Man Down: Conservative Indiana Governor Caves to Obamacare Medicaid Expansion Demands

By Tim Caiello, Forum Summer Fellow

Over the last few months the Forum has been heavily focused on education issues like Read to Succeed and pushing back on Common Core’s federal overreach. 

But we’ve still been keeping an eye on what may be the biggest threat to state autonomy: Medicaid expansion.  As we shared in our Fast Fact sheet Top 10 Reasons Medicaid Expansion is Bad Medicine for South Carolina, expanding Medicaid to able-bodied adults would overwhelm an already broken program, harming the very people it was created to serve: poor children, the elderly and people with disabilities. 

(To see what happens when the government can’t handle health care responsibilities it already has, we don’t have to look any further than the recent news with the Veterans Administration – a perfect example of the well-intentioned dysfunction of government-rationed health care.)

Given the documented fact that Medicaid is not serving current recipients well (and according to Forum research is already the single largest driver of growth in South Carolina’s state budget even without expanding it), it seems to defy logic that conservative governors would fall into this unsustainable trap. 

Yet that’s exactly what we see happening…

Until now, twenty four states had refused to approve the Medicaid expansions. Well, make that twenty three. On Thursday, June 12, conservative Indiana Governor Mike Pence announced a plan that would expand Indiana’s Medicaid coverage through the “Healthy Indiana Plan 2.0” (HIP). The original HIP plan was applauded by free-market thinkers for introducing Health Savings Accounts (HSA) into the mix. The goal: encourage more fiscally responsible medical decisions by giving patients more control and incentivizing them to be shoppers and savers.

However, the Obama administration demanded big changes to this plan, claiming that it would create a gap that left some still uninsured.  So Governor Pence reworked HIP and announced the new HIP 2.0 version of the plan, which essentially amounts to a significant expansion of Medicaid eligibility in Indiana. This has caused significant confusion for many conservatives who originally supported the initial HSA-style HIP plan and count Governor Pence as a strong conservative ally.  In light of the commotion surrounding this Indiana decision, here are a couple helpful facts to keep in mind:

• The plan approved by Governor Pence is not the originally proposed HIP plan that featured a health savings account style approach.
• The plan approved by Governor Pence is a significant expansion of Medicaid along the lines of ObamaCare demands, meaning very limited state flexibility.
• The plan as approved by Governor Pence expands coverage to working age adults whether or not they have a full time job: contradicting the original intent to cover primarily working citizens.
• The state of Indiana anticipates having to divert $1.5 billion into the program to cover the increased costs incurred.

In sum, we find that unfortunately, despite Governor Pence’s solid conservative credentials, Indiana Medicaid expansion is yet another open ended entitlement program that leaves the state holding the bag (with minimal flexibility) when federal funding comes up short.

Here in the Palmetto State, we continue to see Medicaid grow as publicity around ObamaCare drives more currently eligible citizens to enroll.  And expansion supporters recently vowed that they weren’t giving up and would take their fight to the grassroots.  So the fight is far from over.

However, we were pleased to see the House sustain Governor Haley’s veto of funding for a commission to study expanding Medicaid that was slipped into the budget.   And we will continue to support all efforts to resist federal pressure to further expand Medicaid.  Like Governor Haley, we are confident that South Carolina is more than capable of providing the medical care its citizens need without expanding eligibility for a broken and unsustainable Medicaid program.

Tim Caiello is a 2014 graduate of Columbia International University.

What’s In The Hopper?

The Forum is watching the Legislature for YOU...

Like it or not, the actions of the South Carolina General Assembly can have a powerful impact on the pocketbooks of families like yours…on your freedom to work, access health care and educate your family.

The legislature usually takes the summer and fall off and returns in January. To get ready to return for their January through June session, members of the Senate and House started putting bills in the stream in December. In the waning days of 2013 some interesting legislation was filed that could have a significant impact on your life. As always, we will be watching these bills to protect you and your family.

SCHOOLS

Teaching Excellence. Rep. Andy Patrick (R-Beaufort) has filed H.4419, a bill to reform the way we evaluate the performance of teachers. The Forum’s Take: These changes have been needed for decades. Much of the content of H.4419 came out of a series of listening sessions hosted by Students First and co-hosted by Palmetto Policy Forum.

