January 2017 – Page 4

The Fix-Nothing Farce Of Symbolic Politics

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

Solutions gut the rackets by breaking down the status quo's regulatory walls protecting the privileged elites who are strip-mining the bottom 95%.

Much of what passes for politics these days is symbolic. Anyone who studies the issue of illegal immigration concludes that the solution lies not in building $10 billion walls but in changing the incentive structure of citizenship, legal and illegal immigration. As long as successfully crossing the border enables access to free healthcare, education and sanctuary and the potential for cash work–the equivalent of winning the lottery for those with none of these benefits–walls will be tunneled under, overflown or bypassed by sea.

The Trump Administration's proposed policies on tariffs, walls to stop illegal immigration, etc. are defended as symbolic gestures–in other words, their value is in communicating "things have changed", not actually solving the problems facing the nation.

On the other side of the spectrum, protests in defense of a corrupt, failed status quo are also symbolic. No thinking person can claim that the status-quo policies on illegal immigration are fair, just or functional; how is letting illegal immigrants "jump the queue" ahead of the hundreds of thousands of legal immigrants who have labored patiently for years, paying all the outrageous costs of navigating the Kafkaesque complexities of legal immigration fair or just?

Protesting in defense of a racket-based status quo fixes nothing and solves nothing. Protests are also purely symbolic: the indignant express their indignation, gather to support a corrupt, venal system of rackets and then go home to stroke their egos on social media: I struck a blow today for… a corrupt system of rackets that enrich self-serving vested interests and privileged elites.

Dear Trump insiders and protesters: did either of you propose a real solution to the college debt-serfdom racket? No, you didn't. Your symbolic gesture was nothing but a fix-nothing farce. If you think a trillion dollars of debt to pay for mostly worthless credentials is sustainable, fair, just or functional, you're willfully blind to the ugly reality: higher education is just another cartel-state racket:

As Jim Kunstler as often observed, the status quo in the U.S. is nothing but an interconnected network of rackets run by protected technocrats to benefit a plutocracy of wealthy insiders and their political-class lackeys. These rackets–higher education, healthcare, defense weaponry, the corporate media, and on and on–are nothing but institutionalized extortion, embezzlement and fraud, systems that enrich the top 5% at the expense of the bottom 95%:

Dear protesters and Trump insiders: do either of you understand that the whole tragi-comedy of rackets passing for politics is a house of cards that depends on ever-expanding debt? Once the debt bubble pops, the rackets implode, and the real value of symbolic politics–zero– will be revealed.

The farce of symbolic politics fixes nothing. Solutions are not symbolic; solutions gut the rackets by breaking down the regulatory walls protecting the privileged elites who are strip-mining the bottom 95%, "snowflakes" and "deplorables" alike.

That's how the fraud and the rackets are enforced: get each camp to view the other as the enemy in the great coliseum of symbolic, do-nothing politics. Mix and stir, then stand back and continue skimming the nation's wealth in whatever racket is buttering your bread while the two camps distract themselves with symbolic battles.

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In Latest Scandal, Le Pen’s Main Rival Accused Of Getting Wife, Children Jobs Paying €1 Million

Last week we reported that in the aftermath of a report by the Canard Enchaine newspaper, French financial prosecutors had launched an informal probe into possible misuse of public funds by French presidential frontrunner Francois Fillon, who was accused of paying his wife around €500,000 over a period of ten years.

Now one week later, the man who is expected – according to public polls whose reputation over the past year has hit rock bottom – to defeat Marine Le Pen in the French presidential election’s runoff round, was hit with a fresh scandal, after a new report by the same satirical newspaper alleged that Fillon got his wife and two of his children jobs that paid nearly 1 million euros.

According to the report, Penelope Fillon worked as his parliamentary aide for longer than he has admitted and was paid 331,000 more euros for the role than it originally reported. In the new Canard report, the candidate’s wife was paid more for that job than it wrote in its edition last week, reaching a total of 831,440 euros ($897,456) gross. Additionally, two of Fillon’s five children were employed as parliamentary assistants, earning a further 84,000 euros, the report alleged. Le Canard has also written that Penelope Fillon was paid another 100,000 euros for a job at a cultural magazine.

