March 2008 Archives

As reported here, the Maine House did not adopt the amendment attached in the Senate yesterday that preserves OPEGA. In a vote earlier this afternoon, the House "adhered" to its previous budget vote, meaning that it sent the bill back the Senate in the same form it did before. That version, voted out of the Appropriations committee along party lines last weekend, would de-fund and eliminate OPEGA, the investigative arm of the legislature that was established only a few years ago.

In a recent report on the budgets of the legislature and the governor, we found ample reason to save OPEGA, not the least of which is the fact that over the past couple of years it has spent less than $3 million, but found state budget savings of more than $20 million. OPEGA has done remarkable work in the time it has been up and running, and has produced a series of well-researched reports on state government.

The kind of standoff we're now seeing between the House and the Senate has been pretty rare in recent years, with both bodies controlled by the same party. Remarkably, what seems to have happened is that a bipartisan group of Senators, brought together by the assault on OPEGA, have crafted an amendment to restore the agency and find the budget savings elsewhere. It won the support last night of six Senate Democrats and all but one of the Senate Republicans.

So will the Senate hold? What will happen next if the two bodies cannot come to an agreement?

This promises to be an interesting and important couple of days for the future of OPEGA.

New Hampshire--for the 5th straight year.

Unfortunately, Maine comes in at a much lower ranking--number 20. More disturbingly, Maine is down 4 spots from the previous year. Relative to New Hampshire, Maine's score (27.32) is 18.7 percent lower than New Hampshire's (33.61). Other New England states ranking above Maine include: Vermont (#8, 30.91), Connecticut (#11, 29.91) and Massachusetts (#13, 29.84). Only Rhode Island fared worse than Maine coming in at #25 (24.89).

This award is published by CQ Press, formerly by Morgan-Quitno Press, for the past 18 years. In their words, "The 2008 award is based on 44 factors ranging from median household income to crime rate, sunny days to infant mortality rate. The factors used for this year's award are the same as those used last year."

I am unable at this time to diagnose why Maine fell in the rankings because the final reports are only available for a fee. Stay tuned for more . . .

Recently Watson Wyatt released a report of characteristics of companies with very low health insurance cost increases - about 1 percent a year. The average company experienced an increase six times as great. Poor performing companies had an increase ten times greater.

The report's major findings:

"Best-performing companies have a two-year median cost increase of 1 percent, compared with 10 percent for their poor-performing peers. The median two-year increase for all employers is 6.2 percent.

Companies with a CDHP report a two-year average cost trend that is significantly below that of companies without a CDHP (5.5 percent vs. 7.0 percent). Enrollment rates in CDHPs are also strongly linked to lower health care cost trends. Companies with at least 50 percent of their population enrolled in a CDHP have a two-year trend about half that of non-CDHP sponsors.

Both CDHP adoption and enrollment rates are increasing. Forty-seven percent of companies now have a CDHP in place – an increase of more than 20 percent compared with 2007. Forty-two percent of these companies have at least 20 percent of their employees enrolled in a CDHP, up from 27 percent of surveyed companies in 2006.

Best performers and those with consumer-oriented health care models are achieving significant cost savings by implementing programs that use financial incentives; focus on provider quality, data, health and productivity; and provide employees with information to make smarter health care decisions."

The Maine Heritage Policy Center has a consumer-directed health plan for our employees, arranged through our benefit consultant National Worksite Benefit Group of Hallowell, Maine. According to their CEO Joel Allumbaugh, companies with these plans have experienced no premium increases or premium decreases over the last two years.

If your company does not have a Consumer-Directed Health Plan, you should consider it.

Governor Crist of Florida (R) recently proposed an extensive health reform plan, as noted in the Miami Herald. A key element of his plan is the repeal of Certificate of Need (CON), the process where state government must approve private investment and the expansion of health care services. CON is premised on the belief that central government planning can control health care costs.

Gov. Crist outlines several reasons for CON repeal:

· "This proposal reflects the goal of the Governor to increase competition and efficiency in the health care marketplace and provide Floridians with greater access to quality services. Removing the burdensome certificate of need process will foster a competitive business climate, spur economic development, and improve access and quality of care for Floridians.

· CON laws across the states have had over 30 years to demonstrate their ability to contain costs, lower prices, and provide greater quality and access to services. Fourteen other states have removed CON requirements since CON laws have failed to achieve reduced costs and greater quality of care.

· The CON process involves delays due to lawsuits by local competitors. Since the August 2005 CON batch cycle, 20 of the 27 CON applications are still in litigation.

· Costs related to the CON process can run as high as $1 million and each additional opponent can increase costs by 50 percent. These costs are passed on and paid for by all consumers.

· CON laws stifle competition and discourage current providers from offering new services.

· The proposed legislation removes current CON process for establishment of new acute care hospitals, and makes them subject to licensure.