Less Duplication. Rep. Bakari Sellers (D-Bamberg) has filed H.4352, a bill that would among other things do away with the Education Oversight Committee (EOC).  The Forum’s Take: The EOC is a South Carolina oddity meant to provide an independent agency to keep tabs on the State Board of Education (SBE). But what we really need is an representative, accountable SBE, not duplicate agencies and diluted accountability.

Special Help for Special Needs. Senator Wes Hayes (R-York) has filed S.867, a bill to allow tax credits for contributions to scholarships for kids with special needs to attend private schools designed to serve them. The Forum’s Take: This is an exciting opportunity (that has worked well in other states) to help our neighbors afford the specialized education their kids need but can’t always find in the public system.

Local Control of Curriculum. Senator Chip Campsen (R-Charleston) has filed S. 888, a bill to clarify the process for adopting academic standards and assessment. The Forum’s Take: a bill like this would have saved a lot of heartache if in place before the adoption of Common Core State Standards. It makes sure elected representatives (not just bureaucrats) have a say in our school curriculum.

Free Enterprise. Rep. Joshua Putnam (R-Anderson) has filed H. 4369, a bill to allow advertisements on school buses to help pay for purchasing new school buses.  Decision on whether to participate would be made by local school boards. The Forum’s Take: Our state-run bus system is a national anomaly…and finding ways to introduce more free enterprise into it is a good idea.

Finance Reform. Rep. Jenny Horne (R-Dorchester) has filed H. 4407, a bill to reform the way schools and education are financed in South Carolina. Children’s Agency. Rep. Horne has also filed H. 4409, a bill to create a new South Carolina Department of Child and Family Services within the Governor’s cabinet. The new agency would replace the Department of Juvenile Justice and assume certain functions of the Department of Social Services and the Governor’s Office. The Forum’s Take: These are interesting concepts. A key factor in each is whether the changes will help provide relief for the taxpayer. 

Higher Taxes. Rep. Wayne George (D-Mullins) has field H. 4361, a bill to exempt from the cap on property taxes the cost of repairs and improvement of existing school facilities. The Forum’s Take: How would “repairs and improvements” be defined?

HEALTHCARE

Senator Kevin Bryant (R-Anderson) has filed S. 886, a bill to authorize out of state insurers to offer health insurance policies within South Carolina. The Forum’s Take: Nearly every proposal to reduce healthcare costs in the last decade has included erasing the state line barriers to competition. Worth a hearing.

FEDERALISM

Rep. Bill Taylor (R-Aiken) has filed H. 4422, legislation to create a “Federal Education Funding Study Committee.” The Committee would study federal funding of public education in the state and issue a report aimed at improving efficiency and transparency. The Forum’s Take: A critical first step toward reducing federal spending is make state citizens aware of how much Washington takes, ties up in mandates – and then “gives back” – to South Carolina.. The bill could be expanded beyond education.

Rep. Bill Taylor (R-Aiken) has filed H. 4372 and Sen. Larry Grooms (R-Charleston) has field S.833, and Sen. Mike Fair (R-Greenville) has filed S.830, legislation to evoke Article V of the US Constitution. If a sufficient number of states pass this legislation, a convention of states would be called by Congress to amend the Constitution to place limits on federal government power and spending and to enact term limits on federal officials.  The Aiken Standard wrote an informative story.  The Forum’s Take: While there is no silver bullet to restore a century or more of eroded federalism, the Article V strategy is certainly an interesting one, and more likely to succeed than Nullification of federal laws.

GOVERNMENT TAXING & SPENDING

Rep. Joshua Putnam (R-Anderson) has filed H. 4379, a bill to move the date for consideration of the state budget within the House of Representatives from March 31 to March 10, the net effect being to shorten the legislative session. The Forum’s Take: Taxpayer groups and business leaders have been calling for a shorter session for over two decades. This concept it worth consideration.