Fillon has denied any wrongdoing and says the work was real. He told TF1 television last week that she was paid from 1997. Le Canard wrote on Tuesday that she was also employed as parliamentary assistant from 1988 to 1990.

Fillon has not confirmed or denied last week’s numbers and his team could not immediately be reached for comment on Le Canard’s latest report. His British-born wife has not commented at all.

Fillon had said last week that he had also at some point employed two of his grown children when he was a senator but gave no figures. Le Canard wrote on Tuesday that his children were paid a combined 84,000 euros.

With less than three months to go before the first round of voting in France’s 2017 election, on Sunday Fillon promised to withdraw from the race if the preliminary inquiry becomes a formal one, something that has never happened to a major French candidate this late in a presidential contest, in interview with Journal du Dimanche. In the same interview, Fillon said his wife’s pay was registered with parliament and declared to tax service, and added that he has sent proof of payment to investigators.

While Fillon may not be formally charged and thus drop out of the presidential race – a move which would be great boost to Marine Le Pen’s victory changes – Fillon is already hurting. According to Bloomberg, a Kantar Sofres poll released Monday in Le Figaro suggests that the scandal has cost Fillon support. About 22 percent of voters now back the Republican for the first round of voting, leaving him just one point ahead of independent Emmanuel Macron and three points behind the National Front’s Marine Le Pen. Before the inquiry, Fillon was considered the favorite to be France’s next president

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Not that there’s any inflation, but . . .

The numbers are pretty startling.

Nearly 7 in 10 Americans have less than $1,000 in savings.

1 out of every 3 Americans has nothing set aside for retirement.

And, according to Federal Reserve data, the median working-age couple has saved just $5,000 for retirement.

How is this even possible?

How could it be that the citizens of the wealthiest country to have ever existed in the history of the world barely have any savings?

Simple. The cost of living has skyrocketed over time. It’s become terribly difficult for tens of millions of people to keep up. Just look at the data—

Housing prices, once again, are at all-time highs. And for those who choose to rent instead of buy, rents in many cities have also reached all-time highs.

This is especially difficult for the Millennial generation, which finds itself spending over of 40% of disposable income on housing costs.

If you add in student debt (which continues to plague millennials), that takes even more money out of their pockets each month.

And God help you if you decide to have children, the cost of which is now at a record level.

According to a study published last year by the US Department of Agriculture (not sure why they’re the ones looking into this…), the overall cost of raising a child from birth to age 21 is now a whopping $233,610.

Private studies have pegged that amount even higher, in excess of $300,000.

And, not that there’s any inflation, but childcare costs have risen so rapidly that it has become impossible for many families to keep both spouses in their careers.

Then there’s the costs of insurance and medical care, which continue to soar to record levels.

Healthcare costs in the United States are now at the highest levels EVER.

But even more importantly, the RATE at which costs are rising reached their highest level in 32 years.

It’s no wonder that people aren’t able to put any money away… or that, despite a brief dip after the Great Recession, consumer credit is once again exploding.

Just like their federal government, Americans are once again heavily indebting themselves.

And it’s easy to understand why: they just can’t make ends meet.

The tiny silver lining is that wages have finally started to grow, albeit slightly.

But wage growth has been vastly outpaced by the rising costs of major expenses– like housing, childcare, insurance, and healthcare.

If you find yourself in this situation… struggling without any real sense of security… I’d encourage you to at least consider one out-of-the-box solution:

Think about going overseas.

It’s 2017. Your ability to generate income no longer depends on geography.

I have friends who run a small CPA practice preparing tax forms from their beach home in Bali.

Others who do construction work here in Chile.

Software developers, agriculture consultants, insurance salesmen, paralegals, real estate brokers… they’ve all moved abroad and are thriving.

The biggest thing you’ll notice in terms of your personal finances, though, is that living costs are often remarkably cheaper.

Sure, if you move to Tokyo, Geneva, or Oslo you’re going to be forking over even more money to live.

But the vast majority of the planet is likely MUCH cheaper than where you’re currently living.

