‘Insure Missouri’ Strays From Path to Free-Market Reform

Posted on by Beverly Gossage

The ink is barely dry on HB 818, an innovative free-market health care reform bill that encourages individual responsibility and employer participation. Other states, including Kansas, are hoping to emulate it. A new plan proposed last week, however, takes a significant step in the wrong direction. “Insure Missouri” is designed to fund policies for low-income adults, but does not continue on the path to market-based reform that put Missouri on the map.

“Insure Missouri” is modeled after “Healthy New York,” a connector-type program that amounts to central bureaucratic planning for health insurance. It’s a state program with a health plan designed by the state, offered through providers contracted by the state, at rates controlled by the state. What happened to the free-market approach?

The plan as announced will be implemented in three phases over a 15-month period:

Phase 1 offers coverage to some 54,500 working parents and caregivers with children in the home, with income at or below the poverty level. The children in these families are already covered by MO HealthNet.

Phase 2 subsidizes coverage to an estimated 77,000 adults, with income up to 185 percent of poverty level — about $18,900 for an individual. Participant costs will not exceed $145 monthly.

Phase 3 is small business reinsurance. This won’t take effect until 2009, and few details are available. If it follows the “Healthy New York” model, employers would be required to pay 50 percent of premiums and have at least 50 percent of employees participating.

Approximately 189,000 adults would be covered through “Insure Missouri” by 2010, at an estimated price tag of $600 million. According to Rep. Doug Ervin, HB 818’s sponsor, this will rise to $900 million by 2012. There are many unknowns, including the estimated cost per participant, the actual funding sources, and whether employers will be forced to contribute.

“Healthy New York” was initiated because state insurance mandates had drastically inflated premium costs — nearly $700 for an individual and $2,000 for a family. Missouri, on the other hand, has an average monthly rate of $192 for an individual and $332 for family.

In fact, thanks to HB 818, a healthy 25-year-old could pay as little as $37 per month for a plan that includes a free annual physical. His employer can also contribute to the premium and put money in his pretax health savings account (HSA) — which grows with interest. In other words, we already have a new system of incentives designed to increase the ranks of the insured. We should let it take effect before adding new layers of bureaucracy and centralized control.

The goals of any health care reform should include an emphasis on wellness, individual accountability for a healthy lifestyle, and wise consumption of health care. Subsidies should be reserved for the truly needy, with a system in place for smooth transition away from the program.

A simple step toward reaching these goals would be to convert subsidies for all health welfare programs, such as MO HealthNet and SCHIP, into income-based vouchers that can be used to purchase private policies or to join an employer’s plan. For those who feel Missouri must expand subsidies to low-income adults immediately, a pilot program could extend these vouchers to the adults that would be eligible for Phase 1 of “Insure Missouri.”

The advantages would be many. Voucher recipients would be free to add their own funds to buy a more expensive traditional plan, or purchase a lower-premium plan and put the balance of their vouchers into an HSA or health opportunity account (HOA). Those funds can be used for routine health expenses, such as pain relievers. This encourages consumerism, and promotes wellness and responsibility.

Subsidizing this primarily healthy, young group (820,000 on MO HealthNet and SCHIP alone) would add their premiums to the coffers, reduce overall risk for the general public pool, and lower rates for everyone.

Since many providers no longer accept Medicaid/SCHIP patients because reimbursement rates have been lowered, private plans would provide health welfare recipients with a wider choice of providers, decreased wait times, and shorter driving distances. Vouchers would also allow families to take advantage of discounts for private family plans or add the family to an employer’s plan.

Greg Scandlen of Consumers for Health Care Choices wrote, “Missouri’s (HB 818) is so good and such a model for other states that it should change its motto from ‘The Show Me State’ to ‘The Show Us (How to do it) State.’”

Rather than veering off on this path that leads to government-controlled health care, Missouri should forge ahead on the road to personal responsibility and free-market health care reform

Beverly Gossage is a consumer-based health care expert and research fellow with the Show-Me Institute.

 

The Bridges of Pork-Barrel Congress

Posted on by David Stokes

There is a very cool graphic over at the National Taxpayers Union that maps out the ratio of deficient brigdes in a state in relation to amount of porkbarrell spending that state receives. Thanks go to Andrew Sullivan for giving us the link. Short story — states with lots of pork don’t have any better bridges. The good news here for Missouri is that we don’t rank so bad in the ratio. Pretty much in the middle. They do seem to use a very strict standard for “deficient” bridges, though, as we have a lot more than 392 bridges that need work. That won’t change the ratios, though, as they certainly use the same standard for every state.

