The Case FOR Conservative Market-Based Universal Healthcare Reform

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Not Only Possible but Preferable to Anything Put Forward to Date

 

Say what?  Again?  Universal coverage?  Is Bernie Sanders on to something?  Well, in a way yes, as far as good intentions go.  What will be explored here, is the possibility and preferability of achieving the good intention, not by methods of command and control central planning, but government policy that embraces market forces and trusts individuals, making free choices in their self interest, enticed, even when using the money of others, to act as if it is their own, thus avoiding the proverbial road to hell.

The Inspiration

The policy concept presented here, though original, does not deserve to be called The FreeMktMonkey Solution.  It is the expansion and adaptation of  a seed idea presented in the final chapter of David Hogberg’s 2015 book, Medicare’s Victims: How the US Government’s Largest Health Care Program Harms Patients and Impairs Physicians.  In deference to Hogberg’s brilliantly simple but arguably far too timid, solution to Medicare’s flaws, the idea of conservative universal as a replacement to Obamacare, will be presented as the Hogberg Solution, from which it arises.

Starting Points

  1. Just because it’s a policy of the central government does not preclude the possibility of protective legislation that insures and embraces natural forces of voluntary free exchange in the marketplace to achieve desired solutions superior to central control.
  2. The market best achieves optimal setting of prices, and allocation of scarce resources through the direct interaction of the seller and the buyer,  not via the seller and a third party agent of the buyer, who will never share the same level of self interest as the buyer directly.
  3. A person’s life and immediate need for necessary treatment to maintain and extend it is not the same as losing a car to a crash or a home to a fire, or investment to bad advice of a broker.  It’s a tough position for anyone of compassion, including conservatives to stand for denial of treatment in someone’s moment of need, when life is at stake, due to inability to pay.  Accepting this, is to make a strong argument for an individual mandate, that “shared responsibility payment” thing in Obamacare, as an acknowledgement of the implied responsibility of each individual to accept their part, to the limit of their ability,  to protect their neighbor from the potential to have to pick up after their inability to pay.
  4. Medical science has made very rapid advances over the last century.  There are many more treatments, medications and devices available that have drastically improved both quality of life and longevity.  This alone will involve more spending simply because of availability.  It’s sometimes hard to believe that routine use of antibiotics, did not commence until the early 1930s, still about 15 years from being one century ago.
  5. While condition of health is clearly within control for most, it is certainly not for all.  Thus the ability, by healthful living, to protect others from an obligation to have to cover one’s own inability to pay for treatment, is limited.  Sudden unexpected disease, injury, or congenital defects can affect anyone.
  6. As outlined in what remains a gold standard June 1994 study, by Stan Liebowitz, writing for Cato Institute, Policy Analysis No. 211, Why Healthcare Costs Too Much, central to the mess we have in costs of US healthcare, is overreliance on third party payment.  The illusion of free or almost free, in coverage of what can normally be afforded otherwise, adds significant cost by promoting overuse (that must be baked into premium) along with expense to interact, often combatively, with third party payers, to obtain payments that should be made efficiently, directly, at the discretion and choice of the buyer, in direct dealings that preserve the purity of the doctor-patient relationship.  The Cato study suggests the solution is utilization of the highest level of direct payment possible, by health savings accounts and catastrophic insurance.
  7. Only a small percent of healthcare spending is for emergency situations, where there is no time or opportunity to check prices or treatment options, and make informed choices on how to direct resources.  Even this Brown University study that claims previous reports of emergency spending have been far too low, at most estimates emergency spending does not exceed 10% of our total $2.6 trillion.  This argument is often made by those favoring a government single payer system as evidence of why a market in medical treatment cannot exist.
  8. In both the Medicare and non government civilian healthcare markets, use is heavily concentrated into a very small percent of the respective populations, with little of that being priced by normal market forces through the direct interaction between the buyer and seller of services.  This argues for insurance or some backstop protection for the big items, even as the vast majority in most years would have no trouble paying their entire bill without it, and over the long haul, most would be better off by banking premium otherwise spent.
  9. Only small minorities of buyers need to be active in finding the best deal possible to elicit response from sellers that benefits all market participants.  Hogberg notes this as the concept of “marginal consumers” that drive the market, producing price and quality benefits for the non-marginal majority.  This truth is central to the viability of Hogberg’s solution for Medicare (and its extension to universal).
  10. It may not be necessary for buyers to spend their own money to achieve the benefits of the marketplace,  if means can be employed to entice them to spend the money of others as if it was their own, through a system of rewards, that more effectively produces desired results than schemes of central planner bureaucrats.

The Solution

Hogberg comes to the conclusion in Chapter 8, after noting typical failed attempts to get a handle on Medicare spending involve politicians, bureaucrats, and all manner of experts, engaged in elitist planning, at the exclusion of spontaneous order that arises through market forces of individuals freely making choices in their best interest.  He states, “It never seems to occur to them that the best way to align incentives is to let the patient control the money that pays for the care.”  But how to do that in a way that does not promote waste and abuse when it may not be their money?

This is where Hogberg encounters sheer brilliance, that if not so timid with the idea, could have led him to propose an extension of his Medicare Solution pre-Medicare to the entire healthcare sector of our economy, opening the potential to achieve the universal coverage goal of the left in a way that does not make healthcare a right without obligation.

Hogberg’s solution is simple.  Pay the patient, through incentive rewards, to do a better job than various schemes, by CMS, to fix prices, assess quality and value by questionable metrics, determine reimbursement, even direct treatment, all by artificial means far worse than a free market would accomplish on its own.