I purchased my apartment here in Chile, in one of the nicest neighborhoods in the entire country, for less than what a down payment would be in most metropolitan areas in the US.

And I wouldn’t even regard Chile’s housing market as being particularly cheap compared to other places around the world.

Your medical costs will also drop. Seriously, it’s a joke.

Medical treatment overseas can be incredibly high quality and just a tiny fraction of the cost.

Insurance will cost a tenth of what you’re currently paying, if you decide to have insurance at all.

You might just choose to pay cash whenever you need treatment, and it won’t cost more than a nice lunch.

Childcare? Forget about it. In a lot of places overseas (especially in Latin America or Asia), labor costs are so cheap that you won’t even think about daycare.

Instead, you’ll easily be able to afford your own round-the-clock, live-in help… for far less than what you’re probably currently paying for daycare.

Oh yeah. And your tax bill will likely go to ZERO.

This goes for just about all nationalities, including US citizens.

American expats have some special guidelines that they need to follow, but as long as you have what’s known as “bona fide” residency, i.e. you are really truly living abroad, and not just on paper, you can exclude more than $100,000 each year in “earned” income.

(Note, this does not apply to investment income… but there are ways to eliminate that as well. More on that another time.)

Most households spend tens of thousands of dollars each year on taxes, most of which has gone to fund more wars and more debt.

Just imagine what you could do for your family’s future with all that extra savings.

There are all sorts of other benefits as well.

You may have the opportunity to learn another language, and for your children to learn another language.

You and your family may be able to obtain another citizenship.

You’ll have unique international experience that certainly looks good on a resume and differentiates you from your peers back home.

And you’ll have the chance to develop a deep, close network of friends… fellow expats who share your beliefs and values.

I understand that as human beings, we are naturally afraid of the unknown.

And moving abroad is a big, big unknown.

Our ancestors braved that uncertainty once as well. They too were searching for a better life. It’s in our DNA.

So if you find yourself in a similar situation– barely able to stay afloat financially, and insecure about the future– it may at least be worth considering the possibility.

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Trio of LGBT News Stories Shows We’re Not Backsliding on Cultural Acceptance

Snagglepuss While the populist triumph of President Donald Trump represented the possibility of backsliding on freer immigration and trade policies, look at all this news that makes it abundantly clear that America, at least, won’t be backtracking on gay and transgender acceptance.

To wit:

Federal executive order prohibiting anti-LGBT workplace discrimination remains intact. This morning the White House announced that Trump will be keeping President Barack Obama’s 2014 anti-discrimination order in place. This order prohibited discrimination against gay and transgender employees by federal contractors. The White House put out a brief statement:

President Donald J. Trump is determined to protect the rights of all Americans, including the LGBTQ community. President Trump continues to be respectful and supportive of LGBTQ rights, just as he was throughout the election. The President is proud to have been the first ever GOP nominee to mention the LGBTQ community in his nomination acceptance speech, pledging then to protect the community from violence and oppression. The executive order signed in 2014, which protects employees from anti-LGBTQ workplace discrimination while working for federal contractors, will remain intact at the direction of President Donald J. Trump.

To be clear, the administration here is setting the terms for working with the federal government and not attempting to establish (or advance) a general federal ban on LGBT discrimination by private employers elsewhere. If you want to get government money, you have to follow their rules. The order maintains narrow exemptions for religious organizations who provide federally funded social services.

This decision (and the White House deliberately publicizing it) is an important test of whether Trump as president would be able to maintain his own generally pro-acceptance positions as policy even while bringing in social conservatives to run his administration. Now whether the executive order will actually be enforced is another question (that won’t be answered for some time).

The response by the Human Rights Campaign, the top LGBT activist organization, is very “Yes, but … ,” (via The Hill):

“You can’t claim to be an ally when you send LGBTQ refugees back to countries where their lives are at risk. You can’t claim support and then rip away life-saving services made possible through the Affordable Care Act for transgender people and those living with HIV or AIDS. You can’t be a friend to this community and appoint people to run the government who compare being gay to bestiality,” [Human Rights Campaign President Chad Griffin] added.

