Why is American Health Care So Expensive? Because You’ve Been Overcharged

Posted on by Bennett Lewis

Hot off the Cato Institute press, Overcharged: Why Americans Pay Too Much for Health Care tackles an anxiety-inducing question: Why is our health care system so costly and dysfunctional?  Authors Charles Silver and David A. Hyman have differing top-flight educations and differing political backgrounds, but they both recognize the non-partisan reality of our health care system. It performs exactly as designed: expensively and with little accountability.

Silver and Hyman reveal the key flaws in America’s health care system, which replaces consumer choice with government control and third-party payment, driving up the cost of health care. Prices will fall, quality will improve, and medicine will become more patient-friendly only when consumers take charge. As Overcharged explains, when health care providers are subjected to the same competitive forces that shape other industries, they will either deliver better services more cheaply or risk being replaced by someone who will.

Overcharged is getting the attention of top free marketeers and conservative influencers. George F. Will, Pulitzer Prize-winning columnist and author raves that “Silver and Hyman frighten us with the facts and point to ways the biggest player in the health care game—the government—can stop making matters worse.” Show-Me Institute has also noticed the usefulness of Silver and Hyman’s free-market solutions to the national health care problem. We have invited the authors to Missouri to discuss their book. Details for the event are attached. We hope to see you there!

Get Tickets: https://showmeinstitute.org/overcharged-why-americans-pay-too-much-healthcare

Spread the Word: https://www.facebook.com/events/264480817839154/

 

Would Kansas City Bike Lanes Actually Save 36 Lives per Year? Probably Not

Posted on by Kelvey Vander Hart

Kansas City officials are working on a draft of the Bike KC Master Plan, a strategy for increasing bike lanes within city limits. Advocacy group BikeWalkKC says that the plan, which could cost taxpayers anywhere from $387 to $418 million, would save 36 lives per year if implemented. But how do we know that’s true?

It is important to realize that this marketing campaign, even though it uses biker-oriented talking points, is not talking about 36 cyclist lives—the latest annual data from 2017 showed zero cyclist fatalities. Instead, it estimates:

  • 15 lives saved by increased physical activity
  • 6 lives saved by improved air quality
  • 15 lives saved by a reduction in fatal car crashes (not crashes that occur because a cyclist was involved—any fatal car accident counts)

Only the physical activity category is directly connected to bikers who would use the lanes.

There are problems with these estimates. Physical activity benefits, while hard to measure, are dependent upon more Kansas Citians choosing to bike instead of drive. Only 0.3 percent of commuters used bikes in 2018, and a survey noted that fewer than 50 percent of respondents were interested in biking more. More bike lanes could mean an increased number of bikers—but it’s just a projection, and there’s no way to know how many more bikers we’ll see with expanded bike lanes, let alone what the actual health benefits will be.

Six lives saved by improved air quality also seems a stretch. The number was achieved by expanding data from research in New Zealand. Even if this study was properly applied to Kansas City, the boasted number is the highest estimate possible. An economic summary of the Bike KC Master Plan read:

Assuming 1 death due to air quality for every 100 million vehicle miles traveled and 1 per 40 million vehicle starts (trips), the bike plan could reduce Kansas City air pollution fatalities anywhere from 1-6 deaths per year . . . [emphasis added]

The most puzzling estimate is that of fatal crash reduction. The economic summary of the bike plan noted that 228 fatal car crashes occurred within the city limits of Kansas City from 2015-2017, and that 94 of these occurred along the route of the proposed bike lanes. While the summary boasts a 47 percent reduction in these crashes due to the way bike lanes will change the flow of traffic, no crash data was included.

Upon reaching out to the authors of the economic summary for more information, I was told that they did not have any data on the cause of these car accidents: 

The dataset provided by the Mid-America Regional Council did not provide any context on the causes of the crash. There has been some analysis of the contributing factors in fatal crashes . . . but our FHWA source on road diets does not differentiate by crash cause or even crash severity. It is simply an empirical measure on the impact of road-dieted streets on total crash volume. These benefits accrue to all users, regardless of mode or how many people take up bicycling.