· Ties licensure of new acute care hospitals to provision of charity care to Medicaid and underserved populations.

· Requires on-site emergency departments for these new hospitals, as emergency departments see the greatest portion of charity care."

Maine has one of the most restrictive CON laws in the country. It is a failure. Central government planning does not work. Eastern Europe recognized this. The Federal Trade Commission and US Department of Justice have recognized this in recommending CON repeal. Now it is time for Maine to do the same.

Maine should follow Florida and 14 other states and repeal CON and allow the health care industry to innovate and make investments that they deem in the best interest of patients.

The snack tax attempts to rise from the grave. A little known bill is making its way through the legislative process, LD 1833. The name of the bill, To Provide Property Tax and Income Relief, is deceptive. Besides raising taxes on things like beer and wine there is a new tax. If you read the summary of the bill you almost would not catch that this is a new tax. At the very end of the bill is a small line that reads, “It (LD 1833) also reinstitutes the sales tax on non-staple foods.� What is a non-staple food? It is snack food. This is the snack tax. Some would say that this is just broadening the base of the sales tax but it is not. To go from 0 percent to 5 percent on an item is to create a new tax. If you would like to view this bill and its current status check out www.mainevotes.org and type in LD 1833.

The Houston Chronicle recently highlighted the move of some family physicians to customized or concierge care. According to the article:

"Concierge medicine is a relatively small movement in the U.S.

Typically, physicians who charge an upfront annual fee [$1,500 to $1,800] reduce their caseloads, which allows them to make house calls and focus on wellness matters from weight management to depression. Some give patients their cell phone numbers.

Proponents say concierge care is a revolt against the modern health care system where diminishing Medicare and insurance payments have forced doctors to herd dozens of sick patients through their offices in five-minute increments every day."

Some insurers - United and Cigna - don't like it. Others - like Anthem - don't care as long as patients recognize it is a non-covered, out of pocket cost.

According to the customized care trade association of MDVIP, there are 210 physicians nationwide that offer customized care. Maine has none.

When patients pay out of pocket for services, health care is naturally going to become more customized and responsive to their needs. Watch for this trend to make its way to Maine in the near future.

Fire Investigation and Prevention Tax

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

Total Hidden Taxes/Fees to Date: 285

Legislative Democrats are praising the party-line vote of the Insurance and Financial Services Committee to pass LD 2247, Representative Hannah Pingree's Dirigo Health bill. The bill contains a $40+ million tobacco tax increase, a permanent 1.8% claims tax on all health benefits in Maine and do-nothing "reforms" to the individual insurance market.

Despite the flurry of legislative rhetoric to the contrary, the fact remains that Dirigo Health is a costly failure.

Dirigo Health had three stated goals when introduced by Gov. Baldacci in 2003:

1. Cover the all 128,000 uninsured (in 2003) by 2009
2. Be self-supporting with no new taxes or state funds (beyond first year)
3. Stabilize health insurance premiums and healthcare cost increases

Dirigo Health is failing in each area:

• Maine currently has 122,000 uninsured, according the US Census Bureau– a nominal change from the 128,000 in 2003.
• According to Mathematica, only 31 percent of DirigoChoice enrollees are uninsured. Less than 1 in 3. That means of the 14,405 enrolled in Dirigo in January, just 4,466 were previously uninsured.
• DirigoChoice cost the Maine taxpayers $2,964 per enrollee in subsidies and administrative costs for 2007. That’s a cost per uninsured of $9,561.
• Dirigo Health has consumed $53 million in federal budget relief funds PLUS another $110.8 million in Savings Offset Payment/Dirigo Tax monies - $163.8 million so far. Maine families and businesses have had their health insurance costs increased by $110.8 million over the last three years for the Dirigo Health experiment.

The Dirigo experiment has failed. Maine families should not be permanently punished with higher taxes as politicians seek to throw good money after bad.

Hot off the press from the U.S. Census Bureau is new data showing county components of change. In a previous blog, I showed the overall domestic migration by state showing that Maine lost 717 people to the other 49 states. However, looking at the results by county show some serious problems:

1) Seven counties showed an absolute decline in total population: Androscoggin (-216), Aroostook (-75), Knox (-81), Lincoln (-6), Piscataquis (-32), Sagadahoc (-70) and Washington (-27).

2) Six counties showed a decline in natural changes, meaning deaths were greater than births: Aroostook (-95), Knox (-10), Lincoln (-34), Oxford (-5), Piscataquis (-61) and Washington (-44).

3) Eight counties showed a decline in net internal migration, ie, with the other 49 states: Androscoggin (-673), Aroostook (-40), Cumberland (-221), Knox (-96), Sagadahoc (-179), Waldo (-37), Washington (-4) and York (-143).