Exit polls showed that even though Trump has been the most vocal supporter of LGBT issues the Republican Party has seen in a presidential candidate, he did terribly with LGBT voters, even worse than previous candidates. But we’ll have to wait to see how actual policies affect LGBT folks moving forward.

Betsy DeVos, friend of the gays? When Trump selected DeVos as his choice to head the Department of Education, supporters of school choice cheered. She’s a massive ally and fighter for the rights of families to control where their children get educated. But many within the LGBT community were not so happy. DeVos’ family has a lengthy history of opposing gay issues; and we’re not just talking about speaking out or voting against gay issues. The DeVos family has helped bankroll ballot initiatives against gay marriage recognition.

But according to a story by The New York Times, DeVos does not share the positions of her elders. She has a history of personal support for gay and transgender accommodation that she doesn’t make a big public deal about:

Ms. DeVos’s personal experience with the debate over gender identity and bathrooms dates back decades. As chairwoman of the Michigan Republican Party, she came to the aid of a transgender woman who wanted to use the women’s restroom at a call center, upsetting some of the other women there, according to two associates at the time — Mr. McNeilly, who was the party’s political director, and Eric Doster, the general counsel.

“We made the accommodation, and that was Betsy’s call,” said Mr. Doster, who did not recall the woman’s name but said this happened in an office near the Michigan State University campus in 1997 or 1998. “A lot of the co-workers weren’t happy with it. But that’s who Betsy is.”

But, like other supportive moves she has made over the years, it was done quietly. When Ken Mehlman, a former Republican National Committee chairman, was collecting signatures from Republicans for a 2015 legal brief that argued in favor of a constitutional right for same-sex marriage, he turned to Ms. DeVos for help in recruiting people in Michigan. She agreed, friends said.

What this means now for the battle over whether public schools should be either forced or prohibited from accommodating transgender students’ facility needs is unclear or whether she would leave it to the states. Her responses in her confirmation battle suggest a strong support for leaving control of education policies to the states. Looking at what went down in North Carolina, where the state put a prohibition in place for all public schools, hopefully DeVos’ support for choice would include allowing parents of LGBT kids the option of attending schools that will accommodate them—even if these parents have to get together and make new programs themselves.

The Boy Scouts open up membership to transgender children. The fight to convince the Boy Scouts to allow gay teens to participate only as members took decades. It even went all the way to the Supreme Court (which affirmed the Scouts’ Freedom of Association).

The ban on gay scouts ended in 2013. It took less than four years after that for the ban on transgender scouts to fall. From The Washington Post:

Boy Scouts chief executive Michael Surbaugh said in a video message that the organization will now accept boys based on the gender a parent puts on a child’s scouting application, ending a policy of accepting boys based on the gender listed on a child’s birth certificate.

“We realized that referring to birth certificates as the reference point is no longer sufficient,” Surbaugh said in a video message. “Communities and state laws are now interpreting gender identity differently than society did in the past. And these new laws vary widely from state to state.”

Surbaugh said the new policy goes into effect immediately.

“Our organization’s local councils will help find units that can provide for the best interest of the child,” he said in a written statement.

What has always been wonderful about the transformation of the Boy Scouts is that this slow walk toward acceptance has been a result of cultural influence and pressures and not a government mandate. It’s an important reminder that government authority is not the alpha and omega of making life better for LGBT people and other minorities. It doesn’t always take threats of fines or other forms of official punishment for life to get better for people.

Bonus link! “New DC Comic Reinvents Snagglepuss as ‘Gay Southern Gothic Playwright.'”

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Martin Armstrong Warns EU Just Declared US Is The New Enemy

Submitted by Martin Armstrong via ArmstrongEconomics.com,

The European Union’s chief BREXIT negotiator, Guy Verhofstadt, told Reuters that Donald Trump is part of a three-pronged attempt to undermine the European Union.

The other two threats were from radicalized Islam and from Russian President Vladimir Putin, who Verhofstadt said was also working against the progress of the EU project.

"We have a third front, for the moment, undermining the European Union, and it is Donald Trump," Verhofstadt said in a speech at the Chatham House think-tank.

"Trump spoke very favorably of the fact that also other countries will want to break away from the European Union, and that he hoped for a disintegration of the European Union."