How can a 47 percent reduction in fatal crashes be a realistic estimate when there is no available data on what caused the crashes? If the reduction is due to fewer cars traveling the roads with the bike lanes, does that simply mean the crashes occur on the alternative routes these cars travel? Stating the number of crashes occurring within city limits and presenting some traffic flow statistics from other areas does not seem compelling. If BikeWalkKC wants to claim 15 fewer lives taken annually by fatal car accidents as a result of expanded bike lanes, shouldn’t there be more data to back that claim up?

By portraying the Bike KC Master Plan as a strategy that will save 36 lives per year, BikeWalkKC is not avoiding the real problem at hand: this project will cost hundreds of millions in taxpayer dollars, money that could be better spent elsewhere. As my colleague Patrick Tuohey noted,

Kansas City has significant needs, significant transit needs. They are not biking. It is infrastructure. It is infrastructure repairs. It’s getting those steel plates off our streets.

The use of questionable statistics will not help develop solid city policy. If the city has millions of dollars to toss around and is concerned about saving lives, a better idea would be hiring more police officers, not building more bike lanes.

 

 

 

Springfield and Strafford Gave Us Their Checkbooks Two Years Ago. Why Didn’t Battlefield?

Posted on by Patrick Ishmael

Last year, a bill requiring cities to submit their spending records—or “checkbooks”—to the state was filed in the House, and this year the measure passed the lower chamber in a bipartisan vote. Yesterday it was heard in committee in the Senate.

But unfortunately, the bill appears to be facing headwinds in the Senate, where there’s talk of making the reform “voluntary.” That would be a mistake based on a host of misconceptions propagated by House debate of the bill and reinforced by a host of special interests who don’t want these checkbooks public.

First, the idea that “small cities” are going to be unable to produce these records flies directly in the face of the truth. Responses to our Sunshine requests show pretty clearly that despite assertions to the contrary, city size has basically nothing to do with whether a city could produce spending records, or even produce them for free. The following cities—all with fewer than 300 residents—are just a handful of the cities that produced their spending records at no cost:

  • Centertown, population 278
  • Filmore, population 185
  • Lohman, population 163, and
  • St. Thomas, population 263

What was doubly confusing about the House debate and subsequent pushback in the Senate was the claim that Springfield, of all places, would have trouble complying with the law. In fact, we asked Springfield (population 167,000) for their records two years ago, and the city provided them to us—free of charge. Springfield’s much smaller neighbor, Strafford (population 2,400), also provided their checkbook for free.

Meanwhile, their neighbor Battlefield (population 5,500) wanted $35,000. Why should Battlefield be able to price the public out of transparency? Why should any city be able to do that?

This isn’t about city size. It’s about city culture. And if someone tells you otherwise, they’re selling you bunk.

Second, making participation in the state’s checkbook database voluntary for cities would incentivize cities like Battlefield to keep their spending secret. If a city like Battlefield wants to charge the public tens of thousands of dollars to see how it’s spending tax dollars, why would it submit any information to the state voluntarily? Perversely, the city checkbooks that likely need the most oversight will continue to be the least likely to receive it. That’s unacceptable

Lastly, the notion that requiring cities to disclose their spending to state would somehow violate Missouri’s Hancock Amendment, which speaks to unfunded mandates, is ludicrous.  Nothing in the text, case law or spirit of the law of the Hancock Amendment suggests it would prevent the public from seeing how cities spend money. What’s more, cities already have to submit financial reports regularly to the state that include how much they’re spending. And a city can’t submit expenditure totals without knowing their expenditures.

These “checkbook” records exist. Cities shouldn’t get to hide them.

 

 

No, Low-Income Housing Tax Credits Aren’t Effective

Posted on by Elias Tsapelas

Sometimes it seems as if politicians can always find a justification for spending more taxpayer dollars. Despite numerous academic studies and state auditor reports showing the ineffectiveness of low-income housing tax credits (LIHTCs), proponents are now arguing for the program’s revival by pushing exaggerated claims of economic activity that the credits allegedly generate.

