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Missouri’s Attorney General Should Join Health Care Reform Lawsuit

Posted on January 11, 2011May 5, 2026 by Christine Harbin

When Missourians passed Proposition C last August with more than 71 percent of the vote, they signaled opposition to the individual health insurance mandate that is central to the federal health care reform law adopted by Congress earlier this year. Policymakers in Missouri should take steps to represent their constituency’s resounding opposition to the measure. Missouri’s attorney general, Chris Koster, has the opportunity to do just that by joining 20 other states in a Florida lawsuit against Obamacare. Governors and attorneys general who decide to participate have until January 10 to join the suit.

There are many reasons why Missouri should join the health care reform lawsuit. The individual mandate requiring Americans to carry insurance overreaches the federal government’s authority under the Constitution’s commerce clause. Health care is just one among the many goods and services that individuals in Missouri consume, and courts have never interpreted the commerce clause as giving lawmakers the authority to require individuals to purchase a product.

The case that’s being heard in Florida is one of the few among the two dozen pending challenges to the new health care reform law that also contests the law’s expansion of eligibility requirements for Medicaid, the joint federal-state health insurance program for the poor. Expanding Medicaid would burden the state budget, and may exacerbate the existing deficit. Lawmakers in Missouri have already made cuts to education and public safety, and other cuts to essential services — or increased taxes — could be necessary if the Medicaid program were expanded.

Medicaid is already one of the largest expenses in Missouri’s budget, and the new health care law depends on an expansion of Medicaid for its projected increase in insurance coverage. In fiscal year 2008, Medicaid spending in Missouri totaled more than $7.09 billion. The federal government pays for the majority of the expenditures, but Missouri taxpayers covered $2.66 billion, or more than 12.5 percent, of the state’s total $21.2 billion budget. Although the law initially requires the federal government to absorb the full cost of the expansion, states could eventually pay 10 percent.

The states that are party to the health care reform lawsuit argue that the law impinges on state sovereignty by requiring the use of state funds to cover a much larger share of low-income people through Medicaid. Not only does it undermine state autonomy, it is also unnecessary.

There are alternative ways to provide health care to uninsured and low-income populations without restricting individual liberties and freedom of choice. When the government allows more competition and choice in insurance markets, people can better choose how to balance cost with their own relative tolerance for risk. One successful strategy would be to eliminate the way in which insurance is tied to employment, and instead encourage health savings accounts (HSAs), which would allow individuals to purchase portable, cost-effective policies, save for foreseeable health-related expenses, and hedging against unknown future risk.

Top-down, centralized plans can’t take into account the many varied needs and preferences of the hundreds of millions of people such plans will inevitably affect. By signing on to this Florida lawsuit, Attorney General Koster can help signal that Missourians are capable of making their own health insurance decisions without an intrusive federal mandate.

Christine Harbin is a policy analyst for the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

School Choice and Graduation Rates

Posted on January 11, 2011May 5, 2026 by Abhi Sivasailam

A newly released report evaluating the impact of Milwaukee’s voucher program (Milwaukee Parental Choice Program) provides evidence that the program has improved student outcomes. The study notes that prior evaluations have demonstrated positive effects of the voucher program on test scores:

Do students benefit by using the Milwaukee Parental Choice Program (MPCP) to attend a private school instead of a Milwaukee Public Schools (MPS) school? In addressing that question, most prior evaluations focus on whether students in the MPCP score better on tests of academic achievement than students in MPS schools. As reviewed in our 2007 report, two studies based on randomized trials each demonstrated significantly higher mathematics test scores for MPCP students as compared to MPS students four years after enrolling in the program; one study also showed significantly higher reading test scores.

In contrast, the focus of the present study was to investigate the effect of the voucher program on graduation rates:

Overall, had MPS graduation rates equaled those for MPCP students in the classes of 2003 through 2009, the number of MPS graduates would have been about 18 percent higher. That higher rate would have resulted in 3,939 more MPS graduates during the 2003-2009 years. A recent analysis of the economic impact of high school dropouts suggests that the annual impact from an additional 3,939 MPS graduates would include an additional $24.9 million in personal income and about $4.2 million in extra tax revenue.

