No, It Will Cost Missourians Considerably More Than ‘$20 Per Person’ To Expand Medicaid

Posted on by Patrick Ishmael

The St. Louis Post-Dispatch has published a commentary by Saint Louis University School of Law Professor Robert Gatter in which the good professor claims that Missourians would only have to pay an extra $20 per person, per year to expand their Medicaid program. How does he arrive at that dollar amount? In short, some creative accounting.

Here’s the math. Under the ACA, Washington, D.C., will pay 100 percent of the cost of expanding Medicaid for three years starting in 2014. Then the federal share of that cost in any state that expands its program drops gradually over four years to 90 percent, and it remains there forever. Missouri’s budget director estimates that the state would receive about $2 billion on average each year from the federal government during the first 10 years of expansion. Meanwhile, Missouri would pay, on average, about $80 million per year. That cost would be divided among most of Missouri’s roughly 6 million residents. After excluding Missouri’s children and poor adults, about 4 million residents would share that average annual cost. Eighty million dollars divided by 4 million people equals $20.

Prof. Gatter is, unfortunately, just wrong. The cost of expanding Medicaid would not be $20 per Missourian. It would be much more.

First, Gatter lowballs the state cost of the expansion. As I have written before, the Kaiser Family Foundation estimates that the new program could cost the state almost $800 million in the program’?s first five years — twice what most news outlets have been reporting as the program’s potential cost to the state — and on an annual basis, likely over $100 million in the years that followed. Gatter’s “$20 per person” assumption is based on a rosy baseline that considers only the state budgetary costs in supporters’ ideal budgetary scenario. For a state already facing a battery of budgetary problems, such programmatic ambiguity is dangerous — and especially dangerous if that ambiguity is not admitted.

But the state contribution to the expansion is only a fraction of the cost to Missourians. Again, we are the federal government. Federal money that would go toward a Medicaid expansion is not, despite what the Post-Dispatch has called it, a ?”windfall.”? It is our money, being paid back to us from our own pockets. Taking this into account and dividing Gatter’?s annual $2 billion cost to the feds between his four million Missourians, taxpayers can expect to pay closer to $500 total each year to expand Medicaid, not $20. (I say “closer” because there is, as with so much of this stuff, some taxing and spending nuance involved here.)

That said, and in Gatter’?s own words, those costs then ?”remain there forever” — unless, of course, the law is repealed.

It is bad policy to let politicians essentially split their programs onto different credit cards and for us to act like one or both cards are free money, rather than a liability. If the cost of one bill rises, taxpayers’ overall bill rises. It i?s not an “investment” for a husband to spend $20 out of one family account and $500 out of another, and then to tell his wife he only spent $20 of the family’s money. It is, at best, a shell game, and one that will eventually bite all involved. The result? For Missourians, it means higher taxes, fewer services, or both, with a ?reform? that does not credibly control health care costs.

And a word on Prof. Gatter’s assertion that the Medicaid expansion would produce net savings to the state economy. The professor writes that Missouri experiences “an annual loss to [the] economy of $720 million to $1.5 billion for the 308,000 Missourians [who the proposed] Medicaid expansion would cover.” But does spending $2 billion-plus in taxpayer money each year — state and federal money, much of it likely borrowed — to recoup even $1.5 billion in presumably taxable economic activity really make economic sense? Even liberally construing all of the savings Gatter contemplates in his piece to the maximum, his case for “savings” is far from made, both for individuals and for the government.

Missourians will not get off cheaply with an ACA Medicaid expansion, and in a very real way, much of the cost of the expanded program would just go to another, already maxed-out credit card also in the taxpayers’ name. That is a problem.

Just Wait A Minute

Posted on by Michael Rathbone

On Aug. 7, Kansas City voters will consider a proposed sales tax increase. Is this a good move for Kansas City? Or is it just more of the same desperate cycle? City taxes and regulations hurt the business environment. Businesses and jobs leave. City funds and services suffer. Taxes are increased to replace funds and maintain services. More businesses and jobs leave. Repeat. While this is being sold as a tax switch, the new revenue from sales taxes will be much higher than the offsetting cuts from the elimination of land taxes and car registration fees.

