Mercatus Site Feed http://mercatus.org/feeds/home/people/id.70%2Ccfilter.0/satya-thallam en Houston Supporter and Friend Lunch http://mercatus.org/events/houston-supporter-and-friend-lunch-0 <h5> Events </h5> <p>For years, policymakers have avoided reforms to fix the troubled finances of our entitlement programs. But now, the deadlines are on top of us. Unless change takes place before 2016, the Social Security Disability Insurance trust fund will run out of money, resulting in benefit cuts—a significant financial shock for those on the disability rolls.</p> <p>New research by Mercatus Center Senior Research Fellow Jason Fichtner argues that policymakers should use this opportunity to adopt much-needed reforms of the Disability Insurance program, which could set the tone for future entitlement reforms. Please join us for a lunch discussion centered on reform options for the program and a broader discussion on the path forward to make real change. We encourage you to ask Jason any questions you may have on entitlement spending; as a foremost expert on entitlement programs, he will be eager to discuss topics ranging from Social Security and retirement, to tax and budget policy.</p> <p>This is not a fundraising event, and there is no charge to join us. We are pleased to have you as our guest to show our thanks and appreciation to our donors. Dress is business casual. Please invite friends or associates who might be interested.</p><p><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">To RSVP for this event, please contact Brittany Hemsath at&nbsp;</span><a href="mailto:bhemsath@mercatus.gmu.edu" style="font-style: normal; font-size: 12px; font-family: Helvetica, Arial, sans-serif; color: #666699;">bhemsath@mercatus.gmu.edu</a><span style="font-family: Helvetica, Arial, sans-serif; font-size: 12px; font-style: normal;">&nbsp;or (703) 993-8297.</span></p> http://mercatus.org/events/houston-supporter-and-friend-lunch-0 Tue, 05 May 2015 03:53:30 -0400 Certificate-of-Need Laws: Implications for South Carolina http://mercatus.org/publication/certificate-need-laws-implications-south-carolina <h5> Publication </h5> <p class="p1">Thirty-six states and the District of Columbia currently limit entry or expansion of health care facilities through certificate-of-need (CON) programs. These programs prohibit health care providers from entering new markets or making changes to their existing capacity without first gaining the approval of state regulators. Since 1971, South Carolina has been among the states that restrict the supply of health care in this way, with 20 devices and services—including acute hospital beds, magnetic resonance imaging (MRI) and positron emission tomography (PET) scanners—requiring a certificate of need from the state before the device may be purchased or the service offered.</p> <p class="p1">CON restrictions are in addition to the standard licensing and training requirements for medical professionals, but are neither designed nor intended to ensure public health or ensure that medical professionals have the necessary qualifications to do their jobs. Instead, CON laws are specifically designed to limit the supply of health care and are traditionally justified with the claim that they reduce and control health care costs. The theory is that by restricting market entry and expansion, states will reduce overinvestment in facilities and equipment. In addition, many states—including South Carolina—justify CON programs as a way to cross-subsidize health care for the poor. Under these “charity care” requirements providers that receive a certificate of need are typically required to increase the amount of care they provide to the poor. These programs intend to create <i>quid pro quo</i> arrangements: state governments restrict competition, increasing the cost of health care for some, and in return medical providers use these contrived profits to increase the care they provide to the poor.</p> <p class="p2">However, these claimed benefits have failed to materialize as intended. Recent research by Thomas Stratmann and Jacob Russ demonstrates that there is no relationship between CON programs and increased access to health care for the poor. There are, however, serious consequences for continuing to enforce CON regulations. In particular, for South Carolina these programs could mean approximately 6,331 fewer hospital beds, between 10 and 19 fewer hospitals offering MRI services, and between 33 and 41 fewer hospitals offering computed tomography (CT) scans. For those seeking quality health care throughout South Carolina, this means less competition and fewer choices, without increased access to care for the poor.</p> <p class="p3"><b>The Rise of CON Programs</b></p> <p class="p1">CON programs were first adopted by New York in 1964 as a way to strengthen regional health planning programs. Over the following 10 years, 23 other states adopted CON programs. Many of these programs were initiated as “Section 1122” programs, which were federally funded programs providing Medicare and Medicaid reimbursement for certain approved capital expenditures. South Carolina enacted its first CON program in 1971, prior to the passage of the National Health Planning and Resources Development Act of 1974, which made certain federal funds contingent on the enactment of CON programs, and provided a strong incentive for the remaining states to implement CON programs. In the seven years following this mandate, nearly every state without a CON program took steps to adopt certificate-of-need statutes. By 1982 every state except Louisiana had some form of a CON program.</p> <p class="p1">In 1987, the federal government repealed its CON program mandate when the ineffectiveness of CON regulations as a cost-control measure became clear. Twelve states rapidly followed suit and repealed their certificate-of-need laws in the 1980s. By 2000, Indiana, North Dakota, and Pennsylvania had also repealed their CON programs. Since 2000, Wisconsin has been the only state to repeal its program.</p> <p class="p4">South Carolina remains among the 36 states, along with the District of Columbia, that continue to limit entry and expansion within their respective health care markets through certificates of need. On average, states with CON programs regulate 14 different services, devices, and procedures. South Carolina’s CON program currently regulates 20 different services, devices, and procedures, which is more than the national average. As figure 1 shows, South Carolina’s certificate-of-need program ranks the 8th most restrictive in the United States.</p> <p class="p5"><a href="http://mercatus.org/sites/default/files/Certificate-of-NeedSC-MOP.png"><img height="376" width="585" src="http://mercatus.org/sites/default/files/Certificate-of-NeedSC-MOP.png" /></a></p> <p class="p6">Note: Fourteen states either have no certificate-of-need laws or they are not in effect. In addition, Arizona is typically not counted as a certificate-of-need state, though it is included in this chart because it is the only state to regulate ground ambulance services.</p> <p class="p1"><b>Do CON Programs Control Costs and Increase the Poor’s Access to Care?</b></p> <p class="p1">Many early studies of CON programs found that these programs fail to reduce investment by hospitals. These early studies also found that the programs fail to control costs. Such findings contributed to the federal repeal of CON requirements. More recently, research into the effectiveness of remaining CON programs as a cost-control measure has been mixed. While some studies find that CON regulations may have some limited cost-control effect, others find that strict CON programs may in fact increase costs by 5 percent. The latter finding is not surprising, given that CON programs restrict competition and reduce the available supply of regulated services.</p> <p class="p1">While there is little evidence to support the claim that certificates of need are an effective cost-control measure, many states continue to justify these programs using the rationale that they increase the provision of health care for the poor. To achieve this, 14 states make some requirement for charity care within their respective CON programs. This is what economists refer to as a “cross subsidy.”</p> <p class="p1">The theory behind cross-subsidization through these programs is straightforward. By limiting the number of providers that can enter a particular practice and by limiting the expansion of incumbent providers, CON regulations effectively give a limited monopoly privilege to providers that receive approval in the form of a certificate of need. Approved providers are therefore able to charge higher prices than would be possible under truly competitive conditions. As a result, it is hoped that providers will use their enhanced profits to cover the losses from providing otherwise unprofitable, uncompensated care to the poor. Those who can pay are supposed to be charged higher prices to subsidize those who cannot.</p> <p class="p1">In reality, however, this cross-subsidization is not occurring. While early studies found some evidence of cross-subsidization among hospitals and nursing homes, the more recent academic literature does not show evidence of this cross-subsidy taking place. The most comprehensive empirical study to date, conducted by Thomas Stratmann and Jacob Russ, finds no relationship between certificates of need and the level of charity care.</p> <p class="p1"><b>The Lasting Effects of South Carolina’s CON Program</b></p> <p class="p1">While certificates of need neither control costs nor increase charity care, they continue to have lasting effects on the provision of health care services both in South Carolina and in the other states that continue to enforce them. However, these effects have largely come in the form of decreased availability of services and lower hospital capacity.</p> <p class="p1">In particular, Stratmann and Russ present several striking findings regarding the provision of health care in states implementing CON programs. First, CON programs are correlated with fewer hospital beds. Throughout the United States there are approximately 362 beds per 100,000 persons. However, in states such as South Carolina that regulate acute hospital beds through their CON programs, Stratmann and Russ find 131 fewer beds per 100,000 persons. In the case of South Carolina, with its population of approximately 4.8 million, this could mean about 6,331 fewer hospital beds throughout the state as a result of its CON program.</p> <p class="p1">Moreover, several basic health care services that are used for a variety of purposes are limited because of South Carolina’s CON program. Across the United States, an average of six hospitals per 500,000 persons offer MRI services. In states such as South Carolina that restrict hospitals’ capital expenditures (above a certain threshold) on MRI machines and other equipment, the number of hospitals that offer MRIs is reduced by between one and two per 500,000 persons. This could mean between 10 and 19 fewer hospitals offering MRI services throughout South Carolina. The state’s CON program also affects the availability of CT services. While an average of nine hospitals per 500,000 persons offer CT scans, CON regulations are associated with a 37 percent decrease in these services. For South Carolina, this could mean between 33 and 41 fewer hospitals offering CT scans.