If You Build It, They Will Come
California's Medi-Cal Program Encourages Waste and Fraud
AUGUST 01, 1994 by K. L. BILLINGSLEY
Filed Under : Subsidies
K. L. Billingsley is a media fellow of the Pacific Research Institute in San Francisco.
Critics of the government are not always right that taxpayers don’t get what they pay for. Sometimes they get more. For example, the government of California has recently provided a lesson in the link between human behavior and economics that the best university would be hard-pressed to duplicate. But the lesson proved both expensive and difficult to learn.
In California, no government agency exists to provide health care for middle-class working people and their families. There is, however, a system for the poor called Medi-Cal, which the taxes of middle-class working people pay for, but which remains off-limits to them.
A number of press accounts have pointed out massive fraud in the Medi-Cal system, which is limited by law to California residents. But people from countries as far away as India have flown in, received operations costing hundreds of thousands of dollars—in one case $2.7 million—and quickly departed the country leaving the bill to California taxpayers who can’t use the system themselves.
In some cases, Medi-Cal’s own personnel helped people to commit this fraud and tried to cover up investigations. Here a bureaucratic principle was at work. More “clients” means bigger budgets, which means a bigger allocation from the state and increased job security. So the bureaucratic incentive, unlike the private sector, is to ignore fraud and bloat the budget.
Democracy is not simply the counting of heads but involves the rule of law. In 1986, the United States government granted blanket amnesty to millions of people who had flouted American immigration laws. Federal and California officials rewarded not only them but those whose status remained illegal.
In 1988 Medi-Cal began providing prenatal care to illegal immigrants residing in or even intending to reside in the state. California even launched an advertising campaign called “Baby-Cal,” spending $78,000 for spots on Spanish-language radio and television stations transmitting from Mexico. The state quickly got what it paid for, and more.
“If you build it, they will come,” was the phrase from the movie Field of Dreams. California not only built it but advertised it on television. And they came, in droves.
According to the most recent figures cited in a San Diego Union-Tribune study, undocumented aliens gave birth to nearly 96,000 babies in the state during 1992. This constituted a full 85 percent increase over the last three years and does not include those covered under amnesty who also used Medi-Cal. The costs for 1992 came to $230 million. That same year 40 percent of California’s 237,000 publicly funded births were to undocumented immigrants. And 41 percent of those who used Medi-Cal for maternity care also used the welfare system after delivery.
There are several lessons here. First and foremost, as fiscal conservatives have often pointed out, you get what you subsidize. For example, if you subsidize single-parent families, you will get single-parent families. If you subsidize indigence, you will get indigence. If you subsidize the births of foreign nationals in the country illegally, you will get what you pay for. But state officials are just now learning that lesson.
Medi-Cal’s John Rodriquez told the Union-Tribune that in his “wildest imagination” he never imagined the program growing so fast. “i think,” he added, “we are seeing a magnet effect.” Precisely.
America has been and always will be a country of immigrants. Historically, however, immigrants have traditionally come through legal channels in search of opportunities, not through illegal channels in search of handouts. The “Baby-Cal” fiasco shows how welfare state fraud has corrupted immigration. And as Cuban-American author George Borjas points out, most people now coming are unskilled and may wind up on welfare even if such programs were not their original attraction.
As the Medi-Cal episode also proves, good intentions can have disastrous consequences. And contrary to what one often hears, there is no “free” health care, something California’s four-billion-dollar debt confirms. Federal politicians might see a warning here, but they seem to be missing the point.
On the contrary, they are now promising universal health care for every American and claim that a tax on cigarettes and changes in Medicare will pay for it all. The failed statist medical experiments of other countries provide some prospects as to its possibilities of success. And California’s Medi-Cal program gives some clues as to what we can expect in the way of waste and fraud. American nationals will hold no monopoly in pillaging the system. If you build it, they will come.