Law to Expand Health Coverage Limits Health Coverage

Posted on by John Payne

The Patient Protection and Affordable Care Act passed last March requires insurers to spend at least 80 to 85 percent of their earnings from premiums on health care for its customers. That certainly sounds like a good idea — who wants 20 cents of their health insurance dollar going to administrative costs? — but it would eliminate limited-benefit health insurance plans known as “mini-meds,” which are used by 1.4 million Americans. The Wall Street Journal reported on the situation last week:

While many restaurants don’t offer health coverage, McDonald’s provides mini-med plans for workers at 10,500 U.S. locations, most of them franchised. A single worker can pay $14 a week for a plan that caps annual benefits at $2,000, or about $32 a week to get coverage up to $10,000 a year.

Last week, a senior McDonald’s official informed the Department of Health and Human Services that the restaurant chain’s insurer won’t meet a 2011 requirement to spend at least 80% to 85% of its premium revenue on medical care.

McDonald’s and trade groups say the percentage, called a medical loss ratio, is unrealistic for mini-med plans because of high administrative costs owing to frequent worker turnover, combined with relatively low spending on claims.

Brian Hook of Missouri Watchdog points out that McDonald’s is among the top 20 employers in the Saint Louis metro area, with between 5,000 and 9,999 employees. Furthermore, this problem is hardly limited to McDonald’s employees:

Insurers say dozens of other employers could find themselves in the same situation as McDonald’s. Aetna Inc., one of the largest sellers of mini-med plans, provides the plans to Home Depot Inc., Disney Worldwide Services, CVS Caremark Corp., Staples Inc. and Blockbuster Inc., among others, according to an Aetna client list obtained by the Journal. Aetna also covers AmeriCorps teaching-program sponsors, who are required by law to make health coverage available.

Aetna declined to comment; it has previously indicated that the requirement could hurt its limited benefit plans.

Granted, these plans are far from perfect, but for many of the people who use them, it is likely the best they can afford. If the plans are outlawed, these people will either seek taxpayer-subsidized coverage or opt for no coverage at all. Mini-med plans are evidence that the market can insure the overwhelming majority of people, but not when it is so frequently hobbled by government restrictions.

Would Prop B Really Help Puppies?

Posted on by Dave Roland

You may have noticed the statewide hubbub about the so-called “Puppy Mill Cruelty Prevention Act.” I’m starting to wonder how many people — on either side of the debate — have actually read either the proposed statute or the current law on the subject. To help clarify the conversation, I thought I’d offer the following comparison between the law currently on the books and the actual text of Prop B.

Current Law: Prop B:
Animals must be fed at least once every 12 hours. “The food must be uncontaminated, wholesome, palatable and of sufficient quantity and nutritive value to maintain the normal condition and weight of the animal. The diet must be appropriate for the individual animal’s age and condition.” Dogs must have access to “appropriate, nutritious food at least once a day”.
Current Law: Prop B:
“If potable water is not continually available to the animals, it must be offered to the animals as often as necessary to ensure their health and well-being, but not less than once each eight (8) hours for at least one (1) hour each time, unless restricted by the attending veterinarian. Water receptacles must be kept clean and sanitized in accordance with this rule and before being used to water a different animal or social grouping of animals.” Dogs must have “continuous access to potable water that is not frozen, and is free of debris, feces, algae, and other contaminants.”
Current Law: Prop B:
Breeders must employ an attending veterinarian and must provide “daily observation of all animals to assess their health and well-being.” While this daily observation need not be made by a licensed vet, “a mechanism of direct and frequent communication is required so that timely and accurate information on problems of animal health, behavior and well-being is conveyed to the attending veterinarian.” “Necessary veterinary care means, at a minimum, examination at least once a year by a licensed veterinarian.”
Current Law: Prop B:
Each dog must be provided floor space equivalent to (animal length from tip of nose to base of tail + six inches) squared. Nursing mothers must be provided additional space as determined by the attending veterinarian. Ceilings must be at least six inches higher than the height of the tallest dog in the enclosure. All shelters “must allow each animal to sit, stand and lie in a normal manner and to turn about freely.” Dogs must have “(1) sufficient indoor space for each dog to turn in a complete circle without any impediment (including a tether); (2) enough indoor space for each dog to lie down and fully extend his or her limbs and stretch freely without touching the side of an enclosure or another dog; (3) at least one foot of headroom above the head of the tallest dog in the enclosure; and (4) at least 12 square feet of indoor floor space per each dog up to 25 inches long; at least 20 square feet of indoor floor space per each dog between 25 and 35 inches long; and at least 30 square feet of indoor floor space per each dog for dogs 35 inches and longer (with the length of the dog measured from the tip of the nose to the base of the tail).”
Current Law: Prop B:
Indoor facilities for animals must generally remain above 50 degrees, and if the temperature drops lower the animals must be provided with “dry bedding, solid resting boards or other methods of conserving body heat.” If temperatures rise above 85 degrees, animals must be provided with “fans, blowers, or air conditioning.” Dogs must have “constant and unfettered access to an indoor enclosure that has a solid floor; is not stacked or otherwise placed on top of or below another animal’s enclosure; and does not fall below 45 degrees Fahrenheit, or rise above 85 degrees Fahrenheit.”
Current Law: Prop B:
Breeders must establish an exercise plan for each animal and have it approved by the attending veterinarian.

