Page 748 – Show-Me Institute

Who Are the Missourians Without Health Care Insurance?

Posted on August 6, 2009May 5, 2026 by Stephen Feman

In the ongoing health care discussion, few have looked at who the people are without health care insurance. In Missouri, most people have some form of employer-sponsored health care insurance program, while those who are elderly have Medicare, and the indigent have Medicaid. Then who are these people without health care insurance that everyone is talking about?

To answer that question, Missouri initiated a survey in 2004 and found 463,000 citizens without any form of health care insurance, about 8.4 percent of the state population. At that time the largest demographic group consisted of people between 19 and 24 years old, because 20.1 percent of them had no health care insurance. The survey’s statistical analysis found that the minority distribution among those without health care insurance was similar to the proportions within the state. That is, no specific group had an excess, and all groups were represented equally.

In 2004, the largest economic division without health care insurance (20.9 percent of all those without health care insurance) consisted of families with incomes between 134 percent and 150 percent of the federal poverty level (FPL). Interestingly, 30 percent of the uninsured population was made of families in which at least one family member worked. In those families, the workers were either self-employed or worked less than 40 hours per week.

Many changes have occurred since then. The onset of this recession was associated with job losses, and some jobs had their benefits reduced. Data from the run-up to the recession exists, but information more recent than 2007 is not available. Nevertheless, during the interval from 2004 through 2007, the number of Missourians without health care insurance increased from 463,000 to 744,030 people, or from 8.4 to 12.6 percent of the population. By 2007, about 82 percent of the people that were health care uninsured were members of families in which at least one member had a job.

Many people in 2007 did not purchase health care insurance. This was seen in 2004, also. That year, 20.4 percent of the health care uninsured population had incomes greater than 200 percent of the FPL. Some had incomes that would have permitted them to purchase health care insurance, but they did not. In fact, in 2004, 9.0 percent of the adults without health care insurance qualified to join existing programs at no personal cost, but did not complete the applications. Since then, the uninsured population segment that could afford health care insurance has grown. By 2007, 33.0 percent of Missouri’s health care uninsured population had incomes greater than 200 percent of the FPL — about 245,530 individuals.

What is the danger to Missouri? Studies show the health care uninsured are unlikely to have regular medical care, so their problems are identified late and cost more to treat. The result is an increase in Missouri health care expenditures, because when those without health care insurance run out of funds, the state pays for their care. Is this what is in store for Missouri?

Reining in Medicaid

Posted on August 6, 2009May 5, 2026 by Caitlin Hartsell

An article in the Springfield News-Leader reports that the number of people within Missouri’s Medicaid program has risen 5 percent during the last year. Given the current economic situation, more people are qualifying for Medicaid.

Legislators have suggested provisions to further expand Medicaid. From an article on Kaiser Health News:

Currently, many low-income adults are not eligible for Medicaid, but they could be if Congress decides to “make income alone the determinant of Medicaid coverage. Under the health reform bill now being considered by the House, all non-elderly people earning at or below 133% of poverty — about $14,400 for an individual, and $29,300 for a family of four — would be eligible.” The House bill would have the federal government “pick up the entire cost of those newly covered under Medicaid — $438 billion over 10 years,” while a Senate finance draft version “would have the feds paying the additional cost for only five years, after which the states would have to pick up their typical share of existing Medicaid costs, which averages over 40%” (Tumulty, 7/21).

As Show-Me Institute intern Abhi Sivasailam said in an earlier blog entry, economist Arthur Laffer recently published an op-ed in the Wall Street Journal about the proposed federal health care reform. The main cause of out-of-control spending in the existing health care system has been the “health-care wedge,” the distance that a patient/consumer has from the actual cost of a procedure. Medicaid exacerbates this wedge by completely separating the patient from any responsibility. The payment structure of Medicaid (which compensates for a lesser amount than some procedures cost) encourages doctors to order more tests than necessary in order to recoup costs. This cycle only raises taxpayer expenses and the cost of health care in general.