To do this Hogberg suggests, since we spend all this public money anyway, provide each Medicare beneficiary with 2 annual accounts: a basic account of $5000, and a major medical account of $70,000.  For anything not spent out of the basic account the beneficiary would be paid 10% at the end of the year to use for any purpose whatever.  For anything not spent out of the major medical account 1% would be paid to the beneficiary.

Here is where Hogberg makes a flaw, as he suggests the 1% from the major medical account would only be paid if that account was reached following total depletion of the basic account.  He recognizes the moral hazard of this in producing an incentive to spend out the basic account ($500 max rebate) to get to the $700 max rebate of the major medical account’s 1% rebate.  The obvious way to correct this would be inclusion of both rebates, so the individual who spent nothing in a given year would get $1200, with perhaps only the $500 going to any purpose and the $700 dedicated to an HSA for future medical expenses, also protecting future rebates.

He points out that in 2012 25.7 million of 37.7 million (68%)  Medicare recipients spent <$5,000, and only 3.9million (10%) spent over $25,000, with their average about $57,000; so a $75,000 total account would be more than adequate for most beneficiaries in any given year.  Expenses beyond that could be covered with a private personal $75,000 (or greater) stop loss policy.  This, due to its low cost due to low use, would likely attract widespread voluntary choice, thereby allowing limited government exposure without the need for rationing either by availability or delay.

Hogberg also missed, or was too timid, to entertain a logical extension of his concept pre-Medicare as a solution to the entire national system, unique in all the world, and compatible with extra governmental market solutions being developed and growing rapidly by efforts of pioneers such as Surgery Center of Oklahoma in transparent honest competitively priced surgery or Atlas MD in Wichita KS, leading development of models of Direct Primary Care, both now entering into direct cash relationships with self paying individuals and the approximate 60% of employers who self fund health benefits they provide their employees, bringing competition, quality and value as seen nowhere else.

Indeed, Hogberg’s suggestion of a demonstration project for Medicare, belies his otherwise strong faith in the power of market forces, such that it is Medicare itself that may better serve as the demonstration project to extend his seed idea to the entire healthcare sector of our economy.

Such an extension would also be compatible with the single best reform proposal of any to date that respects freedom, that of Cato’s Michael Cannon, with his 2008 Large Health Savings Accounts concept, or as published here in July 2014,  after noting the failure of Republicans or conservatives, now in almost 8 years following the election of Obama, to develop a plan of their own that doesn’t dictate purchase of a qualifying product to obtain benefits from the government or retain a large proportion of third party payment, the post “GOP Stuck in ACA Replacement ‘Plan Trap’ as Magic Bullet Solution Hides in Plain Sight“, written prior to any knowledge of Cannon’s proposal, but very similar in approach and expected outcomes.

The Hogberg Solution as applied to the whole US system, as presented here, would require modification to Dr Hogberg’s seed concept, but allow market based universal to become a reality that would significantly, instantly create a system of near ubiquitous direct payment.  This is the game changer, as no other proposal to date has suggested such a virtuous possibility exists, and assuming sufficient popularity, could allow for voluntary participation.

Here’s how it would work.  Every participant would be required to pay a percent of all income into a personal health savings account to a limit.  To start, then periodically adjusted for inflation,  this may be 7.5 of all income to a $50,000 balance, then 5% of all income to a balance of $100,000, which would from that point only have to be maintained.  Employers, as enticements, could agree to match employee inputs.  A national tax would be required to cover additional expenditures, but factoring in market induced competitive savings plus elimination of 3rd party payment processing expense, may be little more than total taxes required to fund Medicare and Medicaid currently, and would replace those taxes.

Hogberg’s suggested Medicare accounts would be modified for the universal system.  For working people they would be accessed, only after exhaustion of personal health savings accounts.  One modification would be the creation of three layers of account.  The basic $5,000 with 10% of any unused portion rebated for any use would remain.  Then an intermediate account of $25,000, followed by a $45,000 major account would apply.  Unused portions of these accounts would be rebated at 2% ($500), and 1% ($450) respectively, but not for any use.  These rebates would apply to the personal health savings account, both providing future protection to the public accounts and allowing reaching one’s mandatory individual funding limits sooner as well as protection of future rebates.  Of interest, $950 is sufficient to fund unlimited direct primary care at many of the growing list of doctors offering this choice.

For anyone still working who exhausts their mandated HSA and taps the government pool, continuing work related payments to their HSA would always precede any government pooled funds in paying for services as used and bills come due.

As percentages of any other government cash assistance transfers (welfare) would be directed into individual health savings accounts as well, both Medicare and Medicaid would be rolled into the new universal system.  Opt outs could be allowed but then initial entry or reentry would be have to be prohibited lifetime.  The idea in the mandate is a requirement to buy nothing, just forced budgeting to protect others in a system where we can agree no one will be left “dying in the streets”, as Donald Trump has stated.  It raises the question also if a tax is not a tax, when that set aside is available for that person’s and their immediate family’s exclusive use.

The game changing nature of this extended Hogberg Solution should be obvious.  Price transparency would happen organically overnight as well as huge savings just from elimination of the cumbersome third party payment mechanism in place now.  Providers of treatment and devices would be instantly responsive to concerns of price and quality.  Even well past normal working years for many, into what are Medicare years now, carried HSA balances would continue to protect the government pooled funds, themselves limited without the need for rationing, by personal stop loss private insurance.  Any remaining HSA balances at death could be transferred to a beneficiary.

Private insurance protection expense beyond the government pool could be further lessened in cost by allowing stop loss policies in excess of $75,000 by including other personal sources, such as one’s HSA balance or other assets willing to be spent first.  Thus a person with $100,000 in their HSA and $25,000 in other assets available for medical expenses, along with the $75,000 government funds, would only need a personal stop loss policy to cover expense exceeding $200,000, very unlikely and very inexpensive.