Clayton-Richmond Heights Merger Talks Dead

Posted on by David Stokes

Clayton and Richmond Heights (two St. Louis County municipalities, for those of you who read us from Kansas City or Lithuania) have seen their merger discussions go down to defeat by a vote of 20-5 at the final meeting of their Joint Study Committee. Both the West End Word and the Post-Dispatch have the details. The death of the discussions was long predicted, as indicated by the fact that only 25 of the 40 members of the JSC even showed up for the final vote. I wrote an op-ed supporting the merger earlier this year, but am not at all surprised by its defeat.

The proposal essentially failed because the committee was unable to come up with any hard evidence that merging the cities would lead to tax and cost savings. Why were they unable to come up with this seemingly easy evidence of economies of scale? I have a friend who served on one of the subcommittees. He or she supported the idea of a merger. However, every subcommittee had a representative from both Clayton and Richmond Heights government on it. For example, the Parks subcommittee had both cities’ parks directors, and so on.

Not surprisingly, as the two government employees had more information and knowledge then the other volunteers, their opinions carried a great deal of weight. Even less surprisingly, the two gov. reps were not at all interested in promoting any cuts to their departments, in any way. Amazingly, both cities run at a level of efficiency that would make Henry Ford proud, at least according to what the city employees on my friend’s subcommittee told them at their meetings. Seriously, both city reps stressed that their departments were running at 100% efficiency and that there were absolutely no economies of scale or cuts that could come out of a merger.

Well, of course, this is absurd, but the volunteer members of any committee don’t stand a chance arguing against full-time government employees. So it seems that the mayors of both cities and the city managers, all four of whom supported the idea of a merger (at least I think they all did; I am open to corrections), were cut off at their knees by other city employees "helping" out on the subcommittees.

The other problems with the discussions were the promise not to fire any employees (which still, apparently, did not satisfy the civil servants) and the "Harmonization of services," which guaranteed that in cases of different service levels, the combined city would always adopt the higher level of service. I am certain that the average resident of both cities would not have insisted on this "harmonization," although the ones who showed up to shout at the public meetings might have.

Let’s be really honest here. Clayton and Richmond Heights would benefit from a merger, but there are probably 70 cities in the county that need to do something like this more than they do. Both are very well-run cities in strong financial positions. Both have comparatively low taxes and great city services. That being said, the merger still would be beneficial for the cities by making the tax base more varied, which would have resulted in lower taxes for residents — mostly by eliminating redundant government jobs.

I know that the JSC tried to hire an outside expert back in 2005, but that effort failed. Looking back, when the Brookings Institution declined to do the study, it probably doomed the entire effort, as it forced officials to rely on city employees for expertise, with all the attendant turf-protection.

Even without a merger, the final report still recommends continuing efforts to work together and share services when possible. That is a very good thing and will greatly benefit residents of both cities.

2006 Annual Report: Better Late Than Never

Posted on by Eric D. Dixon

"How did it get so late so soon?" This query from Dr. Seuss was echoed by the equally whimsical St. Louis native Yogi Berra: "It gets late early out there." Although 2007 is quickly winding down, we’ve finally released our 2006 Annual Report.

Most non-profit organizations release their annual reports much earlier in the year than this. Ours would have been out sooner, too, but we decided to commission a thorough independent audit — to make sure everything was fully on track and accounted for during our first full year of operations. We had most of the report ready to go several weeks ago, but we didn’t want to issue an incomplete profile. Some things are worth the wait.

The report details our 2006 accomplishments and finances, profiles our research areas, board of directors, staff, and scholars from that year, and provides a brief overview of what we’ve been up to in 2007 and where we’re headed next. We have an ambitious publishing schedule this fall, so be sure to keep checking our web site!

I wasn’t a Missourian in 2006 (although my best friend did take me to see Spamalot at the Fox when I visited St. Louis for my birthday last November), much less a Show-Me Institute staffer, so I don’t make an appearance in the annual report. It almost seems odd not to be included, since I’ve been here for several months now, and I spent so much time working on the annual report itself, but as Yogi Berra also (supposedly) said, "The future ain’t what it used to be."