</p> <p class="p1"><b>Conclusion</b></p> <p class="p1">While CON programs were intended to limit the supply of health care services within a state, proponents claim that the limits were necessary to either control costs or increase the amount of charity care being provided. However, 40 years of evidence demonstrate that these programs do not achieve their intended outcomes, but rather decrease the supply and availability of health care services by limiting entry and competition. For policymakers in South Carolina, this situation presents an opportunity to reverse course and open the market for greater entry, more competition, and ultimately more options for those seeking care.</p> http://mercatus.org/publication/certificate-need-laws-implications-south-carolina Mon, 04 May 2015 16:48:09 -0400 China’s $100 Billion Infrastructure Bank: Bumpy Road Ahead http://mercatus.org/expert_commentary/china-s-100-billion-infrastructure-bank-bumpy-road-ahead <h5> Expert Commentary </h5> <p class="p1">Has the Asian century finally arrived? You might think so, reading the international media’s take on the rush to join the new Chinese-led Asian Infrastructure Investment Bank (AIIB). To date, some 58 countries, including almost every country in Asia plus 18 European countries, have queued up for membership. Is this the start of an epochal global power shift that — to paraphrase Chinese President Xi Jinping — signifies the rise of new regional order, better for Asia and better for the world?&nbsp;</p> <p class="p1">The claim heard in Asia is that it’s time for China to share its expertise and help others. By spending nearly 8.5 percent of its GDP on infrastructure, while its neighbors never exceed 4.0 percent, China has been spectacularly successful building an infrastructure for a modern economy in record time. By comparison, the U.S.-led World Bank and the Japanese-led Asian Development Bank are slow and bureaucratic, preventing both organizations from meeting Asia’s needs, which exceed trillions of dollars.&nbsp;</p> <p class="p1">Surprisingly, the momentum to join the bank is creating apprehension within China itself. At a time when China’s portfolio of projects overseas is suffering from scrutiny, stalls, setbacks and local opposition, Chinese enterprises were looking forward to a feeding frenzy of subsidized projects that international oversight of the proposed new bank could stymie.&nbsp;</p> <p class="p1">Meanwhile, a Chinese Treasury Department official revealed to Internet service portal&nbsp;Tencent&nbsp;that an estimated 70 percent of $671 billion in bilateral loans disbursed to support the overseas operations of Chinese firms between 2001 and 2011 are performing below expectations. The problem is that China’s expansion of overseas lending is conducted without any risk assessment being in place.&nbsp;</p> <p class="p1">The reality is, the Chinese are learning the hard way that they’re no better at overcoming the same difficulties that handicap the World Bank and Asian Development Bank in local environments where fiduciary standards are unreliable, corruption is unavoidable and weak local management makes project completion and maintenance problematic. Managerial capacity, it turns out, is not as easy as bricks and mortar to transfer overseas.&nbsp;</p> <p class="p1">But the most tenacious risk is political. Despite China’s goal of avoiding local politics, its infrastructural initiatives embroil China in the politics of its neighbors.&nbsp;</p> <p class="p1">In Sri Lanka, alleged corruption in the $5 billion investment portfolio of Chinese projects helped the opposition defeat President Mahinda Rajapaksa. In Myanmar, the mega Myitsone dam project has been suspended since 2011 due to negative environmental and social impacts that provoked protests among local populations who asked why they should bear the environmental costs for a project that would deliver 90 percent of its output to China. In the Philippines, the newly elected Aquino government in 2012 cancelled the Northrail project due to allegations of corruption in the procurement process conducted by its predecessor. Allegations of corruption turn Chinese investment into a domestic political issue that harms bilateral relations.&nbsp;</p> <p class="p1">The Chinese are confident that AIIB can get off to a fast start by going after “low-hanging fruit” and addressing the long-term issues later. This is an illusion. If such “low-hanging fruit” ever existed, it would have been snatched long ago, but the difficulty in making accurate assessments about project costs and commercial viability keeps investment at bay.&nbsp;</p> <p class="p1">Equity — how the benefits are distributed socially — can also be intractable. Making infrastructure work for the poor is not just an exercise in engineering or financing. A half-century of experience has taught the mature development organizations that local governance failures contribute to the uncertainty of infrastructure investment success.&nbsp;</p> <p class="p1">Here’s the biggest snag that will bedevil the Chinese concept of its new global institution: The Chinese decry the fact that World Bank’s president is traditionally American, the head of International Monetary Fund traditionally European and the Asian Development Bank is always headed by a Japanese president. China’s share of voting on the governing boards of these institutions is kept low.&nbsp;</p> <p class="p1">Yet China’s insistence on the right to appoint the head of the AIIB, and its desire to exercise veto power over bank management, compromises the bank’s professionalism and its ability to operate autonomously, free of political pressures.&nbsp;</p> <p class="p1">Why does China want to replicate the same prejudice for which it criticizes the other multilateral institutions?&nbsp;</p> http://mercatus.org/expert_commentary/china-s-100-billion-infrastructure-bank-bumpy-road-ahead Mon, 04 May 2015 10:14:59 -0400 Eileen Norcross Testifies on Opportunities for Pennsylvania Pension Reform at Pennsylvania Leadership Conference http://mercatus.org/video/eileen-norcross-testifies-opportunities-pennsylvania-pension-reform-pennsylvania-leadership <h5> Video </h5> <iframe width="560" height="315" src="https://www.youtube.com/embed/-Xm05zAmqPw" frameborder="0" allowfullscreen></iframe> <p class="p1">Pennsylvania’s state pension fund is in dire straits. Eileen Norcross testified on opportunities for pension fund reform before the State Senate Finance Committee</p><div class="field field-type-text field-field-embed-code"> <div class="field-label">Embed Code:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> &lt;iframe width=&quot;560&quot; height=&quot;315&quot; src=&quot;https://www.youtube.com/embed/-Xm05zAmqPw&quot; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> http://mercatus.org/video/eileen-norcross-testifies-opportunities-pennsylvania-pension-reform-pennsylvania-leadership Fri, 01 May 2015 20:26:34 -0400 Pavel Yakovlev Testifies on Improving Tax Structures at Pennsylvania Leadership Conference http://mercatus.org/video/pavel-yakovlev-testifies-improving-tax-structures-pennsylvania-leadership-conference-0 <h5> Video </h5> <iframe width="560" height="315" src="https://www.youtube.com/embed/007uoqAaED4" frameborder="0" allowfullscreen></iframe> <p class="p1">Pavel Yakovlev spoke on a panel at the Pennsylvania Leadership Conference discussing taxation, specifically ways to improve the tax structure without raising tax impact on average people.&nbsp;</p><div class="field field-type-text field-field-embed-code"> <div class="field-label">Embed Code:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> &lt;iframe width=&quot;560&quot; height=&quot;315&quot; src=&quot;https://www.youtube.com/embed/007uoqAaED4&quot; frameborder=&quot;0&quot; allowfullscreen&gt;&lt;/iframe&gt; </div> </div> </div> http://mercatus.org/video/pavel-yakovlev-testifies-improving-tax-structures-pennsylvania-leadership-conference-0 Fri, 01 May 2015 20:27:19 -0400 A New ‘Save SSDI Plan Could Derail Social Security http://mercatus.org/expert_commentary/new-save-ssdi-plan-could-derail-social-security <h5> Expert Commentary </h5> <p class="p1">The urgent financing crisis facing <a href="http://www.economics21.org/commentary/social-security-disability-insurance-2015-1-14">Social Security Disability Insurance</a> (DI) is giving rise to suggestions that the DI Trust Fund be merged with Social Security’s larger Old-Age and Survivors Insurance (OASI) Trust Fund. These two components of Social Security have been kept separate thus far since their inceptions. Of the two, DI currently faces the much more immediate (2016) threat of depletion. Combining the two funds would allow disability benefits to be paid from payroll taxes currently earmarked for Social Security retirement benefits. The following factors should be borne in mind if any such policy change is considered.</p> <p class="p1"><b>1: Historical Rationale for Separate Trust Funds.</b> Social Security’s retirement and disability benefit systems were enacted at different times with separate financing arrangements. Social Security’s old-age benefits were enacted in <a href="http://www.ssa.gov/history/35act.html">1935</a> during the Franklin D. Roosevelt presidency; for roughly the first two decades thereafter Social Security had but one trust fund. Disability insurance was established in <a href="http://www.ssa.gov/history/35act.html">1956</a> during the Eisenhower presidency.&nbsp;</p> <p class="p1">When Social Security was first established, lawmakers assured the public that its retirement pensions would be self-financing, funded by workers’ “<a href="http://www.ssa.gov/history/fdrstmts.html">contributions, not taxes</a>,” and that benefits would not become a drain on the federal budget. When disability insurance was added later, similar promises were made that it would also be self-sustaining, and not siphon funds from Social Security’s retirement program or from the general budget.&nbsp;</p> <p class="p2">The addition of disability benefits to Social Security was intensely controversial. After many years of lobbying by advocates, the House of Representatives included disability benefits in a Social Security bill passed in 1955. The <a href="http://www.ssa.gov/history/pdf/Downey%20PDFs/Social%20Security%20Amendments%20of%201956%20Vol%201.pdf">Senate Finance Committee</a> later stripped the disability provisions from the House legislation, its committee report stating that “paying cash disability benefits to insured workers under the old-age and survivors insurance program would not be desirable.” The committee’s report couched its rationale in terms of protecting Social Security’s primary retirement benefit function, saying that “the old-age and survivors insurance system is on a sound financial basis; your committee strongly believes that it must be kept so and should not be altered by adding a benefit feature that could involve substantially higher costs than can be estimated.”