An important consideration to bear in mind when reviewing education research is that educational goals are varied, and a wide variety of educational outcomes can be implicated by policy changes. As such, even if a policy change is demonstrated to have a negligent impact on an important student outcome such as test scores, that policy may still positively impact other desirable student outcomes. In the case of the voucher program in Milwaukee, it appears that several student outcomes are positively implicated by school choice. In other regions of the country, school choice programs have had a much less significant impact on test scores. It is important that researchers and the general public then probe the effects of such programs on other desirable outcomes, as well, before a summary judgment of the policy is made.

Education Debt: The Next Bailout?

Posted on January 11, 2011May 5, 2026 by Christine Harbin

Subsidize

Over-Consume

Bailout

Repeat

It’s a continuous cycle that that policymakers would be wise to end.

Whenever the government subsidizes a good or an activity, it causes individuals to consume more it than they would otherwise. This is because the subsidy decreases the price to consumers, many of whom, by the law of demand, consequently consume a higher quantity. This occurs across all industries. In Missouri, for example, it happens in ethanol production, homeownership, historic preservation, health care, film production, etc.

Education is another product that is over-consumed when subsidized. Last Sunday, a New York Times article illustrated how federal subsidy is partly responsible for the over-consumption of law school:

Apparently, there is no shortage of 22-year-olds who think that law school is the perfect place to wait out a lousy economy and the gasoline that fuels this system — federally backed student loans — is still widely available.

A negative consequence of this overconsumption is degree inflation. According to the signalling model, which contributors to Show Me Daily have discussed previously, individuals have an incentive to accumulate degrees to indicate to employers that they are higher-quality than others in the labor supply. Many jobs that may have required only a high school degree in the past now require a college degree. Based on this article, it seems that jobs that may have required a college degree in the past now require a law degree.

Another negative consequence is lower earnings. It’s a catch-22: The prospect of high earnings encourages a higher number of people go to law school, but because there is a high supply of lawyers, there is downward pressure on earnings.

By knocking the price system out of equilibrium, the government causes a misallocation of resources, which produces a market bubble that will burst as soon as the subsidy ends. Is education debt the next bubble to burst? Will there be an education debt bailout? The protagonist in the article — who has a law degree, $250,000 in debt, and a low-wage temp job — doesn’t seem too worried. He says:

“Bank bailouts, company bailouts — I don’t know, we’re the generation of bailouts,” he says in a hallway during a break from his Peak Discovery job. “And like, this debt of mine is just sort of, it’s a little illusory. I feel like at some point, I’ll negotiate it away, or they won’t collect it.”

Bailing out education debts would mean bad news for taxpayers, since the costs would be diffused onto them. The federal government could not afford it — adding the debts of debt-laden law students would certainly exacerbate the federal deficit.

I’m Just Disappointed That the AP Didn’t Play Up the “Dickensian Aspect” a Bit More

Posted on January 11, 2011May 5, 2026 by Audrey Spalding

Watch out. According to the latest report from the Associated Press (AP), despite recent attempts by states to limit the availability of pseudoephedrine, a key ingredient in both meth production and cold medicine, meth production is up. The AP reached this conclusion after its review of federal data showing that “meth incidents” are on the rise.

Meth incidents, I should note, are a count of the number of times that meth labs, dumpsites, or even meth production equipment is seized. The statistic is not, as I once naïvely thought, a count of meth lab explosions, or even labs themselves. The AP’s analysis does not delve into which types of “incidents” are on the rise, just that the total is up. Additionally, an uptick in meth lab incidents could just be an effect of law enforcement cracking down on meth production more effectively. So, already, we should approach the AP analysis with skepticism.

A few years ago, a number of states, including Missouri, limited the purchase of pseudoephedrine, restricted where it could be sold, and began to track those who purchased the drug. The AP says that those restrictions have created a black market trade in pseudoephedrine, the cold medicine.

From the AP:

An Associated Press review of federal data shows that the lure of such easy money has drawn thousands of new people into the methamphetamine underworld over the last few years.

“It’s almost like a sub-criminal culture,” said Gary Boggs, an agent at the Drug Enforcement Administration. “You’ll see them with a GPS unit set up in a van with a list of every single pharmacy or retail outlet. They’ll spend the entire week going store to store and buy to the limit.”

