Tag Archives: Moral Hazard

International tests show US children lagging despite record spending on education

Jay Richards tweeted this article from the Wall Street Journal.

Excerpt:

Since 1998, the Program for International Student Assessment, or Pisa, has ranked 15-year-old kids around the world on common reading, math and science tests. The U.S. brings up the middle—again—among 65 education systems that make up fourth-fifths of the global economy. The triennial Pisa report also shows—again—that East Asian countries like Hong Kong, Japan and South Korea produce the best outcomes.

U.S. performance hasn’t budged in a decade. For 2012, U.S. students placed 26th in mathematics, a bit below the Organization for Economic Cooperation and Development average, and 17th in reading and 21st in science, close to the average. The U.S. slipped in all categories compared to international competitors, plunging from 11th in reading as recently as 2009.

American teenagers seem especially weak in core academic subjects with high cognitive demands, such as translating concepts into solutions for real-world problems. A quarter never become proficient in math. In Shanghai and Korea, the comparable figure is 10% or fewer. Some 7% of U.S. students reached the top two scientific performance levels, compared with 17% in Finland and an amazing 27% in Shanghai. Is it tiger moms or tiger schools, or maybe both?

The U.S. is way out front in one measure: per-student spending. Only Austria, Luxembourg, Norway and Switzerland spend more. Despite laying out $115,000 per head, the U.S. did no better than the Slovak Republic, which spends $53,000.

Perhaps most depressingly, the data show no statistically significant U.S. achievement improvement over time. None. In an era when it pays to be thankful for small mercies, at least we’re not getting worse, but America’s relative standing is falling as other countries improve.

[…]Massachusetts has been running public schools since 1635 and today is home to some of the best performers in the nation. The state entered Pisa as if it was its own country—but students of the same age in Shanghai performed as if they had two more years of math instruction than those in the Bay State.

[…]Pisa also adds another count to the bill of indictment for the Democrats who block reform to serve their teachers union patrons. Education Secretary Arne Duncan called the report “a picture of educational stagnation,” but liberals are major impediments to more accountability, merit-based compensation and school-choice competition. The Justice Department has even gone so far as to sue Louisiana to block its modest voucher program, which is a moral crime against the students consigned to failing schools.

There are a few areas of economics that I think that Christians really ought to understand, and education is one of them. We definitely need to be concerned about policies that make it harder for poor, minority students to get ahead. We keep throwing money at the unionized public school system, and we get no results. We need to think about making education more like online shopping. What makes online shopping great is choice and competition. If schools were allowed to compete with one another, then the customer would be assured of getting more quality for less money. The public school system is a monopoly, and it serves the teachers and the education bureaucrats – not the children.

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New study finds that many young people won’t purchase Obamacare plans

Dr. David Hogberg of the National Center for Public Policy Research explains how Obamacare affects young people.

Here’s the executive summary:

If the ObamaCare health insurance exchanges are to function properly, it is crucial that a substantial number of people ages 18-34 join them. This age group that is young and relatively healthy must purchase health insurance on the exchanges in order to “cross-subsidize” people who are older and sicker. Without the young and healthy, the exchanges will enter a “death spiral” where only the older and sicker participate and price of insurance premiums will increase precipitously.

This study finds that in 2014 many single people aged 18-34 who do not have children will have a substantial financial incentive to forego insurance on the exchanges and instead pay the individual mandate penalty of $95 or one percent of income. About 3.7 million of those ages 18-34 will be at least $500 better off if they forgo insurance and pay the penalty. More than 3 million will be $1,000 better off if they go the same route. This raises the likelihood that an insufficient number of young and healthy people will participate in the exchanges, thereby leading to a death spiral. 

The design of the plan is to tax younger, healthier people – especially men – in order to obtain the money to pay for heavy users of health care.

To compel the young and healthy to purchase insurance, the architects of ObamaCare included an individual mandate that requires individuals to either buy insurance or pay a penalty. The penalty, which increases over time, is whichever is greater: $95 or one percent of income in 2014, $325 or two percent of income in 2015, and $695 or 2.5 percent of income in 2016 and thereafter.