As my colleagues have discussed many times before, three consecutive state auditors (both Democrat and Republican) have concluded that the LIHTC program spends less than $0.42 of each dollar on affordable housing. As of 2017, there were over a billion dollars of LIHTCs outstanding or available to be issued, and those are dollars that won’t be available for spending on existing state services. It should be obvious that Missourians deserve better stewardship of their hard-earned tax dollars, but the program’s supporters argue those figures don’t adequately capture the economic benefits the state receives.

The target of the proponents’ critique is the economic modeling tool the state uses to measure the impact of government programs. One conclusion from the 2017 audit that used the model in question was, over a span of 15 years, Missouri received only $0.12 return for each dollar invested in LIHTCs. But proponents argue the model is “incomplete and thus questionable,” and as one elected official recently noted regarding LIHTCs, “value and effectiveness can’t always be quantified in data.”

It is important to note that the critique relating to the audit’s findings does not mention the inefficiencies of the program. Literature on the topic is clear that the regulations surrounding the construction and development of low-income housing inflate project costs. And there are now multiple academic studies that show the federal program does not significantly increase the amount of available affordable housing.

While the LIHTC program is considered a tool for economic development, its effectiveness should be measured by its ability to achieve its defined purpose—increasing the availability of affordable housing in Missouri. More specifically, how have the credits Missouri has issued in addition to the credits offered by the federal government induced additional development of affordable housing, and at what cost?

As the research indicates, the LIHTC program is not an effective or efficient way to increase the amount of affordable housing across the state, regardless of the claims of economic impact made by the program’s supporters. As policymakers consider reviving the state’s practice of issuing LIHTCs, their decision should be based not on the emotional appeal for new housing, but on whether the program as currently constructed is a justified use of their constituents’ tax dollars. The evidence indicates it is not.

 

A Moonshot of Mistakes: Missouri’s Missing Million

Posted on by Patrick Ishmael

When the United States put a man on the moon in 1969, the state of Missouri was the 13th largest in the country in terms of population. Today, it’s the 18th largest. While the rest of the country grew significantly over the last half-century, Missouri has lagged behind its peers to such an extent that had it simply grown like the rest of the country, it’d have had a million more residents than it does today.

What happened? A new paper published by the Show-Me Institute from economists Rik Hafer and William Rogers provides some insight into Missouri’s half-century of stagnation.

Much of the problem can be traced to the underwhelming growth of Missouri’s two major metropolitan areas: Kansas City and St. Louis. Hafer and Rogers found that from the late 1960s to the mid-2010s, the Missouri portions of the Kansas City and St. Louis metropolitan statistical areas (or MSAs) grew by about 20 percent, which at first glance might not seem terrible. The problem is, similar “mid-major” MSAs around the country grew by nearly 90 percent during the same period.

At least in some respects, the issue boils down to job growth and the retention of trained workers in high-growth industries. Certainly, individual states may be more predisposed toward certain industries based on their geography, their natural resources, and other factors, but in the five industries that have seen the largest growth in the U.S. over the last 20 years—information, professional business services, education, financial services, and mining/logging—Missouri has lagged the national average. For years, Missouri has had weak domestic in-migration, and in particular, the state has had weak in-migration of holders of bachelor’s and advanced degrees who might fill the jobs in these fast-growing industries.

Indeed, in at least four of these industries, a bachelor’s or advanced degree might be expected for a substantial number of these jobs, and arguably those jobs tend to be more urban in nature rather than rural. And that brings us back to Missouri’s two major cities: The industries that need these workers aren’t growing as fast there as they are elsewhere in the country. And although Kansas City and St. Louis are generally regarded as the “engines” of the state’s growth, Missouri’s economic horsepower has sounded more like a Pinto than a Porsche over the last few decades, in no small part due to these losses in talent.

But not every part of the state has been caught up in the state’s overall growth malaise. The metropolitan areas of Springfield and Fayetteville, Arkansas—specifically the parts in Missouri—have exceeded the state’s growth averages over this roughly 50-year horizon. And even within Missouri’s mid-major MSAs, places like St. Charles County and Platte County have been bright spots for the state, offsetting some of the weak economic performance seen in places like Jackson County, St. Louis County, and St. Louis City.

