The Spectacle Blog

The Disconnect Between Cause and Effect

By on 9.19.06 | 5:33PM

Got an email today from FamiliesUSA with a link (PDF) to one of its publications criticizing state-based Taxpayer Bills Of Right (TABOR). I found this passage enlightening when it comes to the political left's ignorance (often willful) of economics:

While the reduction in state revenues and limits on spending required by TABOR will be damaging to many state programs, health care will be particularly hard hit. That's because TABOR allows tax revenues and state spending to increase with inflation, but health care spending has been going up faster than inflation. The TABOR formula adjusts for inflation based on increases in the CPI. But medical inflation has increased by at least 8 percent each year for the past six years, rising more than twice as fast as the CPI.5 Consequently, TABOR will squeeze health care programs sooner-and harder-than other kinds of state programs.

In recent years, as health care inflation has driven up Medicaid costs, states have responded by either raising taxes or cutting Medicaid. States that adopt TABOR amendments will be unable to consider the first option (raising taxes) due to TABOR constraints. Instead, TABOR states will face pressure to cut optional Medicaid benefits and/or drop Medicaid enrollees, thereby increasing the number of uninsured.

And health care inflation just "happens." It's not like the provision of free medical care by state governments drive up the demand for health care, thereby driving up health care prices. Of course not. That's just conservative drivel.

There are ways to reform Medicaid so that it has a much less inflationary effect on health care. But FamiliesUSA opposes those too.

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