[…]The gender breakdown of these individuals presents another problem. Women have higher rates of health utilization than men, including more visits to primary-care physicians and greater use of diagnostic tests and emergency care. However, as Table 3 shows, roughly two-thirds of the individuals for whom insurance will cost at least $1,000 more than the fine are men.

Hard to see why any young man would have voted Democrat, and yet many did. Did they know that they were voting for a tax on themselves at a time when many of them are poorly educated by government-run schools, and can’t even find jobs? How can you pay a fine for not having health care when you don’t have a proper education or a proper job?

The net effect of the “community rating” and “guaranteed issue” provisions of Obamacare will be to raise health insurance premiums and force private companies to stop offering plans:

If the exchanges do not attract a sufficient number of people in the 18-34 age demographic, they will eventually enter an insurance “death spiral.” This occurs when the young and healthy drop out of the “insurance pool.” This leads to “adverse selection” in which insurance is only attractive to those who are generally older and sicker. If the insurance pool is comprised largely of people who are older and sicker, then insurance prices will rise to cover their costs. That rate increase causes even more young and healthy people drop their insurance, leaving the pools even older and sicker than before, and so on. Eventually, all but a few insurers will be forced to discontinue their business on the exchanges because they can no longer make a profit. Fewer insurers means less competition, resulting in even higher insurance premiums.

Community rating and guaranteed issue are catalysts for a death spiral. In its strictest form, community rating means that insurers must charge everyone the same premium, regardless of factors such as health status and age. Guaranteed issue means that an insurer must sell a policy to a consumer anytime.

Under ObamaCare, the exchanges use a modified version of both of these regulations. Its form of community rating doesn’t allow insurers to vary rates based on health status. It does allow, however, for modification of premiums if one smokes and to compensate for age (although in a more restricted manner than the market currently does). Regarding guaranteed issue, insurers must sell policies to all comers but (with a few exceptions) only during the annual open enrollment period from October to December.

Both of these rules give young and healthy people big incentives to forgo insurance coverage altogether. Community rating means young people have a reduced incentive to buy insurance since they will pay a premium that is above the market rate. Many who are currently purchasing insurance in the individual market, for example, will see a substantial premium increase if they switch to the exchange.

In a market without guaranteed issue, consumers run the risk of insurers not selling them policies when they get seriously ill. But that risk is largely gone under the exchanges. For instance, a young person who gets a serious illness in June only has to wait until October to sign up for insurance and then wait until January 1 of the next year to receive coverage. Combined, community rating and guaranteed issue give the young and healthy big incentives to forgo insurance until they are sick.

“Community rating” and “guaranteed issue” have actually already been tried at the state level. What happened then?

This:

The late Conrad Meier, then a senior fellow in health care policy for the Heartland Institute, examined what happened when these two regulations were instituted on the state level in his 2005 monograph “Destroying Insurance Markets.” In the early 1990s eight states — Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont and Washington — imposed community rating and guaranteed issue on their individual insurance markets. The result, according to Meier, was the above-described death spiral.

For example, in 1992 the New Jersey legislature adopted community rating and guaranteed issue rules for its individual insurance market with the passage of the “Individual Health Coverage Program.” The monthly premium for family coverage from Aetna rose from $769 in 1994 to $6,005 in 2005, a whopping increase of 683 percent! Other insurers saw similar increases.

Before the reforms began, there were about 28 insurers covering the New Jersey individual market. By 2007 there were only seven. According to the Census Bureau, the number of people in New Jersey’s individual market fell from about 998,000 in 1994 to 630,000 in 2005, a decline of 37 percent.

It’s pretty clear that Obamacare was designed to replicate this same effect that’s been observed in states at a national level, paving the way for single payer health care. What will Americans think when their healthcare is controlled by the kind of people who run USPS, Amtrak, the Bureau of Motor Vehicles and the IRS? 

Why do so many people vote for the Democrat party?

