Governor Romney’s Mediscam

Daniel Hatcher, a professor of law at the University of Baltimore, recently authored an op-ed for the Boston Globe on how Romney, as governor, was a deft practitioner of what’s been called “Mediscam.” The practice, which Hatcher credits to another New England Republican, Judd Gregg, is basically a case of lying through numbers: because a state’s spending on Medicaid is matched (and sometimes exceeded) by the federal government, some governors have taken to monkeying with their budget reports in order to wring more from federal coffers. It’s not quite Greece-before-2008-level chicanery, but it’s close.

And according to Hatcher, when it came to abusing Medicaid, Romney was second-to-none.

The comparison between Governor Romney’s creative paperwork and citizen Romney’s creative tax returns is, of course, unavoidable. But as far as I know, the great State of Massachusetts does not currently have many holdings in the Caymans. Indeed, reading Hatcher’s description of how Romney exploited Medicaid’s potential weaknesses for fraud, I’m reminded more of Romney’s m.o. as Bain Capital CEO than his tax return contortions:

Buried in his 2004 budget, Romney proposed maximizing federal aid by taxing hospitals, shifting the resulting tax payments in and out of an uncompensated care fund, back to hospitals as adjustment payments, and diverting resulting federal Medicaid funds to state general revenue. He also proposed using taxes on nursing homes and pharmacies in his efforts to maximize and divert federal aid.

In such strategies, health care facilities serving the poor are used to claim federal funds to help the poor. But the health care facilities and the poor may get nothing, as the state diverts the federal aid to general coffers — and revenue maximization contractors reap millions in contingency fees. Romney used such private companies to help carryout his strategies.

Recall that loading up on other people’s money and using it to pay significant service fees was the essence of Bain Capital’s model, at least so far as those on its payroll were concerned. When he was in private equity, the cash would come from loans taken out by the firms Mitt took over through Bain Capital. As governor, it came out of Massachusetts’ hospitals, nursing homes, and Medicaid-using populations. Not in the sense that the scheme should have netted them even more extra funds than it did. That would’ve been less-than-ideal, but, in that scenario, everyone (except Uncle Sam) comes out ahead. But that wasn’t what Mitt was doing.

What he was doing was raising taxes on Medicaid users and providers in order to funnel the resulting supplementary funds into the pockets of private contractors as well as the State’s piggy bank. Medicaid users come out worse, not less-better.

As governor, Romney wasn’t the only one doing this. But the steady consistency of how he managed both Bain Capital and Massachusetts is disconcerting — and not simply because it’s so opposite from the Romney’s ever-shifting public persona. The pattern we see throughout is a willful perversion of the law’s intent, a manipulation of the system that only Ayn Rand could find morally defensible, and the maximization of short-term paydays at the expense of the collective, long-term interest. He’s probably a good dude in his personal life; but this is how Romney’s run all of his professional ventures.

And if we look at his current proposals for Medicaid — turning the program into one in which the federal government no longer matches state payments but rather doles out a set amount of cash to each state, more or less letting them do with it what they will — we’ve little reason to suppose a President Romney would be any different.

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