“The opportunity for exercise may be provided in a number of ways, such as
(I) Group housing in cages, pens or runs that provide at least one hundred percent (100%) of the required space for each dog if maintained separately under the minimum floor space requirements of this rule;
(II) Maintaining individually housed dogs in cages, pens or runs that provide at least twice the minimum floor space required by this rule;
(III) Providing access to a run or open area at the frequency and duration prescribed by the attending veterinarian; or
(IV) Other similar activities.”

 “Regular exercise” means constant and unfettered access to an outdoor exercise area that is composed of a solid, ground level surface with adequate drainage; provides some protection against sun, wind, rain, and snow; and provides each dog at least twice the square footage of the indoor floor space provided to that dog.
Current Law: Prop B:
“Excreta and food waste must be removed from primary enclosures daily and from under primary enclosures as often as necessary to prevent an excessive accumulation of feces and food waste, to prevent soiling of the animals contained in the primary enclosures, and to reduce disease hazards, insects, pests and odors. When steam or water is used to clean the primary enclosure, whether by hosing, flushing or other methods, animals must be removed, unless the enclosure is large enough to ensure the animals would not be harmed, wetted or distressed in the process. Standing water must be removed from the primary enclosure and adjacent areas. Animals in other primary enclosures must be protected from being contaminated with water and other wastes during the cleaning. The pans under primary enclosures with grill-type floors and the ground areas under raised runs with wire or slatted floors must be cleaned as often as necessary to prevent accumulation of feces and food waste and to reduce disease hazards, pests, insects and odors.” Dog shelters must be cleaned of waste at least once per day while the dog is outside the enclosure.

Prop B would certainly require some changes — for example, although it talks about the requirements for enclosures, it also seems to forbid them entirely by demanding “constant and unfettered access” to both indoor and outdoor spaces. Wouldn’t any enclosure that prevented such “constant and unfettered access” to these things violate the law?

Another interesting point is that, as you can see, some of the standards that Prop B would establish are actually lower than those in the current law. If the law currently requires that dogs be given food at least twice per day, why would you want to lower the requirement to feeding once a day? If the law currently sets the expectation that indoor facilities be kept higher than 50 degrees (and specifies the actions that must be taken to ensure the animals’ comfort if the temperature drops lower), why adopt the lower expectation of 45 degrees? Even where the standards established under the two laws are very similar, our current rules are very specific about how animals ought to be cared for. Why would it be a good idea to move from those specifics to something more general?

I am not, of course, advocating either in favor of the current law or in favor of Prop B. I just think that people should have a more thorough understanding of the proposed changes before they decide where they stand on this issue.

Private Sector Can Help Kansas City Manage Its Public Infrastructure, Likely for Less

Posted on by David Stokes

The $2.5 billion settlement to improve the Kansas City sewer system has put the city well past the question of whether something needs to be done with its infrastructure assets. Right now, private companies are willing to pay for the right to manage the city’s property, and long-term savings result when the private sector operates public services more efficiently. Partnering with the private sector — either in the form of up-front payments for asset management, or cost savings from greater operational efficiencies — could help Kansas City meet its financial obligations, both now and in the future.

