Barry is a Senior Economist with the National Center for Policy Analysis, one of the most influential think tanks in America today.
The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. The NCPA's goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector. Topics include reforms in health care, taxes, Social Security, welfare, criminal justice, education and environmental regulation.
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Daily Policy Digest
Provided courtesy of: http://www.ncpa.org/
Daily Policy Digest
- Navigating the ObamaCare Maze
- 21 May 2013 07:00:58 CDT -
On October 1, millions of Americans are supposed to be able to go online and acquire health insurance on electronic exchanges in the states where they live. But here is a question that is being increasingly asked by people in the insurance industry: What happens if the exchanges aren't ready on time, says John C. Goodman, president and CEO of the National Center for Policy Analysis.
- The only states that have functioning exchanges at the moment are Massachusetts and Utah.
- Both developed their exchanges independently of the Affordable Care Act, and they may not be able to do everything the federal government requires.
- Fifteen other states are trying to develop their own exchanges with varying degrees of success.
- The other 33 states have either completely ceded responsibility to the federal government or have entered a partnership that gives the federal government responsibility.
One problem is that too little money was budgeted for creating the exchanges.
- The Congressional Budget Office originally estimated that setting up the exchanges would cost between $5 billion and $10 billion.
- California alone is spending more than $900 million, yet the health reform law allocated only $1 billion for the country as a whole.
- The Obama administration has been cannibalizing other federal health budgets in a mad rush to find more for the exchanges.
A second problem is complexity.
- The Obama administration wants something the federal government has never done: a computer system that connects Health and Human Services, the Internal Revenue Service, the Social Security Administration, Homeland Security and perhaps other departments.
- This is a herculean task with unclear benefits.
- Meanwhile, has anyone asked why we need to link all these agencies in order to operate an exchange?
A third and much bigger problem is competency. The federal government is probably the worst entity possible to design an exchange. One of the worst mistakes the federal government makes is the tendency to try to reinvent systems the private sector has already invented. The government has been true to form under the health reform law, completely ignoring private exchanges that are up and running.
Source: John C. Goodman, "Navigating the ObamaCare Maze," Wall Street Journal, May 19, 2013.
For more on Health Issues:
- The Market for Medical Care Should Work Like Cosmetic Surgery
- 21 May 2013 07:00:57 CDT -
Cosmetic surgery is one of the few types of medical care for which consumers pay almost exclusively out of pocket. In health markets without third-party payers, doctors and clinics use price competition, package prices, convenience and other amenities in order to attract patients willing to purchase their services. When patients pay their own medical bills, they become prudent consumers. Thus, the real (inflation-adjusted) price of cosmetic surgery fell over the past two decades -- despite a huge increase in demand and considerable innovation, says Devon M. Herrick, a senior fellow with the National Center for Policy Analysis.
- The price of medical care has increased an average of 118 percent.
- The price of physician services rose by 92 percent.
- All goods, as measured by the inflation rate, increased by 64 percent.
- Cosmetic surgery prices only rose only about 30 percent.
Cosmetic services have become competitive for a variety of reasons, including the fact that surgeons generally adjust their fees to stay competitive and quote package prices.
Wherever there is price competition, quality competition tends to follow. Consider corrective eye surgery.
- From 1999 through 2011, the price of conventional Lasik fell about one-fourth due to intense competition.
- Eye surgeons who wanted to charge more had to provide more advanced Lasik technology, such as Custom Wavefront and IntraLase (a laser-created flap).
- By 2011, the average price per eye for doctors performing Wavefront Lasik was about what conventional Lasik had been more than a decade ago; but the quality is far better.
- In inflation-adjusted terms, this represents a huge price decline.
By contrast, the market for medical care does not work like other markets. In most markets, prices and quality indicators are transparent -- clear and readily available to consumers. Health care is different: Prices are difficult to obtain and often meaningless when they are disclosed. Most patients never learn the true cost of their care.
Source: Devon M. Herrick, "The Market for Medical Care Should Work Like Cosmetic Surgery," National Center for Policy Analysis, May 2013.
For more on Health Issues:
- Subsidizing Failure
- 21 May 2013 07:00:56 CDT -
There is at least one place with huge potential for ending wasteful higher education spending: to stop subsidizing students who do not graduate and put their education to good use, say Jenna Ashley Robinson and Jay Schalin of the Pope Center for Higher Education.
According to a forthcoming study by Harry Stille, the director of the Higher Education Research/Policy Center in Greenville, South Carolina, the key is admissions policy -- the more qualified the students, the more likely (and sooner) they are to graduate. Stille's data show that the relationship between admissions criteria and graduation rates is extremely strong.