More Choice on the Horizon? Glimpsing the Future of St. Louis Public Schools

Posted on by Dave Roland

Last night I participated in a panel discussion (hosted by Metropolis St. Louis, FOCUS St. Louis, and the League of Women Voters) about the future of St. Louis Public Schools — my first official event as the Show-Me Institute’s new education policy analyst. The panel included Dr. John Martin (deputy superintendent of SLPS), Melanie Adams (member of the appointed Special Administrative Board overseeing SLPS), Evan Lewis (vice-president of Urban Prep Academy, an all-boys’ charter school in inner-city Chicago), State Senator Jeff Smith, and myself. Each of the panelists had a few minutes to make a statement about their vision for the future of public education in St. Louis before the floor was opened up to questions from the 40 people in attendance.

I would encapsulate the essential views of the participants as follows*:

Dr. Martin: SLPS has fallen on hard times because of rapid leadership turnover, and because it has to assume the responsibility of parenting kids who live in poverty and transience. The state government isn’t treating the system respectfully in this whole process. The best way to improve education in St. Louis is to seek our input before the administrative board takes any unusual action because there is a wealth of institutional wisdom within SLPS that can help right the ship if people will just keep administrators involved in the decision-making process. By the way, charter schools are dangerously unaccountable, and allowing financially disadvantaged families the opportunity to leave the public schools would be deadly for public education. Long live traditional public schools!

Ms. Adams: The system is broken, but we can fix it by introducing accountability and flexibility for the administrators. The administrative board hasn’t yet charted the path out of this mess, but we will work to move beyond the petty squabbling that has defined and degraded SLPS. Our focus will be doing what is best for the kids.

Mr. Lewis: Urban Prep Charter Academy demonstrates that educational success is attainable in impoverished urban areas. We have the flexibility to hire a staff and shape a curriculum that connects with young black men in unique ways. We set high expectations for our students and we take pride in knowing that, despite the fact that many of these students were not performing well in their traditional public schools, they almost always rise to the occasion with the proper support and encouragement. Even children in difficult circumstances are capable of academic achievement when schools are freed from bureaucratic constraints and allowed to pursue the best educational practices for each school’s particular setting and student body.

Sen. Smith: As an educator, I have seen both the good and bad aspects of SLPS, and I know that the system must be reformed in some way if it is to meet the needs of this city’s children. As a charter school administrator, I’ve seen the advantages that have resulted from the relative lack of constraints in seeking out the best educational practices. As a legislator, I’ve met almost absurd resistance from the teachers’ union when my education proposals would offer financial incentives to increase the number of quality teachers in Missouri classrooms. It’s time to set aside the interests in institutional turf and fiefdoms, and pursue any policy that will improve education for our children. Getting those children educated is a matter far more important than the sort of political, institutional, or personal concerns that have derailed reform in the past.

Mr. Roland: The key to resolving educational woes in St. Louis and elsewhere is to empower parents to seek out the best available education for their children. Almost without exception, parents are more invested in the success of their children than any bureaucrat will ever be, and therefore are more inclined to hold schools accountable for giving their children quality educations. A good school choice program will open the doors of opportunity for families who would otherwise never be able to send their children to schools that have the academic and disciplinary flexibility that is not available in traditional public schools.

Taken as a whole, I believe the evening resulted in a basic consensus that the reclamation of public education in St. Louis hinges on three central concepts: school accountability, educational flexibility, and the availability of some form of parental choice among schools. I won’t pretend that, despite my efforts, everyone was persuaded that we need full-blown school choice immediately. But my sense of the discussion was that most people recognize allowing even a restricted form of choice (open enrollment in traditional public schools, expansion of charter school options, etc.) would be an improvement over the status quo.

* Please note that these statements reflect my own impressions from listening to the other speakers, and should not be taken as direct quotes. The impressions of others present at the event may differ from my own.

Welcome, Dave Roland and Justin Hauke!

Posted on by Eric D. Dixon

The Show-Me Institute is expanding, bringing aboard new policy analysts and a research assistant to help us conduct the best in Missouri public policy research.

Dave Roland joins us as an education policy analyst, bringing with him three years of experience as an attorney with the Institute for Justice, litigating school choice, economic liberty, and property rights cases in state and federal courts. He has undergraduate degrees in political science and Biblical studies from Abilene Christian University, and both a law degree and a master’s in theology from Vanderbilt University. Dave’s wife, Jennifer, will also be joining us as a policy analyst in a couple of weeks. She’s the former legislative affairs attorney for IJ’s Castle Coalition — but more about her later.

Also joining us as a research assistant is Justin Hauke, a graduate student at Washington University’s Olin Business School who until recently worked as a senior research associate for the St. Louis Federal Reserve. He has an undergraduate degree in economics and math from the University of Texas at Austin. Justin has been blogging here for a few days now, and we’ve already released his first op-ed. (Actually, he co-wrote an op-ed for us almost a year ago, so technically that would be his first.)