Well, don’t count me among the shocked. After all, it’s pretty common knowledge that regulation and restriction can create all sorts of black markets of perfectly banal commodities, such as “food, cookware, haircuts, clothing, machinery repair, house building—almost everything people use in their everyday lives.” In this case, government restriction has made something that had previously been easy to acquire that much more difficult, thus increasing the price of pseudoephedrine on the black market to far above the, say, Walgreens price.

Recent government regulation of pseudoephedrine appears to have led to a brief decline in meth production after the regulations were put in place, followed by a bounce back as meth producers found other ways to acquire drug ingredients. In the past year there were, as the AP breathlessly tells it, “10,064 meth incidents, a 62 percent rise over the previous two years.”

Yikes, I guess. This means that there are 0.00003278 meth incidents for every person in the U.S. If that’s too many decimal places for you, perhaps a better way of looking at it would be to say that there is one meth lab incident for every 30,505 people. Per year. And that can be as minor as the seizure of “chemicals and glassware.” I personally am more concerned with car fatalities (which are, by definition, fatal and occur three times more frequently than meth lab incidents).

Say you, or perhaps Gov. Jay Nixon, are still concerned by this uptick in meth statistics. Let’s set aside that we don’t know what type of “incident” is on the rise; whether this is attributable to an increase in use or to better law enforcement; whether the previous low points in the statistics were attributable to declining drug production, or just a shift from one type of drug production to another; and the extraordinarily probable explanation that drug producers will figure out how to adapt (as they have already done) to additional government regulation of pseudoephedrine.

Let’s say that the governor, or even AP reporters, suggest instead that pseudoephedrine be put behind a prescription wall. Only those who have a prescription from a doctor would be allowed to purchase cold medicine. Would that solve the problem? And would that step be worth it?

Okay, yes, those were rhetorical questions. For the first question: Of course not. If meth producers are paying individuals to buy up pseudoephedrine until they hit government-imposed purchased limits, it certainly seems likely that those producers would pay individuals to take the additional step of getting prescriptions to buy up pseudoephedrine. I suppose such a policy would help at least one group of people: Those who could get a perscription and then sell pseudoephedrine to meth producers. I bet that they could get a better price.

The second question is one that I’ve already answered on this blog, and has the same answer as the first: Of course not! There are so few “meth incidents” that to reduce them even by half hardly seems worth the cost to everyone else of either having to go to the doctor’s office when they have a cold, or forgoing treatment.

Again, I’d like to remind legislators, governors, and reporters that health care costs are a huge issue that seems insurmountable at the moment. Regulations like these are bound to increase those costs: Either individuals will have to pay for a doctor’s time in order to obtain a prescription for cold relief, or, if that person has a low co-pay, this regulation will raise health insurance providers’ costs, which will most certainly result in health insurance premium costs rising.

I hope that politicians and reporters will find some other, less intrusive issue to sensationalize for personal gain.

(H/T for post title suggestion to John Payne.)

Missouri’s Urban and Transportation Infrastructures – Jerome J. Day previews his Show-Me Institute Case Study

Posted on January 10, 2011May 5, 2026 by Jerome Day

In a study released by the Show-Me Institute, Jerome Day makes a strong case for helping to drive Missouri’s economy by revamping the state’s transportation infrastructure. The long-time university professor and administrator envisions an innovative partnership with the private sector to build a new I-70 north of the existing highway that would carry more than just vehicle traffic.

Day adds that the railway could be used for passenger traffic.

Hello, My Name Is Christine and I Have a Health Savings Account

Posted on January 10, 2011May 5, 2026 by Christine Harbin

Today, the Springfield News-Leader ran my recent editorial in which I argue that Attorney General Chris Koster should join the multistate lawsuit challenging the federal takeover of health care. I have enjoyed reading the comments there, because many are quite colorful. I would like to address the following comment specifically, because it depends on assumptions that are false:

I hope the SNL editors research and footnote the types of benefits offered to the Show-Me Institute’s employees, if any, and that Harbin discloses her participation, if any, in them. My guess is that she would refuse to disclose which benefits she receives, much like the GOP Congress refused to do this week.

