March 2007 Archives

Anthem's parent company, WellPoint, is shaking up the health insurance marketplace with a new product targeting the young and uninsured with affordable coverage that they actually want and will buy.

According to a recent Business Week story, WellPoint "is winning hundreds of thousands of new customers with policies named "Part-Time Daredevil" and "Gravity Bender," offering basic coverage for as little as $67 a month..... Indeed, consumers are snapping up the novel policies that WellPoint markets, so far mainly in eight states. Sold on sites like Tonik.com and Soundhealth.com, they're a hit with those aged 19 to 29, and a big part of the way WellPoint has sold coverage to some 780,000 previously uninsured people in the last two years...The scaled-back individual policies WellPoint offers under the Tonik and Sound brands may cost as little as one-third of what employer-based group coverage does, but they cover as few as four doctor visits annually (with co-pays) and carry deductibles ranging as high as $5,000 (or $10,000 for services outside a network)."

So far, about 78 percent those buying Tonik plans were previously uninsured. And these policies cost receive no taxpayer subsidies - unlike DirigoChoice.

In Maine, due to costly insurance regulations, such policies could not be targeted in young people in such a cost-effective way. So Maine young people wanting affordable health insurance will have to move out of state, as Tonik is now available in next door New Hampshire and Connecticut.

That's not the way life should be - or needs to be.

In a classic example of Orwellian Double-Think, "government spending" in now "government investment." Naturally, this implies that government spending has a surplus benefit above and beyond the taxes raised to finance the spending. There has been a firestorm in academia debating whether or not this is true. A recent article published in the Review of Regional Studies by Stephen Brown, Kathy Hayes and Lori Taylor titled "State and Local Policy, Factor Markets and Regional Growth" sheds new light on this issue--find article here. The working paper, essentially an early draft, can be found on the Federal Reserve Bank of Dallas's website here.

Let's start with their conclusion:
"Consistent with the previous literature, we find that some state and local government expenditures more than offset the negative effects of the taxes used to finance them. Most do not." p. 53

"Apparently a large public sector crowds out and substitutes for growth of private labor and capital." p. 53

"We also find that the increased provision of public capital may discourage labor in-migration . . . some forms of state and local public capital have been increased to the point that (for the average state) further increases reduce private output. The net effect is that the increased provision of state and local public capital appears to reduce private gross state product--although total output may be higher." p. 53

This is precisely the result that I have discovered in Maine's Public versus Private Sector share of the personal income--report here. Since 2000, the public sector has accounted for all the growth in personal income while the private sector has actually shrunk. This appears to be a real-world example of the public sector crowding out the private sector as found by the authors. So when evaluating the "virtues of government investment" just remember that the "dead-hand of taxes" often outweigh the benefits of spending.

To read more great quotes from the paper, click "continue reading" below.

Stephen L. Bowen: Still time for compromise on education reform

Bangor Daily News, March 21, 2007

It is said that the sign of a good compromise is that all the parties involved have something about the final product that they dislike. The fact that the Education Committee’s alternative to Gov. Baldacci’s school district consolidation plan has been roundly criticized, however, should not be taken as a sign that it is a good compromise. It is not.

While the governor’s own assessment of the committee’s proposal, that it is too little, too late, is the correct one, his own plan is flawed as well. There still remains, therefore, room in the middle for a compromise that really will generate administrative savings while improving the educational product Maine schools provide.

Read the rest of the op-ed at here

In a new article in the National Review, Chris Edwards explains how Ireland became an economic success story. He found that: "Irish government spending fell from more than 50 percent of GDP in the 1980s to 34 percent by 2005. For Europe that is a triumph of restraint, given that the average size of government across 25 EU countries today is 47 percent of GDP."

Further evidence that spending drives taxes: "And Ireland has steadily reduced its tax rates. The top individual income tax rate was cut from 65 percent in 1985 to 42 percent today. The capital-gains tax rate was cut from 40 to 20 percent in 1999."

The Cigarette and Tobacco Products License Fees

The next installment of the "Hidden Tax/Fee of the Week" is available on the MHPC website.

Total Hidden Taxes/Fees to Date: 273

Sometimes in Maine we seem to be the last to jump on board with national trends. HCA, a national for-profit chain of 165 hospitals, will "begin telling patients in advance how much they will pay," according to a story in the Tennessean. Both patients with consumer-directed health plans (plans combined with Health Savings Accounts) and the uninsured can get prices in advance and call HCA for estimates of their total cost of treatment.

Too often people complain about for-profit providers in health care. Isn't it interesting that a for-profit hospital chain seems to be most comfortable with posting its prices and is leading the push for greater price transparency in health care?

Maybe competition and the profit motive are positive factors in health care, just like they are in the other 5/6ths of the economy.

The Tobacco Products Tax

The next installment of the "Hidden Tax/Fee of the Week" is available on the MHPC website.

Total Hidden Taxes/Fees to Date: 268

In the February 24 to March 2 edition of the "The Economist" magazine was a special report on offshore finance (subscription required). The essentials of the report is best summarized in this quote: "Companies the world over are increasingly global. They are also facing ever fiercer competition at home and abroad, which makes them increasingly sensitive to costs--including the costs of regulation and tax." Maine policymakers need to be more sensitive to that fact.

Not everything is negative with US health care and health care spending. Consider this information from the National Center on Policy Analysis:

BURYING GOOD NEWS

Health care costs are increasing at their lowest rate in nearly a decade, according to the latest report from the Center for Medicare and Medicaid Services (CMS), which each year reports on health care spending and offers its forecast for spending into the future.

For example:

* Health care spending growth in the United States slowed for the third straight year in 2005, increasing 6.9 percent.
* This marks the slowest growth rate in health spending since 1999, when enrollment in more tightly managed care plans peaked.
* And further slowing is expected when 2006 data are available.

For the most part, the mainstream media's coverage focused on the CMS' long-term projection that total health care spending will double by 2016. That does seem worrisome, but even here there is some good news buried by the press, says Investor's Business Daily (IBD). The forecast growth is down from last year's report:

* Last year, the CMS projected that national health spending would consume 20 percent of the economy by year 2015.
* This year, they project that spending in 2016 will be about 19.6 percent of the economy; not a huge difference, but certainly a notable one.

The lack of consumer involvement in the cost of health care is a key driver in the upward pressure on prices. If consumers had more of a direct financial stake in their health care decisions, the market would respond with more transparent pricing, competition on price and quality, as in other markets, says IBD.

Equally important, this lack of consumer involvement is a direct result of government policies that encourage overreliance on insurance for routine medical bills and direct government spending, explains IBD.

Source: Editorial, "Burying Good News," Investor's Business Daily, February 27, 2007.

For text:

http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=257472580100703

For more on Health Issues:

http://www.ncpa.org/sub/dpd/index.php?Article_Category=16