Regarding Medicaid, Missouri has relatively low expenditures compared to the rest of the country. Missouri spent $6.6 billion on Medicaid in 2007, approximately 2.06 percent of what the United States spent that year. During the past 10 years, Medicaid spending in Missouri has grown at a slower rate than the national average, but it is still growing. Every dollar that Missouri spends sees some percentage of a match (based on a varying multiplier rate) from the federal government. In 2008, the federal government paid for 62.4 percent of Medicaid’s cost; in 2009, that percentage has jumped to 71.2. This creates an even larger wedge for states that have less of a responsibility for each enrolled individual, but are making payment decisions. Some other states have already (or almost) run out of money to pay for Medicaid, including New Hampshire, Georgia, Illinois, and Mississipi. With compensation decreasing to a point lower than procedural cost, more doctors are refusing to accept new Medicaid and Medicare patients. It is apparent that Medicaid is not working, and Medicare is set to run out of money by 2017. Expanding Medicaid and creating a similar public option are not workable solutions.

One way to decrease the size of the “health-care wedge” is by encouraging the use of health savings accounts (HSAs), something that the Show-Me Institute has written about, and that Arthur Laffer writes about in his op-ed:

A patient-centered health-care reform begins with individual ownership of insurance policies and leverages Health Savings Accounts, a low-premium, high-deductible alternative to traditional insurance that includes a tax-advantaged savings account. It allows people to purchase insurance policies across state lines and reduces the number of mandated benefits insurers are required to cover. It reallocates the majority of Medicaid spending into a simple voucher for low-income individuals to purchase their own insurance.

Health care vouchers and HSAs may be the best ways to fix the growing health care problem, and to rein in Medicaid before it becomes even more unsustainable than it already is.

Laffer on Health Care

Posted on August 6, 2009May 5, 2026 by Abhi Sivasailam

Economist Art Laffer has recently released a study and published an op-ed in the Wall Street Journal evaluating the needs, prospects, and viability of health care reform proposals.

Laffer agrees with reformists that the cost inflation of health care is unsustainable. He contends, however, that the plans currently on the table neglect the true source of these costs — the “health-care wedge” between the actual costs of providing care and the costs incurred by a patient. Laffer writes:

When the government spends money on health care, the patient does not. The patient is then separated from the transaction in the sense that costs are no longer his concern. And when the patient doesn’t care about costs, only those who want higher costs—like doctors and drug companies—care.

Laffer’s research suggests that $1 trillion in government health care subsidies will thus do nothing to control costs, and will even serve to accelerate cost inflation. He proposes reform based on modifying the structure of incentives by encouraging personal responsibility:

A patient-centered health-care reform begins with individual ownership of insurance policies and leverages Health Savings Accounts, a low-premium, high-deductible alternative to traditional insurance that includes a tax-advantaged savings account. It allows people to purchase insurance policies across state lines and reduces the number of mandated benefits insurers are required to cover. It reallocates the majority of Medicaid spending into a simple voucher for low-income individuals to purchase their own insurance. And it reduces the cost of medical procedures by reforming tort liability laws.

As I see it, the national health care debate is centered on three core values: cost, access, and quality. By focusing purely on expanding access to health care, we fail to honor our commitments to restraining cost and maintaining quality. It may be better, then, to look for proven tools that focus on cost reduction as a means to expanding access. This means not only considering the aforementioned proposals, but also pursuing continued deregulation of primary care, encouraging the health services sector to move away from fee-per-service incentive structures, and lowering the education and opportunity costs incurred by health care professionals.

Stay tuned for Laffer’s Missouri-specific health care report for the Show-Me Institute.

Is This the Beginning of the End for “Free”?

Posted on August 6, 2009May 5, 2026 by David Stokes

A little-known website, Drudge Report, links to a few stories this morning with the same theme: Businesses in this economy are going to stop giving their products away. First of all, apparently NewsCorp is going to start charging for all of its news in the near future — online, and everything. I have no idea whether this will be good for its profit margin or condemn it to online irrelevancy. (We subscribe to the Wall Street Journal here at work, so I guess it won’t affect us too much.)