By trusting individuals with control of the money, acting freely in their self interest, and having faith in the predictability of their response to properly presented economic incentives and constraints, along with a system of rewards, we can create a government devised system that respects the marketplace, innovation, and choice, while keeping government command and control decision making out of the equation.

Opportunity for GOP in Scalia’s Death – If Statesmanship Can “Trump” Egos

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AS ONE DOOR CLOSES,  ANOTHER ONE OPENS……..

 

UPDATE 2/21 — Friday, Feb 19, the US Circuit Court of Cook County in Chicago agreed to hear a challenge to Ted Cruz’s eligibility to become President.  Since no one knows for sure how the court will rule, and how messy it could get, the  argument set forth in this op-ed is only strengthened as “natural born” is not a qualification to serve on the Supreme Court.

 

Make no mistake, the events of Saturday February 13, 2016 will be remembered when future histories of the United States of America are written.  News of the unexpected death of Supreme Court Justice Antonin Scalia, has rattled the nerves of conservatives who see a narrowly divided court shifting to the death of Conservatism for a long time.  Monica Crowley, typical of the immediate response, tweeted on learning the news, “The worst possible news.  Oh my Lord.”

As the dust settled, an epic political struggle, ahead of a pivotal Presidential election, has been defining itself, with the GOP vowing to block any nomination Obama may put up until after the election and a new president takes office.  That the debate will get heated is certain, as Obama quickly announced he will nominate a replacement soon and Democrats claim the Senate has no right to delay, even as the GOP exposes precedent, where Democrats have taken a similar stance.  Truth being, it’s politics.

GOP delay is not without risks either, as the cost could mean loss of the Senate; and as evidenced by the South Carolina debate the evening of Scalia’s death, the GOP has their own problems with increased infighting that could lead to Donald Trump walking away with the nomination, then losing the general election to either Hillary Clinton or Bernie Sanders.  In fact, the GOP was facing a whole lot of potential trouble absent Scalia’s passing.

A February 2-3 poll of 1,236 registered voters nationwide, conducted by Public Policy Polling (PPP) paints the current troubling picture for the GOP.  In head to head matchups with either Clinton or Sanders, only Marco Rubio beats either.  Considering only Trump, Rubio and Cruz as the Republican likely nominees, Trump loses the worst against either likely Democratic opponent.  Plus Trump’s favorable-unfavorable rating, at 63% unfavorable, seriously lags any of the other Republican hopefuls, by this latest poll.

But for the optimist, who believes when one door closes another often opens, or the faithful who may see divine intervention, Scalia’s death, oddly may have presented an opportunity for the Republican party to escape their mess, by a deal that could trump even Donald Trump himself.  American history is known for grand compromises in times of crisis, and this one would fit among those of our past, if the individuals can rise to a rare level of statesmanship ahead of their own selfish egos.

Here’s how that could happen, from one who started out favoring Carly Fiorina, then moved to support of Ted Cruz, and never trusted Donald Trump.

National polls from whatever source show Trump between 30-40% approval.  This, of course means 60-70% of likely GOP voters favor another candidate or are still undecided, with most of that support either for Cruz or Rubio.  Unconventional times call for unconventional methods to deal with the situation, and this solution would certainly be unconventional, as it constructs a unified path to victory in November, quells the toxic circus atmosphere of the last debate, and takes care of the Supreme Court question simultaneously.

With apologies to Ted Cruz supporters, he needs to step aside, throwing all his support to Marco Rubio.  Rubio, in return, as his part in this Statesmanship Deal, must commit to nominating Ted Cruz to the Supreme Court, either to fill the current vacancy if not filled, or the immediate next one that arises.  Every effort should be made to get the remaining candidates, Bush, Kasich and Carson to support the deal.  Both Rubio and Cruz would come away winners, and Donald Trump’s future would become very clouded.

The deal should not be behind a cloak of secrecy, but be made public and defended.  As participants, though, both Rubio and Cruz, as Senators, would have to stay out of the effort to delay Obama’s nomination, leaving that job to Mike Lee, Rand Paul, or Mitch McConnell if he can maintain his spine.

To extend this unconventional approach one step further, in an effort to seal the deal for November, Rubio should then immediately name Carly Fiorina as his running mate if nominated, and she should join him on the campaign trail as soon as possible.  This demonstration of ability to come together with a unified approach to victory would be a big problem for the Democratic Party.

Finally, on the gang of eight issue, Rubio hopefully is being genuine in seeing the error of his ways and accepting the political realities of the issue, as he has expressed.  He still has some other conservative flaws, like support of sugar subsidies, but then conservative plusses also, namely his significant effort to undermine and cripple Obamacare, by restricting bailouts of insurers in the budget deal that Obama signed.

Meanwhile Ted Cruz, a Catholic also (correction I’ve been informed he’s Baptist), at under 50 years old, could be the ideal replacement for Antonin Scalia, upholding our Constitution faithfully for another 30+ years.  One door closes.  Another door opens, and the Republic is spared a progressive avalanche.

 

Don’t Let PA House’s Ghost Vote Scandal Fade with 2015

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 Only Vigilance will Bring Results

 

A little over a week ago, as the GOP dominated Pennsylvania House was wrangling over what to do to achieve an almost six month late budget freshman Democratic Governor Tom Wolf might finally sign, a move was made to revert to a budget approved by the also GOP controlled Senate, known as the “framework”.  That general fund budget included $30.8 billion in spending, along with marginal pension and liquor reform, but not the tax increases necessary to pay for it.