- The 10 state university systems that have the most difficult admissions criteria were all in the top 20 systems for graduation rates.
- Conversely, of the 10 state systems with the easiest admissions criteria, only two -- New Hampshire (6) and Rhode Island (15) -- ranked higher than 37th best for graduation rates.
Stille attempts to compute the cost to the state from students dropping out by multiplying the number of students who start but fail to complete college ("non-completers") at a school (or system) by the amount that the state subsidizes students at that school. Arizona State University is the most wasteful, with an annual cost-of-non-completion of roughly $26 million because it is a large school with a low graduation rate. The University of Virginia is at the other extreme, wasting less than a quarter of a million dollars per year due to drop-outs.
Stille indicates that the average amount of time it takes for students to graduate from public institutions is 5.5 years. This is costly. For example, look at East Carolina University's most recent cohort for which extended graduation statistics are available, the 3,792 students starting in the fall of 2006.
- Of these students, 32.7 percent graduated after four years, and 58.2 percent graduated after six.
- That means that 25.5 percent of the class (the difference between those who graduated in four and six years, or 967 students) needed at least one extra semester to finish their education.
- The state of North Carolina appropriates $5,660 per student per semester, so that, in the fall of 2010, taxpayers were charged $5.5 million extra for students who took extra time to graduate, from just one cohort.
Much of that $5.5 million was waste from taking too long to complete school. Multiplied by several cohorts over many semesters, the cost becomes enormous.
Source: Jenna Ashley Robinson and Jay Schalin, "Subsidizing Failure," Pope Center for Higher Education, May 12, 2013.
For more on Education Issues:
- Optimism in an Era of Growing Inequality and Economic Difficulty
- 21 May 2013 07:00:55 CDT -
The Great Recession of 2007-2009 has profoundly affected the American people. Personal economic stress levels are high, and insecurity about jobs, housing, education and retirement is up among nearly all segments of the public, with many families reorganizing their lives to adjust for declining wealth and real income, as well as poor job prospects. At the national level, Americans are expressing record levels of frustration with what they see as a dysfunctional political system in Washington. Yet despite the American people's struggles with this extended period of economic difficulty, their core values and beliefs about economic opportunity, and the nation's economic outlook, remain largely optimistic, say Pew pollsters Andrew Kohut and Michael Dimock in a new report for the Council on Foreign Relations.
By modern historical standards, these have been tough times for the American public.
- Though the United States enjoyed rising prosperity each decade after World War II, that stretch of economic growth came to an end in 2000.
- Median household income was lower in the past decade than in the 1990s, and the net worth of the average family declined by 35 percent over the same period.
The American public has noticed this change.
- During the past five years, an average of less than 40 percent of people rated their finances as excellent or good, compared to 48 percent earlier in the decade and in the mid-to-late 1990s.
- However, in a display of characteristic optimism over this difficult period, nearly six in 10 Americans expected their finances to improve in the coming year.
- Despite a prolonged recession, levels of optimism about better times one year ahead are comparable to what they have been over the past two decades.
This resilience suggests that while economists may debate whether the fundamentals of the American economy are in decline, the public's mood, so far, can be better interpreted as that of retrenchment, not defeat.
There is also little evidence that economic class is becoming a greater factor in shaping American values than in the past. Americans are certain that the nation can solve its problems, that hard work ultimately pays off, and that income divides are an acceptable part of a healthy economy. But they increasingly see a lack of fairness in public policies that are failing to promote economic opportunity.
Source: Andrew Kohut and Michael Dimock, "Resilient American Values: Optimism in an Era of Growing Inequality and Economic Difficulty," Council on Foreign Relations, May 2013.
For more on Economic Issues:
- The Federal Reserve's Unsound Policies
- 21 May 2013 07:00:54 CDT -
The Federal Reserve is increasing the long-term risk in our financial system through both its monetary and regulatory policies, says John A. Allison, president and CEO of the Cato Institute.
- From 1914 until 2007 the Fed's balance sheet grew to $900 billion.
- Since 2007 the balance sheet has exploded to $3.2 trillion and is growing $80 billion per month.
- The Fed's capital ratio is currently 1.3 percent, while the average capital ratio of the largest banks is 8.0 percent.
The Fed's balance sheet has been radically expanded to hold down interest rates by buying Treasury and Freddie/Fannie bonds, significantly expanding the lending capacity of banks.
Since the U.S. dollar is the world's reserve currency, these actions have created a global currency trade war, causing misallocation of capital and lowering the global standard of living. The only reason the U.S. dollar has held its relative value is its status as the reserve currency. This allows the Fed and Congress to get away with printing money and incurring massive debt that the market would not otherwise permit.
Current Fed regulatory policy is also increasing the risk in the banking system.
