Tag: vouchers

State Rep. Balks at Voucher Funding for Muslim School

Just as Louisiana’s legislative session was wrapping up earlier this month, state Rep. Kenneth Havard refused to vote for any voucher program that “will fund Islamic teaching.” According to the AP, the Islamic School of Greater New Orleans was on a list of schools approved by the state education department to accept as many as 38 voucher students. Havard declared: “I won’t go back home and explain to my people that I supported this.”

For unreported reasons, the Islamic school subsequently withdrew itself from participation in the program and the voucher funding was approved 51 to 49. With the program now enacted and funded, nothing appears to stand in the way of the Islamic school requesting that it be added back to the list, and it is hard to imagine a constitutionally sound basis for rejecting such a request.

This episode illustrates a fundamental flaw in government-funded voucher programs: they must either reject every controversial educational option from eligibility or they compel taxpayers to support types of education that violate their convictions. In either case, someone loses. Either poor Muslims in New Orleans are denied vouchers or taxpayers who don’t wish to support Muslim schools are compelled to do so.

It doesn’t have to be that way. Education tax credit programs can ensure universal access to the education marketplace without violating anyone’s freedom of conscience. That’s because tax credits extend choice not only to parents but to taxpayers as well. Taxpayers in Arizona, Pennsylvania, and a half dozen other states can choose to donate to nonprofit tuition-assistance organizations that serve the poor. If they do make a donation, they pick the organization that receives their funds, whether it be Catholic, Muslim, Jewish, secular or entirely indifferent to religiosity.

Similarly, direct education tax credits for parents who pay for their own children’s education compel no one to support those parents’ choices. Such personal education tax credits, which already exist in Illinois and Iowa, merely let parents keep more of their own money. Far from increasing the tax burden on their fellow citizens, parents who pay for their own children’s education with the help of a credit save other taxpayers from having to pay for their children’s state schooling.

The school choice movement does not need to throw taxpayers’ freedom of conscience under the bus to secure freedom of choice for parents.

Government, Education, and Freedom

I did the above interview recently with ChoiceMedia.tv on the subject of education tax credits and vouchers, in which I argued that credits are a better way of ensuring universal access to the education marketplace. Credits can either directly reduce the taxes owed by families who pay for their own children’s education (as in Illinois and Iowa), or they can offset donations taxpayers make to non-profit k-12 scholarship programs that provide tuition assistance to the poor (as in Pennsylvania, Arizona, Florida, and several other states).

The interview elicited an important question from a commenter: If financial assistance for the poor comes from scholarship programs, isn’t there a risk that those programs will impose restrictions on how the scholarships can be used, thereby curtailing poor families’ educational options?

Minimizing that problem is actually one of the many reasons to prefer education tax credits over vouchers. Any time someone other than the parents is footing the bill for a child’s education, there is the risk that this third party is going to limit parents’ choices. The worst case, historically, has been when that third party is the government. When governments pay for schooling, there is a single set of regulations on what choices parents can make, and there is no way to avoid those regulations short of rejecting the financial assistance altogether—which the poorest families have difficulty doing. Vouchers bring with them this single set of government rules (and it is often an extensive one as I discovered in this study).

By contrast, scholarship tax credit programs, like the one in Pennsylvania, give rise to a multitude of different organizations that provide tuition assistance to poor families. If any one of those organizations decides to impose a particular set of restrictions on the use of its scholarships, it has no effect on any of the other organizations. Parents looking for financial assistance are thus free to seek it from a scholarship organization that aligns with their needs and values. The multiplicity of different sources of funding is instrumental—in fact it is essential—in ensuring that poor parents’ choices are not curtailed.

I’ve made this argument in a variety of places, most recently in a U.S. Supreme Court brief in the Arizona tax credit case ACSTO v. Winn.

Let the Market Cut Medicare?

The center-right consensus is that in order to balance the budget and improve health care, Congress needs to overhaul Medicare using some form of voucher or premium support.  Whereas the current program offers an essentially unlimited subsidy for medical care, under these options Congress would give each enrollee a fixed subsidy with which they could purchase private health insurance.  But how should Congress determine the size of these fixed subsidies?

The House GOP approved a budget under which Congress would pick the amount.  Beginning in 2022, all new enrollees would receive a voucher.  The average voucher amount would be equal to the average amount Medicare currently spends per enrollee in 2011, adjusted for overall inflation.  Congress would adjust the actual voucher amount for each enrollee based on health status and income, so some enrollees would receive larger and some would receive smaller vouchers.  But since the average voucher would grow at the rate of inflation (i.e., about 2.5 percentage points slower than per-enrollee Medicare spending currently grows), this approach would reduce Medicare spending over time.