&nbsp;</p><p class="p1">Supporters of disability insurance responded to these concerns by introducing an amendment (George et al) during Senate floor consideration to finance these benefits through a separate trust fund. As Senator Walter George (D-GA) stated during floor debate:</p><p class="p1">The moneys for disabled persons will not be commingled in any way with the funds for old-age insurance or for widows and spouses. The contribution income and the disbursements for disability payments will be kept completely distinct and separate. In this way the cost of disability benefits always will be definitely known and the costs always will be shown separately... a separate tax is to be levied to build up a fund which can be easily policed, which can never encroach upon the fund for widows, and for those who reach age 65, and for children and other beneficiaries.</p> <p class="p2"><a href="http://www.thefiscaltimes.com/Columns/2015/04/30/New-Save-SSDI-Plan-Could-Derail-Social-Security">Continue reading</a></p> http://mercatus.org/expert_commentary/new-save-ssdi-plan-could-derail-social-security Fri, 01 May 2015 10:23:53 -0400 Big Data, Big Business, and Big Government: How Bureaucrats Are Keeping People in the Dark about the Export-Import Bank http://mercatus.org/expert_commentary/big-data-big-business-and-big-government-how-bureaucrats-are-keeping-people-dark <h5> Expert Commentary </h5> <p class="p1"><em>This article appears in the June edition of Reason Magazine</em></p><p class="p1">When the feds disappear huge amounts of data about a dysfunctional, cronyist federal agency without warning, it should raise a few eyebrows. When the bureaucrats evade questions about what happened to the trove of facts and figures, alarm bells should start ringing. And when they staunchly refuse to restore the missing data, despite an outcry from researchers and activists, it's time to take matters into your own hands.</p> <p class="p1">For years, many in the free market movement—myself included—have argued in favor of abolishing the U.S. Export-Import Bank, a New Deal–era agency that exists to facilitate a relatively small number of domestic exports through its taxpayer-backed credit programs. The fundamental case against the Ex-Im Bank is simple: It's not the federal government's job to subsidize private businesses, period.</p> <p class="p1">Unfortunately, principled arguments against programs like this one are a tough sell to policy makers, Republicans and Democrats alike. That's because most politicians are slaves to special interests who have gotten very good at explaining why small businesses or producers of green energy or companies located in hard-up congressional districts should be the exception to that rule. It's also difficult to rally the losers in this bargain against it, because the costs are dispersed across a mass of victims, most of whom either are unaware of the harm they are incurring, or know but lack the motivation to make their objections heard.</p> <p class="p1">Ex-Im, for example, artificially reduces the cost to foreign airlines of buying Boeing planes. Politically powerful Boeing reaps the rewards, but U.S. airlines, which don't benefit from the subsidies granted to their overseas competitors, are harmed. However, a U.S. carrier may not appreciate the disadvantage it's at until after the savings it isn't getting have allowed a foreign airline to open a new route or reduce its ticket prices. By then, it may be too late to speak up.</p><p class="p1"><a href="http://reason.com/archives/2015/04/30/big-data-big-business-and-big">Continue reading</a></p> http://mercatus.org/expert_commentary/big-data-big-business-and-big-government-how-bureaucrats-are-keeping-people-dark Fri, 01 May 2015 10:09:03 -0400 Affordable Care Act's Latest Challenge http://mercatus.org/expert_commentary/affordable-care-acts-latest-challenge <h5> Expert Commentary </h5> <p class="p1"><i>The following is a Cobank interview with Robert Graboyes.</i></p><p class="p1">Businesses across the United States have had to scramble over the past couple of years to keep up with changes in health care legislation. The Affordable Care Act of 2010 – a.k.a. “Obamacare” – imposed stringent new requirements on employers, requiring that companies with 50 or more full-time employees provide a minimal level of coverage to their workers. The law also required all Americans to have insurance, extended subsidies to lower-income people in order to make health insurance more affordable, and established a network of state and federal “exchanges” where people can purchase insurance and obtain the subsidies.</p><p class="p1">Obamacare survived a challenge in the U.S. Supreme Court in 2012, and today, millions of Americans receive coverage through government-run exchanges. But now it is before the Court again – this time over the legality of subsidies that the law depends on to be economically viable. A ruling from the Court should come in June.</p><p class="p1">For a detailed perspective on the latest case, OUTLOOK turned to health care policy expert Robert Graboyes, a scholar at the Mercatus Center at George Mason University in Arlington, Virginia. An outspoken critic of the health care law, and of the various conservative counterproposals, Graboyes says a ruling by the Court against Obamacare will likely cripple the law and cause significant turmoil for the government, businesses and citizens alike.&nbsp;</p> <p class="p1"><b>OUTLOOK: </b>Remind us of the key components of the Affordable Care Act.<span style="font-size: 12px;">&nbsp;</span></p> <p class="p1"><b>Robert Graboyes:</b> The ACA was designed to reduce the number of uninsured people in the U.S. by roughly half. Of the newly insured, around half would get coverage through Medicaid; the other half would purchase private policies – some through the new exchanges.&nbsp;</p> <p class="p1">The ACA has three primary pieces: 1) a requirement that everyone have insurance – called an individual mandate – or pay a tax in lieu of insurance, 2) government subsidies for people whose income is below a certain threshold, and 3) a requirement that employers with 50 or more full-time employees (or full-time equivalents) pay penalties for any of their employees that receive subsidies, which is called the employer mandate. &nbsp;</p> <p class="p1">There are other key provisions of the law as well. Guaranteed issue means that insurance companies cannot refuse to insure anyone because of a pre-existing condition. Modified community rating means insurance companies can’t charge higher premiums just because someone is already sick or deemed to be high-risk.</p> <p class="p1"><b>OUTLOOK:</b> In your opinion, how is the law faring now?&nbsp;</p> <p class="p1"><b>RG:</b> Other than “more people with insurance,” the law’s goals were never clearly stated, so there are few objective metrics on which to judge it. More are insured, but there’s no increase in supply of health care to meet any new demand. The subsidies, the exchanges, the tax aspects are all in disarray. Some people get better coverage and others worse. It makes some people better off financially and others worse off. It likely improves health for some and worsens it for others. By none of these criteria do the winners clearly outnumber the losers. In sum, the law redistributes wealth and health at enormous cost.&nbsp;</p> <p class="p1"><b>OUTLOOK:</b> What have been some of the big problems with implementation?&nbsp;</p> <p class="p1"><b>RG:</b> A big chunk of the ACA was intended to operate through a series of state-run online insurance exchanges, which would serve as marketplaces where people could compare and purchase policies from different health care providers. Residents of states that chose not to establish a state exchange could review and purchase policies from federal exchanges (i.e., Healthcare.gov). The law’s authors anticipated that most states would build their own exchanges. However, 36 declined from the start. Oregon – which spent $300 million on its exchange and never managed to enroll a single person – has now flipped to make it 37 states in the federal program. Clearly, the authors of the law were surprised to find that most states did not establish their own exchanges.</p> <p class="p1"><a href="http://www.cobank.com/Newsroom-Financials/CoBank-News-Feed-2/2015/April/~/media/Files/Searchable%20PDF%20Files/Newsroom%20Financials/Outlook/Outlook%202015/Outlook_0415.pdf">Continue reading interview</a></p> http://mercatus.org/expert_commentary/affordable-care-acts-latest-challenge Fri, 01 May 2015 09:58:14 -0400 The Known and Unknown of the Ex-Im Bank http://mercatus.org/expert_commentary/known-and-unknown-ex-im-bank <h5> Expert Commentary </h5> <p class="p1">Have you noticed that everyone in the top tier of Republican presidential candidates — Ted Cruz, Marco Rubio, Rand Paul, Scott Walker and Jeb Bush — has gone on record against a small New Deal-era crony agency called the Export-Import Bank of the United States? In fact, Sen. Rubio recently came out with all guns blazing against the bank, arguing that it picks winners and losers and shouldn't be reauthorized once its charter expires June 30. Maybe their commitment to end Ex-Im cronyism and corruption will rub off on their colleagues.</p> <p class="p1">There are several reasons one might want to let the bank expire. First, the Ex-Im Bank exemplifies the kind of government program that benefits well-connected companies by harming unseen victims. Over 60 percent of its activities benefit 10 large and politically connected companies — including Boeing, General Electric and Caterpillar.</p> <p class="p1">Ex-Im credit subsidies have the economic effect of redistributing jobs and prosperity away from the 98 percent of unsubsidized firms, employers and workers and toward large corporations that do not lack for financing opportunities. This means that the bank does not actually increase the net dollar amount of exports.</p> <p class="p1">Ex-Im also imposes damage on 189 American industries by directly subsidizing foreign competition. Consider the list of Ex-Im's top 10 foreign beneficiaries. We find several rich, state-owned airlines. Emirates, the top airline recipient of Ex-Im largesse, is a state-owned company that uses Ex-Im savings to compete with unsubsidized U.S. airlines. Examples of Ex-Im transactions such as these contributed to an estimated loss of 7,500 U.S. airline jobs.</p> <p class="p1">But it gets worse. The top beneficiary of Ex-Im abroad is Pemex, a Mexican government-owned oil and gas company with a market capitalization of $490 million. Even as the Obama administration does everything it can to penalize U.S. energy companies, Ex-Im extended $7 billion in cheap credit over seven years to the conglomerate.</p> <p class="p2">In addition, Pemex has admitted to serious corruption issues, including a contracting process co-opted for the benefit of organized crime.</p> <p class="p1">Questionable Ex-Im deals are quite common. For instance, a Wall Street Journal article recently highlighted two deals totaling over $1 billion for the benefit of the state-owned Russian bank Vnesheconombank. VEB maintains a close business relationship with a major Russian arms dealer responsible for more than 80 percent of Russia's weapon exports, including shipments to Bashar Assad's regime in Syria. Because money is fungible, lowering VEB's financing costs to buy Boeing planes can easily facilitate sales of more weapons to hostile regimes.</p> <p class="p1">Russian companies can no longer receive new Ex-Im subsidies, though taxpayers are still on the hook for $1.5 billion in pre-existing Russian loans. But in order to know whether the bank is actually complying with such country limitations, we need to be able to check its data.