Somewhat more interesting is the decision by some coffee shops to force people who sit there all day to actually buy something. I have never had a cup of coffee, so I have not spent too much time in coffee shops. Nonetheless, during the little time I have spent in them, I have always been amazed at the people sitting there using the resources without paying anything (or paying barely anything). When I had my own small business in the ’90s, I tried not to do anything for free. I often gave extremely large discounts in certain situations (mostly for multiple legal papers being served at the same address), but I didn’t ever want to do anything for free. I certainly understand why some coffee shop owners no longer think its cute to have people taking up seats for hours without paying for anything.

This issue hits home because one of our favorite places to go after work here at the Show-Me Institute is C.J. Muggs in Clayton, where they set out excellent free appetizers during happy hour. They more than make back this loss from beer drinkers, but not everyone who works at the institute drinks alcohol. So, I wonder whether Muggs makes any money on the people who go there, buy a soda (they always pay for something), and then eat the free food? I have to guess that they make enough money off the beer drinkers to more than make up for a few people who just get a soda. But, if Muggs were to take away the free food, we would be really screwed.

Interstate Rail Project Would Bring High-Speed Spending

Posted on August 6, 2009May 5, 2026 by Randal O'Toole

On June 17, the Federal Railroad Administration (FRA) asked states for proposals for spending the $8 billion of stimulus money that Congress allocated to high-speed rail. Which raises a question: Would you pay $1,000 so that someone — probably not you — can ride high-speed trains less than 60 miles per year? That’s what the FRA’s high-speed rail plan is going to cost: at least $90 billion, or $1,000 for every federal income taxpayer in the country.

That’s only the beginning. Count on adding $400 for cost overruns. Taxpayers will also have to cover operating losses: Amtrak currently loses $28 to $84 per passenger in most of its short-distance corridors.

The FRA plan also has huge gaps, such as Dallas to Houston, Jacksonville to Orlando, and the entire Rocky Mountains. Once states start building high-speed rail, expect local politicians to demand these gaps be filled at your expense. And don’t be surprised when the government asks for billions more in 30 years to rebuild what will then be a worn-out system.

What would we get for all this money? Unless you live in California or Florida, don’t expect superfast bullet trains. In Missouri and most of the rest of the country, the FRA is merely proposing to boost the top speeds of Amtrak trains from 79 miles per hour to 110 mph. A top speed of 110 mph means average speeds of only 60–70 mph, which is hardly revolutionary. Many American railroads were running trains that fast 70 years ago.

The pro-rail Center for Clean Air Policy predicts that, if the FRA’s system is completely built, it will carry Americans 20.6 billion passenger miles per year in 2025. That sounds like a lot, but, given predicted population growth, it is just 58 miles per person.

Missouri’s portion of the plan will cost at least $875 million, or nearly $150 for every Missouri resident, plus tens of millions more per year in operating subsidies. For that, the average Missourian will take a round trip on the train only once every six years. Most of the rest of your $1,000 will go to California, which wants to you to help pay for a costly bullet train. Even this train will do little to relieve congestion or save energy; mainly, it will just fatten the wallets of rail contractors.

Who will ride these trains? We can get an idea by comparing fares between New York and Washington, D.C. As of this writing, $99 will get you from Washington to New York in two hours and 50 minutes on Amtrak’s high-speed train, while $49 pays for a moderate-speed train ride that takes three hours and 15 minutes. Meanwhile, relatively unsubsidized and energy-efficient buses cost $20 for a four-hour-and-15-minute trip with leather seats and free Wi-Fi. Airfares start at $119 for a one-hour flight.

Who would pay five times the price to save less than 90 minutes? Those wealthy enough to value their time that highly would pay the extra $20 to take the plane. The train’s only advantage is for people going from downtown to downtown. Who works downtown? Bankers, lawyers, government officials, and other high-income people who hardly need subsidized transportation. Not only will you pay $1,000 for someone else to ride the train, but that someone probably earns more than you.

