Show Me Better (Part 2): Certificate Of Need And Access To Care

Posted on by Christien West

One of the benefits of free markets is their ability to match buyers with sellers. Potential customers assess the supply of goods and services, the parties agree to the prices, and, generally speaking, purchases are efficient – delivering comparable value to both parties.

Unfortunately, Missouri’s certificate of need (CON) program may be erecting barriers to the market functioning efficiently when matching care providers and care consumers. A recent working paper by the National Bureau of Economic Research examined how hospital entry deregulation in Pennsylvania affected the market for cardiac revascularization. Because Pennsylvania eliminated its CON program in 1996, economists were able to compare clinical outcomes before and after the program’s repeal — the ideal conditions by which to conduct an experiment. The researchers found that “free-entry improves the match between underlying medical risk and treatment intensity” and “improved access to care.”

Another study conducted in the same state, on the same topic, found that the post-deregulatory market did a better job at matching the appropriate procedure to the appropriate risk level. After deregulation, better doctors also saw an influx in demand for their services.

Removing the CON program in Pennsylvania empowered patients to attain better care from better doctors. Certainly, a market uninhibited by cumbersome regulations does a better job at matching the right patient to the right procedure, performed by a better doctor, than a nine-member regulatory board. Missouri could follow Pennsylvania’s lead in doing away with the micromanagement and creating a system conducive to competition and innovation.

This Illustration Of Missouri Pension Enhancements Says It All

Posted on by James V. Shuls

Costrell_2014_Figure_2

Today, the Show-Me Institute released a new case study by Robert Costrell, professor of economics and education policy at the University of Arkansas. His paper, “Teacher Pension Enhancement In Missouri: 1975 to the Present,” illustrates how state lawmakers have consistently enhanced retirement benefits for teachers. These enhancements have helped create the system we have today, which has an incredible spike in benefits around a teacher’s 25th year and many other flaws.

For more information about pensions, I encourage you to check out our “Missouri Government Pension Fast Facts.”

 

 

 

 

 

 

 

 

A Transportation Sales Tax Is Bad Policy For Missouri

Posted on by Joseph Miller

As first appearing in the Southeast Missourian:

In the 1929 Rose Bowl, the speedy Roy Riegel of the University of California football team achieved immortality in the annals of college sports when he picked up a fumble, bounced off a tackler, and raced 69 yards – in the wrong direction.

In picking up another loose football — namely, what to do about a sudden decline in revenues for transportation infrastructure — it now seems Missouri may be about to duplicate “Wrong Way” Riegel’s feat. In hoping to correct a severe budgetary problem at the Missouri Department of Transportation (MoDOT) through a statewide 10-year, 0.75 percent sales tax, Missouri is pointed in the wrong direction from a policy viewpoint — one that can only result in inefficiency and waste and undermine the department’s ability to maintain and improve the road system.

How bad is MoDOT’s funding situation? Just a couple of years ago, MoDOT had $1.3 billion annually to spend on road and bridge improvements. By 2017, that amount could fall to $325 million – or just a quarter of what it was a few years ago, when MoDOT had more than $250 million in federal stimulus money. The expiration of stimulus spending is just one of the problems. Historically, the bulk of the department’s revenues came from fees imposed on drivers – most importantly, the 17 cents per gallon state gas tax. However, that tax has held steady since 1996. If the gas tax was simply adjusted for inflation, it would be 8 cents higher and generate almost $300 million per year in additional revenue for MoDOT. But instead of tapping this traditional funding source to plug the spending gap, the Missouri Legislature proposed implementing a statewide sales tax. That tax could raise $534 million a year or $5.4 billion over the course of 10 years. That might be a good deal more than the amount needed to keep Missouri’s infrastructure from “crumbling.”

Anticipating the funding bonanza, local governments around the state have put forward wish lists that would tap into sales tax money. Rather than confining themselves to critical transportation needs, cities and counties put forward lists filled with expensive wants. For example, in Southeast Missouri, municipalities plan to spend money lengthening runways at the Poplar Bluff and West Plains airports. These small general aviation airports generally mostly serve recreational fliers, and local governments and federal and state grants heavily subsidize them. They are in no need of additional sales tax money. Other requests are simply bizarre, such as the pedestrian bridge across a creek in the tiny rural community of Williamsville. Someone should explain why such a bridge is necessary when there are few homes and no sidewalks on either side of the creek in question. Certainly the shoulder state road, which sees only 700 cars a day, is an easy enough route for the occasional pedestrian seeking to traverse the creek.

