Congratulations to RGF’s Matt Mitchell!

Matt has passed the biggest obstacle to obtaining his Ph.D. in economics at George Mason University. Matt is a fellow of the Institute for Humane Studies. He has begun inquiry into the efficiency effects of the generality of rules. Does it help when the government grants tax favors or subsidies to preferred groups (the emphasis of the Richardson Administration)? Or, is it better from an economic prosperity standpoint (not to mention fairness) to make everybody play by the same rules?

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Pre-K: How gullible can we be?

How gullible can we be when it comes to the pre-kindergarten expansion of government? Answer: really gullible (subscription):
“Gov. Bill Richardson on Tuesday released the results of a poll that showed 83 percent of the New Mexico respondents support a voluntary pre-kindergarten program he is backing.”
I wonder how many would support this feel-good, “for the kids” initiative if they actually read the bill?

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Perverse Incentives of the Medicaid Match

The federal government wants its Medicaid bed scam money back (subscription):
“The Centers for Medicaid and Medicare Services demanded the state return funds it paid last year under a now-disallowed bed tax plan designed to generate $22 million in federal funding.”
We are not going to get sane Medicaid policy until we eliminate the incentive of states to rip off the federal purse via the Medicaid match. That should be priority one for Medicaid reform

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More on “It takes a state…”

Where are the skeptics? I seem to be only one of a few. Mountains of evidence to support government pre-kindergarten? How about the mountains of contrary evidence here, here and here? Are you too much into feel-good rhetoric about the kids to check out documented skepticsm? How gullible can we be? Our government doesn’t have a track record of success. And now you believe that Lucy won’t pull the football away this time?
Suggestion: since it looks like we are going to start another expensive government program that won’t work, why don’t we abolish an equal dollar amount of those programs that already don’t work?

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Does it Take a State to Raise a Child?

Apparently the legislative monopoly in Santa Fe thinks so. Now they want to foist pre-kindergarten on the beleaguered NM taxpayer. Here is what I think:
1)It won’t work.
a) This is interest group politics. Self-interested government bureaucrats and “advocacy groups” gain – it is in their financial interest to implement pre-K. As a result their studies are suspect. Parents are different in their abilities and motivation to educate their children. Children have different abilities when it comes to learning. What did these studies do to control for differences in parents and differences in children? Did they evaluate the trade offs between nurturing by loving parents and “teaching” by “licensed providers.”
b) Government K-12 doesn’t work. And it will not work under so called “reform.” What makes us think the Pre-k will work? How naïve can we be?
c) Touchy feely one-size-fits-all standards don’t allow for differences in parents and differences in children. Example of what they are trying to foist on us: “The curriculum for each program shall address the total developmental needs of the child, including physical, cognitive, social and emotional needs, and shall include aspects of health care, nutrition, safety, the needs of the family and multicultural and linguistic sensitivity, in coordination with other resources for families.” Give me a break! Parents know what is best for their children, not so called experts in Santa Fe or licensed providers.
d) Expands failed government school education monopoly. This will make it even more difficult to turn things around.
2)We can’t afford it.
a) Budget pie can only get so big. There is little room to increase budget, because other states (e.g. Texas, Colorado) are so much better than us. Other priorities such as teachers’ pay raises are likely to suffer.
b) We cannot raise taxes and be prosperous. NM taxes are already too high and going up (compare us to Texas and Colorado). This is not just an assertion. For detailed analysis of the history of taxes and spending in NM go to: http://www.riograndefoundation.org/tops/index.htm.
c) Pre-K will ratchet up uncontrollably after the “mere” $9 million to start.
d) Why do we want to provide more wealth transfers at others expense? This is nothing more than taxpayer funded childcare.
e) How much failed government education is enough? Will this lead to pre-pre-K and so on ad infinitum?
f) This looks like political opportunism pure and simple — politicians taking advantage of gullible public (pictures with the kids) for their own gain.
3)Other help already available (although it, too, is more than somewhat ineffective)
a) Means tested transfers (effect on family of four detailed in RGF publication “Reform This!” )
b) Head Start is a program that does not work. Any gains from the program are totally eroded in short amount of time. Some children are actually harmed because of associations with other children they would be better off never having met. Thinking Pre-K will produce better results than Head Start is wishful thinking.
Unfortunately Arizona is confronting the same nonsense.