Nor is high-speed rail good for the environment. The Department of Energy says that, in intercity travel, automobiles are as energy-efficient as Amtrak, and that boosting Amtrak trains to higher speeds will make them less energy efficient and more polluting than driving.

An expensive rail system used mainly by a wealthy elite is not change we can believe in. Missouri should use its share of rail stimulus funds for safety improvements such as grade crossings, not for new trains that will obligate taxpayers to pay billions of dollars in additional subsidies.

Randal O’Toole is a senior fellow at the Cato Institute, and author of the Show-Me Institute study “Review of Kansas City Transit Plans.”

[Editor’s note: A portion of the sixth paragraph of this op-ed originally read, “the average Missourian will take a round trip on the train only once every 12 years.” The correct figure for Missouri is “once every six years.” We have corrected this in the interest of accuracy, and apologize for the oversight.]

Cash for Clunkers Clunks

Posted on August 5, 2009May 5, 2026 by Caitlin Hartsell

Last week, government officials announced that the “Cash for Clunkers” program — which offers subsidies of up to $4,500 when trading in an old car for more environmentally friendly one — had been so successful that the funding allotted for it had run out. This seems to be a fairly typical government story: a seemingly great idea that lacks the necessary funding. The program’s proponents hail it as a way to reduce carbon footprints and to provide a boost for the economy. Both of these claims are exaggerated and, in some ways, entirely untrue.

According to a New York Times article:

Dealers estimated that they sold a quarter-million cars with the rebate money.

And the Transportation Department reported that the average gas mileage of the vehicles being bought was significantly higher than required to qualify for a rebate of $3,500 to $4,500. Of 120,000 rebate applications processed so far, the department said the average gas mileage of cars being bought was 28.3 miles per gallon, for S.U.V.’s, 21.9 miles per gallon, and for trucks, 16.3 miles per gallon.

Are these numbers worth $1 billion in taxpayer subsidy? Probably not. Are they worth the proposed additional funding of $2 billion? Definitely not. These mileage differences are pretty small. The environmental impact is negligible, especially considering that the subsidy leads to a perfectly good car being destroyed and new cars built to replace them. In a CNN article, Harvard economist Jeffrey A. Miron discussed the program’s unintended consequences, pointing out that trading in for more fuel-efficient cars might actually encourage more driving.

The other argument, that the subsidy stimulates the economy by aiding the auto industry, is an example of Frédéric Bastiat’s “broken window” fallacy, which can be explained by a short illustration: A boy broke a baker’s window, and the townspeople said, “Ah, but think of the business the glassmaker will get! It’s good for the economy.” So the baker spent $50 to buy a new pane of glass, which stimulates the glass industry. Had he not done that, though, he would have used that money to buy something else — a new suit from the tailor, perhaps — and he would still have had his window. Real economic growth doesn’t come from an artificial restriction of options, by prompting somebody to spend money on a window rather than on a suit. Similarly, when the government uses taxpayer money to stimulate one part of the economy, this comes at the expense of those other economic sectors that will no longer benefit from some measure of either consumer spending or invested savings. Tax cuts are a more effective way to drive economic growth and job creation.

At any rate, encouraging people to trade in a paid-off car to take on debt for a new car is a bad idea, as economic commentator Peter Schiff mentioned in a recent article:

The recently passed “cash for clunkers” program (currently on-hold, as it ran out of funding in one week) is a perfect example of how government policy can make the economy worse. By incentivizing Americans to destroy fully paid-for cars so they can go deeper into debt buying brand new ones, the government weakens an already crippled economy. The last thing we want to do is subsidize Americans to go deeper into debt by buying more stuff. Don’t they realize that is precisely the behavior that got us into this mess?

This program bears a remarkable resemblance to many ill-fated home subsidy programs, in which people were encouraged to purchase houses they could not afford. Overall, Cash for Clunkers is a wasteful and expensive program that does not need a further subsidy. Missourians would be better served with corporate tax breaks that would help create new jobs instead of artificially aiding the auto industry.

How Do You Eat an Elephant?

Posted on August 4, 2009May 5, 2026 by Sarah Brodsky

One bite at a time!