The commenter guessed incorrectly. Even though I don’t consider it to be relevant to my argument, nor do I consider it to be the responsibility of the Springfield News-Leader to investigate it before running an editorial, I’m happy to clarify the health care benefits that I enjoy. This is no secret — it’s something that I mentioned yesterday when I was talking about health care policy on the Mike Ferguson show on the Eagle 93.9 FM in Columbia. It’s a characteristic of my generation — we tend to be very willing to disclose details of our finances.

I have a health savings account (HSA) and a health insurance policy with a $5,000 deductible. My monthly premium, which I pay out of pocket, is around $100, which is manageable. I work at the Show-Me Institute because I am committed to the ideas of liberty and individual responsibility — certainly not because I receive a lucrative benefits package, because I don’t. If I simply wanted a fat paycheck, I would get a job in the private sector or become a school superintendent.

Insurance policies are not one-size-fits-all, particularly in health care. Although high deductible insurance plans and HSAs work very well for healthy 20-somethings like John Payne and me, I’ll readily admit that it is not something that works best for everybody. However, a plan that works best for everybody doesn’t exist. A so-called Cadillac insurance plan with a low deductible, for instance, would be a poor fit for me at this time in my life. This is precisely why health care should remain in the free market — it preserves consumer choice and ensures that individuals can select the policies that fit their needs. We can see that when the government increases the number of mandates, the cost of coverage rises.

Show-Me Institute staff and scholars have highlighted the advantages of HSAs previously. As one particular benefit, my policy is portable (i.e., it’s not tied to my employer). Therefore, if I were to leave the Show-Me Institute, my health care coverage would be unaffected. From my perspective as a young person, an additional benefit of an HSA is that it serves as a tax-sheltered savings account. Unlike flexible savings accounts, which expire every Dec. 31, the money that I put into my HSA rolls over each year. Furthermore, if I don’t spend the money in my account by age 65, I can withdraw it without penalty like I would with a traditional IRA.

The bottom line is that it is important to preserve choice in health care. Overall welfare would decrease if families and individuals weren’t free to choose the policies that best fit their particular lifestyles and budget constraints.

“Wha’eva, I Do What I Want”: The DED Goes Off the Reservation

Posted on January 7, 2011May 5, 2026 by Audrey Spalding

I thought that the Missouri Department of Economic Development (DED) could sink no further. After all, the agency recently awarded tax credits to a man who pleaded guilty to passing bad checks, and has been scolded by the State Auditor’s Office for (perhaps accidentally) pulling numbers out of thin air that happen to overstate the economic benefits of a particular tax credit project.

But the DED has outdone even itself. This week, the St. Louis Post-Dispatch reported that the agency had awarded $8 million to a redevelopment project that a court judge has ruled no longer exists.

NorthSide Regeneration LLC, the company behind an enormous and ambitious project slated to occur in north Saint Louis, received the $8 million. However, the tax credits that the DED awarded must be tied, according to state statute, to a “redevelopment agreement.”

State statute specifies that such a redevelopment agreement exists only when a city has selected a developer (in this case, NorthSide), by passing an ordinance to award additional local tax incentives to the company. Unfortunately for the NorthSide company, although city alderman passed such an agreement, it was thrown out by a judge in July — so, according to the statute, NorthSide simply isn’t entitled to the money. The judge, in his ruling, stated:

FURTHER ORDERED, ADJUDGED AND DECREED that defendants [including NorthSide and the city of Saint Louis], their officers, agents, employees, and all persons acting in concert with them with notice of this Order and Judgment be and they are hereby permanently restrained and enjoined from implementing Ordinances 68484 and 68485 [the city ordinances that authorized the redevelopment agreement] of the City of St. Louis, including but not limited to implementing any special allocation fund pursuant to said ordinances, transferring revenues to or from any fund pursuant to said ordinances, or otherwise taking action under said ordinances.

I find these lines from the Post-Dispatch to be sadly amusing:

The credits, which come on top of $20 million the developer received in 2009, were authorized under the Distressed Areas Land Assemblage program. Economic development officials said that after McKee met all the law’s requirements, they had no choice but to issue the credits.

“We have to abide by the statute as it stands and as it stands, there are no safeguards for taxpayers,” said agency spokesman John Fougere. “We thought it was very important to demand the protections we secured in this agreement.”