While some sales tax money will be wasted on popular, if not useful, pet projects, most money will go to fixing MoDOT’s highway funding crisis. And a 0.75 percent sales tax is not an economically sound way to fund roads and bridges. Paying for highways based on how much people shop, and not how much they drive, creates a free-rider problem. It promotes congestion, road degradation, and sprawl. It also is fundamentally unfair to force occasional drivers to pay as much or more for new roads as interstate trucking companies.

There is a better solution: Raise the gas tax and/or implement tolls on major highways. These user-generated fees greatly reduce the free-rider problem inherent in a transportation sales tax. Adjusting the gas tax for inflation would increase road funding in Missouri while simultaneously reducing MoDOT’s long-term costs. Tolling major highways and bridges, like I-70, would enable major improvements financed through public-private partnerships. By charging drivers for the roads they use, tolls and gas taxes are a fair and economically sound solution to MoDOT’s funding problems.

If the Missouri Legislature and voters approve a statewide 0.75 percent sales tax, it will only be a temporary fix. When the tax expires, Missouri will face an even worse problem than it does today — after 10 years of running in the wrong direction.

Joseph Miller is a policy researcher at the Show-Me Institute, which promotes market solutions for Missouri public policy.

 

Amendment 7: The Tax That Keeps On Taxing

Posted on by Joseph Miller

According to current projections, the proposed Missouri Amendment 7, or 0.75-cent transportation sales tax, would raise $5.4 billion for roads, bridges, and other projects over the next 10 years. The Missouri Department of Transportation (MoDOT) has been active in promoting a list of those projects, showing how it would spend the largess. But what is less publicized is that many projects on that list receive the sales tax funds contingent on local governments also bringing money to the table. In many cases, projects approved for state sales tax money require local governments, and their taxpayers, to provide tens or even hundreds of millions of additional dollars.

Take the example of the Saint Louis area. The City of Saint Louis is set to get $25 million for a streetcar that goes from downtown to the Central West End. That might not be such a bad deal, if it were not contingent on Saint Louis coming up with an additional $271.5 million to complete the plan. The sales tax will also provide $40 million to the city for bus rapid transit, but only if Metro can come up with an additional $40 million. In return for $20 million for an I-64/22nd St. Parkway interchange (mostly to the benefit of the Northside Redevelopment Project), the city and developers have to provide an additional $8.9 million. All told, in return for $270 million in state sales tax money, the City of Saint Louis has to find an additional $323 million from other funding sources. That’s $1,016 for every man, woman, and child living in the city.

The story is similar in Kansas City. The city will get $144 million for the streetcar, contingent on it finding the rest of the half billion needed to make the project happen. While Kansas Citians have long been aware of, and been familiar with plans to fund, the streetcar, this is not so for other projects. Kansas City will receive $24 million for a bike path from Pleasant Hill to Kansas City, if it can find $48 million locally. For those counting, that’s a $72 million bike path. Altogether, projects that the sales tax would fund require $459 million in additional funding from the Kansas City area.

The result of these policies is that after taxes have gone up statewide, purportedly to save our “crumbling” highways, local governments may have to increase taxes even further to secure funding for projects on MoDOT’s list. Amendment 7 is the tax that keeps on taxing.

Show Me Better: Assessing Certificate Of Need In Missouri

Posted on by Christien West

One of the most obvious examples of a massive government burden on our health care system is the Affordable Care Act (Obamacare), but Obamacare does not have a monopoly on onerous government regulations in Missouri. In fact, some state-run regulatory programs, such as certificate of need (CON), may also play a role in increasing the cost of care and decreasing access to care for some of the state’s neediest patients.

A certificate of need is a legal document the state issues to allow a health care provider to expand, modify, or construct certain health care facilities. In Missouri, a nine-member committee reviews applications for certificates of need and administers them in accordance with its own rules. For example, last year, the Lafayette Health Center received a CON to construct a new $40 million hospital. Based on the committee’s rules, Lafayette likely paid the review committee a hefty $40,000 application fee.

One of the original purposes of the program was to guarantee health care access by limiting competition in a particular region. Proponents assert that, with less competition, the likelihood of a hospital going out of business will be reduced, hopefully ensuring a sufficient level of care for citizens near the health care provider. Yet, empirical evidence suggests that CON programs neither control costs nor improve health outcomes. Indeed, they may actually hamper access to care and patient choice, at least under some circumstances.

If the certificate of need law could be hurting the people it was intended to help, should it be reformed? Abandoned? These questions are central to why we, as Missourians, ought to take a serious look at the necessity and efficacy of the state’s CON program. In future posts, I will review how CON regulations impact health care costs, access to care, and clinical outcomes.