Verhofstadt served for nine years as prime minister of Belgium, and has served in the European Parliament since 2009.

He said that the European Union had severe problems, saying it was in a "poly-crisis", but nevertheless argued that the solution was for greater co-operation between states.

"A disintegration of the Union would be a disaster … not only for Europe but also I think for our allies and for the world."

His comments reflect just how deranged the EU politicians really are for they will accept no blame whatsoever for any of their own policies that are dictatorial in nature and have sought from the start to federalize Europe while denying that was their goal all along.

Verhofstadt told Reuters that the other two threats were radicalized Islam, which them themselves opened their own borders to accept with open-arms, and from Russian President Vladimir Putin, who just said that Europe should stay together. Putin even warned that the EU would not be a global player as is.

Verhofstadt actually claimed that all three parties were working against the progress of the EU project. The EU is doomed and their own refusal to address the autocratic anti-democratic policies have sealed their fate. It was the USA that encouraged the formation of the Euro – NOT the political surrender of sovereignty of all members to Brussels.

This is the problem. The EU is blaming everyone but itself for its failures. That means they are incapable of preventing the collapse since they are in total denial that there is a problem. The deliberatly established a system whereby the European people CANNOT vote to change any politician since they do not stand for election. Draghi has engaged in QE since 2008. It has failed for 8 years. But no European can get rid of him at the polls. That means the ONLY was to bring about change is to exit the EU. Verhofstadt cannot bring himself to look in the mirror. We warned this would be the outcome of the EU project back in 1996 for its was designed knowing they wanted federalize Europe while denying that was their motive.

We warned about the rise and fall of the Euro back in 2011. We warned that the Euro would fail and provided the Hamiltonian Model as the answer to save Europe. The Committee establishing the Euro attended our World Economic Conference in London. We have had direct contact, yet it has gone in one ear and our the other. It is easier to blame others than admit a huge mistake they made all by themselves. Meanwhile, European politicians are deranged and believe they could win trade war against the USA because of its strong economy? Not really sure what world these people are in but it does not seem to be connected to Earth.

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Why February May Be An Ugly Month For Markets: Here Are BofA’s “Danger Signals”

With the S&P500 ending January on the back foot, more pain may be in store for markets in February.

This is the observation of BofA’s chief technician Stephen Suttmeyer, who provides several danger signals why bulls may want to be particularly cautious ahead of the coming months.

As he notes, the post-Presidential Election S&P 500 rally has done better than the post-Brexit rally, but there are warning signs moving into February just as there were coming off the mid-August post-Brexit S&P 500 peak.

These include complacent VXV/VIX and put/call ratios, a bearish divergence for the US most active advance-decline line, and a Net Tab sell signal. In addition, there is the risk of a weaker
February based on seasonals and the US Presidential Cycle Year 1 pattern going back to 1928. A close below 1.17 on the VXV/VIX as well as a cross for VIM Distribution above VIM Accumulation would increase the risk for following weaker February seasonals.

Of the items listed, we find the seasonal argument most persuasive. While February tends to be a weaker month for the S&P 500 in general and is up only 52.8% of the time with an average return of -0.05% going back to 1928, February is particularly weak in the first year of a presidential cycle: in that case February is up only 41% of the time with an average S&P 500 decline of 2.10%. Even more troubling, when the President is in his first term, February of Year 1 is up only 23% of the time with an average decline of 3.84%.

And then there are the purely “overbought” technicals, chief among which is the VXV/VIX ratio. As Suttmeyer notes, the VXV/VIX is overbought & complacent. The VXV/VIX spiked at oversold levels below 1.0 low on Brexit in late June and ahead of the US Election in early November. Overbought readings can persist and the VXV/VIX has been overbought for the most part since mid November. However, it could go even higher, and would take a decisive move below 1.17, similar to the bearish late August/early September signals, to suggest the risk of a deeper decline in the S&P 500.

Then, there is the 25-day CBOE total put/call ratio which generated a buy signal off the contrarian bullish or fearful levels associated with the US Presidential Election. However, since then this measure of tactical market sentiment moved to overbought in mid December and is on a sell signal off these overbought or complacent levels, which is a risk for February.