- All large banks are being forced to use the same regulatory-driven mathematical risk management models.
- This means that all the major banks will have a strong incentive to take the same type of risk, which significantly increases the overall risk in the financial system.
In addition, by holding interest rates below what the market would create, the Fed is punishing moderate-income savers, especially older individuals.
- Retired individuals with low to moderate net worth should not be making risky investments.
- However, the Fed has forced down interest rates so that low-risk investments have negative real returns.
- This means that many older individuals who hoped to live on their interest income have to consume their principle, which threatens their standard of living.
- On the other hand the extra liquidity created by the Fed is driving higher returns in risky investments, typically owned by high-net-worth individuals.
The primary beneficiary of the Fed's low interest rate strategy is the U.S. federal government, the world's largest debtor. The federal government's annual deficit is at least $250 billion less than it would be if interest rates were normalized. It appears that the real purpose of the Fed is to obtain favorable financing for the U.S. government, at the expense of private savers.
Source: John A. Allison, "The Federal Reserve's Unsound Policies," Cato Institute, May/June 2013.
For more on Economic Issues:
- Leaving Canada for Medical Care, 2012
- 20 May 2013 07:00:53 CDT -
Among the consequences of poor access to health care in Canada is the reality that some Canadians will ultimately receive the care they require outside of the country. Some of these patients will have been sent out of the country by the public health care system due to a lack of available resources or the fact that some procedures or equipment are not provided in their home jurisdiction. Others will have chosen to leave Canada in response to concerns about quality; to avoid some of the adverse medical consequences of waiting for care such as worsening of their condition, poorer outcomes following treatment, disability or death; or simply to avoid delay, says Nadeem Esmail, director of health policy studies at the Fraser Institute.
Understanding how many Canadians receive their health care in another country each year gives some insight into the state of health care in Canada, as well as the state of medical tourism among Canadian residents. Data on this topic are not readily available but an estimation is possible using annual wait times data from the Fraser Institute.
- In 2012, a significant number of Canadians -- an estimated 42,173 -- received treatment outside of the country.
- This is a decrease from the estimated 46,159 in 2011.
- Increases between 2011 and 2012 in the estimated number of patients going outside Canada for treatment were seen in Saskatchewan (from 1,221 to 1,380), Quebec (4,600 to 6,308), New Brunswick (526 to 997), and Newfoundland & Labrador (433 to 649).
- Conversely, British Columbia (from 9,180 to 8,132), Alberta (9,267 to 6,661), Ontario (18,172 to 15,725), Nova Scotia (1,271 to 858), and Prince Edward Island (54 to 28) saw a decrease in the estimated number of patients who received treatment outside Canada.
- The estimate for Manitoba was roughly the same in both 2011 and 2012 (1,436 to 1,435).
- At the same time, the national median wait time for treatment after consultation with a specialist decreased from 9.5 weeks in 2011 to 9.3 weeks in 2012.
- Among the provinces, wait times from consultation with a specialist to treatment increased in seven provinces, falling only in Saskatchewan, Manitoba and Ontario.
Source: Nadeem Esmail, "Leaving Canada for Medical Care, 2012," Fraser Institute, May 2, 2013.
For more on Health Issues:
Health Policy Digest
Provided courtesy of: http://www.ncpa.org/
Consumer Driven Health Care
- Health Care Reform Tax Will Hurt Franchisees
- 04 Oct 2011 12:43:58 GMT - When the employer mandates go into effect in 2014, many franchised businesses will be motivated to reduce the number of locations and move workers from full-time to part-time status...
REAL CLEAR MARKETS
- Saving Jobs from Health Reform's Harmful Regulations
- 04 Oct 2011 12:43:58 GMT - If the rate of health care cost growth had not exceeded general inflation, a typical family would have had $545 more per month in spendable income instead of $95 -- a difference of $5,400 per year...
- Does Health Insurance and Seeing the Doctor Keep You Out of the Hospital?
- 04 Oct 2011 12:43:58 GMT - Gaining health insurance and using more primary care services leads to more hospitalizations as a result of physicians' discretionary decisions regarding aggressive and intensive treatment...
AMERICAN ENTERPRISE INSTITUTE
- The Case for Competition in Medicare
- 04 Oct 2011 12:43:58 GMT - A well-functioning marketplace would set in motion the forces needed to transform American medical care into a model of efficient patient-centered care...
- Potential Effect of Health Care Reform on Emergency Department Utilization Not Clear
- 04 Oct 2011 12:43:58 GMT - In 2010, 71 percent of emergency physicians said that they expected emergency department visits to increase due to the implementation of the Affordable Care Act...
NEW ENGLAND JOURNAL OF MEDICINE
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