Of course, what Fougere fails to mention is that one easy way of safeguarding Missouri taxpayers is not to award $8 million to a redevelopment agreement that has been thrown out by the court. Instead, the department awarded the tax credits, but with a specification that if a court were to throw out the redevelopment agreement again, the company has to give back the money.

In essence, the DED has awarded NorthSide an interest-free loan, just in case the company manages to prevail in court at some point in the future. I admit that I am flabbergasted as to why the DED would do this. Surely, DED employees wouldn’t ignore their statutory obligations?

A possible reason is that because NorthSide is in the process of appealing this ruling, the DED viewed the judge’s ruling as not final — it could be overturned. However, it is strange that the DED, especially in light of recent public scrutiny, would not take the more prudent course of awaiting the result of the appeal before awarding tax credits.

Not only does Missouri desperately need a thorough, critical review of tax credit programs in general, it is clear that the workings of the DED need to be examined. This agency awards hundreds of millions of dollars each year, and is neglecting its duty to safeguard taxpayer money.

Picking Winners and Losers Using Health Care Regulation

Posted on January 7, 2011May 5, 2026 by Christine Harbin

Typically, when I discuss how government picks winners and losers in the marketplace, it’s in the context of targeted tax credits in Missouri. The practice of picking and choosing is disadvantageous for overall welfare because it increases the cost of doing business for non-favored groups. This places them at an artificial competitive disadvantage and makes it difficult to compete against groups that enjoy the government’s favor.

According to an editorial in the Wall Street Journal, the government is picking winners and losers
by exempting some companies from regulation, and not others. From the editorial:

One of these effects [of the health care law] is the spectacle of employers going hat-in-hand to the Department of Health and Human Services (HHS) for waivers from some of the law’s more onerous provisions. […]

It’s not hard to connect the dots. The Obama administration is using waivers to reward friends. On the flip side, business executives will be discouraged from contributing to the president’s opponents or from taking any other steps that might upset the White House or its political appointees at HHS.

Providing special exemptions to some is a tacit admission that the cost of providing health care under the new regulations is prohibitively high. From the perspective of overall welfare, it would be better if the the federal government enacted a policy that favored no groups over others.

Contributors to Show-Me Daily have previously discussed the negative consequences of the Patient Protection and Affordable Care Act. In particular, the measure will will ultimately limit health care coverage because it eliminates limited-benefit health insurance plans known as “mini-meds.” Additionally, it will likely increase unemployment, particularly among those with low incomes, because it increases the cost of labor to an employer.

An Open Letter to Missouri Attorney General Chris Koster

Posted on January 7, 2011May 5, 2026 by Brenda Talent

Dear Atty. Gen. Koster:

To date, 20 out of the 50 states have joined a multi-state lawsuit challenging the constitutionality of the recent federal health care reform law. That case, Florida v. United States Department of Health and Human Services, Case No. 3:10-CV-19-RV/EMT, is currently pending before U.S. District Judge Roger Vinson. Other states are expected to join the lawsuit by Jan. 10.

The law at issue is defective on its merits; it raises the cost of health care, intrudes into decisions that should be reserved to individuals and businesses, limits the availability of health insurance, and increases the deficit at a time when the federal debt is already threatening the solvency of the nation. But I urge you to join the lawsuit because of grave concerns over the constitutionality of the law and, in particular, of the individual health insurance mandate.

The individual mandate requiring Americans to carry insurance overreaches the federal government’s authority under the Constitution’s commerce clause. Health care is just one among many goods and services that individuals in Missouri purchase, and courts have never interpreted the commerce clause as giving the federal government the power to require individuals to purchase a product. To put it simply, a person’s decision not to buy health insurance is not an act of “commerce.” If the commerce clause justifies this kind of intrusion, there is literally no limit to the power of the federal government over the lives and freedom of the American people.

Missouri voters understand the constitutional infirmity of the health care law. When they passed Proposition C last August with more than 71 percent of the vote, they signaled strong opposition to the individual mandate. In view of this expression of the popular will, and the implications of this expansion of federal power, I urge you to join the states that have filed this constitutional challenge in an effort to protect the liberty of their citizens.

Most respectfully,

Brenda Talent
Executive Director, Show-Me Institute

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