We hope to hear much more from our new staff members as they get settled in!

Hannah Montana Teaches Teens Valuable Lesson About Law of Supply and Demand

Posted on by David Stokes

Today’s Post-Dispatch has an article about the continuing education pre-teen girls are receiving about the basic laws of economics. If large numbers of people want an item (a concert ticket) that has a limited supply (number of seats), that price will go up. Sometimes substantially. Add into the mix the strange rules of modern parenting and our entertainment-obsessed culture, and you have the perfect recipe for an extremely weird situation:

She gave in and bought six tickets from an online broker for a total of $900 for a Dec. 11 concert in Columbus, Ohio. Edelstein paid $150 for each $56 ticket. She bought two extra to sell, to help finance the family’s road trip.

Traveling to Ohio for a concert by a teenage girl. At $100 more than face value per ticket. Buying extra tickets to sell at even higher prices to finance the trip (nothing wrong with that; it’s just peculiar). It’s like a modern suburban version of Easy Rider, with two extra pop concert tickets substituted for the cocaine. If Phil Spector gets out of jail to buy this woman’s tickets in Columbus, that is really gonna freak me out.

For the record, there should be rules limiting the number of tickets one person can by, and there is nothing wrong with efforts to enforce those rules on scalpers. That would be a case of a private entity (the venue) choosing to offer its product to as many people as possible. Efforts should continue to block scalpers from buying huge numbers of tickets via computer programs, or however else they do it. But that does not mean it should be a crime for people to sell commodities they purchase for whatever price they choose. Changes to the law that legalize scalping for sporting events should be extended to concerts.

Hannah Montana tickets are not clean water after a flood, or Red Cross blood after an earthquake. Hell, they’re not even Cake tickets or something people will remember six months from now. They are just items to be bought and sold on the open market. If Hannah Montana teaches this principle to young girls, it will be an excellent lesson in basic economics, as explained decades ago by a band worth paying top dollar for.

(Note: Phil Spector played the man who bought the drugs in Easy Rider. I HATE explaining references, but considering most people won’t get it, and he is currently being tried for murder, I probably needed to do so.)

Tour of Missouri’s Value Yet to Be Determined

Posted on by Joseph Haslag

World-class cycling came to Missouri. For one week in mid-September, Missourians were offered an intimate look at the sport. Judging by the crowds and the enthusiastic press, the state embraced the Tour of Missouri and consumed the product of watching cyclists whizz by at 30 miles per hour.

There has been some criticism of state officials, including in this blog, arguing that the state’s return on its investment is negative. I have not seen the final tally, but suppose that Missouri State Government paid $1 million to sponsor the Tour. On average, between 3 and 4 cents of every dollar of Gross State Product (GSP) is received by Missouri’s General Revenue Fund. Thus, the break-even point is somewhere between $25 million and $33 million in additional GSP that would have to be generated by the Tour of Missouri. I have seen the estimated economic impact from the Tour de Georgia and am skeptical. The bottom line is that it is unlikely that the Tour of Missouri created enough new jobs or new physical capital to generate an additional $25 million of GSP. Nor were there enough idle resources — such as empty hotel rooms — used by out-of-state fans and participants to add that much to the Missouri economy. Rather, what we saw was people substituting the goods and services associated with the Tour of Missouri, displacing other forms of entertainment. As such, I would agree with the narrow economic calculation of the rate of return; it was probably negative.

Does this mean that the State of Missouri should not have sponsored the event with any funding? That answer is yet to be determined. Economic theory indicates that governments do improve welfare when they use resources to overcome coordination failures in the market. In this case, can one imagine that the Tour of Missouri would have been an entertainment offering without the state government’s sponsorship? No. It is difficult to coordinate the numerous activities necessary to put on such a cycling festival; profit-motivated entrepreneurs are probably incapable of solving the coordination problem. Hence, there is a role for government to solve these issues and provide its citizens with this form of entertainment.

The rate-of-return argument notwithstanding, stewards of the state resources must be vigilant. Over time, the justifiable size of state sponsorship will decline as the coordinating problems decline. There will always be issues with state roads and protection that require some state intervention. However, the initial mobilizing services will disappear in several years. If the Tour of Missouri is valuable enough to Missouri citizens, it will survive declining state sponsorship. Ultimately, market forces will determine the value to this enterprise just as it vets all goods and services that consumers choose from. It will take several years to assess the outcome, though there are hints from the revealed preferences of the thousands of people lining the Tour route.

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