What can be done? That question is beyond the scope of Hafer’s and Rogers’ work, but it merits a discussion among the public and by policymakers. Different regions will have to grapple with different problems; last year, for instance, I wrote that St. Louis City’s long-standing woes can be traced back to its dysfunctional educational, crime, and tax policies, all of which incentivize current and prospective residents to put down their roots elsewhere in the region, or beyond it entirely. Similar criticisms can be leveled at Kansas City. Elsewhere in the state, educational and tax issues are perhaps the more pressing issues for long-term economic growth in their regions.

Regardless, Missourians must begin a serious and deliberate process to ensure that the state is creating an environment for people of all educational backgrounds to succeed here. Hopefully, by the next time astronauts set foot on the Moon, the state will have gotten a handle on its growth problems.

Missouri Needs to Prepare for Expanding Tech Job Market

Posted on by Abigail Burrola

Recently, the Missouri Chamber Foundation released a report claiming that Missouri is situated for high growth in the technology industry in the next decade. This is a great opportunity, but Missouri may not be ready to take advantage of it.

The report projects Missouri to be the ninth-highest state in tech growth over the next decade with 2.9 percent growth, ahead of the national 2.1 percent projection. The tech industry includes energy, environmental, life sciences and information technology (IT).

Despite projected growth, Missouri workers may not be prepared to fill the needs of an expanding tech industry, as jobs could outpace the availability of skilled workers. A survey by Gallup of 1,000 Missouri employers find that only 44 percent were satisfied with the current availability of skilled workers, and only 15 percent agree that high schools are preparing students for the workforce. In 2016 one of the largest workforce gaps was in Science and Technology—around a 9 percent gap  between the workforce demand and available workers.

This gap shows the need for more high school graduates prepared to enter the tech field. If students graduate with the proper credentials, they could have access to a high-demand job and enter the workforce immediately. The largest tech sector in Missouri is IT, of which high school students can earn over 15 IT-related industry-recognized credentials (IRCs) approved by the Department of Elementary and Secondary Education (DESE). An IRC is a nationally recognized credential that tests job skills, awarded by a third-party professional organization. In 2018, fewer than 500 IT-related IRCs were earned among Missouri high school students (less than one percent of the graduating class if all test takers were seniors) according to data received from DESE.

Florida and North Carolina have found that providing bonus pay to teachers is one way to get more students to graduate with an IRC. Bonus pay encourages high schools and teachers to focus on the important work of preparing students for a career.

A growing tech sector would be a huge boon to Missouri’s economy. But if we don’t act now to ensure our workforce is ready for these jobs, the potential boon will turn into a missed opportunity.

 

Taxes and Fees Affect Shopping Decisions

Posted on by Patrick Tuohey

A recent paper on car rental fees published by the Tax Foundation cites Kansas City, Missouri for its rental car excise fee. As with the earnings tax, Kansas City leaders argue that this is free to residents because we’re taxing people who don’t live here. The paper’s authors refer to this as tax exporting, and it affects the decisions people make:

While tax exporting may succeed in disproportionately burdening nonresidents with a rental car tax, the taxes have negative economic effects for the taxing jurisdiction. In addition to lowering the quantity of car rental services demanded, there is evidence that consumers will travel to lower tax jurisdictions nearby, as was the case when Kansas City, Missouri levied a $4 per day rental car tax. Residents and nonresidents alike traveled across the state line to nearby Kansas, which offered a lower effective tax rate on an ad valorem basis, to avoid the tax in Missouri. This harmed Kansas City, Missouri’s economy, resulting in missed tax revenue, lower output, and potentially lost jobs in the rental car industry.

I myself have gone across the state line to rent a car in Kansas to save money. Many people in the region have done this, I am guessing, and the impact adds up. The paper cites research that put numbers to this behavior regarding rental cars:

Tax scholars William Gale and Kim Rueben found that a $4 per day rental car levy in Kansas City, Missouri—an effective tax rate of about 13 percent on an economy vehicle—reduced the number of customers at affected branches by 9 percent relative to branches that were unaffected. While consumers had less than a proportionate response to the tax, they altered their behavior by using other transportation options.

Kansas City cannot tax its way to prosperity. If city taxes remain high while services remain low, consumers and residents will continue to do what they have been doing: vote with their feet.

 

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