In 1984, Oklahoma City contracted out the management of its wastewater treatment facilities to a private utility company, Veolia Water. At the time of the contract, Oklahoma City spent $14 million per year on its system. Seventeen years later, in 2001, Veolia operated an improved system for only $11 million per year. These numbers have not been adjusted for inflation, making the savings even more impressive. Veolia still operates the Oklahoma City wastewater system today, after further contract renewals.

I provide this example not to encourage you to buy stock in Veolia or move to Oklahoma City, but to showcase the potential effectiveness of partnering with the private sector in public infrastructure operations, management, and delivery. A city council committee has approved a resolution for Kansas City officials to study the possibilities offered to residents and taxpayers from private sector competition for public infrastructure programs. The full council is scheduled to consider the proposal soon.

This resolution is limited in its reach. The proposal simply calls for the city to study the expected effects of contracting out the management of certain assets. There is no plan or intention to sell off and fully privatize city assets. Instead, the study could consider a range of options, such as private companies that pay the city for the right to operate city parking garages, or a private engineering firm contracting to operate water or wastewater facilities. One local example of the benefits of these ideas involves recent successful changes to the Kansas City animal shelter, although that particular effort moved further toward full privatization than this proposal does.

Successful examples of the private provision of public services can be found throughout Missouri. They include instances of outsourcing, contracting, and private ownership. Private companies successfully operate the nation’s only private, commercial airport in Branson; manage the pharmacy services of Saint Louis County’s Department of Health; provide electricity, gas, and water throughout Missouri; and manage trash collection in communities throughout the state. Around the country, private companies efficiently operate public highways, libraries, jails, and much more.

Not every example would be appropriate for Kansas City, but a study could help determine where private partnerships would benefit the city. Mayor Mark Funkhouser deserves credit for bringing these issues to the forefront, and the people of Kansas City will benefit if they get the serious study they deserve.

David Stokes is a policy analyst for the Show-Me Institute, a Missouri-based think tank.

 

Free Trade Does Not Cost Too Much

Posted on by David Stokes

Mike Guzy, who currently writes for the St. Louis Beacon and formerly wrote for the Post-Dispatch, is a very talented writer. A column he wrote probably 10 years ago for the Post defending the use of the death penalty remains one of the best treatments of that topic I’ve ever read. But today in the Beacon, he gets his economics wrong. How wrong? Let’s just say it took only a few seconds of research to find two economists who are frequently at odds with each other both disagreeing with his point.

What is his point? That cheap imports are causing unemployment in our current recession, and the proper solution is to raise tariffs on imported goods. From his article:

The only conceivable way to revitalize the American middle class — the little engine of consumption that pulls the global economy — is to impose labor tariffs on imported goods, making their cost comparable to those manufactured here.

Let us now quote famous men and women writing about the Smoot-Hawley Tariff, which did almost exactly what Guzy calls for, and is near-universally derided as one of the worst pieces of legislation ever passed by Congress. Here is Great Depression historian and economist Amity Shlaes:

This lack of concern resembles many Americans’ disregard for the effects of the Smoot-Hawley Tariff Act, signed into law by Hoover in June 1930. Republicans told themselves that the tariff couldn’t hurt much since trade was a small part of the U.S. economy at that point.

But that view overlooked the signal that markets were sending. Long ago Jude Wanniski noticed that the progress of the Smoot-Hawley legislation tracked declines in the stock market. More recently Scott Sumner, a professor of economics at Bentley University in Waltham, Massachusetts, has argued that the tariff reduced investment all over the world, and therefore produced deflation.

Shlaes’ great book, The Forgotten Man, goes into much more detail about the harm of the tariff.

And now we turn to Paul Krugman for his views on the Smoot-Hawley Tariff:

Just to be clear, I don’t think the Smoot-Hawley tariff was a good thing — it was a really bad thing. Nasty protectionism! Bad Smoot-Hawley! Bad! Bad! Bad!

