Critical Condition

Orszag vs. Medicaid

Peter Orszag, former director of the White House Office of Management and Budget, has landed a gig as a contributing editor to the New York Times. On Sunday, he had an interesting article arguing that Medicaid funding was raiding public finances that should go to higher education.

I generally rely on Prof. Richard Vedder for my understanding of the economics of public universities, so I’m not going to accept Orszag’s assumption that the government should be giving more funding for higher education. Nevertheless, if a welfare program like Medicaid is devouring public funds that would have otherwise gone to education, Orszag has done a public service bringing our attention to it.

Unfortunately, his article errs in describing Medicaid. He asserts that Medicaid costs have increased so much because health costs have increased a lot faster than other costs in our society. That’s only part of the story: Medicaid spending per beneficiary has increased much faster than private health spending per beneficiary. Secondly, Medicaid spending grows in good times and bad: It is not an “automatic stabilizer” that kicks in when recession hits and unemployment increases.

So, Orszag’s conclusion (from a 2003 study) that states rob universities to fund Medicaid during recessions, and shift dollars back when the economy recovers, cannot be quite right. But the shocker is Orszag’s proposed solution: Increased federal funding for Medicaid, which he believes would allow states to direct more funding for higher education!

Medicaid is already a joint state-federal program in which the federal government pays over half the costs. This has fueled spending, not contained it.

Most Popular

The Imaginary Trump

Like Andrew Jackson, Donald Trump is man who represents the age in which he lived. Whatever you may think of the age. Jackson embodied a generation of men who had risen and made their mark in a young country. He represented their desire for greater representation, even if it had costs for slaves and Indians. He ... Read More

The Imaginary Trump

Like Andrew Jackson, Donald Trump is man who represents the age in which he lived. Whatever you may think of the age. Jackson embodied a generation of men who had risen and made their mark in a young country. He represented their desire for greater representation, even if it had costs for slaves and Indians. He ... Read More
Film & TV

Bowing Down to Obama

‘How can we miss you when you won’t go away?” political podcaster Yvette Carnell joked two years ago when Barack Obama began his comeback tour by making sideline pronouncements about the state of the nation after his brief retirement. Now the comeback is official, with two new Kool-Aid-drinker Obama ... Read More
Film & TV

Bowing Down to Obama

‘How can we miss you when you won’t go away?” political podcaster Yvette Carnell joked two years ago when Barack Obama began his comeback tour by making sideline pronouncements about the state of the nation after his brief retirement. Now the comeback is official, with two new Kool-Aid-drinker Obama ... Read More
Economy & Business

Shopping Superstitions

It’s the boss-bossiest time of the year, when Americans getting ready to open up their wallets to buy Christmas presents are lectured by illiterate halfwits about where and how to spend their money. The usual demands: Buy local, or buy from small businesses. This is pure nonsense, and you should feel free to ... Read More
Economy & Business

Shopping Superstitions

It’s the boss-bossiest time of the year, when Americans getting ready to open up their wallets to buy Christmas presents are lectured by illiterate halfwits about where and how to spend their money. The usual demands: Buy local, or buy from small businesses. This is pure nonsense, and you should feel free to ... Read More
History

The 1620 Project

On November 11, 1620, the Mayflower arrived on the eastern coast of North America. She had weathered the slings and arrows of maritime misfortune for almost ten weeks at that point, but the passengers thought the discomfort of crossing a small price to pay for passage to the Promised Land. After all, these were ... Read More
History

The 1620 Project

On November 11, 1620, the Mayflower arrived on the eastern coast of North America. She had weathered the slings and arrows of maritime misfortune for almost ten weeks at that point, but the passengers thought the discomfort of crossing a small price to pay for passage to the Promised Land. After all, these were ... Read More