Senator Katrina Shealy (R-Lexington) has filed S. 901, a bill to phase out the personal income tax. The Forum’s Take: There is a 50-state competition for free enterprise. States that are reducing income taxes, like Kansas and Tennessee, are reaping great benefits in the form of more and better jobs for their citizens.

ROADS & BRIDGES

Rep. Raye Felder (R-Horry) has introduced H. 4356, a “local option motor fuel user fee,” that would allow a county to impose a tax not to exceed two cents per gallon on fuel to fund road improvement projects within the county. Senator Ray Cleary (R-Georgetown) had filed S. 891, a bill to increase the gasoline tax from 16 cents per gallon to 36 cents per gallon graduated over time. The Forum’s Take: Our infrastructure needs are enormous and represent a legitimate function of government. Because they increase taxes, these bills may not be the answer, but they represent the beginning of a crucial conversation about how we prioritize and pay for this vital backbone of job creation in our state.

STAY TUNED for more to come when the legislature convenes again in a few days.

For Pension Funds, Higher Fees Don't Mean Higher Returns, Study Finds

Originally published in the Wall Street Journal, July 2, 2013

Report on State Pension Funds Adds Fuel to Debate on Active Investment Managers
By MICHAEL CORKERY

Public-employee pension plans paying the highest investment fees aren't generating the highest returns, according to a new study by a pair of Maryland think tanks.

In fact, just the opposite may be true, says the Maryland Public Policy Institute and Maryland Tax Education Foundation.

On average, 10 states paying the most money-management fees had lower investment returns between June 30, 2007 and June 30, 2012 than 10 states paying the fewest fees.

In recent years, many pensions have been willing to live with the high fees charged by alternative investment managers, such as hedge funds, in hopes that these firms can deliver high returns with less risk than stocks.

The report could add fuel to the growing debate over whether pensions should be moving away from higher-cost, active-investment managers and toward lower-cost, passive investments such as indexes.
The report calculates investment fees as percentage of a pension fund's total assets.

"Many states are spending millions of dollars a year in Wall Street fees and they seem to be getting very little in return," says Jeff Hooke, a co-author of the study and chairman of Maryland Tax Education Foundation, a conservative-leaning group.

The 10 state pension funds paying the most fees had a median five-year annualized return of 1.34%. The 10 state funds paying the least in fees reported a 2.38% return for the five year period.

The study ranks fees and investment returns at the largest pension funds in 35 states with fiscal years ending June 30, 2012.

The study examined fees for statewide pension funds covering a range of workers. In some states, the study looked at the largest pension plan, such as teachers' funds. South Carolina Retirement System paid the most fees in the study, totaling 1.3% of total pension assets. The Teacher Retirement System of Georgia paid the least in fees, totaling 0.09% of total assets, according to the study.

South Carolina's five-year return rate was about 1.5% while Georgia's returns were about 2.9%, the report says.

In a statement, South Carolina chief investment officer Hershel Harper said "there is no one common practice in reporting investment fees paid.''

"We understand practices vary widely, making any 'apples to apples' comparison of standard financial statement investment management fees nearly impossible," Mr. Harper said. South Carolina has a relatively large allocation to alternative investments.

A spokesman for the Georgia teachers' pension couldn't be reached.

The study grew out of the Maryland think tanks' scrutiny of the pension plan of their home state, says Mr. Hooke, a managing director at Focus, an investment banking firm in Washington, D.C. Maryland's investment fees totaled 0.64%, the third highest in the study.

Mr. Hooke says in a similar study last year, his group missed some fees paid by certain states, but those oversights have been corrected this year.

Some pension plans have been demanding lower fees from hedge funds and private-equity firms. One plan in Montgomery County, Pa. has moved nearly all of its money into index funds to lower costs.

Education Alert: Universal Pre-K…Spending for Success?

In short, “No.”  President Obama’s push for massive federal spending on a universal pre-kindergarten program generated heated opposition over cost, government overreach and the questionable effectiveness of existing programs like Head Start.

But now this debate has landed on our front step. The South Carolina State Senate  is scheduled to vote early next week on Budget Proviso 1.83 that would create just such a program in SC.  This is the wrong choice for South Carolina’s hard-earned taxpayer education dollars.