Op-ed: Proposed Amendment 7 Is Bad Policy

Posted on by Joseph Miller

Today, the St. Louis Business Journal printed my commentary on why the proposed Amendment 7, which would implement a 0.75-cent sales tax to pay for Missouri’s roads, is bad policy.

The op-ed corrects some of the misconceptions that exist about Missouri’s highway system, particularly the idea that the state’s roads and bridges are “crumbling.” While Missouri’s transportation infrastructure can improve in many areas, the fact is that the highway system is in good shape whether you compare it to other states or simply the condition of Missouri’s roads 10 years ago. There is no crisis that should scare Missouri voters into supporting a policy that is destructive and inequitable.

The Missouri Department of Transportation (MoDOT) does have a funding problem, but paying for highways based on how much people shop, instead of how much they drive, is unfair and economically unsound. A better solution is to raise the gas tax or implement tolls on major highways.

If You Haven’t Registered For Our July 31 Friedman Legacy Day Events, What Are You Waiting For?

Posted on by James V. Shuls

McShane

 

For a number of years now, we have partnered with the Friedman Foundation for Educational Choice to celebrate the life and work of Nobel Prize-winning economist Milton Friedman. In his 1955 piece, “The Role of Government in Education,” he introduced the modern concept of the school voucher. He wrote:

Governments could require a minimum level of education which they could finance by giving parents vouchers redeemable for specified maximum sum per child per year if spent on “approved” educational services.

Parents would then be free to spend this sum and any additional sum on purchasing educational services from an “approved” institution of their own choice. The educational services could be rendered by private enterprises operated for profit, or by non-profit institutions of various kinds.

Later in his life, he became an even stronger advocate for empowering parents through school choice.

This year, in honor of his efforts to expand school choice, we are hosting two Friedman Legacy Day events.

The first is at 8:30 a.m. in Saint Louis at De La Salle Middle School. Mike McShane, a fellow at the American Enterprise Institute, joins us for an interesting discussion about private schools closing and re-opening as charter schools.

The second event is at 6:30 p.m. at the Kansas City Central Library. Economist Mark Skousen will share stories of his long friendship and debates with Milton Friedman.

We hope you will join us for at least one of these events. For more information, please visit the events tab on the Show-Me Institute website.

Skousen

Are Missouri’s Highways And Bridges Crumbling?

Posted on by Joseph Miller

Supporters of Amendment 7, the proposed 0.75-cent transportation sales tax, have increasingly begun to argue that Missouri’s roads and bridges are in desperate need of repair. Whether it’s an editorial in the St. Louis Business Journal, a radio host on KMOX, or a bus with a piece of bridge lodged in it, the message is the same: Missouri’s transportation infrastructure is “crumbling.” Presumably, if Amendment 7 does not pass, soon we will be living in the Missouri version of I am Legend. However, all the empirical evidence suggests that the opposite is the case.

ialPictured: Missouri’s Highway System – 8/6/2014

We have often commented that Missouri is “middle of the pack” in various state rankings. Not so with our state highway system. According to the Reason Foundation, our highway system is the eighth best in the nation, in part due to the good condition of our interstate highways and rural roads. The National Chamber Foundation has ranked our road quality seventh best in the nation, with only 6.3 percent of Missouri roads in mediocre or poor condition.

This is not surprising to those familiar with Missouri’s recent infrastructure expenditures. In the last 10 years, Missouri’s highway system added more lane miles while increasing the percentage of major highways in good condition to 88.5 percent and repairing a third of the state’s deficient bridges. And as transit supporters are wont to point out, Kansas City and Saint Louis hold first and second place on a list of cities with the most highway miles per capita. Missouri was able to perform so many projects in the last decade because it issued more than $3 billion worth of bonds and received more than $600 million from the federal Stimulus Act. That allowed the Missouri Department of Transportation (MoDOT) to implement the “Smoother, Safer, Sooner Road and Bridge Program” and the “Safe and Sound Bridge Improvement Program,” among other projects.

When we look at Missouri’s highway infrastructure today, the reasonable conclusion is that the system is in good condition, the best it has been in decades. While Missouri’s highway infrastructure has specific needs (I-70 rebuild, Broadway Bridge), by no definition is the system “crumbling.” MoDOT does have a funding problem, but there is time to select the right funding solution. There is no imminent crisis which would force us to accept an unfair, and economically unsound, transportation sales tax.

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging