Medicaid beneficiaries, say, $50 to get a prescription filled. Pharmacists tended to trust the Medicaid system and filled the scripts. Then the perpetrator would sell the opioids on the street for up to $3,000 for a single bottle. The perpetrator of this crime pleaded guilty to multiple charges in 2015.

This is just one small slice of the pie. The Johnson report discusses everything from a drug ring in the Bronx to a Maryland pharmacist charged with $90,000 in Medicaid fraud to a $1 billion fraud from a cabal of healthcare providers in Miami. A fictionalized story recently written by Michael Connelly, called Two Kinds of Truth, describes such drug activity in California by Mexican and Russian cartels based on real drug criminals who prey on Medicaid and Medicare patients.

The connection to Medicaid expansion is real. More than 80% of nearly 300 cases were filed in Medicaid expansion states. These include New York, Michigan, Louisiana, New Jersey and Ohio as the worst offenders. The report says,
“The number of criminal cases increased 55 percent in the first four years after Medicaid expansion, from 2014 -2017, compared to the four-year period before expansion.”

Clearly there is a problem here that is especially unique to the Medicaid population. It is apparent that criminals, including corrupt physicians and pharmacists, contribute to this problem by preying on those who are most vulnerable. Expanding the population of those covered by Medicaid has only expanded the opioid problem. We must find a better way to meet the healthcare needs of these low-income Americans without contributing to the opioid crisis.

AmazonCare – The New Solution?


Amazon delivers packages. Can it deliver better healthcare?

The stock market believes they can. The market responded to the announcement that Amazon, J.P. Morgan Chase, and Berkshire Hathaway would enter the healthcare insurance business by selling off healthcare stocks.

But just because Jeff Bezos, Jamie Dimon, and Warren Buffet want to work together to lower healthcare insurance costs, doesn’t mean they will solve the complex system of healthcare delivery. Many others have tried before.

Robert Laszewski, insurance industry analyst, recalls similar efforts in the early 1990s by leading employers in the Minneapolis-St. Paul market. That effort failed and he believes this one will, too.

To put this into perspective, Amazon, J.P. Morgan Chase and Berkshire Hathaway employ a little over one million people. That’s a lot of employees, but it’s only about the same number of covered lives as Blue Cross Blue Shield covers in Rhode Island and Delaware. Laszewski doesn’t see this as enough to make a real impact.

These industry titans believe they can change the status quo through improved data. No doubt they have used data effectively in their businesses. But Laszewski says by comparison, UnitedHealth, through its Optum data technology subsidiary, has detailed health care utilization information on over 115 million consumers, four out of five hospitals, 67,000 pharmacies, 100,000 physician practices, 300 health plans, and government agencies in 34 states and D.C.

Here is Laszewski’s prediction: “After a few years of high profile press releases and trade association presentations this one will end up in exactly the same place all of the others have. Nowhere.”

The Wall Street Journal editorial board seems to be in agreement. “The new creation will represent hundreds of thousands of employees, which sounds like a lot but isn’t enough scale to change U.S. health care, and the question is how transformative this enterprise will aim to be, A brick wall of interest groups – hospitals, insurers, the AMA – will resist any change and make Uber’s fights with taxi cartels look like minor league ball.”

The press release says the group will form an “independent company that is free from profit-making incentives and constraints.” But WSJ says the problem isn’t profit. In fact, profit often is the incentive that drives innovations and cures for diseases. The fundamental problem is that the cost of a service is disconnected from underlying value. Patients don’t know the price of services and consume health care as if it’s free since government or employers are the third-party payers for most Americans.

Further evidence that profit isn’t the problem comes from looking at government-financed healthcare. The government doesn’t care about profit – and that’s part of the problem. They have no difficulty spending the taxpayer’s money – and still they can’t deliver quality healthcare!

Quality healthcare that doesn’t waste money will only come when healthcare spending is tied to the consumer’s pocketbook. When choosing the way you spend your healthcare dollars is just as much a part of your budget as what you spend on groceries, then we will see the cost of healthcare go down and the quality go up. Competition for those dollars will lower the cost of healthcare treatment and raise the quality – because that’s what competition does in every other business.