</p> <p class="p1">Good luck with that. A third of Ex-Im foreign transactions are labeled "unknown" in the dataset. This makes it impossible to know whether Ex-Im loans are going to companies in restricted countries committing human rights abuses, such as North Korea and Iran.</p> <p class="p1">It's hard to trust Ex-Im's data. The bank has a history of intentionally mislabeling data to artificially increase "small business" numbers. Last year, the bank pulled down the public dataset that I and other watchdogs used to analyze its transactions. The new dataset, posted months later, was scrubbed of critical fields at Chairman Fred Hochberg's direction. Now we cannot even tell whether companies such as VEB are purchasing bank-financed Boeing jets.</p> <p class="p1">Ex-Im cronyism is unjust and inefficient. But rampant Ex-Im Bank corruption and secrecy are absolutely unacceptable. It remains to be seen whether Republicans in the House of Representatives will use their largest majority since 1928 to stop the bank once and for all as their presidential candidates would like.</p> http://mercatus.org/expert_commentary/known-and-unknown-ex-im-bank Thu, 30 Apr 2015 10:18:33 -0400 Hard To Justify Ex-Im Bank's Cronyism, Corruption http://mercatus.org/expert_commentary/hard-justify-ex-im-banks-cronyism-corruption <h5> Expert Commentary </h5> <p class="p1">Have you noticed that everyone in the top tier of Republican presidential candidates — Ted Cruz, Marco Rubio, Rand Paul, Scott Walker and Jeb Bush — has gone on record against a small New Deal-era crony agency called the Export-Import Bank of the United States?</p> <p class="p2">In fact, Sen. Rubio recently came out with all guns blazing against the bank, arguing that it picks winners and losers and shouldn't be reauthorized once its charter expires June 30.</p> <p class="p2">Maybe their commitment to end Ex-Im cronyism and corruption will rub off on their colleagues. There are several reasons one might want to let the bank expire.</p> <p class="p2">First, the Ex-Im Bank exemplifies the kind of government program that benefits well-connected companies by harming unseen victims. Over 60% of its activities benefit 10 large and politically connected companies — including Boeing, General Electric and Caterpillar.</p> <p class="p2">Ex-Im credit subsidies have the economic effect of redistributing jobs and prosperity away from the 98% of unsubsidized firms, employers and workers and toward large corporations that do not lack for financing opportunities. This means that the bank does not actually increase the net dollar amount of exports.</p> <p class="p2">Ex-Im also imposes damage on 189 American industries by directly subsidizing foreign competition.</p> <p class="p2">Consider the list of Ex-Im's top 10 foreign beneficiaries. We find several rich, state-owned airlines. Emirates, the top airline recipient of Ex-Im largesse, is a state-owned company that uses Ex-Im savings to compete with unsubsidized U.S. airlines.</p> <p class="p2">Examples of Ex-Im transactions such as these contributed to an estimated loss of 7,500 U.S. airline jobs.</p> <p class="p2">But it gets worse. The top beneficiary of Ex-Im abroad is Pemex, a Mexican government-owned oil and gas company with a market capitalization of $490 billion. Even as the Obama administration does everything it can to penalize U.S. energy companies, Ex-Im extended $7 billion in cheap credit over seven years to the conglomerate.</p> <p class="p2">In addition, Pemex has admitted to serious corruption issues, including a contracting process co-opted for the benefit of organized crime.</p> <p class="p2">Questionable Ex-Im deals are quite common. For instance, a Wall Street Journal article recently highlighted two deals totaling over $1 billion for the benefit of the state-owned Russian bank Vnesheconombank.</p> <p class="p2">VEB maintains a close business relationship with a major Russian arms dealer responsible for more than 80% of Russia's weapon exports, including shipments to Bashar Assad's regime in Syria. Because money is fungible, lowering VEB's financing costs to buy Boeing planes can easily facilitate sales of more weapons to hostile regimes.</p> <p class="p2">Russian companies can no longer receive new Ex-Im subsidies, though taxpayers are still on the hook for $1.5 billion in pre-existing Russian loans. But in order to know whether the bank is actually complying with such country limitations, we need to be able to check its data.</p> <p class="p2">Good luck with that. A third of Ex-Im foreign transactions are labeled "unknown" in the dataset. This makes it impossible to know whether Ex-Im loans are going to companies in restricted countries committing human rights abuses, such as North Korea and Iran.</p> <p class="p2">It's hard to trust Ex-Im's data. The bank has a history of intentionally mislabeling data to artificially increase "small business" numbers.</p> <p class="p2">Last year, the bank pulled down the public dataset that I and other watchdogs used to analyze its transactions. The new dataset, posted months later, was scrubbed of critical fields at Chairman Fred Hochberg's direction. Now we cannot even tell whether companies such as VEB are purchasing bank-financed Boeing jets.</p> <p class="p2">Ex-Im cronyism is unjust and inefficient. But rampant Ex-Im Bank corruption and secrecy are absolutely unacceptable.</p> <p class="p2">It remains to be seen whether Republicans in the House of Representatives will use their largest majority since 1928 to stop the bank once and for all as their presidential candidates would like.</p> http://mercatus.org/expert_commentary/hard-justify-ex-im-banks-cronyism-corruption Thu, 30 Apr 2015 10:14:17 -0400 Credit Cards Have Not Increased Consumer Debt Burden http://mercatus.org/publication/credit-cards-have-not-increased-consumer-debt-burden <h5> Publication </h5> <p class="p1">Consumer advocates argue that widespread availability of credit cards encourages consumers to take on excessive debt. Consequently, there is an effort to impose new regulations on credit cards and other credit sources to limit their use.</p> <p class="p1">The data, however, do not show a ballooning consumer credit payment burden. The chart below shows that, contrary to conventional wisdom, the debt-service ratio of household consumer debt has <i>not</i> risen over time. In fact the debt-service ratio is actually lower today than in 1980.</p> <p class="p2"><a href="http://mercatus.org/sites/default/files/C1-Zywicki-debt-burden.png"><img src="http://mercatus.org/sites/default/files/C1-Zywicki-debt-burden.png" width="585" height="397" /></a><span style="font-size: 12px;">What has changed is the composition of consumer debt as credit cards replaced installment loans from retailers and personal finance companies over time. There is, therefore, little empirical support for the notion that increased prevalence of credit cards have led to some sort of explosion in consumer debt. Regulations seeking to limit their use might well be a solution in search of a problem.</span></p> http://mercatus.org/publication/credit-cards-have-not-increased-consumer-debt-burden Mon, 04 May 2015 16:53:20 -0400 The CFPB, Not What It Was Hoped to Be http://mercatus.org/expert_commentary/cfpb-not-what-it-was-hoped-be <h5> Expert Commentary </h5> <p class="p1">A few days ago, as I got up to leave a Washington cafe, I was stopped by a medical doctor sitting at the next table. "You are Sen. Elizabeth Warren, right?" he asked with giddy expectation. He was visibly crushed when I informed him that I was not the person he so enthusiastically hoped I was. My cafe neighbor's experience — great anticipation and excitement followed by severe disappointment — is one that is all too common in Washington. Things simply are not always what they first appear to be and may, in fact, be dramatically different. The Consumer Financial Protection Bureau&nbsp;(CFPB) — an entity inspired by Warren (D-Mass.) — is another example of the phenomenon of disappointed expectations.</p> <p class="p2">The CFPB was created by Dodd-Frank to protect consumers as they engage in financial transactions. The complexity and importance of consumer financial products and services, the champions of the bureau reasoned, warranted the formation of a new agency charged specifically with looking out for consumers' best interests.</p> <p class="p1">The reality is not so rosy. The bureau's actions, although intended to protect consumers, harm them by limiting their options and raising their costs. Consumers with the fewest options — consumers in the most precarious financial circumstances — are particularly vulnerable to the bureau's supposedly protective initiatives. Consider, for example, the difficulties that families attempting to buy or sell a manufactured home now face because of rules that block the types of mortgages that are commonly available for these homes. Admittedly, manufacturing housing loans are high-cost, but they are also high-risk. For a would-be buyer, the alternative might be an even more costly rental apartment.</p> <p class="p1">Or consider the bureau's planned <a href="http://www.consumerfinance.gov/newsroom/cfpb-considers-proposal-to-end-payday-debt-traps/"><b>proposals</b></a> for payday and other consumer loans. Among other things, "lenders would have to determine at the outset of each loan that the consumer is not taking on unaffordable debt." The contemplated requirements would make those loans much more work-intensive for lenders, would expose lenders to additional legal liability and would likely drive some lenders out of business altogether.</p> <p class="p1">The bureau and its creators operate under the assumption that the consumer financial contracts in use today are a zero-sum game. According to this view, there is a winner — the financial company — and a loser — the consumer. In a voluntary exchange, both the consumer and the company benefit when a consumer takes out a loan. The consumer has access to money now that she otherwise would not have. The financial company will receive future payments to compensate it for making the money available now. Everyone is happy.</p> <p class="p1">Certainly, the consumer would be even happier if she were wealthy enough not to need the loan at all. The CFPB can't fix that problem by placing regulatory restrictions or prohibitions on a consumer financial product. As economist Tom Durkin and Professor Todd Zywicki <a href="http://www.washingtonpost.com/news/get-there/wp/2015/04/17/credit-is-a-powerful-tool-for-american-families/"><b>wrote</b></a><b> </b>recently in <i>The Washington Post</i>, "Eliminating access to preferred products doesn't eliminate the need for credit."</p> <p class="p1">Consider the example drawn from a 19th-century legal case that Professor Michael Munger <a href="http://www.thepublicdiscourse.com/2014/01/11845/"><b>provides</b></a> of a shipwrecked captain, who desperately wants to save his and his crew's life:</p> <p class="p1">It's perfectly true that the captain of the Richmond is "coerced by circumstance." After all, he's on the rocks, the ship is breaking up, and it is likely that he and the crew will all die if they are not rescued. It would be paradoxical to prohibit ... a contract that allows the captain to escape this desperate circumstance. After all, our moral intuition is that we should help the desperate. But if we outlaw the contract for the rescue in the name of <i>our</i> virtue, we harm the very party we pretend to care about.