Matt Levine’s Money Stuff: Medicaid Taxes Pay for Themselves (Correct)

Medicaid

A classic conflict of interest occurs when the buyer of something gets reimbursed for part of the cost by someone else. Schematically:

1. Alice is a repeat consumer of a thing, and Bob is a producer of that thing.
2. Carol is someone — Alice’s employer, her insurer, a government agency, etc. — who has an obligation to reimburse Alice, say, 60% of what she pays for the thing. (Or to pay 60% of the cost directly to Bob.)
3. The thing costs $100.
4. Alice pays Bob $100 and gets the thing.
5. Carol pays Alice back $60.
6. Net, Alice pays $40 and Carol pays $60; ...