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Getting Around the High Cost of Government Controlled Health Care

Here (subscription required) is a fascinating story of successful efforts to control the high health care costs fostered by government price controls, mandates and tax subsidies for third party payments. With this innovation doctors do not get punished financially for spending more time with patients; and they spend no time doing government required paperwork. The only problem: You have to be large to bring health care in house. Some excerpts from the article:
“Last year Quad/Graphics, one of the nation’s biggest printing companies, spent about $6,000 per employee on medical costs, 30% less than the average company in its home state of Wisconsin. Its 12,000 workers spend fewer days in the hospital and take their medicines more regularly.
Even more unusual: Quad provides most of the care itself. Starting with a small plant clinic in 1990, Quad has brought nearly all of its primary health care in-house. As the whir of its giant presses hums through the waiting-room wall, company doctors and nurses practice everything from pediatrics to gynecology.”
“Quad is fast becoming a model for companies desperate to control double-digit rises in health-care costs. Dozens of companies have toured Quad’s clinics looking for inspiration. Those weighing plans to build their own in-house clinics include Toyota Motor Corp.’s North American manufacturing division, Kohler Inc. and Miller Brewing Co.”
“Some Quad doctors say they were initially skeptical about working in a corporate clinic. “When I interviewed, I said ‘I don’t want to just take care of sore throats,’ ” says Ann Merkow, an internist who left the general medical practice she took over from her father to join Quad nine years ago.
But she says she found it rewarding to work with incentives built around patient health. At her own practice, she says, 80% of patients were on Medicare, where doctors are reimbursed per visit but don’t get paid for preventive care. ‘In the other model, you almost get punished for taking time for patients,” she says, “There were many years I made less than teachers in the area.'”

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Making Medicaid Work

It was good to see CHRIS EDWARDS and ALAN REYNOLDS calling for block grants to states for Medicaid in today’s WSJ:
“We think that Congress should go beyond the administration’s limited cuts by enacting an overall federal budget cap to force trade-offs between defense, entitlements and domestic discretionary spending. And Congress needs to start moving major programs such as highway spending and the giant Medicaid back to the states. A first step would be to turn Medicaid into a block grant and slow spending to at least the inflation rate. The Bush budget includes some restraint on Medicaid spending, but block-granting the program would create savings of $55 billion annually by 2010 and $161 billion annually by 2015.”
It is time we recognized the perverse incentives that lead states to deny scarcity when it comes to Medicaid decision making.

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Another Medicaid Horror Story

Our legislature should recognize this(subscription required) from Mississippi. Some excerpts:
“Over the past five years state and federal spending in Mississippi on Medicaid — the health program for the poor and disabled — has doubled to $3.5 billion. Fully one-quarter of state residents are in the program. “Medicaid is a cancer on our state finances,” says Mississippi Gov. Haley Barbour…”
“Now a state-versus-federal battle over Medicaid may be looming. President Bush, faced with a swelling federal deficit, will propose Medicaid changes in the budget he sends Congress today. The administration wants to cut about $60 billion from what it projects it will spend on the program over the next decade, mostly by cracking down on techniques used by states to collect extra federal payments.
Federal officials also are pushing a broader overhaul of Medicaid financing. Currently the federal government and state governments split Medicaid costs, so if states boost benefits or costs go up, Uncle Sam has to keep pitching in. One option under discussion with governors would cap federal contributions for certain Medicaid recipients at a set amount each year. They would have to pay 100% of Medicaid costs above the cap, but they would have wider flexibility than they do now to reconfigure benefits and increase costs for the targeted populations.
As states try to slash costs under current rules, they run into many roadblocks. Federal law mandates that states must cover many types of care, such as pregnancy care for certain low-income women. Reducing the number of beneficiaries is hard because they often have nowhere else to turn. What’s more, because Medicaid is a “fee for service” program that pays doctors and hospitals every time they treat a fever or patch up a cut, it’s difficult to encourage efficiency.
Patients, too, have little incentive to ration their own care because they pay at most a small sum to see the doctor. “When something is free, people don’t care what it costs,” says Mr. Barbour in Mississippi. Advocacy groups for the poor say that even a $5 fee for a doctor visit can prevent some people from getting needed care.”
Florida is actually doing something about the problem:
“By far the most promising answer to date comes from Florida, where Governor Jeb Bush is proposing a radical restructuring of the program that serves 2.2 million low-income people at an expected cost this year of $14.7 billion. The aim is twofold — to provide incentives for better service by putting more choice in the hands of the consumer and to rein in the rate of growth in spending.”
Somewhere along the line somebody has to do something about the perverse incentives faced by state governments because of the federal Medicaid match for state spending. Because of the match there is an overwhelming incentive on the part of state politicians, bureaucrats and advocates to deny scarcity. For example, in the 2004 legislative session an absurd and harmful nursing home bed tax was passed into law. Its only purpose was to generate more revenue from the federal government for Medicaid.

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