</p> <p class="p1">Likewise, an emergency short-term loan can be a costly, but much-wanted and needed lifeline for a consumer in dire financial straits.</p> <p class="p1">The CFPB typically opts for regulatory solutions that fall short of an outright ban. If not properly crafted, these regulations can harm consumers as financial institutions pass on some or all of the costs of new regulations to consumers. Even if lenders absorb the cost of the new regulations, consumers may end up borrowing more than they need because the lender cannot afford the fixed costs associated with smaller loans.</p> <p class="p1">The CFPB, by failing realistically to consider how its initiatives affect consumers, is not having the salutary effect on consumers that its proponents believed it would have. In fact, it is exposing them to new worries and costs.</p> <p class="p1">Just as my cafe neighbor was disappointed to discover that I was not Sen. Warren, supporters of the CFPB are likely to be disappointed that it is not what they had hoped. Instead, the bureau is building a regulatory infrastructure that harms consumers by limiting their options, forcing them into one-size-fits-all products and raising their costs. Consumers would be better off with more options and clear disclosure so that they can choose wisely, rather than with a bureau that wishes away consumers' financial realities and tries to choose for them.</p> http://mercatus.org/expert_commentary/cfpb-not-what-it-was-hoped-be Wed, 29 Apr 2015 11:38:26 -0400 Top Ten Foreign State-Owned Beneficiaries of Ex-Im Subsidies http://mercatus.org/publication/top-ten-foreign-state-owned-beneficiaries-ex-im-subsidies <h5> Publication </h5> <p class="p1">This week’s chart shows the top ten state-owned foreign buyers of domestic exports financed by the US Export-Import Bank, based on the total amount of financing from FY 2007 to FY 2013. &nbsp;</p> <p class="p1"><a href="http://mercatus.org/sites/default/files/C1-Top-ten-SOE-EXIM.png"><img height="371" width="580" src="http://mercatus.org/sites/default/files/C1-Top-ten-SOE-EXIM.png" /></a></p> <p class="p1">As former deputy national security adviser, Mark Pfeifle, noted in in Monday’s <a href="http://www.wsj.com/articles/the-peculiar-uses-of-a-taxpayer-bank-1430085289"><i>Wall Street Journal</i></a>, the Ex-Im Bank “has a long history of assisting international firms that raise serious red flags.” He singles out the Mexican state-owned petroleum giant, Pemex, which tops the list with $7.2 billion worth of US exports financed with backing from American taxpayers:</p> <blockquote><p class="p2">Consider Pemex, Mexico’s state-owned oil company, which conceded&nbsp;<a href="http://www.globalpost.com/dispatch/news/agencia-efe/130517/mexican-daily-pemex-admits-serious-corruption%22%20%5Ct%20%22_blank">in 2013</a>&nbsp;that it deals with “serious” levels of corruption and that it has been plagued by “interference from organized crime”—including roughly $1 billion in stolen oil over a two-year span. That hasn’t stopped it from becoming the Ex-Im Bank’s single largest debtor, owing American taxpayers some $5.6 billion at the end of the fiscal year 2014.</p></blockquote><p class="p1">The Ex-Im Bank’s defenders argue that the federal agency is conducive to national security. That’s the same argument its founders made when it was created in 1934 to facilitate, in part, trade with the Soviet Union. The Soviet Union is long gone (without Ex-Im playing a role in its demise), and yet the bank continues to put American taxpayers on the hook for deals with state-owned foreign enterprises with dubious backgrounds. It is past time for the authorization of the Ex-Im Bank to expire.</p> http://mercatus.org/publication/top-ten-foreign-state-owned-beneficiaries-ex-im-subsidies Mon, 04 May 2015 09:13:34 -0400 Agencies Fail 2014 Cyber Report Card and Report Record Number of IT Breaches http://mercatus.org/publication/agencies-fail-2014-cyber-report-card-and-report-record-number-it-breaches-FISMA <h5> Publication </h5> <p class="p1">The recent congressional push to expand federal influence over private cybersecurity practices through controversial measures like the <a href="https://medium.com/plain-text/what-you-should-know-about-cisa-950c395dddf6">Cybersecurity Information Sharing Act</a> (CISA) follows the worst year for federal information security failures on record. Many of the agencies that would be empowered to extract personal data from private entities through CISA had high rates of breaches in FY 2014. The federal government’s continuing challenges to properly secure its own systems render it a poor candidate for expanded control of the nation’s cybersecurity.</p><p class="p1"><a href="http://mercatus.org/sites/default/files/C1-By-agency-2014_0.png"><img src="http://mercatus.org/sites/default/files/C1-By-agency-2014_0.png" width="585" height="424" /></a></p> <p class="p1">This weeks’ charts use data from the Office of Management and Budget’s (OMB) FY 2014 Federal Information Security Management Act (FISMA) compliance report to display the agency share, type, and number of reported federal information security incidents for FY 2014 and over time.&nbsp;</p> <p class="p1">The first chart displays the total number of information security incidents reported by the 24 “CFO agencies” (so designated by the <a href="https://fas.org/sgp/crs/misc/R42975.pdf">Chief Financial Officer Act of 1990</a>) that are held to stricter FISMA standards and reporting requirements for FY 2014.</p> <p class="p1">NASA accounted for 15,256 of the 67,196 information security incidents reported by CFO agencies last year, 12,017 of which are categorized as “other,” while another 1,226 malware infections and 1,185 “social engineering” incidents — where federal employees are fooled by fake webpages to download malicious software —as the second chart, below, explores in greater detail.</p> <p class="p1">The Department of Veteran’s Affairs — which <a href="http://www.securityfocus.com/news/11393">suffered numerous data breaches</a> throughout the 2000s and <a href="http://www.military.com/daily-news/2014/02/24/report-va-data-breach-practically-unavoidable.html">recently ignored reports of impending cybersecurity peril</a> only to <a href="http://www.federalnewsradio.com/1177/3769129/Contractor-security-flaw-puts-data-of-7000-veterans-at-risk">expose personally identifiable information (PII) for thousands of veterans to outside groups</a> — came in second with 11,800 reported incidents, 4,877 of which were non-cyber, 2,490 of which involved policy violations, 2,065 of which related to unauthorized equipment access, and 1,583 incidents of malware.</p> <p class="p1">The Department of Health and Human Services — recently thrust into a much more <a href="http://www.computerworld.com/article/2486138/government-it/lawmakers-seek-answers-on-obamacare-data-hub-security.html">prominent data management role through its responsibilities managing the Affordable Care Act </a>— reported the third highest number of incidents, consisting of 3,631 non-cyber incidents, 2,000 policy violations, and 1,060 malware infections.</p> <p class="p1">Importantly, the agencies that would be entrusted with significant new data extraction and management responsibilities under CISA reported alarming security breaches last year. Employees at the Department of Justice (DOJ) were fooled by deceptive websites to download malicious software onto agency computers 182 times in FY 2014. The Department of Homeland Security (DHS) reported 1,816 pieces of computer equipment lost or stolen. Department of Defense (DOD) personnel downloaded malware onto network systems 370 times and reported roughly 2,500 employee policy violations in the past year alone. These disquietingly elementary mistakes suggest that DOJ, DHS, and DOD may be ill-prepared to responsibly and effectively undertake proposed CISA authorities.</p> <p class="p2"><a href="http://mercatus.org/sites/default/files/C2-Breakdown-2014.png"><img height="424" width="585" src="http://mercatus.org/sites/default/files/C2-Breakdown-2014.png" /></a></p> <p class="p1">The second chart breaks down the figures by <a href="http://s8.postimg.org/z4y8v4u8l/D">incident type</a>. Non-cyber violations involving lost or mishandled physical records constituted the largest portion of information security incidents last year. The 14,747 incidents reported in the catch-all “other” category that includes random, miscellaneous, or unknown information breach incidents, also contributed to a large bulk of all information security failures in FY 2014.</p> <p class="p1">Policy violations, where federal employees fail to follow PII management procedures, made up the third most common information security failure last year, with 12,102 reported. Lost, stolen, or otherwise missing federal equipment incidents were also high, with 9,308 reported in FY 2014. Malware is likewise known to have infected federal networks at least 7,705 times.</p> <p class="p1">The report concludes that around half of last years’ incidents could have been easily avoided through the use of strong authentication techniques, which prevent unauthorized access by requiring users to log in with unique Personal Identity Verification Cards. But many <a href="http://www.federaltimes.com/story/government/cybersecurity/2015/03/03/fisma-report-weak-user-authentication/24311607/">agencies have made little progress</a> in reaching internal strong authentication goals.&nbsp;</p> <p class="p2"><a href="http://mercatus.org/sites/default/files/C3-Spending-and-Breaches.png"><img src="http://mercatus.org/sites/default/files/C3-Spending-and-Breaches.png" width="585" height="424" /></a></p> <p class="p1">The third and fourth charts are updated versions of a <a href="http://mercatus.org/publication/federal-cybersecurity-breaches-mount-despite-increased-spending">previous Mercatus Center analysis</a> from January. Total reported cybersecurity incidents reached an all-time high of almost 70,000 incidents last year. Despite spending $2.4 billion in increased FISMA spending between FY 2013 and FY 2014, the number of reported federal information security incidents increased by 15 percent—from 61,214 in FY 2013 to 69,851 in FY 2014. Since FY 2006, the total number of reported information breaches increased by an astounding 1169 percent.</p> <p class="p1">Part of the rise in reported information security incidents in FY 2014 can be attributed to “enhanced capabilities to identify, detect, manage, recover and respond to these incidents” — through <a href="https://www.us-cert.gov/incident-notification-guidelines">enhanced incident reporting requirements to US-CERT</a> and the new <a href="http://www.dhs.gov/sites/default/files/">EINSTEIN 3</a> threat detection and repulsion software of the <a href="http://www.dhs.gov/national-cybersecurity-protection-system-ncps">National Cybersecurity Protection System (NCPS</a>) — as well as an overall increase in actual incidents. Accordingly, the true number of federal information security incidents in previous years may have been even greater than initially reported.</p> <p class="p2"><a href="http://mercatus.org/sites/default/files/C4-Breaches-blue.png"><img height="424" width="585" src="http://mercatus.org/sites/default/files/C4-Breaches-blue.png" /></a></p> <p class="p1">The number of reported security incidents involving PII  did slightly decrease overall and as a share of the total incidents between FY 2013 and FY 2014, but this damaging type of breach still constitutes roughly a quarter of all reported incidents.