Nonetheless, having given up on a move to send the Governor a stopgap emergency budget that he promised to veto, an attempt was made in the House to set the Senate bill up for a vote.  When it was approved by just one vote 100-99, someone told Rep Daryl Metcalfe that one of the yes votes was cast by Rep Peter Daley, who was not on the floor.

On a subsequent motion to reconsider, Rep Metcalfe, a Republican, observed Democratic Rep Mike Schlossberg pushing the voting button of Rep Daley.  This prompted Metcalfe to inform the Speaker, who ordered all members to be in their seats for further votes.

Very quickly the word got out, with tweets claiming “ghost voting” and suggesting that for Schlossberg it’s one man, two votes.  Several media outlets reported on the ghost voting.  At no point, on social media, did anyone defend what most saw as shocking, immoral, dishonest behavior.

As it turns out, a total of three votes were cast for members not present in the hall of the house as the rules require.  In the case of Democratic Rep Leslie Acosta, she was reported to be in Nicaragua.  Republican Rep John Maher claimed he was just steps away due to business in his capitol office, and had his vote cast for him as a courtesy.

The following day I was in the capitol.  Being an occasional visitor, in talking to several trusted friends who are there much more often, in a short period of time I heard some very revealing stories about ghost voting.

First, they all agreed that ghost voting is not a rare event but common practice!  It’s one of those things where, in spite of a rule against it, everyone looks the other way.

Beyond this revelation that would shock the average citizen, who would likely question the practice as a serious breach of the public trust, I was told of a practice where legislators sometimes rig their voting devices with pennies to cast a vote for them when off the floor.  Then sometimes they forget to remove them!  If this doesn’t sound like high school, it gets worse!

On the Senate side the rules allow voting for an absent member, but only when on either capitol leave for business within a 10 mile radius of the capitol, or legislative leave, for business within their home district.  I imagine an example of capitol leave may include appearing at Dauphin County District Attorney Ed Marsico’s office to be charged with a crime.

Even so, when Senate votes are cast for a member on appropriate leave, they are required to be cast by the floor leader of that member’s party and no one else.  Yet as I was told, sometimes the leave type is changed for a member prior to a vote to make it legit.  One known story that goes around is of a Senate member tweeting pictures of himself from an Atlantic Ocean beach while on legislative leave, and yes, having a vote cast on his behalf!

Rep Metcalfe has called for a House Ethics Committee investigation.  He also wants to see house rules changed so members could move to invalidate votes where rules have been broken.  While this makes sense, the Senate likewise should take a look at its rules regarding voting.

If there’s good news in all of this, it’s that someone got caught in the act where the outcome of a vote was possibly affected, and the practice has become publicly known.  It presents a real opportunity to clamp down on behavior that no one has tried to defend, making reform in short order a likely possibility, if (and here’s the if) the issue is not allowed to fade from the public discourse.

Make no mistake.  Everyone wants this incident to be behind them.  A representative of House Democratic Leader Frank Dermody’s office told me today that House leaders from both parties have discussed the ghost voting issue over the past week.  Being the type of thing that can quickly fade from people’s minds, silence can quickly open the door to do nothing, allowing continuance in a comfort zone of corruption.  Constant reminders from an aware public, on the other hand, will likely result in quick action.  On this one, ordinary citizens hold an unusual amount of power.

 

 

Solving PA’s School Property Tax Problem – a Radical Departure From Relief or Elimination Schemes

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Seeking Simplicity & Fairness that’s Self Regulating & Self Limiting

 

Pennsylvania has been kicking around various ideas to either provide relief from or totally eliminate local school property taxes for nearly 40 years.  SB/HB 76 is the current legislation that, while potentially close to passage as the result of unrelenting textbook grassroots support over many years, falls short on several accounts.  In what follows I’ll attempt to explain and offer an alternative.

Funding schemes have created wild distortions in the ratio of local to state funding obligation across our 500 school districts, aided significantly by a hold harmless provision, whereby districts in attendance decline cannot have their state funding cut back.  District obligation of funding ranges from less than 40% to over 80%.  Spending per student is wildly disparate also, ranging 3 times, from about $10,000 to about $30,000.  Some districts run a tight ship while others simply spend too much.  The number of districts itself cannot help but create areas of advantageous and very difficult tax bases, from which to derive sufficient funds locally.

The impact of the local obligation thus varies considerably across the state for different reasons.  Generally, citizens who have benefited by hold harmless are not complaining.  Others in high growth areas or that have overspent, reside within a challenging tax base, or for whatever reason,  have faced school property tax hikes that have far outstripped inflation.  In the most extreme examples monthly school property tax obligation exceeds the mortgage payment, and homes have become hard to sell while falling in value as demand has been driven away.

Some people have been forced to sell to avoid foreclosure and others driven into it by inability to pay surging property taxes.  It is this extreme, down to where it doesn’t hurt so much, that has driven a powerful, centrally led, unusually well organized, grassroots push to totally eliminate the school property tax.

Sadly, the fervor of the school property tax elimination movement, has crowded out serious discussion of alternatives or sufficient questioning of what could go wrong, to the point that individuals and groups in opposition have mostly maintained that position quietly, to not offend those they normally find allies on liberty and limited government issues.  Departures have even been met with threats and ridicule on occasion.  What follows will risk that wrath.

So what are my objections to and problems with this popular legislation?

First, the problem has not been accurately defined.  All areas of the state don’t favor the huge tax shift that would be necessary with 76.  They’re satisfied with the status quo, suggesting the property tax is secondary to the undeniable problem of the amount of the school property tax in some areas.  There appears to be an amount of school property taxation below which it’s not worth making a fuss.