A drawback of this approach is that opponents can (and do) demagogue it, claiming that the vouchers would be insufficient and seniors would die for lack of medical care.  This demagoguery ignores two important factors.

First, as Peter Orszag and President Obama themselves loved reminding us during the ObamaCare debate, there is lots of wasteful spending in the Medicare program.  Orszag frequently cites the Dartmouth Atlas, which estimates that one third of Medicare spending is pure waste.  Since the amount of the House GOP’s vouchers would be based on per-enrollee Medicare spending, they would essentially give Medicare enrollees 50 percent more money than they would need to purchase all the beneficial medical care that Medicare currently provides.  The vast amount of wasteful Medicare spending is a disgrace.  But when converting to a voucher system it’s an absolute boon, because it provides a huge margin of safety.  It means that enrollees could reduce their medical consumption by one third without harming their health.

Second, the anti-reform demagogues presume that vouchers would do absolutely nothing to make health care more efficient.  Vouchers would make the nation’s 50 million heaviest consumers of medical care cost-conscious in a way they have never been before.  Like an old man trying to send back soup at a deli, they will force providers to cut costs and thereby make their vouchers go farther.

It is because of this second factor that Yuval Levin proposes a different way of setting the voucher amount(s).  Levin proposes to use a competitive-bidding process.  Under this approach, everyone in Medicare would receive a voucher equal to the second-lowest bid that health plans submit to provide a standard package of benefits.  Enrollees could then apply their voucher to any private plan or even a government-run plan.  Under this approach, enrollees would still be cost-conscious: if the health insurance policies they choose cost more than the voucher amount, they would have to make up the difference; if the policies cost less, they would keep the savings.  Levin argues that this cost-consciousness would also lead enrollees to put pressure on providers to cut costs, and therefore the amount of the second-lowest bid would automatically grow at a slower rate than per-enrollee spending under the current Medicare program.  ”In such a system,” Levin writes, “the premium-support benefit would grow exactly as quickly as required to provide a comprehensive insurance benefit, since the growth rate would be determined by a market process rather than a preset formula. ” Voila!  The competitive forces of the market would cut Medicare spending.

The best evidence that competitive bidding will reduce Medicare spending is that the durable medical equipment manufacturers have fought efforts to impose it on them.  So while I’m not hostile to the idea, I don’t think it’s an improvement over the House GOP plan.

First, Levin calls competitive-bidding “the Confident Market Solution” because he is confident that markets will reduce the cost of health care.  I’m confident of that too.  But I’m also confident that rent-seeking will be present in Medicare, no matter what reforms Congress enacts.  I am far less confident that markets will reduce costs faster than rent-seeking will increase them.  My sense is that politicians will be much more likely to hold the line on rent-seeking if they actually draw one.

Second, House Budget Committee chairman Paul Ryan (R-WI) crafted a House budget that proposed to reduce the growth of Medicare spending using hard, score-able numbers.  Hundreds of House members likewise stuck their necks out by voting for it.  The Confident Market Solution essentially undercuts those folks by telling them they should not have done something so bold and courageous.  Levin is no doubt correct that a competitive-bidding process that doesn’t specifically commit Congress to reducing Medicare spending growth is more politically feasible than a voucher plan that does.  When politicians choose the more politically perilous option, however, reformers should tell the world why that was the right thing to do.

Third, Levin would include a public option in the competitive-bidding system.  I am also confident that the government would heavily subsidize that health plan until it drove private insurers (and any hope of cost-cutting innovations) out of the market.

I’ve discussed what I think is a better approach to Medicare reform here and here.

$154 Million Medicaid Fraud Settlement a Sign of Govt Failure, Not Success

The federal government, four states, and a whistleblower have extracted a $154 million settlement from Par Pharmaceuticals for fraudulently inflating the prices it charges Medicaid, according to the Associated Press.

With Medicare and Medicaid losing roughly $100 billion each year to fraud and other improper payments, however, the fact that a paltry $154 million settlement is news can only mean that federal and state governments are not even trying to combat fraud in any serious way.   As I explain in this video, that’s because politicians have almost zero incentive to do so – which makes massive amounts of fraud an inherent part of these programs:

Under ObamaCare, Medicare and Medicaid fraud will only get worse.