</p> <p class="p1">The federal government’s continuing struggles to secure its own information security systems renders it a poor candidate for exerting more control over private cybersecurity policy. Agencies that would be empowered to collect and retain massive amounts of private data, like the DOJ, DHS, and DOD, have reported hundreds to thousands of careless cybersecurity failures each year. Giving these agencies expanded authority to extract private data is unlikely to improve national computer security preparedness. Rather, private and public information security will be attained by encouraging bottom-up “notice and response” approaches to disseminate knowledge about identified cyber-breaches among appropriate parties that properly align each level of dynamic security</p> http://mercatus.org/publication/agencies-fail-2014-cyber-report-card-and-report-record-number-it-breaches-FISMA Thu, 30 Apr 2015 17:14:03 -0400 Uncle Sam Wants Your Fitbit: The Fight for Internet Freedom Gets Physical http://mercatus.org/expert_commentary/uncle-sam-wants-your-fitbit-fight-internet-freedom-gets-physical <h5> Expert Commentary </h5> <p><em>This article appears in the May edition of Reason Magazine</em></p><p><span style="font-size: 12px;">We are at the dawn of the Internet of Things—a world full of smart devices equipped with sensors, all hooked up to a digital universe that will become as omnipresent as the air we breathe. Imagine every appliance in your home, every machine in your office, and every device in your car constantly communicating with a network and offering you a fully customizable, personalized experience. Besides neato gadgets and productivity gains, this hyper-connected future will also mean a new wave of policy wars, as politicians panic over privacy, security, intellectual property, occupational disruptions, technical standards, and more.</span></p> <p class="p1">Behind these battles will be a grander clash of visions over the future course of technology. The initial boom of digital entrepreneurship was powered by largely unfettered experiments with new technologies and business models. Will we preserve and extend this ethos going forward? Or will technological reactionaries pre-emptively eliminate every hypothetical risk posed by the next generation of Internet-enabled things, perhaps regulating them out of existence before they even come to be?</p><p class="p1"><a href="http://reason.com/archives/2015/04/09/uncle-sam-wants-your-fitbit">Continue reading</a></p> http://mercatus.org/expert_commentary/uncle-sam-wants-your-fitbit-fight-internet-freedom-gets-physical Tue, 28 Apr 2015 16:59:20 -0400 To Make Social Security Disability Insurance Fairer and Sustainable, Eliminate the Grid http://mercatus.org/expert_commentary/make-social-security-disability-insurance-fairer-and-sustainable-eliminate-grid-SSDI <h5> Expert Commentary </h5> <p class="p1">When severe and permanent disability strips workers of their ability to support themselves and their families, their plight demands our support. The United States has heeded this call through the Social Security Disability Insurance program, but at a large and growing cost. Our system is going broke and fails to reflect a 21st century labor force.&nbsp;</p> <p class="p1">The program uses a “Listing of Impairments” to determine whether an applicant is disabled. Traditionally, applicants without a medical condition meeting or mirroring an entry on the listing faced great difficulty in obtaining benefits. Listing-based determinations, however, have plunged from 80 percent to 50 percent over the past 30 years according to the Social Security Administration. In these decades, determinations shifted from the listings to a complex array of rules known as the “Medical-Vocational Grid.”&nbsp;</p> <p class="p1">The grid—designed for cases that fail to meet the listings—uses age, education/skills level, and language proficiency as determinations criteria. But the grid has grown increasingly outdated even as its use proliferated. Continuing to eschew the listings in favor of the grid is fiscally unsustainable, and grossly unfair to current workers.</p> <p class="p1">In a bygone era, the U.S. labor force’s heavy reliance on physical labor made age a relevant factor in assessing disability. But the tremendous growth of the service sector in the “new economy” has supplanted old professions and introduced deskwork as the new norm. Dr. Timothy Church of the Pennington Biomedical Research Center estimates that the percentage of all jobs requiring at least moderate physical exertion declined from over 50 percent in 1960 to 20 percent in 2008.</p> <p class="p1">This shift toward sedentary labor has gone hand-in-hand with increases in labor force participation by older workers. According to the U.S. Bureau of Labor Statistics, 30 percent of civilians aged 55 and over went to work in 1985. Today, 40 percent of the 55+ age cohort participates in the labor force. This upward trend continues, as advances in technology allow—and changes in social practices and market incentives encourage—the older worker to be the norm rather than the outlier. The rule of emphasizing age in disability determinations is outdated and unfair to the millions of Americans 50 and older who participate in the labor force.</p> <p class="p1">A similar story emerges when we examine the role of English proficiency in the labor force over the past 50 years. In 1950s America, a Mexican or Columbian in the U.S. labor force would face substantial work limitations if he or she were “late to the game” in learning English. But contemporary America offers far more opportunity to foreign speakers. A Latino immigrant can now find a plethora of ethnic enclaves in the United States with ample opportunities for Spanish employment.</p> <p class="p1">Even outside of these enclaves, industries heavily involved in trade and globalization put a premium on foreign speaking employees. Why, then, does English proficiency remain an integral part of the determinations process? A system where workers can readily use a foreign tongue to obtain disability payments is a fundamentally unfair system.</p> <p class="p1">The SSA’s use of education level as a determination factor is equally outmoded. The grid favors those with a “limited education,” defined by a lack of a high school diploma. But the labor force is more educated than ever before. U.S. Census data tells us that 80 percent of adults 25 or over have a high school diploma, a 40-percentage-point increase from 1950.</p> <p class="p1">The grid’s rules on education were written for a time when a vast majority of workers failed to complete high school and were at a sharp disadvantage compared to the few that graduated. Currently, struggling workers borrowing money to attend community college courses at night subsidize dropouts deemed to have “little education.” Keeping these built-in advantages for less-educated applicants is unfair, given the sacrifices made by workers trying to further their educations.</p> <p class="p1">The continued use of education, language, and age in disability determination fails to account for the advances of the modern era. Restoring fairness to the determinations process means that the grid needs to go. Additionally, the Listing of Impairments needs to be frequently updated. The agency already promises five-year revisions, but these updates are rarely systematic.</p> <p class="p1">Critically, medical advances that make diseases more “livable” are left out. Legal scholar Adrienne Jones castigates the SSA for using “1993 medical criteria to determine disability in 2014” in its handling of HIV/AIDS cases.</p> <p class="p1">Factoring these societal and technological advances into the disability determinations process will end Disability Insurance’s unsustainable expansion and restore fairness to our nation’s critical moral endeavor.</p> http://mercatus.org/expert_commentary/make-social-security-disability-insurance-fairer-and-sustainable-eliminate-grid-SSDI Tue, 28 Apr 2015 12:25:29 -0400 FDA's "Orphan Drug" Designation Warps Medical Research http://mercatus.org/expert_commentary/fdas-orphan-drug-designation-warps-medical-research <h5> Expert Commentary </h5> <p class="p1">With Earth Day and Arbor Day now in our rearview mirror, the countdown to a host of other summertime days of celebration such as Memorial Day, Independence Day and Labor Day can begin. This reminds me of when I was 10 years old, and I complained to my father that there is a Mother’s Day, Father’s Day, Grandparents’ Day, Teacher’s Day and Secretary’s Day, but no Child’s Day. My father exclaimed, “Every day is Child’s Day!”</p> <p class="p1">While we focus a good amount of attention on days like this, it’s worth noting that another special day recently passed us by with little fanfare: Did you know that there is a Rare Diseases Day? It’s Feb. 28. (My friend and health care scholar Bob Graboyes of the Mercatus Center quipped that it should be February 29th. Exactly!)</p><p class="p1"><a href="http://www.usnews.com/opinion/economic-intelligence/2015/04/27/fdas-orphan-drug-designation-warps-medical-research">Continue reading</a></p> http://mercatus.org/expert_commentary/fdas-orphan-drug-designation-warps-medical-research Fri, 01 May 2015 12:47:56 -0400 Modernizing the SSDI Eligibility Criteria: A Reform Proposal That Eliminates the Outdated Medical-Vocational Grid http://mercatus.org/publication/modernizing-ssdi-eligibility-criteria-eliminates-medical-vocational-grid <h5> Publication </h5> <p class="p1">The Social Security Administration has been awarding benefits through its Disability Insurance (SSDI) program at an increasing rate, but meanwhile the actual rate of disability in the US population working age and older has remained stable or even decreased. The SSDI Trust Fund will run out of money by 2016. While some propose transferring payroll taxes from Social Security’s retirement fund to its disability fund, it would be much better to address the underlying problems by reforming the SSDI system.</p> <p class="p1">A new paper published by the Mercatus Center at George Mason University documents the growth of SSDI and explains that the “medical-vocational grid” reflects a view of the labor market and disability that is out of date with the economy and modern medicine. The grid’s guidelines make it easier to award SSDI benefits to middle-aged and older workers, unskilled workers, and non-English-speakers, and should be eliminated and replaced with a simpler, fairer, and more uniform system for determining eligibility. The same process applied to people under age 45 should also be applied to those above age 45.</p> <p class="p2">To read the paper and learn more about its authors, economist <a href="http://mercatus.org/mark-j-warshawsky">Mark J. Warshawksy</a> and Mercatus MA Fellow <a href="http://mercatus.org/ross-marchand">Ross A. Marchand</a>, please see “<a href="http://mercatus.org/sites/default/files/Warshawsky-SSDI-Eligibility-Criteria.pdf">Modernizing the SSDI Eligibility Criteria: A Reform Proposal That Eliminates the Outdated Medical-Vocational Grid</a>.”