Make no mistake.  Any substantial tax on real estate has problems, chiefly that it’s difficult to apply fairly, but goes beyond that.  While real estate is no more property than the money in a paycheck exchanged for labor,  or the money withheld from a paycheck (that makes us treat it too lightly),  it represents accumulated wealth, income that’s survived ongoing expenses, wealth that has been purposed by choice, often is near term illiquid, and has uniquely acquired sentimental value over time.  Then that same wealth, apart from any current ability to pay, is repeatedly taxed over and over again.

It’s a form of wealth that is not regularly priced to market as stocks or bonds.  Its value and revaluation by costly reassessment is an educated guess beyond its last known sale price at market.  Some people regularly challenge assessments and others regularly evade permits when making improvements, adding to the unfairness in application.  Yet local taxing authorities rely on the relative stability of the property tax in fluctuating economic conditions, to ease budgeting.

Another problem with the local school property tax elimination scheme is its shift of all funding to the state.  On many occasions I’ve asked local elimination  supporters if they would favor shifting all school funding to the Federal level.  I’ve never gotten one expression of agreement.  They know control would go to the source of the funding, yet are so frustrated with high and rising school taxes they are willing to let the state take over all funding, risking any impositions it may bring.

They make the argument that local districts no longer maintain local control anyway, due to various state and federal mandates.  When I see my local board discuss whether to field a football team, the need to replace the turf, build a new running track, repair a building, sell a building, build a building, decide what instructional materials to use or how much to pay employees, I know this is not true.  I expect there would be less happiness after passing 76, when the state announces all will use the same books and instructional materials because they can make a bulk purchase or that one union contract and pay scale will apply to all districts, just as the pension agreement.

By the promise of 76 to replace all current property tax revenue dollar for dollar, then strictly limit spending increases, by allowing exceptions by local EIT or PIT application, only for specific purposes, for a defined length of time, after approval by no exception referenda, the law seems to place an unfair burden on those who have been most frugal and favor the spendthrifts.  As unexpected needs arise the wasteful, at least for some time, will have more wiggle room to make cuts and diversions.  Call it an odd blessing of wastefulness.

With each district knowing how much funding they will have available without having to ask the taxpayers for more, there will be a force to contain but not cut spending.  The motivation may more likely be to make sure every penny is spent so no one suggests sending less state funding in the future.

While 76 supporters suppose a great benefit in stripping local elected officials of their taxing authority by bumping the state PIT from 3.07% to 4.34%, while calling a 41% hike modest, and the SUT from 6% to 7% over more goods and services, then shielding those revenues in a lock box, and setting limits on yearly increases, they trust state elected officials to leave everything alone down the road.  Future officials could jack up the PIT and SUT, raid the lock box, obliterate the ban on the local school property tax itself, or impose a property tax from the state level.  There should either be promise of something wonderful for the risk, or the much higher hurdle of constitutional amendments.

Supporters’ belief and claims that the tax money shift would magically cause an economic boom should be approached with extreme skepticism.  Almost the same amount of money is removed from Pennsylvania’s private sector economy.  A free ride would exist but would be small, from non citizens paying the increases in the SUT while visiting or passing through.

There are winners and losers.  Accepting claims property values would jump 10% or more is good for people who own property, or realtors’ commissions, but it heightens the barrier for young people saving for a down payment, after being impacted by a 41% hike in the tax on their income and paying higher taxes when they make purchases.  Big winners are retired people whose spending needs are less and face no state tax on pension income.

We should have been curious along the way, why professional conservative organizations have never been more than neutral with their positions on 76.  If there was confidence 76 would yield the economic boom predicted, based on sound academic study produced by their extensive research staffs, it’s hard to believe organizations like Americans for Prosperity, Commonwealth Foundation, NFIB, or the PA Manufacturers Association would not have been solidly in support.

76 is not without risks and even supporters admit it is not perfect legislation.  The amount of the tax shift to replace all money raised by local property taxes now is close to $14 billion.

One nagging question remains.  Why do liberty minded, limited government types, especially at the forefront of promoting 76, on this one issue, submit to entrusting government at a higher level, more distant from the people?

So, if not 76, then what?

To start, I agree with 76 supporters that any scheme to offer school property tax relief without total elimination risks return of even higher taxes locally and overall in the future.  Further the distortions caused by hold harmless need to be eliminated by whatever change is made to the current system, and if not done at once, likely will remain forever.

Assuming the core local funding (apart from spending) problem really lies in the ratio of state to local funding responsibility, with the property tax itself a secondary but important issue, the first step should be to more equally distribute state to local funding by defining the ratio.

The local districts, for their part, would be free to spend whatever and however they see fit.  But if districts completely control spending, and the state commits to a defined funding obligation, isn’t that crazy?  It certainly could be.

To avoid that obvious hazard, districts should be empowered with a moveable state to local funding ratio they can control, to or against their favor, depending on how much they actually spend per student relative to their peers.  While they are free to spend as much as they want, as spending per student rises relative to other districts, funding for that portion of spending shifts rapidly and heavily to local responsibility.  Heavy spenders could not expect to impose their largess on others.  This would force attention to the margins of local spending choices, by a realization that each district is in competition with others to not just contain but reduce spending and become more efficient.  Its integrity could only be confounded by the improbable collusion of all 500 districts with each other.

I’ll note here that this proposal will require some small immediate tax shift to state PIT and SUT, but far less than the massive shift required by 76.  The goal is to more equally share state and local funding obligations, then keep it that way, as defined by a funding ratio statute.