Krugman is clear that although he doesn’t think protectionism and the tariff caused the Great Depression, it was nonetheless a terrible idea.

When legislation makes the goods that we import, and voluntarily choose to purchase, more expensive, it limits our choices and our freedoms, and increases our costs of living. It also immediately harms the enormous number of Americans who depend on trade, shipping, and related industries for their employment, and results in retaliation by other trading partners that would limit our exports. Instituting higher tariffs for protectionist purposes is always a net loss for our economy.

Why Does Kansas City Need More Power to Take Private Property?

Posted on by Audrey Spalding

The Kansas City Star recently wrote that the city should step up its efforts to deal with more than 12,000 vacant properties in the city. Vacant properties discourage people from moving into neighborhoods, can become dangerous because of brick theft, and can attract criminals.

To combat vacancy, Kansas City passed a law more than a year ago that allows the city to take property that is designated as vacant and a nuisance (meaning it might have overgrown weeds, cars that are damaged or disabled, or, in worse cases, criminal activity) to be taken from the property owner and given to a receiver. The receiver can rehab or bulldoze the property and eventually sell it to a new — and, hopefully, better — owner.

But this law just isn’t the way to fight vacancy. Both Kansas City and Saint Louis can, and do, recover property from owners who have utterly abandoned it. If property owners don’t pay their property taxes for several years, local government can take the property and put it up for sale so that, hopefully, it will be put to more productive use. I am wary of Kansas City using this new power to transfer properties to “better” owners, because it allows the city to seize property that, although vacant, has an owner who is not delinquent on his or her property taxes. If the current owner continues to pay property taxes, he or she is claiming the property explicitly.

Properties in productive use go vacant all the time — a property under construction is not occupied, nor is a property that has been put up for sale. Can you blame people for holding onto a property for a little longer before putting it up for sale in the currently anemic market? Perhaps a better question is, should Kansas City take property from people who are holding out for a better price, or don’t want to sell for some other reason?

The city also has ways to deal with properties that are deemed a “nuisance.” After notifying the property owner, the city can inspect and reinspect the property until the nuisance (say, rotting plant matter) is fixed. If not, the city can even fix the nuisance itself and/or issue a fine.

So, Kansas City has ways to deal both with truly vacant properties and nuisance properties. Why exactly is this receivership law necessary? From here, it looks like the receivership law is an attempt to speed up the process at best (while also deteriorating property rights), and a manipulable ordinance at worst.

Importance of Quality in Primary Education

Posted on by Abhi Sivasailam

If you’re like me, you too have spent the past few months eagerly awaiting the release of a certain academic article. Well, I’m pleased to report that the wait is over. Here it is: “How Does Your Kindergarten Classroom Affect Your Earnings? Evidence From Project STAR.” The paper is written by several “superstar” economists whose research supports the conclusion that investments in improving the quality of early education can provide lasting benefits. The paper is also noteworthy for tracking the effects of early educational interventions onto market outcomes, and not just subsequent educational outcomes.

Here’s the abstract:

In Project STAR, 11,571 students in Tennessee and their teachers were randomly assigned to different classrooms within their schools from kindergarten to third grade. This paper evaluates the long-term impacts of STAR using administrative records. We obtain five results. First, kindergarten test scores are highly correlated with outcomes such as earnings at age 27, college attendance, home ownership, and retirement savings. Second, students in small classes are significantly more likely to attend college, attend a higher-ranked college, and perform better on a variety of other outcomes. Class size does not have a significant effect on earnings at age 27, but this effect is imprecisely estimated. Third, students who had a more experienced teacher in kindergarten have higher earnings. Fourth, an analysis of variance reveals significant kindergarten class effects on earnings. Higher kindergarten class quality – as measured by classmates’ end-of-class test scores – increases earnings, college attendance rates, and other outcomes. Finally, the effects of kindergarten class quality fade out on test scores in later grades but gains in non-cognitive measures persist. We conclude that early childhood education has substantial long-term impacts, potentially through non-cognitive channels. Our analysis suggests that improving the quality of schools in disadvantaged areas may reduce poverty and raise earnings and tax revenue in the long run.

For those who don’t want to read the whole paper, the research is also available as a PDF of Power Point slides.