Finally, one last tactical concern moving into the weaker seasonal month of February is a bearish divergence on the US Top 15 Most Active A-D line. A bearish divergence occurs when an indicator peaks before the market does. A 12/27 peak for the most active A-D line vs a 1/25 peak for the S&P 500 is a bearish divergence (yellow light) for this important market breadth (and volume) indicator. The most active A-D line measures the breadth of the top 15 US stocks (market cap > 500m) by share volume. When this A-D line falls ahead of the market indices, it suggests that smart money may be selling into strength.

So while a further pullback may be imminent, BofA leaves on a hopeful note: “Many indicators support buying into dips”, such as NYSE A/D line, a bullish MACD, Dow Theory still is confirming a buy signal, as well as global breadth which still remains bullish.

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Online Grocer Debuts “Fruit-Picking Robot” In Latest Blow To Minimum Wage Proponents

In the latest sign that low-skill jobs are doomed to the inevitable, detrimental effects of technological advancements, particularly in era of politicians relentlessly fighting for higher minimum wages, an online grocer in Britain, Ocada, has debuted a prototype of a robotic arm that can pick fruit off an assembly line just like a human worker. Per a report from BBC, the fruit and vegetable picker is part of a five-year, EU-funded collaboration between five European universities and Disney, called Soma (Soft Manipulation).

Currently, all of Ocado’s customer orders are bagged on an assembly line at a warehouse in Andover, Hampshire by 1,000s of human hands. But that may be all about to change as Ocado’s technology looks to combine it’s robotic human hand with computer vision and the ability to actually pick fruit and vegetables according to ripeness.

“People have tried suction cups, robot hands with three fingers… What we are trying to do is to actually mimic the human hand.“

“The gripper is based on air pressure, which controls the movement of the robotic fingers.

“What we are trying to do is combine computer vision – being able to recognise products by looking at them – with the control aspect which is the gripping aspect.”

At the moment, only the gripper is being demonstrated but ultimately the robot will learn to distinguish fruit ripeness through machine learning.

It will also be able to pick other items which require different care – such as wine bottles and detergent.

“Fruit and vegetables are the hardest to pick,” said Mr Voica.

And here is a look at the developing technology in action:

And another:

And while the robotic hand is still under development, Ocado told TechCrunch that it is already being tested in a replicated warehouse and will soon be rolled out for live use in it’s Andover facility.

To manipulate different items without damaging them, Ocado’s new robotic arm uses a gripper that is anthropomorphic, or takes the form of the human hand. Dubbed the RBO Hand 2, this element has flexible rubber “fingers,” and uses pressurized air to move them and enable safe, gentle handling of groceries. Researchers at the Technische Universität Berlin (TUB) developed the soft robotic hand, originally. Other types of robotic grippers out there use suction to pick apples, or a ball filled with sand-like material to physically grasp metal parts.

Ocado has already been testing the robot hands in a replicated production warehouse, to figure out if they’re ready for real world use. The answer is now yes. Clarke tells TechCrunch, “We will begin to gradually deploy this at our Andover warehouse, where in due course, [the gripper] will start picking a meaningful fraction of the range of 48,500 items we ship out to customers.” The company will begin the roll out slowly, recording the results of tests in the real world environment. It will still be some time before Ocado customers get a back packed up by SoMa Ocado RBO Hands.

Of course, it’s easy to imagine how such technology can be used to replace millions of low-skilled tasks across a variety of industries, once again highlighting the headwinds facing international labor markets for decades to come.

Do you see what happens, Bernie? Do you see what happens, Bernie, when you artificially raise minimum wage and make capital projects way more attractive? This is what happens, Bernie.

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Taxes and Red Tape Keep Colorado’s Marijuana Black Market Profitable: New at Reason

Meddling state officials have managed to make the legal pot market in Colorado uncompetitive.

J.D. Tuccille writes:

You have to give it to Colorado. The state’s voters legalized recreational marijuana in 2012, transforming the popular stuff from a prohibited vice to a substance that could be produced, bought and sold without the hassle of hiding dealings from the authorities and the fear of arrest for voluntary transactions. Yet the marijuana black market is still going strong over four years later, with many sellers and customers willing to take a chance on legal consequences rather than make a risk-free deal.

