KFF health news correspondent Katheryn Houghton posted a fascinating article on a Montana man who admits to an ongoing fraud against Medicaid.
I rail against health care fraud. I edited and published a 500-page book full of examples of rapacious health care fraud and government indifference. What this guy is doing is clearly illegal. I would rather he stop. Yet I’m not sure I could vote to convict him.
This guy is basically Jean Valjean, from Les Miserables, so that’s what I will call him. Like the original Valjean, he feels like he’s facing a life-and-death choice. The article hints that Republicans’ recent Medicaid changes are to blame, but they aren’t.
The policy failure is that the government is putting its boot on Valjean’s face every single day. Republicans, Democrats, regulators, and industry lobbyists are all playing the part of Inspector Javert. Impartial journalism by default must explore whether government is creating the need it hopes to subsidize.
This Valjean is in his late 30s. He is struggling with alcoholism, bipolar disorder, and insomnia. He has a job making sandwiches. He’s paying his taxes. He is in treatment. Taking his meds. Accessing services. Taking classes to earn a government license to work as an addiction counselor. And he is succeeding.
Valjean is climbing the economic ladder. His income has risen enough that he is now ineligible for Medicaid. (This has nothing to do with the new Republican budget. It’s a rule Democrats created. Had the GOP budget not passed, he would still be ineligible.) This is a good thing.
Unfortunately, Valjean sees Medicaid as his best option. His other coverage options have too many gaps (Obamacare) and/or are too expensive (his employer’s health plan and Obamacare). From his perspective, losing Medicaid would reduce his income and consumption. He believes it would cause him to fall back into addiction, or worse.
Lie or Die
Note that the government is creating a perverse incentive for Valjean not to improve both his life and the lives of others in his community via productive work. In what may be the best, most colorful description I’ve ever heard of government-created low-wage traps (and the Samaritan’s Dilemma broadly), Valjean tells Houghton:
“They’ll give you a bone if you stay in the mud. But you have to stay there.” (Forget addiction counseling. Somebody give that man a typewriter.)
Facing the prospect of either reducing his work effort and income to remain eligible for Medicaid (he did this for a time), or losing Medicaid subsidies, Valjean found a third way:
“I only saw one option. Fudge the numbers.”
Valjean’s earnings amount to $24,100 annually, roughly $2,500 above the $21,597 cutoff for Medicaid eligibility. He is choosing to lie to the government by claiming his earnings are below the cutoff, so he can keep receiving Medicaid subsidies.
That’s a crime. It’s anti-democratic: he is directly subverting the will of legislators who put those rules in place, and the voters who elected them. He’s breaking the social contract. He could go to jail.
Pangs of Conscience
Part of the reason I’m not sure I could vote to convict is that Valjean appears to be in a fragile, vulnerable place. Valjean is a low-income, low-skilled, hardworking, bipolar, insomniac/addict who is struggling to make his life better. Recovery. Is. Not. Easy.
“I don’t want to be a fraud,” Valjean told Houghton. “I don’t want to die. Those shouldn’t be the only two options.”
The other part is how Valjean came to be in this position: government took away his other options. The government is not just denying him a bone. It is beating him down as he tries to climb up from the mud.
Taxed to Death
The government is adding to Valjean’s struggles by actively making him poorer. It is directly taxing his earnings to the tune of $5,100 per year: $450 in Montana income tax, $950 in federal income tax, and $3,700 in federal payroll taxes. (Were Congress to eliminate the federal deficit by increasing everyone’s taxes proportionally, Valjean would lose another $1,350).
Since Valjean is declining his employer’s health plan, the federal tax exclusion for employer-sponsored health insurance is stripping him of maybe $7,600 of additional cash income. These are not small amounts to someone who’s juggling six prescriptions near the poverty line.
Valjean also pays Montana’s car registration fee, and both an 18.4-cent per gallon federal gas tax and Montana’s 33.75-cent per gallon gas tax (Montana’s is higher than the median) every time he uses his car.
Valjean pays a 12.8 percent federal Universal Service Fund tax and a 7.03 percent state tax on his phone plan. Wherever he finds lodging, some of the $1,937 that Montana collects per capita in state and local property taxes is surely finding him.
Les Miserables Americain
The government is stripping essential freedoms from, and imposing crushing burdens on low-skilled, thirtysomething addicts who are struggling so much they feel like they’re going to die.
Valjean is committing a crime, and that’s wrong. Yet the government is committing more crimes against him than he is against it. Fewer people would commit Valjean’s crime if the government did not do so much to take away their money and freedom.
I say free Valjean.
Michael Cannon ([email protected]) is the director of health policy studies at Cato Institute. A version of this article appeared at the Darwin’s Fool Substack. Reprinted with permission.