ECM sent me this article from National Review that explains why so many people vote Democrat.

Excerpt:

First, we should recognize that the War on Poverty is now a huge budget item. According to calculations by the Congressional Research Service and the Senate Budget Committee, taxpayers coughed up over $1 trillion in federal and state-provided benefits in 2011. These benefits flow to tens of millions of voters and cover the waterfront, offering low-income Americans everything from cash assistance to food, housing, and medical care, not to mention help with education, transportation, home-heating costs, and child care. Spending on these programs has soared more than 40 percent since 2007. That’s an unsustainable trajectory.

Then we get some facts from a Wall Street Journal article on the topic:

  • The percentage of the American labor force drawing disability benefits from the government has doubled since 1992, from 3 percent to 6 percent. They further note: “The number of workers qualifying for disability since the recession ended in 2009 has grown twice as fast as private employment.”
  • During the last four years, the Obama administration’s aggressive promotion of the food-stamp program has increased the number of recipients by 18.5 million.
  • Unemployment insurance that lasted no longer than 55 weeks in 1980 and 72 weeks in 1992 now can last 99 weeks. Some 40 percent of unemployed workers have been out of work for more than half a year.

And how does it affect voting?:

The Battleground Polls conducted by the Tarrance Group on behalf of George Washington University and Politico make this level of detail readily available. The poll helpfully divides its sample of likely voters into, among other things, those who self-identify as either “low income” or “middle class.”

So, what do we know about these voters?

  • Those who self-identify as “low income” are more likely to be unemployed, frustrated over the state of the economy, and pessimistic over the general direction of our country than are those with higher incomes. Yet the Battleground Poll indicates they are more Why do people likely than those who identify as middle class to believe the country is heading in the right direction (42 percent vs. 35 percent).
  • Do welfare benefits insulate these voters from the sort of economic concerns that plague middle-class voters? Apparently so. Compared with their middle-class counterparts, far fewer low-income voters cite pocketbook issues as their number-one concern (53 percent vs.74 percent). Middle-class voters are, almost by definition, far more likely to pay taxes than low-income voters. Unsurprisingly, they are much more likely to list the economy and the level of spending and deficits as their most important concern (28 percent and 17 percent, respectively) than low-income Americans. Among the latter group, only 20 percent say the economy is most important, and a mere 7 percent worry about spending and deficits. Again, this is not surprising, considering that, for most low-income Americans, government benefits come with no strings attached, and at little or no cost in taxes.
  • In contrast, low-income Americans cite Medicare, Social Security, and education benefits as their number-one issue (29 percent in all) more than twice as frequently as do middle-class voters (only 13 percent).
  • If the receipt of welfare benefits affects voters’ views of the economy and alters the equation they use to judge candidates, one would expect them to give the president high marks for how he has handled the most stagnant and underperforming economy in over half a century. And, indeed, that is the case. By a margin of 51 percent to 37 percent low-income voters prefer Obama over Romney on this measure. They prefer Obama by an even more lopsided margin, 55 percent to 37 percent, on the issue of jobs. In contrast, Romney wins big among middle-class voters on these concerns (56 percent to 41 percent on handling the economy, and 54 percent to 43 percent on jobs).

These people aren’t voting for any high and noble reason. They want money. It’s just greed. Greed is why people vote Democrat.

Elusive Wapiti adds:

It makes sense, really. The 47% vote their pocketbook too… the issue comes from the pocketbook being oriented in the opposite direction. Government largesse fills their wallet, whilst draining the bankbooks of the 53%. They are the “zero liability” voter; they are insulated from the costs of the programs and candidates they vote for… but they are understandably quite concerned with ensuring the payouts continue.

You need to get out there today and vote for Mitt Romney to stop the downward spiral into dependency and bankruptcy that we can see in countries like Greece, Spain and Italy. We can see it happening over there, don’t let it happen here.

How health care mandates drive up health care costs

From Investors Business Daily.

Excerpt:

The ObamaCare legislation gives the administration the authority to compile a list of female preventive services that all new health insurance plans will have to cover without employing deductibles or charging co-payments. A medical advisory panel is recommending that birth control services should be one of these services.

