Unions and Medicaid

Ezra Klein says that unions do fight for the public good against corporations all the time, in contrast to what I said earlier:

This is the exact sort of proposal that unions tend to fight. Why? It's hard to say. Relatively few of their members are on Medicaid. The whole point of being in a union, on some level, is that you don't have to be on Medicaid. But unions have this odd notion of "solidarity." So whenever Medicaid cuts end up on the agenda, you'll find the labor movement is the only well-funded, mass-membership lobby throwing its shoulders into the fight to save Medicaid.

This is the role that unions play that some of my conservative friends are missing. Megan McArdle, for instance, asks, "In what way do public sector unions act as a check on the power of corporations?" You can find one of the answers in Walker's agenda. Corporations aren't lobbying against Medicaid, of course. But they're lobbying for massive corporate tax cuts. And they look likely to get them (in fact, they've already gotten some). But the hundreds of millions of dollars or billions of dollars that those tax cuts add to the deficit will have to be made up somewhere. And Medicaid is a likely target. There is no one behind Medicaid with even an ounce of the political power that the business community wields.

No one, that is, except unions. And unions also happen to be the only organized interest group standing in opposition to continual tax cuts for corporations and the wealthy. This is why this fight is so important to both sides. If it were just about the money, it would be easier to resolve. But it's not just about money. And it's not, as McArdle goes on to suggest, about "some extra benefits for the teachers' unions." After all, the unions have already offered to make the concessions on benefits that Walker has asked for. Rather, this is about the balance of political power in Wisconsin and, given the potential for other governors to adopt Walker's proposal, nationally. It's about whether there will be anyone left to speak up next time a state with a yawning deficit proposes to give corporations a massive tax break while slashing Medicaid benefits. And that matters.

Clearly, Ezra and I look at the same situation and see two different things.  In the most recent quarter for which the Census has data, corporate income taxes provided about $9.2 billion worth of revenue to all 50 states.  This is less than 20% of New York State's Medicaid bill. It is also about 3% of the overall tax revenue collected by the states.  This goes up to about 4.5% in the second quarter of the year, which includes April 15th, but overall, it is not a very significant source of revenue.

Sales and gross receipts tax are much more significant--about $72 billion, or a quarter of the total tax take.  But general gross receipts taxes are used in only a minority of states; most of that is sales tax revenue.  And sales taxes are generally assumed to ultimately be borne by the consumers, not corporations.

So the unions are not lobbying against corporations, who do not have much of a dog in this fight.  Who does?  Taxpayers, and consumers of health care services.

Look at what is happening in New York State, where Medicaid spending is far higher than any other state in the country.  There are a lot of reasons that spending is so high, but two loom largest in my mind: 

1. the decision to force local governments to match state funds (effectively allowing the state to "spend" three dollars in local and federal matching funds for every one dollar of state spending); this was later modified in the face of fiscal meltdown in the state's poor northern and western regions, but still puts considerable upward pressure on the budget
2. Local 1199 of the SEIU, which during the good time wins lush reimbursement expansion for its members, and during down times has mostly successfully avoided cuts by dint of running theatrical ads implying terrible catastrophes await if there is any cut at all to New York's lavish reimbursements.

Ezra is a great advocate of the power of our new health care law to rationalize spending growth.  But as soon as the technocrats try to cut back on reimbursements for any sort of labor intensive services--the ones that cost the most money--they, like New York's governors, are going to be faced with ads like this:

And that one's pretty mild--I vividly recall one that featured a woman running through deserted streets cradling her baby, only to arrive at the emergency room to find the doors chained shut.

You can view this as "saving Medicaid", or you can view this as funneling every available tax dollar into health care cost inflation.  It's not that the union position never coincides with the interests of Medicaid beneficiaries--of course they want there to be more beneficiaries, so they're going to fight to the death against a decline in enrollment.  But when it's between them and the beneficiaries, the unions choose . . . themselves.  So if the question is higher reimbursement for home health care aides, the union will always be on the "higher" side, even if that means fewer people get served, or cuts have to be made in other areas, like medical devices.

Assuming that PPACA doesn't get repealed, enrollment is now a non-issue.  Now it's going to be a fight between people who want to control the growth of health care costs in order to provide as many services as possible . . . and workers whose paychecks depend on further growth in health care spending.  Labor will probably side with the health care unions, at least for a while, because there is solidarity within the movement.  But eventually I'd expect that even this will erode; unions are consumers of health care services even more than they are providers.

If we neither cut reimbursements, nor services, then the fight is between unions and taxpayers, most of whom are not corporations, or even particularly rich.  Obviously, Ezra and I have different distributional priorities.  But I still don't see how public sector unions (or quasi-private-sector unions like 1199, whose bread-and-butter is reimbursed by Medicare and Medicaid) can be seen as acting as a check on corporate power.  Like most other groups, most of their activity is simply directed at making themselves as well off as possible.