Maintaining a profitable black market for a perfectly legal product is quite an accomplishment. But never fear, Colorado lawmakers have a plan—they’re moving to ban marijuana advertisements by unlicensed vendors. That should learn ’em.

Except… Given the history of illegal dealings that have prospered even in the absence of Craigslist postings, that’s probably not going to do the trick. It doesn’t even begin to address the driving force behind the black market, which is taxes so sky high and regulations so burdensome that they make legal pot uncompetitive.

View this article.

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How Trump’s Refugee Order Is Playing out in the World

Today at noon ET I am once again guest-hosting The Dean Obeidallah Show on SiriusXM Insight, channel 121. As befits a Muslim-hosted show, we are going to be talking about the executive-order controversy, first with BuzzFeed Mideast correspondent Borzou Daragahi, then with political commentator Pejman Yousefzadeh. Please call the program any time at 1-877-974-7487.

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More than 10 Percent of Federal Medicaid Payments Last Year Were Improper

Every year, the Government Accountability Office (GAO) releases a report putting a dollar figure on the amount of improper payments in Medicaid. And every year, it shows that the program, a jointly funded federal-state program for the poor and disabled and one of the nation’s biggest budget items, spends a substantial portion of its annual budget in ways that it shouldn’t: On fraud, on waste, on services not rendered, not medically necessary, or incorrectly billed.

Last year, for example, the GAO found that about 9.8 percent of federal Medicaid expenditures, or about $29 billion, was spent improperly. That was up from the previous year, and the increased error rate was the main driver of an overall increase in improper payments across the federal government.

This year, the total has risen once again. About 10.5 percent, or $36 billion, of federal spending on the program isn’t up to snuff, according to a GAO report released this morning.

The program’s sheer size, along with the variety of types of individual payments it makes, makes it particularly vulnerable to bad spending. And that’s been the case for a long time. The GAO added Medicaid to its list of high-risk programs in 2003, and in the years since, government officials have been slow to implement the watchdog’s list of suggested reforms intended to reduce unnecessary spending. This is an enduring problem for Medicaid, one that neither Republican nor Democratic administrations have figured out how to fix.

Among the problems that GAO highlights: Medicaid officials have not taken sufficient steps to make sure that “only eligible beneficiaries are enrolled in Medicaid.” Basically, there are too many people signing up for coverage who don’t actually qualify for coverage—especially with regard to Obamacare, which dramatically expanded the program in participating states. Today’s report notes the GAO’s own study showing that 9 of 12 fictitious applications were approved for coverage and subsidies under the health law during last year’s special enrollment period. This isn’t strictly limited to Medicaid, but it suggests how weak the controls are on application.

And although the federal government has taken some steps to review eligibility protocols, it has “excluded from review federal Medicaid eligibility determinations in the states that have delegated authority to the federal government to make Medicaid eligibility determinations through the federally facilitated exchange.” In short, it has, rather conveniently, exempted the federally run exchange from the sort of oversight that the GAO says is necessary.

On the flip side, the GAO also warns that health officials aren’t doing enough to make sure that only eligible providers are enrolled in the program. The report notes that “our prior work has identified hundreds of Medicaid providers who were potentially improperly receiving Medicaid payments”—basically, folks who are engaging in fraud, or something fairly close—and says that the Centers for Medicare and Medicaid Services (CMS) isn’t doing nearly enough to weed out these bad actors.

The report also notes that there are not enough controls in place for Medicaid managed care, in which the program’s services are contracted out to private companies, and that there’s not enough coordination between Medicaid the Obamacare exchanges.

Beyond the bureaucratic details, what this report makes clear, yet again, is that Medicaid is not a particularly well-run program, and that its size, scope, and complex structure make it particularly susceptible to waste and fraud. And in its current state, the program has proven difficult to reform through better oversight and program management. Which means that folks who are looking to fix these problems ought to be thinking bigger, and looking for more substantial structural reforms that don’t effectively have a 10 percent waste level built into the system.

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