The committee from the National Academy of Sciences’ Institute of Medicine that issued the guidelines also suggests that free breast-pump rentals, counseling for domestic violence, annual wellness exams and HIV tests be part of all health insurance plans.

These mandates won’t come without significant costs. The additional benefits won’t be free, despite the left’s loose usage of that word in association with health care. The mandates will force insurance premiums higher and someone will pay.

The Congressional Budget Office said years ago that existing mandates at the state level — there are more than 2,000 of them, according to the Council for Affordable Health Insurance — raise premiums by 15%.

That’s just a starting point. CAHI, which has done heavy work on this issue, believes that state mandates push premiums up by 20%. In some states, the increase can be as high as 50%. The result is a cost curve that bends upward, not down.

Mandates at the state level run from the expected to the bizarre. They require insurers to provide such unorthodox coverage as wigs (hair prostheses), Oriental medicine, port-wine stain elimination, smoking cessation, acupuncture, midwives, counseling, and marriage, occupational and massage therapists.

As we’ve noted before on these pages, the state mandates are an insult to common sense. Why would a single man need an insurance package that covers in vitro fertilization, maternity leave, midwives, breast reduction or mammograms?

Does it make sense for a childless, unmarried woman to be forced into a plan that includes care for a newborn and screening for prostate cancer? And is there any reason a teetotaler’s policy should cover alcohol abuse?

These regulations are not only asinine, they wreck the health insurance marketplace. The longer the list of mandates, the less competition there is. When insurers have to carry these gold-plated packages, they can’t compete with lower-priced plans that have fewer benefits. This can price some customers entirely out of the private market.

Here’s a post from Ruth Blog that makes the financial aspects clearer, using “free” contraception as an example.

Excerpt:

First of all, preventive medicine implies the prevention of a pathological condition. Pregnancy is anything but pathological. Artificial contraception is an elective medical therapy for those desiring to block a totally normal and healthy physical condition. Not only is contraception elective, but the decision to have sex should be elective as well.

Secondly… If an unmarried woman makes the conscious decision to be sexually active, it seems she should also bear the consequences of such a decision. Her partner should be willing to share any burdens of the relationship, including the financial cost of sexual relations. If a woman is not in a stable relationship, it seems unreasonable to demand someone else has to pay for her sexual dalliances.

[…]Sexual activity is elective. Preventing the normal consequence of sexual activity, pregnancy, is elective. The use of artificial contraception to prevent pregnancy is a personal lifestyle choice, not a medically recommended therapy. Therefore, artificial contraception should not be considered mandated preventive medical care. In these tight fiscal times, we cannot afford to be too inclusive with what constitutes preventive medicine.

Note that the artificial conception would be free for women who want to have children without fathers. And we know how that works out.

The Heritage Foundation points out that mandates actually reduce the freedom and prosperity of women who don’t use these services.

Excerpt:

Many Americans find the use of birth control morally objectionable, and some women may simply have no need for a health plan that covers these services, based on any number of personal choices and other factors. Those that fall into this category would have no choice but to pay for unnecessary coverage if the recommendations are made law.

[…]If HHS takes an overly prescriptive approach regarding these particular measures, women who would prefer not to pay the higher premiums to carry health benefits they don’t need or to which they object won’t have that option.

In a truly market-based insurance exchange, women would be able to choose a health plan that met their needs and was consistent with their values, and those who wished to forgo certain benefits would have the freedom to do so. If any attempt at health reform is to succeed at reducing costs and tailoring coverage to the specific needs of each individual, it must ensure that consumers are able to choose the plan and benefits that work best for them, rather than submitting to the decisions of a bureaucratic board.

There is no opt out for moral women when these things are mandated as minimum coverages in every policy. There is no escape. My fear is that women would be forced to pay for these services and then feel obligated to use them since that is the only way to get any value for the money that is being forcibly extracted from them.