Also, is raising the sales tax the most efficient way to gain revenue for the city? Why would the city want to eliminate its land tax in the first place? My colleagues, Professor Joe Haslag and Policy Analyst David Stokes, have written about the benefits of land taxation for local governments. Kansas City is unique among local governments in Missouri because it is able to collect land taxes. There is widespread agreement among economists that land taxation causes a minimal amount of economic distortion, yet in its search for extra revenue, Kansas City looks to raise sales taxes.

When people vote on an issue, they should be equipped with as much information as possible. The situation in Kansas City is no different. Even though half a cent sales tax increase does not seem like a large amount, people should be aware that even innocuous decisions can carry with it unforeseen consequences.

Best Bet To Save Soulard Market? Privatization

Posted on by Brett Gall

The Soulard Farmers Market
The Soulard Farmers Market.

Last month, Saint Louis City officials unveiled a plan to spend up to $18 million renovating the historic city-owned and managed Soulard Farmers Market. The city plans to partially rely on revenues from a proposed tax hike for funding. However, there is an alternative to a multi-million dollar taxpayer-funded makeover: privatization.

When nearly 40 farmers’ markets (see page 4) markets popped up across Saint Louis, including four markets within a 3-mile radius of the Soulard Market, and Walmart and Target began carrying fresh groceries, Soulard Market did not adapt. Its prices are higher than Walmart, it misses out on Sunday shoppers because it is closed, its structures are a mess, and it faces a branding problem as a nearly farmer-less farmers’ market, where “very few vendors grow what they sell.”

The market faces daunting odds: it has operated at a loss for most of its recent history and another downtown farmers’ market was cancelled last year due to a lack of interest. While the city’s plan makes strides in responding to evolving shopper preferences, it targets a symptom instead of the disease, doing so at the cost of millions in taxpayer dollars for another potential redevelopment failure.

The benefits from privatization could be numerous. The property, which is protected under historic ordinances and could potentially be further protected through historic preservation easements, would provide revenue to the city or allow slightly lower tax rates if it was sold. Private ownership would create a stronger profit motive because owners would be personally invested in the market. Owners/lessees, not taxpayers, would assume the risk of development. Even if the proposed plan is perfect, privatization would be beneficial to increase competition.

Currently, public planners are tip-toeing around vendors more concerned with maintaining their status quo of privilege (from a time “years ago when rules were a little more lax or when variances were allowed”) than promoting the long-term success of the market. The St. Louis Post-Dispatch describes the vendors’ reluctance to bring competition to the market:

[Vendors] worry that new vendors could drive them from their turf and scare away customers who rely on the market . . .They . . . worry that any reconfiguration of the market could change dynamics that have fallen into place over decades of doing business.

What vendors miss here is that the “dynamics that have fallen into place” are a major reason the market has become a ghost of its former self. Maintaining long-standing vendor-shopper relationships and character is important, even for a private market, yet respect for culture does not preclude dramatic change. But tell that to the vendors:

“I know what makes my place click,” [a vendor] said. “If they [re-situate] everything, it would throw off everyone’s business. Why don’t you just build this fantasy market across the street and see who stays in business longer?”

These fantasy markets are a reality. Others are doing what the Soulard Market does, but better. The proposed plan is a short-term gamble to solve a long-term problem. The best long-term bet for the market is private ownership and management.

As for who will stay in business longer, vendor Lenard Chartrand is not revealing any secrets when he when he says, “The market has to change or it will die.”

Some ‘Windfall’: Would It Actually Cost Missouri Nearly $800 Million To Expand Medicaid?

Posted on by Patrick Ishmael

Since the U.S. Supreme Court ruled that the Affordable Care Act’s Medicaid expansion could not be forced on the states, there has been a lot of talk about whether Missouri should opt into the expanded Medicaid program anyway. The St. Louis Post-Dispatch describes the state-to-federal funding arrangement as a “windfall” because, they say, the state would “only” have to pony up $431 million to get $8 billion in federal funding.

But would it really cost the state $431 million?