Keep in mind that this is for the time-period July 1, 2006 to July 1, 2007 when the economy was still doing reasonably well. What will next years data show? The probability that Maine's overall population might shrink has clearly gone up with this new data. Click "continue reading" to see full table.

First, our new Cross-Border Shopping report by J Dwight and I is now released titled: "The Silent Tax Revolt: Mainers Cross-Border Shopping in New Hampshire II" One point we left out of the report was that we did a reverse count of all NH license plates at the Biddeford Super-Walmart. We counted a grand total of . . . drum roll please . . . 3 cars.

Speaking of New Hampshire, I have been brushing up on New Hampshire news by reading the Manchester's Union Leader. I came across two opinion articles that highlight an important difference between Maine and New Hampshire--how residents of each state view the world. When reading these two articles, ask yourself if you would read either in the Portland Press Herald?

1) Without the Pledge: NH would become Connecticut, Tuesday, Mar. 11, 2008.

2) The NH Advantage: Two studies help define it, Sunday, Mar. 9, 2008.

We first blogged on this story about a month ago, when it was first reported here and here that the town of Southport had decided, against the advice of their school superintendent, to simply ignore the new state law requiring a "validation" referendum vote to approve their school budget.

The school budget for Southport was approved at its town meeting last week. Under law, they are to have a referendum vote by Monday, which would be 10 business days after the town meeting vote. They have made clear that they do not intend to do so.

It will be interesting to see what, if any, repercussions will follow this decision to disenfranchise voters, but published reports indicate that Southport is prepared to deal with them, even if those repercussions include the state withholding its share of funding for Southport's school.

So, should the state be able to tell Maine's small towns how to approve their school budgets? Will we ever be able to get school budgets under control unless there is greater transparency and voter involvement on the local level? Our recent report on the budget validation process shows that it does keep budget growth down and is very popular with voters.

What about the state? The report we released this week shows how the state has been shifting its own educational spending onto the local units. Should such a budget approval process be implemented on the state level as well?

Hmmmmm.......

This is a miscellaneous post:

1. From my previous blog in this series on the State Coincident Index, there were only 4 states that broke the 200 index value by December 2007. They are: Arizona (219.47), Idaho (230.80), Nevada (247.61) and New Hampshire (200.22). While New Hampshire is the lowest of the group, that is pretty good company in terms of economic development.

2. Upon further examination of 2007 state government tax collections from the Census Bureau, I noticed a stark difference in the growth of state government tax collections between Maine and New Hampshire. Between FY 2002 and FY 2007, Maine's state government tax collections grew $954,850,000 (36 percent) to $3,581,680,000 from $2,626,830,000. In stark contrast, New Hampshire's state government tax collections between FY 2002 and FY 2007 grew $183,552,000 (10 percent) to $2,080,573,000 from $1,897,021,000.

I will translate these figures into "percent of income" when the Bureau of Economic Analysis releases their 2007 estimate of personal income at the end of March. Stay tuned . . .

Every month the Federal Reserve Bank of Philadelphia publishes their State Coincident Index which is an important gauge of economic activity within a state. In their words: "The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP."

According to the index, Maine not only lags all New England states, but also lags the national average. At the other end of the spectrum, New Hampshire not only leads all New England states, but also leads the national average. In both cases, the lead is by a significant margin (to see graph, click "continue reading."). If, as some folks stipulate, New Hampshire's growth is a direct result of its proximity to Boston; then: (1) why is New Hampshire growing significantly faster than Massachusetts and (2) why isn't Rhode Island getting the same pick-up in economic activity? Could it be because Rhode Island's tax burden looks more like Maine's than it does New Hampshire's?

We all know that Maine state government is now facing an almost $200 million budget deficit. The primary culprit is declining tax collections. Some folks would have you believe that declining tax collections are happening everywhere. While other states may be seeing a slow-down in collections, Maine's problem is much deeper.

Last week, the U.S. Census Bureau released its 2007 state tax collections data. Between FY 2006 and FY 2007, only three states saw an absolute decline in tax collections: Maine (-$16,899,000), Florida (-$1,463,277,000) and Wyoming (-$97,149,000). Florida repealed their intangibles tax which explains their drop. Wyoming saw a decline in their highly volatile severance taxes which explains their drop. What explains Maine's drop in tax collections?

More disturbingly, the drop is not concentrated in any single tax: Individual Income Tax (-$10,626,000); Corporate income tax (-$4,161,000); Death and Gift (-$20,510,000); Documentary and Stock Transfer (-$5,095,000); Occupation and Business Licenses (-$869,000); Amusements Licenses (-$96,000); Other Selective Sales Taxes (-$3,813,000); Pari-mutuels (-$247,000); Insurance Premiums (-$8,889,000) and Property (-$3,949,000).

Overall, this broad-based decline in tax collections suggests a broad-based decline in economic activity. This further suggests that the current budget deficit should be closed by reductions in spending, not by tax increases.