With that I suggest the following 5 steps:

1) Rank all 500 districts by actual total spending per student as determined by average daily enrollment, or preferably, average daily attendance.

2) Establish funding ratio breakpoints by relative spending per student.  While for illustration only (actual breakpoints would have to be determined by study) I suggest the following :

Up to 60th percentile funding = 60% state : 40% local

60th-70th percentile = 50% state : 50% local

70th-80th percentile = 40% state : 60% local

80th-90th percentile = 20% state : 80% local

>90th percentile = 0% state : 100% local

This means any district keeping spending per student below the 60th percentile would only be responsible for 40% of its funding.  The ratio of state funding responsibility is purposely tilted toward the low end, with the idea of elimination of some of the dubious factor adjustments for items like number of English as a second language students or free lunch eligibility, etc. that are applied today.

3) Give districts much more leeway in how to meet their local obligation by options to shift away from the traditional assessment based property tax.  Such may include EIT, PIT, sales tax, flat per capita tax, flat per registered vehicle tax, higher real estate transfer tax, or even property taxation that is always based on the last known value established by the purchase price at market, thus eliminating assessments, with only one exception, for sales among friends or family, at below the true open market price.

4) Provide an opportunity for districts to slightly shift their funding obligation onto the current users of the system by allowing a charge of up to 3% of their total spending per student as a per student tuition.  This small imposition of ownership, “skin in the game”, so to say, would likely provoke very significant response expressed as more pressure on elected boards to find efficiencies.

5) Investigate consolidation of districts to average the effect of pockets of poor tax bases across wider geographic and economic areas.

That’s the concept.  Yes, it requires a certain leap of faith, but confidence in its viability is vested in the predictability of how people react to properly presented economic incentives and constraints when making free choices in their self interest.  Competition is key to achieving a spending and funding scheme that is both self limiting and self regulating, while allowing free choice and government that resides close to the people.

Does Obamacare Contain a Serious Violation of the 14th Amendment?

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Is another challenge in its future?

While I’m neither a lawyer nor a legal scholar I do have an interest in things legal.  I also have an interest in the healthcare issue and have posted many original articles and op-eds on this blog.  So when I noticed something at Healthcare.gov that seemed weird and just not right it stuck in my mind.  I bounced my thoughts around with friends and organizations via social media.  Finally when Pacific Legal Foundation tweeted that they were combing through the issue and would address it in a weekly podcast, I felt validated, humbled and eagerly await their opinion.

So what is the issue and could it eventually provoke a fourth (more on that later) Obamacare challenge to reach the Supreme Court?  From the home page of Healthcare.gov, rolling over “Get Answers”, then under “Coverage for…”, finally clicking “American Indians and Alaska Natives” a story of unequal special treatment for one group over others unfolds.

The level of special treatment is shocking in regard to our Constitution’s 14th Amendment which requires equal protection under the law for all citizens.  Qualification comes with membership in a Federally recognized tribe or being an Alaska Native Claims Settlement Act (ANCSA) Corporation shareholder.

American Indians and Alaska Natives most favorably have no closed season under the ACA.  They can sign up for a health plan on the exchange anytime they want and even change plans once per month.  They can choose to have no insurance at all without paying the tax penalty.  On top of that, up to 300% of federal poverty level (up to around $70,650 for a family of 4) they pay ZERO copay or deductible.  How is this equal treatment under the law?

Every other group not exempted from the law by provisions in the law, generally based on religious beliefs, is subject to the same rules governing the exchanges as anyone else.  This includes a closed season three quarters of the year, a hefty tax for choosing to go uninsured, and reduced copays and deductibles only up to 250% of the federal poverty level on silver plans.

Closed seasons, when there’s guaranteed issue as with the ACA, prevent gaming the system exactly as the special provisions for American Indians and Alaska Natives allow.  No closed season opens the door to only signing up for insurance after the discovery of a serious illness.  This is precisely why employer provided health benefits, which have long been guaranteed issue, have an annual open season for about a month each year, barring specified life event exceptions.  For such plans to work time commitment at all times must be required of everyone.

There is an Indian Health Service already on reservations where Indians can get free healthcare from Indian healthcare providers or others if referred by one, but Healthcare.gov discusses advantages of additionally obtaining plans in the exchanges, suggesting better access to programs not provided by other Indian health programs.  They also suggest this will help the tribe by allowing more services to others, suggesting tribal programs run on a globally limited budget.  Think rationing of services or extended waiting times that accompany such approaches and perhaps the ineptitude of the Veterans Administration as well.

This raises questions of possible reasons if American Indians and Alaska Natives could or should be treated unlike ordinary citizens under the Constitution.  Are they citizens at all?  Aren’t Indians sovereigns within our country, nations within a nation?  The answer seems to be to a point.  The “FAQ” section of the Bureau of Indian Affairs website provides many clues and answers.

First let’s consider eligibility.  Described in the FAQ, membership in a federally recognized tribe is determined by each tribe.  It makes clear that “there is no single federal or tribal criterion or standard” and eligibility for membership “will differ from tribe to tribe”.

If this doesn’t seem loose enough, the FAQ tells us that “blood quantum” is not the only means by which a person is considered, including “how strongly a person identifies himself or herself as an American Indian or Alaska Native”.  As it’s becoming popular to identify outside one’s race or even gender, it appears any of the 561 recognized tribes could open membership to anyone willing to learn the history and customs and believe enough, perhaps even paying a hefty entry fee in the process, thereby granting them special benefits under Obamacare too!

Even among those with sufficient blood quantum, estimated by the Census Bureau to be 4.5 million in 2007, enrolled tribal members are around 2 million, less than one half.  Of the total population more than half do not live on reservations, and can be integrated into the larger society to any degree, while still maintaining tribal membership.