</p> <p class="p4">BACKGROUND</p> <p class="p5"><b>Disability Insurance Criteria<br /></b><span style="font-size: 12px;">The Social Security Disability Insurance program was enacted in 1956, providing federal benefits to citizens deemed unable to work due to disability. The main criterion for getting SSDI benefits was functional incapacity due to a medically determinable impairment. Four criteria were included in the evaluation process:</span></p> <ul class="ul1"> <li class="li6">A person who is performing substantial gainful activity cannot be found disabled.</li> <li class="li6">A person must have a medically determinable impairment, expected to last for a long time or result in death, that significantly limits his or her ability to perform basic work activities.</li> <li class="li6">The impairment must meet or equal one or more of the impairments in an official listing.</li> <li class="li6">If a person is otherwise qualified for SSDI benefits but does not have an impairment found in the listing, then vocational factors (age, education, and work experience and skills) are considered.</li> </ul> <p class="p1">The Social Security Administration has promulgated rules and procedures for each of these steps, several of which would benefit from reform. But any reform effort should focus on the fourth criterion, which opened the door to the medical-vocational grid.</p> <p class="p5"><b>The Medical-Vocational Grid<br /></b><span style="font-size: 12px;">SSDI applicants who do not qualify as disabled under the official listing move on to the fourth criterion, the medical-vocational grid. If an applicant is considered unable to engage in his or her previous level of work based on work history, but does have an ability to undertake some form of work, then the applicant’s eligibility for SSDI will be determined using the grid. Depending on the level of work possible, applicants will be deemed eligible or ineligible based on their age, education, skills, and language ability. This approach makes several mistakes:</span></p> <ul class="ul1"> <li class="li6"><i>It makes age a hard cutoff.</i> For example, a 50-year-old who can perform only sedentary work and is unskilled is presumptively disabled, while a 49-year-old is not (unless he or she cannot speak English). Given increases in the average human lifespan, the age cutoffs and loose standards for age-related disability are ripe for reform. Many in the baby-boomer generation who wish to retire early will be found to be disabled under the medical-vocational grid if they have a history of unskilled work or skilled work with skills that do not transfer to other work.</li> <li class="li6"><i>It regards language as a factor.</i> Using the English language as a criterion can have a counterintuitive effect, and language is no longer the barrier it once was. In Puerto Rico, a lack of English skills will result in applicants being deemed disabled, even though the common language in Puerto Rico is Spanish. The US workforce is far more diverse culturally, ethnically, and linguistically than it was in the 1950s. For example, more than half of the increase in the labor force between 1996 and 2012 came from foreign workers.</li> <li class="li6"><i>It leads to more eligible beneficiaries.</i> The loose standards of the medical-vocational grid have allowed many types of ailments to qualify for disability benefits despite questionable medical proof. For example, as numerous cases of fraud discovered in 2014 demonstrate, the increasing proportion of awards to those suffering from mental illnesses and musculoskeletal diseases may be caused by some applicants gaming the system and misrepresenting their conditions.</li> <li class="li6"><i>It assumes jobs require physical exertion.</i> The medical-vocational grid fails to consider that the nature of the workforce has changed over the last several decades. The economy has shifted away from exertional jobs that require direct physical labor and toward more sedentary jobs, owing to computerization and mechanization. Moreover, flexibility within a career was an exception in the 1950s, while today people switch jobs and occupations more readily than ever before.</li></ul> <p class="p4">POLICY PROPOSALS</p> <ul class="ul1"> <li class="li6">The official medical listing of diseases and conditions should be updated on a regular basis rather than infrequently. (In the past, sometimes more than a decade has gone by between updates.) As technology and medicine progress, so too must the government’s ability to determine whether diseases and conditions are truly disabling.</li> <li class="li6">The medical-vocational grid, involving age, education, and language skills, should be eliminated. As older people live longer and work less physically demanding jobs in a more open and less educationally segregated workforce, the grid is no longer fair or necessary—nor does it reflect current conditions. Age, education, and language skills should not be considered.</li> <li class="li6">If age must be considered, policymakers should raise the cutoff—for example, to above age 60.</li> <li class="li6">Eliminating the medical-vocational grid will require legislation, but—as an interim step—the Social Security Administration can increase all age requirements by five years through regulation.</li> <li class="li6">Any new criteria should apply only to new applicants, to avoid controversy and criticism from those currently receiving benefits. However, better investigation of current beneficiaries and targeted disability reviews will help ensure that those who are legally disabled are the only ones receiving benefits.</li></ul> <p class="p4">CONCLUSION</p> <p class="p1">Due to its impending insolvency, SSDI must be reformed, and this reform should include the elimination of the medical-vocational grid. The disability insurance program is going bankrupt because it is too easy for certain applicants to qualify for benefits: those who are over age 50, don’t speak English, or have less than a high school education. The current guidelines are designed for conditions that existed decades ago, not for the economy and workers of today.</p> http://mercatus.org/publication/modernizing-ssdi-eligibility-criteria-eliminates-medical-vocational-grid Tue, 28 Apr 2015 12:26:53 -0400 Costs of Merging Social Security Retirement and Disability Funds http://mercatus.org/expert_commentary/costs-merging-social-security-retirement-and-disability-funds-SSDI <h5> Expert Commentary </h5> <p class="p1">The urgent financing crisis facing <a href="http://www.economics21.org/commentary/social-security-disability-insurance-2015-1-14">Social Security Disability Insurance</a> (DI) is giving rise to suggestions that the DI Trust Fund be merged with Social Security’s larger Old-Age and Survivors Insurance (OASI) Trust Fund. These two components of Social Security have been kept separate thus far since their inceptions. Of the two, DI currently faces the much more immediate (2016) threat of depletion. Combining the two funds would allow disability benefits to be paid from payroll taxes currently earmarked for Social Security retirement benefits. The following factors should be borne in mind if any such policy change is considered.</p> <p class="p1"><b>#1: Historical Rationale for Separate Trust Funds.</b> Social Security’s retirement and disability benefit systems were enacted at different times with separate financing arrangements. Social Security’s old-age benefits were enacted in <a href="http://www.ssa.gov/history/35act.html">1935</a> during the Franklin D. Roosevelt presidency; for roughly the first two decades thereafter Social Security had but one trust fund. Disability insurance was established in <a href="http://www.ssa.gov/history/35act.html">1956</a> during the Eisenhower presidency.&nbsp;</p> <p class="p1">When Social Security was first established, lawmakers assured the public that its retirement pensions would be self-financing, funded by workers’ “<a href="http://www.ssa.gov/history/fdrstmts.html">contributions, not taxes</a>,” and that benefits would not become a drain on the federal budget. When disability insurance was added later, similar promises were made that it would also be self-sustaining, and not siphon funds from Social Security’s retirement program or from the general budget.&nbsp;</p> <p class="p1">The addition of disability benefits to Social Security was intensely controversial. After many years of lobbying by advocates, the House of Representatives included disability benefits in a Social Security bill passed in 1955. The <a href="http://www.ssa.gov/history/pdf/Downey%20PDFs/Social%20Security%20Amendments%20of%201956%20Vol%201.pdf">Senate Finance Committee</a> later stripped the disability provisions from the House legislation, its committee report stating that “paying cash disability benefits to insured workers under the old-age and survivors insurance program would not be desirable.” The committee’s report couched its rationale in terms of protecting Social Security’s primary retirement benefit function, saying that “the old-age and survivors insurance system is on a sound financial basis; your committee strongly believes that it must be kept so and should not be altered by adding a benefit feature that could involve substantially higher costs than can be estimated.”&nbsp;</p> <p class="p1">Supporters of disability insurance responded to these concerns by introducing an amendment (George et al) during Senate floor consideration to finance these benefits through a separate trust fund. As Senator Walter George (D-GA) stated during floor debate:</p> <p class="p2"><i>The moneys for disabled persons will not be commingled in any way with the funds for old-age insurance or for widows and spouses. The contribution income and the disbursements for disability payments will be kept completely distinct and separate. In this way the cost of disability benefits always will be definitely known and the costs always will be shown separately... a separate tax is to be levied to build up a fund which can be easily policed, which can never encroach upon the fund for widows, and for those who reach age 65, and for children and other beneficiaries.</i></p> <p class="p1">These assurances just barely overcame longstanding concerns about potential negative effects of DI on Social Security’s retirement program; the George amendment <a href="http://www.ssa.gov/history/pdf/Downey%20PDFs/Social%20Security%20Amendments%20of%201956%20Vol%201.pdf">passed</a> 47-45.&nbsp;</p> <p class="p1"><a href="http://www.ssa.gov/history/ikestmts.html">President Eisenhower</a>, who had long entertained misgivings about adding a disability component, cited the separate trust fund arrangement in his signing statement as one of the features making the new law acceptable. “A separate trust fund was established for the disability program in an effort to minimize the effects of the special problems in this field on the other parts of the program--retirement and survivors' protection.” The 1957 <a href="http://www.socialsecurity.gov/OACT/TR/historical/1957TR.pdf">trustees’ report</a> (and subsequent reports) similarly echoed that benefits for the disabled would be provided “with a financing arrangement that is separate from the old-age and survivors insurance system.”