The source of the Post-Dispatch‘s figure is a Kaiser Family Foundation report, published in May 2010. The document lists the costs and federal benefits that would come to each state when the state joined the expanded Medicaid program. And they list two participation scenarios: first, a “standard” scenario, where participation in the program is moderate, and an “enhanced” scenario where, as they put it, there would be a “more aggressive outreach and enrollment campaign by federal and state governments as well as key stakeholders including community based organizations and providers that would promote more robust participation” in the expansion. Would the government aggressively market the expansion? Almost certainly, and the feds already have aggressively promoted other parts of the ACA (to wit: “The agency [Health and Human Services] also is launching a more aggressive marketing campaign . . .”)

Long story short, things could get a lot more expensive for Missouri to participate in Medicaid than the Post-Dispatch‘s report would indicate. Kaiser’s “standard” participation scenario indeed predicts that Missouri would have to pick up $431 million in new spending. But, if the program’s participation rate is higher, the state could be stuck with somewhere around $773 million in new spending. And that is just for the years 2014-19. Legislators can count on at least an extra $100 million to $150 million each year after that to pay for the expansion, and possibly much, much more if participation rates are higher.

And where, exactly, would all of that money come from? You, of course, through higher taxes and/or reduced state services elsewhere. And that is completely neglecting the fact that Missourians would not be getting a “windfall” of federal dollars. Taxpayers are the government. We would be paying ourselves. If participation in Missouri’s Medicaid program rises, the cost to the federal government will increase, meaning not only will taxpayers be spending more money through the state, but they will have to spend more money through the feds, as well.

Some “windfall.” Taxpayers and policymakers deserve to know when they are being sold a bill of goods. This is one of those times.

McGraw Milhaven – David Stokes on KTRS

Posted on by David Stokes

David Stokes has a recurring spot on McGraw Milhaven’s KTRS radio program.

Among the topics discussed in this appearance: the Supreme Court decision regarding the Affordable Care Act, the possibility of Saint Louis city and county sharing police resources, Schlafly Brewery’s urban farm proposal (and its tax implications).

 

McGraw Milhaven – David Stokes on KTRS

Posted on by David Stokes

David Stokes has a recurring spot on McGraw Milhaven’s KTRS radio program.

Among the topics discussed in this appearance: Auditor Schweich’s report on the Missouri Department of Economic Development, problems with tax credits generally, water pricing during a shortage, imposing water meters on residents of the city of Saint Louis.

 

Richmond Heights Continues To Ignore A History Of TIF Failures

Posted on by Mary Hopkins

The Show-Me Institute has written extensively about the negative effects of Tax Increment Financing (TIF), yet cities in Missouri continue to provide us with cases of TIF failure. The city of Richmond Heights, for example, is pursuing plans to redevelop the Hadley Township area just south of Hwy. 40 and east of Hanley Road using TIF to attract potential developers. The real kicker: This will be the fifth attempt in 10 years to redevelop the low-income neighborhood into a commercial area.

Usually when we write to warn cities about the dangers of TIF, we urge them to consider the failures in other cities or other developments. Officials in the city of Richmond Heights need not look past the city’s own history and, in fact, the history of this particular development. Developers have had their eye on the area since the late 1990s, and two of the proposals (from Michelson Commercial Realty in 2006 and United Plaza in 2010) seemed like they might actually get off the ground before collapsing, mostly due to the state of the economy following the 2008 crash. Now, Richmond Heights is at it again, enticing Pace Properties and Menards with promises of substantial amounts of TIF ($27 million and $24 million, respectfully).

The interesting thing about Hadley Township is that it is not an example of TIF having a negative impact on an area because it cost taxpayers millions and showed less-than-impressive returns — though that is exactly what could happen if the current plans move forward. Instead, this is a case of a city dangling TIF like a carrot in front of developers but failing to complete any of the proposals brought forth. This has left homeowners in limbo; many have moved on or let their homes fall into disrepair because of rumors that they will soon be bought and torn down. It seems like a dismal outlook for the area — either taxpayers are on the hook for more than $50 million of the developments or the neighborhood is left in the blighted state it has reached because of the failures of the past decade. There is, however, a third option: Ditch the TIF and encourage private developers to take advantage of the fact that many of the residents are willing to sell. Private developers, not TIF, could provide the solution that the residents of Hadley Township have been seeking for so long.

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