What health care mandates really achieve is 1) to buy votes from the providers of the mandated services, and 2) to transfer wealth from people who don’t want or need these elective services (e.g. – single chaste Christian men) to people who need it because of their own elective lifestyle choices. And the more I have to pay to subsidize other people’s breast implants, contraceptives, STI  treatments, abortions and in vitro fertilizations, the less I can afford to do the things that I want to do, which isn’t fair. My money is my money, and their money is their money. I should be allowed to keep what I earn and buy only the health care that I need. I have other uses for that money. Let the government do-gooders find some other way to boost their self-esteem instead of playing Robin Hood with health care.

155,000 illegal immigrants receiving welfare benefits in the socialist UK

From the UK Daily Mail. (H/T Verum Serum)

Excerpt:

Tens of thousands of workers with no right to be in Britain have been claiming benefits thanks to an extraordinary loophole in the law.

Ministers have discovered that Labour allowed 155,000 illegal immigrants to qualify for sickness benefits and maternity pay. Government sources put the cost to the public purse at ‘tens of millions of pounds’.

They say the shambles is a damning indictment of how Labour lost control of both the benefits and immigration systems with taxpayers left to foot the bill. Work and Pensions Secretary Iain Duncan Smith will outlaw the practice in welfare reform legislation expected to be unveiled this week.

Ministers believe most of those abusing the system came to work in Britain for a limited period and overstayed their visa. Others managed to get a job without a work permit.

At present, someone could be illegally in the UK and able to claim Employment and Support Allowance (ESA), paid to those too sick to work, as well as statutory payments such as maternity or paternity pay and sick pay.

Astonishingly, the Work and Pensions Department has not in the past asked to see work permits when assessing claims for ESA.

Employers, meanwhile, have not been asked to show proof that workers are in Britain legally when processing claims for maternity or paternity pay or sick pay.

[…]Hundreds of thousands of National Insurance numbers were handed out under Labour to illegal workers as, alarmingly, there was no requirement on JobCentre staff to check whether a person was in the country legally.

[…]However, the European Commission has warned ministers that the rules may infringe the human rights of EU citizens and are ‘not compatible’ with EU law. It has started legal proceedings against Britain to have restrictions on welfare claims by incomers scrapped.

[…]The scale of the welfare challenge facing Britain is laid bare today in figures which show at least 330,000 children – around one in 30 – are growing up with a parent claiming Jobseeker’s Allowance.

The Labour Party is the UK-based equivalent of the Democrat party here, and Democrats also advocate for similar welfare programs for illegal aliens. Here, illegal immigrants get free health care (from emergency rooms, that cannot turn anyone away), free schooling in public schools, and free birthright citizenship. And they get to work without paying any income taxes. It’s a mess. This is being paid for by everyone else who plays by the rules. And all this doesn’t even include the crime problems.

Now consider this article from the UK Daily Mail. (H/T Verum Serum)

Excerpt:

Ministers today faced calls for an inquiry into claims that their open-door immigration policy was designed to make Britain more multicultural and allow Labour to portray the Tories as racists.

A former Labour adviser alleged that the Government opened up Britain’s borders in part to try to humiliate Right-wing opponents of immigration…

The Daily Mail reported on Saturday the controversial claims by Andrew Neather, who worked for Tony Blair and Jack Straw.

He said Labour’s relaxation of immigration controls in 2000 was a deliberate attempt to engineer a ‘truly multicultural’ country and plug gaps in the jobs market.

He said the ‘major shift’ in immigration policy was inspired by a 2001 policy paper from the Performance and Innovation Unit, a Downing Street think-tank based in the Cabinet Office…

Ministers were reluctant to discuss the move publicly for fear that it would alienate Labour’s core working-class vote, Mr Neather said. But they hoped it would allow them to paint the Conservatives as xenophobic and out of touch.

‘I remember coming away from some discussions with the clear sense that the policy was intended – even if this wasn’t its main purpose – to rub the Right’s nose in diversity and render their arguments out of date,’ Mr Neather added.

That’s right. This mess was intentionally created.