&nbsp;</p> <p class="p1">From time to time some have opined that the OASI and DI funds could be safely combined. For example, the <a href="http://www.ssa.gov/policy/docs/ssb/v43n2/v43n2p3.pdf">1979 Social Security Advisory Council</a> recommended “the merger of the Old-Age and Survivors’ Insurance Trust Fund and the Disability Insurance Trust Fund into a single fund.” Lawmakers, however, rejected this recommendation on a bipartisan basis when passing the landmark <a href="https://www.govtrack.us/congress/bills/98/hr1900/text">program amendments of 1983</a>. In short, today’s disability insurance system was enacted on the promise that it would be self-financing through a separate trust fund, and would not be permitted to draw from worker and employer contributions made for funding retirement benefits.</p> <p class="p1"><b>#2: The Self-Financing Principle.</b> Merging the OASI and DI trust funds would implicitly require only that Social Security as a whole be self-financing, abandoning the requirement that each of its components be sustainable on its own. Once the principle of self-financing is abandoned for individual components of Social Security it becomes less clear where the line of fiscal responsibility will remain drawn. For example, Medicare’s two components of Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) arguably have more in common with each other than do OASI and DI, in that they serve essentially a single aged population. Yet <a href="http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/downloads/tr2014.pdf">Medicare HI</a> is currently held to a much tighter fiscal standard than its partner SMI, the latter having an open tap on the general federal budget. If self-financing is abandoned for DI, it would become an obvious temptation to also do so for Medicare HI and to mix other functions of the <a href="http://www.ssa.gov/OP_Home/ssact/ssact-toc.htm">Social Security Act</a> as well.&nbsp;</p> <p class="p1">For many decades there was an unshakable bipartisan consensus supporting Social Security self-financing, based on a shared belief that the program’s unique political strength rested on perceptions that it paid its own way. I have <a href="http://mercatus.org/sites/default/files/TheEndofSocialSecuritySelfFinancing_Blahous_v1-1_0.pdf">written</a> about how <a href="http://www.economics21.org/commentary/end-social-security-self-financing-what-next">this commitment has eroded</a> in recent years, threatening the program’s future. Self-financing requires that lawmakers make the tough decisions necessary to balance program income and expenditures. A merger of the trust funds would signify that lawmakers were no longer willing to uphold this ethic for Social Security DI.</p> <p class="p1"><b>#3: The Perception of Earned Benefits.</b> The politics of such a merger would likely be complex and daunting. To date there has been a general acceptance of workers all paying into Social Security disability insurance even though only those who experience a disabling condition withdraw benefits from it. The public thereby grants that individual workers may receive back from disability insurance far more or far less than they put in, requiring only that the program as a whole be self-sustaining.&nbsp;</p> <p class="p1">This contrasts with Social Security’s retirement system, from which participants generally expect to withdraw benefits that in some way reflect the value of their own contributions. The public has long taken a dim view of using Social Security’s OASI fund for any purpose other than paying retirement and survivor benefits. It is not clear whether there would be general acceptance of diverting funds heretofore earmarked for retirees/survivors to finance disability benefits, and thereby reducing benefits payable in retirement.</p> <p class="p1"><b>#4: The Risk of Delaying Necessary Financial Repairs.</b> The DI fund’s currently impending depletion requires that lawmakers enact corrections before the end of 2016. A combined OASDI fund would by contrast not run out until 2033. &emsp;</p> <p class="p1">If a fund merger induces lawmakers to further postpone needed financial repairs, the result would be a disaster for Social Security, potentially a fatal one. <a href="http://www.socialsecurity.gov/OACT/TR/2014/tr2014.pdf">Program trustees</a> (of which I am one) have repeatedly explained that significant further delays are sharply against the interest of program participants, and that strategies for maintaining solvency “would not be feasible if delayed until trust fund reserve depletion in 2033.”</p> <p class="p1">By itself this does not suggest that the two funds could never be merged. The primary danger would come from merging the funds at a time when Social Security still faces a large financing shortfall. This could be avoided by considering a fund merger either after, or in the context of, legislation to close Social Security’s financing gap. The <a href="http://socialsecurity.gov/policy/docs/ssb/v46n7/v46n7p3.pdf">1983 amendments</a> set a precedent in this regard, including various changes to trust fund management along with reforms to achieve solvency.&nbsp;</p> <p class="p1"><b>#5: Transparency versus Opacity.</b> Social Security politics are divisive and difficult in part because the program promises much more in benefits than participant contributions have earned, while there is little transparency as to how income is being redistributed. This effectively causes program costs and tax burdens to rise steadily over time, as individuals demand the full payment of benefits they feel they have earned, even if those benefits are largely subsidized by younger taxpayers, who must experience rising tax burdens and net income losses to finance them.&nbsp;</p> <p class="p1">In my book <a href="http://www.amazon.com/Social-Security-Unfinished-HOOVER-PUBLICATION-ebook/dp/B004HKIE2A/ref=sr_1_1?ie=UTF8&amp;qid=1429970711&amp;sr=8-1&amp;keywords=social+security+the+unfinished+work"><i>Social Security: The Unfinished Work</i></a> I argue that greater transparency would better equip Americans to make informed judgments about how expensive they want the system to become, and what benefit levels would be most equitable. Specifically, I <a href="https://books.google.com/books?id=V7Q-zZjbrfIC&amp;pg=PA112&amp;lpg=PA112&amp;dq=blahous+social+security+roughly+one-third&amp;source=bl&amp;ots=lhbdVEK3BO&amp;sig=7zMsMc3KVPnRmWWyK2sVlxs7530&amp;hl=en&amp;sa=X&amp;ei=GqA7VYGBIIKpNtiSgHA&amp;ved=0CEQQ6AEwBQ#v=onepage&amp;q=redistribution&amp;f=false">explain</a> that only about one-third of each worker’s contribution is earning a benefit for that worker, roughly one-third is redistributed from richer to poorer to provide a safety net, while the remaining one-third is being redistributed from younger generations to older ones, never to be returned under current law.&nbsp;</p> <p class="p1">Mixing the retirement and disability funds would add another layer of opacity to the system, in that it would no longer be explicit even what portion of each individual’s taxes were being used to finance retirement benefits, and what portion for disability benefits.</p> <p class="p1">Merging the OASI and DI trust funds would be a significant departure from lawmakers’ previous promises that the establishment of disability benefits within Social Security would not reduce the funds available for paying retirement benefits. It could also have the adverse effects of further delaying necessary financial repairs, worsening operational opacity and weakening commitment to the self-financing principle. The best time to consider such a merger would be in the context of legislation closing the financing gaps of DI and OASI alike.&nbsp;</p> http://mercatus.org/expert_commentary/costs-merging-social-security-retirement-and-disability-funds-SSDI Fri, 01 May 2015 10:23:06 -0400 Certificate-of-Need Laws: Implications for New Hampshire http://mercatus.org/publication/certificate-need-laws-implications-new-hampshire-testimony <h5> Publication </h5> <p class="p1"><i>See updated research: <a href="http://mercatus.org/publication/certificate-need-laws-implications-new-hampshire">Certificate-of-Need Laws: Implications for New Hampshire</a></i></p><p class="p1">January 28, 2015&nbsp;</p> <p class="p1">Representative Frank Kotowski<br /> Health, Human Services &amp; Elderly Affairs Committee New Hampshire House of Representatives&nbsp;</p> <p class="p1">Dear Chairman Kotowski:&nbsp;</p> <p class="p1">Thank you for the opportunity to provide some comments regarding New Hampshire’s certificate-of-need (CON) program. The Project for the Study of American Capitalism at the Mercatus Center at George Mason University is dedicated to advancing knowledge about the effects of government-granted privilege on society. As part of its mission, the program conducts careful and independent analyses that employ economic and legal scholarship to assess legislation, regulation, and taxation from the perspective of the public interest. Therefore, this commentary does not represent the views of any particular affected party but is designed to assist your Committee as it explores these issues.&nbsp;</p> <p class="p1">Attached, please find a research brief by George Mason University economist and Mercatus Center Scholar Thomas Stratmann and me about the effects of CON regulations on the provision of health care services in the state of New Hampshire. Our findings show that continued application of New Hampshire’s CON program, and its restrictions on the provision of health care services within the state, limits the choices available for those seeking quality care. In particular, using the general findings from recent research by Thomas Stratmann and Jacob Russ,1 we estimate that continued application of the state’s CON program has reduced the provision of health care services in the following ways:&nbsp;</p> <ul class="ul1"> <li class="li2">1,300 fewer hospital beds, </li> <li class="li2">7 fewer hospitals offering MRI services, and </li> <li class="li2">9 fewer hospitals offering CT scans.&nbsp;</li></ul><p><span style="font-size: 12px;">Moreover, while New Hampshire’s CON program may have been initially intended to control costs and increase care for the poor, recent research has demonstrated that these goals have never been achieved through CON regulations. There is little evidence to support the claim that certificates of need are an effective cost-control measure, and Stratmann and Russ have found that these programs have no effect on the level of charity care provided to the poor. While controlling health care costs and increasing care for the poor may laudable public policy goals, the evidence is strong that CON regulations are not an effective tool for doing so. Instead, these programs simply decrease the supply and availability of health care services by limiting entry and competition.</span></p><p class="p1">Thank you for giving me the opportunity to provide comments regarding the history and effects of New Hampshire’s certificate-of-need regulations. As we note in the attached paper, this is an opportunity for policymakers in New Hampshire to reverse the course and open the health care market for greater entry, more competition, and ultimately greater choice for those seeking care.&nbsp;</p> <p class="p1">Sincerely,&nbsp;</p> <p class="p1">Christopher Koopman<br /> Research Fellow, Project for the Study of American Capitalism Mercatus Center at George Mason University&nbsp;</p><p class="p1"><a href="http://mercatus.org/sites/default/files/Koopman-Certificate-of-NeedNH-testimony.pdf">Continue reading&nbsp;</a></p> http://mercatus.org/publication/certificate-need-laws-implications-new-hampshire-testimony Mon, 27 Apr 2015 11:30:16 -0400