It’s worth noting some of the other facts provided in the FAQ as follows:

American Indians are citizens of the United States and the states in which they reside, and have been so, generally, since 1924.

American Indians have the right to vote.

American Indians can run for and hold any public office as any other US citizen.

American Indians do not have special rights different from other US citizens unless based on treaties or other arrangements.

American Indians do pay taxes like everyone else with the exception of state taxes when living or conducting business on a reservation.

Laws that apply to non Indians also apply to Indians except on reservations where only federal and tribal laws apply to members.  Only state laws do not apply to members when living on a reservation.

American Indians do serve in the armed forces of the United States.

So what is the takeaway of all this?  It seems proper application of the 14th Amendment would back and provide standing for any uninsured non Indian to be exempt from the individual mandate and its tax or require American Indians and Alaskan Natives to be subject to it.

It also seems that any uninsured non Indian tribal member who encounters a serious illness outside the open season without a qualifying event, would have standing to claim harm by being denied immediate access to insurance on an exchange as is afforded American Indians or Alaskan Natives primarily as a result of their ethnicity.  It’s with this I await what the legal minds at Pacific Legal have to say.

Pacific Legal Foundation, which has been defending against government impositions on property rights and liberty since 1973, is involved with another Obamacare case, Sissel vs HHS, that could invalidate the entire law as a violation of the origination clause, and is now under appeal to the Supreme Court.  If accepted it will be the 3rd challenge, hence the chance a possible violation of the 14th Amendment outlined here could eventually become number four.

Pacific Legal produces a weekly podcast each Wednesday and maintains an informative website, both with stories and updates on the many fascinating cases they agree to accept.  Importantly and impressively they represent every client and every case at no charge.  Liberty minded individuals would do well to consider supporting them with a donation.

King v Burwell, Marijuana, and a Path to Marginalize Obamacare in its Presence

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States Should Start It / If Weed is Worth it……..

Short of repealing Obamacare the next best thing would be finding a method to marginalize it in its presence.  Oddly King v Burwell, along with 23 states plus DC that approved medical use of marijuana and three plus DC that approved recreational posession and use of the plant, may provide a path to doing just that if King prevails.

King v Burwell is the case challenging whether government subsidies can apply to qualified health insurance sold on exchanges run by the federal government.  Proponents of King, led by Michael Cannon of Cato Institute, and Jonathan Adler of Case Western Reserve University School of Law, contend the law is clear that subsidies can only be applied in exchanges established by the states.  As the issue was raised, the IRS simply declared that federal exchanges too are eligible for subsidies.

Four separate but related court cases challenged this IRS decision, and in November the Supreme Court agreed to hear King.  The case is scheduled to be heard March 4th, with a decision sometime in June.  In the event King prevails, most agree there will ensue chaos of a sudden affordability vacuum if the approximately 5 million people who own qualified health insurance bought in states with federal exchanges lose their subsidies.  This will likely bring intense political pressure to find a fix, even as businesses, relieved of penalties triggered by employees obtaining subsidies will argue for other remedies.

In addition, many individuals will find the cost of unsubsidized ACA triggering plans now exceed 8% of their income, relieving them of the individual mandate and its tax for not buying insurance, except they will then either have to scrape to find the unsubsidized premium or be left uninsured with no other choices.

Several Republican governors of federal exchange states, including rising star Scott Walker are feeling nervous about a King win, and don’t seem to know what they may be able to do.  At a National Governors Association event, they took to saying that it’s Congress’s job to deal with any fallout.  None expressed any ideas of what states may be able to do short of somehow restoring the subsidies.

So what if federal exchange states, rather than looking to Congress, switching to a state exchange or piggybacking on another state’s successful state exchange, as has been suggested, would simply make alternate, non ACA qualified, more affordable choices available off the exchange?

Since I had never seen evidence to the contrary and had been told by both Andrew Schlafly, attorney with the Association of American Physicians and Surgeons, and Oklahoma Attorney General Scott Pruitt, whose name is on one of the other three cases, that they knew of nothing in the ACA to prohibit states from making available non ACA qualified choices off the exchange, I heretofore thought this was possible and within the law.

My take had been that the ACA only defined what must be in health insurance plans to be on the exchange, qualify for subidy, and avoid paying the mandate tax, making possible, with or without King, state provision of a parallel free system along side the government control system, allowing states, with their retained authority to regulate insurance through their insurance departments, the potential to allow or even require the availability of alternate choices off the exchange, understanding non qualified plans would not avoid the mandate tax.

I thought this may be especially attractive to those individuals discovering low cost direct primary care arrangements, where an increasing number of primary care physicians are offering unlimited care for a monthly fee.  Here is a rapidly growing need for pure catastrophic insurance as a compliment, that ACA qualified plans have shut down.

I believed all this.  Then, February 9, in a twitter exchange with Phil Kerpen, President of American Commitment, he sent me a link indicating otherwise.  There is indeed federal code that prohibits what I thought was possible.  The office of my Congressman, also previously unaware, identified it as a law from the 1940s that had been amended by Obamacare.  Talk of leaving no stone of iron fisted control unturned!

So what to do now?  State offer of non ACA compliant health insurance off the exchange, no matter how welcome, or as immunization against the affordability aspects of a King win in 37 federal exchange states, would run afoul of Federal law.  It would be an act of defiance, but isn’t this what 23 states plus the District of Columbia did when they approved the medical use of marijuana?  Taking it further, isn’t this what Colorado, Washington, and now Alaska and DC did by approving the recreational use of marijuana?  So far, for those state actions, the feds have chosen to stand down.  If legal weed is important enough to risk federal admonishment, how is offering citizens, still willing to pay the mandate tax, the choice of affordable non ACA qualified options off the exchange not?  It would seem.