Come Meet Some (Alleged) Criminals!

Posted on by Dave Roland

On Monday, the Show-Me Institute will host another Show-Me Forum in Columbia, at which I will present a talk called “Economic Liberty and Occupational Licensing: If You Aren’t Outraged, You Haven’t Been Paying Enough Attention.” I’ll talk about the ways in which occupational licensing laws are being used and abused both in Missouri and nationwide. As a special bonus, we will have on hand five or six Missouri entrepreneurs that the state believes are criminals, simply because they failed to get the government’s permission before providing useful services to informed, willing consumers.

For anyone who can’t make it to the Show-Me Forum, consider tuning in to Mike Ferguson’s radio show on Monday afternoon between 4:20 and 4:40, when Mr. Ferguson will interview me and Mrs. Brooke Gray, an equine dentist who has found herself in the crosshairs of the Missouri Veterinary Medical Board.

You’ve Been on a Fast Train, and It’s Going Off the Rail

Posted on by John Payne

Transportation expert (and sometimes Show-Me Institute author) Randal O’Toole wrote an editorial for USA Today about the folly of huge government subsidies for high-speed rail. O’Toole’s basic point is that we get very little transportation benefits from high-speed rail in comparison to its massive costs:

At an inflation-adjusted cost of about $450 billion paid out of highway user fees, the Interstate Highway System, to which high-speed rail is sometimes compared, provides more than 4,000 miles of passenger travel for every American, miles that Americans were not traveling before the system was built. By comparison, a $600 billion expenditure on high-speed rail will provide, at best, around 300 miles of travel per person.
[…]
Amtrak brags that its high-speed Acela between Boston and Washington covers its operating costs, though not its capital costs. It does so, however, only by collecting fares of about 75 cents per passenger mile. By comparison, airline fares average only 13 cents a passenger mile, and intercity buses (which, Amtrak doesn’t want you to know, carry about three times as many passengers between Boston and Washington as the Acela) are even less expensive.

According to the Bureau of Economic Analysis, Americans spent about $950 billion on driving in 2008. This allowed us to travel, says the Federal Highway Administration, more than 2.7 trillion vehicle miles, for an average cost of about 35 cents per vehicle mile. Since the California High-Speed Rail Authority estimates cars in intercity travel carry an average of 2.4 people, the average cost is less than 15 cents a passenger mile.

O’Toole also points out that urban elites are the ones most likely to benefit from high-speed rail travel, because they are more likely to live in the downtown areas where train stations are typically located. The construction of high-speed rail has little to do with the costs and benefits of different modes of travel, and almost everything to do with aesthetic preferences. Unfortunately, aesthetics usually trump economics in the political world.

Back in February, I explained why Saint Louis should not expand the MetroLink light-rail system.

(Blog entry title reference here.)

Kansas City to Take a Hard Look at How It Provides Services

Posted on by David Stokes

According to the Reason Foundation, New York Governor Mario Cuomo said about privatization, “It is not a government’s obligation to provide services, but to see that they are provided.” That statement perfectly sums up the inspiring choice by Kansas City leadership to study and consider the potential to make greater use of the private sector in Kansas City’s infrastructure management and delivery.

I want to be very clear from the beginning that Kansas City is NOT considering full-scale privatization of its infrastructure, as I recommended the city of St. Louis do with its water division. Kansas City leaders will study the potential for contracting with private partners to manage facilities, including wastewater treatment, parking, and more. Today’s Kansas City Star has a very good story about yesterday’s committee meeting (which I attended). Mayor Mark Funkhouser and the members of the committee deserve a great deal of credit for their willingness to consider these possibilities for the taxpayers and residents of Kansas City.

This type of operations and management (O&M) outsourcing can have great benefits for the city and its people. Oklahoma City has had great success after outsourcing its wastewater treatment plants in 1984. Anyone who thinks that this type of original thinking always fails or hurts taxpayers simply needs to look at the success in Oklahoma City for the other view. Like anything, these types of efforts can be executed either well or poorly. Although privatization failures exist, Oklahoma City represents only one example of success out of many. I look forward to sharing them with you as this discussion moves forward.

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