Little changes can add up. That’s why I enjoyed this Wall Street Journal article about small ways that the federal government has found to save money, adding up to a savings of $102 million. That’s enough to subsidize 68 bicycle races in the state of Missouri.

Critics point out that $100 million is a tiny fraction of the federal budget. They’re right that cutting costs in millions of dollars doesn’t have much effect on the inefficiency of government. It’s not enough — but it is the first step. A government that does nothing about obvious, easily avoidable inefficiencies certainly won’t cut back on the most entrenched programs.

And, although publicizing $100 million in savings with great fanfare may be a shameless PR move, I’d like to see more of this kind of PR from government. Usually, politicians highlight the number of people affected by government programs, or some equally invalid measure of success. Cost-cutting PR is a welcome change.

A savings of $100 million would be more meaningful at the state level. I hope the state of Missouri will follow the federal government’s lead on this and look for ways to save $100 million. If officials need ideas about which expenditures are nonessential, may I nominate the bicycle race?

Randal O’Toole Op-Ed on High-Speed Rail

Posted on August 4, 2009May 5, 2026 by David Stokes

A few days ago the Post-Dispatch published an op-ed from Randal O’Toole of the Cato Institute, about Midwest high-speed rail. O’Toole has done some work for us in the past, and he is working on a paper for us right now about rail. Please check it out.

America Does NOT Need a Public Service Academy

Posted on August 4, 2009May 5, 2026 by Caitlin Hartsell

A classmate of mine at Wash. U., Melissa Goldberg, published an editorial in the Post-Dispatch last week titled “America needs a public service academy.” With just a quick, superficial glance at the proposal, one might think that this is a great idea. Its proponents want to create a school, similar to the military service academies, designed to promote public service skills and train a dedicated bureaucracy. The article called for Missouri to host this school, citing politicians that have already given their blessing.

There are many things to take issue with, here — firstly, the comparison to military schools. Specialized training for the Air Force, Army, Navy and Coast Guard makes sense because they perform life-or-death tasks that require a specific level of discipline and set of skills. Many technical skills that need to be learned are not necessarily intuitive. Even then, training at these academies is not a prerequisite to being an officer; plenty of people who come from ROTC, or just normal universities and training programs, perform the same duties as the academy alumni.

If people really think a public service academy is necessary (and I don’t), a better plan might be to have a sort of public service ROTC. Goldberg argues that “mounting college debt and an uncertain economy” limit the number of candidates qualified to enter public service jobs. If that is true, perhaps a leadership program at a “regular” university, or experience in various types of campus leadership positions, would provide sufficient training. Another option for current schools to attract students to public service programs might be to offer debt forgiveness after a former graduate has spent a certain amount of time working in a public service profession. Many schools already offer this option for particular professions; most law schools will forgive debts if a lawyer works as a public defender for a certain amount of time (usually 10 years).

A centralized public service academy would be susceptible to the whims of politics and potential indoctrination. The possibility of an ideologically charged program churning groups of bureaucrats with specific politic belief systems (or even, one that accepted only those students who already adhere to such beliefs) should bring any American pause. Even if one argues that the university system already does this, the fact that a wide variety of schools exist to compete with each other tends to limit the scope of any overarching ideological bias. Why must a single public service school be given the official taxpayer stamp of approval?

The best leadership training entails actual experience with leading others, so school with a student body entirely composed of self-described leaders does not readily lend itself to this sort of practical opportunity in the way a “traditional” school might. In order to gain experience as a leader, one needs followers. Even Wash. U., which is the same size as the proposed academy — 5,000 students — has a plethora of leadership opportunities, from clubs to sports to student government. Establishing a dedicated school for public service would be redundant at best; leadership should be in the practicum, not the curriculum. At any rate, creating a permanent and entrenched bureaucracy from an early age is not something Americans should support, let alone fund.

Why waste at least $205 million of public money to create an unnecessary public service academy that would not provide a better experience than a normal university? A public service academy, while potentially well-intentioned, would be a bad idea for America.

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