More likely, on an Obamacare challenge, the feds would push back hard, but states would have arguments in defense, as well as significant public support that may even exceed weed, especially if King prevails, subsidies are lost, and a sudden affordability vacuum ensues.  While the stand down on marijuana would mean nothing in a legal sense, it may help state defiance on Obamacare play well in the court of public opinion, giving state officials more backbone to act.

States can point to their continued regulation of health insurance where the feds have found it convenient to not supplant them.  State coverage mandates in excess of ACA essential minimum coverage rules still apply, as do their definitions of regional pricing zone boundaries.  They can question also why their regulation of all other types of insurance remains intact, without federal meddling.

There’s the argument McCarran-Ferguson 1945 still gives states the authority to offer alternatives, so long as they don’t attempt to eliminate the federally designed plans.  They could claim restriction only to such limited choices represents overbearing federal imposition and violates the Constitutionally protected freedom of their citizens to contract.  They could point to a long standing tradition of state regulation of insurance in return for insurance being exempt from federal antitrust law.

Perhaps as important, since the ACA unquestionably allows doing absolutely nothing upon payment of the mandate tax, any opposition would be forced into the absurd argument that doing something substantially more than nothing in protecting others from one’s potential inability to pay their medical bills should be prevented, so long as the tax is paid.  In fact, Congress, seeing this argument play out, may be motivated to specifically allow non ACA qualified offerings and reduce or eliminate the mandate tax for buyers, in recognition of their obvious reduction in potential liability to others by their actions.

If only one state or a few, federal exchange or otherwise, would boldly take this course of action, we would present, at least the opportunity to embark on a path to marginalize Obamacare in its presence.  A parallel free system, alongside the government control system could be created, and repeal would no longer be necessary as people could freely choose which system they prefer.

The sudden chaos of a King win would be the perfect time to have alternate choices available, as the potential to quickly attract sufficient numbers to spread the risk enough to insure viability would be most opportune.  If weed is worth it………

Don’t Be Like Me…Resolve to Get That Colonoscopy!

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Now over two weeks into 2015, those well intended resolutions, often centered around taking better care of one’s self, are no doubt already beginning to be forgotten.  Gym attendance is likely already on the slide.  Diets are being forgotten.  Tobacco revenue is recovering.  All as accepting return to the status quo proves easier than determined vigilance for many.

Most of us can take better care of ourselves and should keep tabs on the state of our health.  As I’ve learned the hard way, having that screening colonoscopy, especially after age 50, in spite of a family history, is one diagnostic test not to be avoided.

Not being one to worry or “run to meet trouble”, as an old friend used to say, for the 13 years that it has been available at no cost to me, I’ve avoided and made excuses for getting this most important procedure.  In spite of reminders and urging from my wife, as well as the fact that my mother had polyps removed, I took the position that only a small percent of those who don’t bother to get checked, will actually develop colon cancer.  While this assumption is true, I’m now facing what should have been caught in its earliest stages, likely as a  precancerous polyp, years ago.

The trouble with colorectal cancer is that it can grow without pain or notice until it becomes very serious, causing a bowel blockage or spreading to other organs.  Nor do tumors always bleed.  Fortunately mine did.  A couple months ago, when I noticed blood in my stool, I knew something was amiss.  I went to a primary care physician for only the second time in my adult life for a head to toe checkup.

Of course when I described the symptom that motivated my visit, a diagnostic colonoscopy was arranged a week later, on Christmas eve.  An “ulcerated mass”, confirmed as cancerous by pathology inspection, was discovered along with a polyp showing cancerous attributes.  A surgical resection of part of my colon was suggested.

Three days later I had a lower abdominal CT scan and chest x-ray that fortunately showed no obvious spread of my cancer to other organs.  Although that’s great news, if the cancer is found in surrounding lymph nodes that will be harvested and inspected during my surgery, I’ll certainly be facing chemotherapy follow up to try to attain a cure, often considered 5 year cancer free survival.  My odds of achieving that outcome are about 65%.

So, yes, my negligence to have regular medical exams, and a screening colonoscopy in particular, may yet prove a fatal choice.  I can’t begin to explain the feeling of personal complicity and stupidity that comes with my situation, nor the impact this has on friends and loved ones.  My hope, in writing this, revealing the details of my medical condition, is to spare others.  Don’t be me! Resolve to get that screening colonoscopy!  Don’t make excuses!

Even for those without insurance coverage there are options.  Healthcare Bluebook is a great resource to find fair prices in your area, that can be used to negotiate with providers.  In the Harrisburg, PA area where I live, the fair price for a screening colonoscopy, that amount normally accepted as insurance payment by network physicians, is listed as $1609.  This is broken down as $676 facility fee, $413 physician fee, and $520 anesthesia fee.  Also, colonoscopies can be, and sometimes are, done without anesthesia.

Another option is MediBid, a medical brokerage service started by a Canadian immigrant, Ralph Weber, to connect patients and physicians for specific procedures nationwide.  As one notable example, KATU, Channel 2, Portland, reported in September, 2013, the story of a Chicago man without insurance, looking for a colonoscopy.  Through Medibid he found a physician in McMinnville, OR.  His cost for the procedure, including airfare, lodging, and a rental car was less than half the average $3500 best price he could find in the Chicago area.

Three days from now I’ll be in surgery, beginning the process of trying to stop what could still prove fatal, and likely could have been prevented.  Again, don’t be me!  Resolve to get that screening colonoscopy!  NO excuses!