The Sodom and Gomorrah of Public Schooling?

I was tied up when the massive Atlanta School District cheating scandal broke last month, and so didn’t get around to blogging it. [Recap: nearly 200 teachers and principals in half of the district’s 100 schools were involved]. But, with other large-scale cheating investigations still on-going, U.S. Education Secretary Arne Duncan was asked about the problem yesterday during a video-taped “Twitter town hall” (minute 12:00). Specifically, he was asked if the high-stakes tests mandated by NCLB are to blame (minute 16:50). Though Duncan made an off-hand comment that high-stakes NCLB-required tests may have contributed to the pressure that lead to the cheating, he repeatedly blamed the cheating on a uniquely “morally bankrupt culture” in Atlanta’s public schools. That didn’t convince interviewer John Merrow, who cited several other cities where cheating investigations are underway—nor should it convince you.

The problem is not that Atlanta is the Sodom and Gomorrah of public schooling. The problem is that state schooling separates payment from consumption. The accountability mechanism of competitive markets—the only such mechanism that actually works—requires the payer to also be the consumer, because the central incentive for any service provider is to please the payer. So if the consumer isn’t paying, he or she is rendered relatively unimportant in the eyes of the provider. Atlanta parents want their children to be well educated, but a lot of work is required to meet that goal. State and federal bureaucrats just want high scores on NCLB-mandated tests—that’s much easier to achieve by cheating than by doing an excellent job teaching. So there is an incentive for school officials to cheat because they are paid by the bureaucrats, not by the parents. Not every teacher succumbs to this incentive, of course, but the incentive is very clearly putting pressure in the wrong direction.

Now consider the incentive structure of schools paid directly by parents in tuition. The incentive in that scenario is to give parents what they want, which is usually a high quality education for their children. Certainly schools could try to lie to parents about how well their children are doing, but this is much harder than lying to bureaucrats. A great many parents will notice a discrepancy if their illiterate children are awarded A’s. And parents considering a school will notice a discrepancy if the “A”-graded graduates of that school somehow cannot gain admission to, or often drop out of, the next higher level of education. Word of mouth—and now word-of-social-networking-apps—is a powerful thing. So it’s much harder for parent-funded schools to get away with cheating, even if they were predisposed to use that strategy.

This is why no system of education that relies exclusively on third-party payment will ever match the quality and progress that we have come to expect in every other field. Indeed, it argues for finding ways of ensuring universal access to education that rely, as much as possible, on direct payment of tuition by parents. Of all the currently viable education policies, the one that fits that description best is the education tax credit—particularly direct credits for families’ own education expenses. And, among third-party payment methods, scholarship tax credits also have advantages over the alternatives.

This is a reality many folks will not want to hear or accept, but reality is not optional.

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Education Tax Credits More Popular Than Vouchers & Charters

As Neal wrote about earlier, Education Next has released their new poll, and there are some interesting results.

Surprisingly, the authors buried the lede in their writeup; education tax credits consistently have more support and less opposition than any other choice policy.

This year, donation tax credits pulled in a 29-point margin of support (that’s total favor minus total oppose). In contrast, charter schools had a 25-point margin of support.

The authors added a new, less neutral voucher question that boosted the margin of support to 20 points. They couched the policy in terms of “wider choice” for kids in public schools, and the implication was that it was universal. All three of these additional considerations tend to have a positive impact on support for choice policies.

The standard low-income voucher question showed a big jump this year from a -12 in 2010 to a 1-point margin of support. The last time Education Next asked a low-income tax credit question, it garnered a 19-point margin of support.

Last year, tax credits had a 28-point margin of support (that’s total favor minus total oppose). In contrast, charter schools had a 22-point margin of support and vouchers for low-income kids went -12 points (more respondents opposed).

Public opinion is consistently and strongly in favor of education tax credits over vouchers and even charter schools. And thankfully, they’re a much better policy as well.

Public Right on Choice, Wrong on Standards, But Always Well Intentioned

Today the good folks at the journal Education Next released their annual survey of education opinion. What follows is a quick summary of many of the things the pollsters found, followed by a little commentary about the national-standards results.  (Adam Schaeffer, I have it on good authority, will be flogging the tax credit and voucher findings in an upcoming post.) Bottom line: The public usually has the right inclinations, but gets some answers wrong as a result.

One note: As is always the case with polls – but I won’t go into great detail with Education Next’s questions – remember that question wording can have a sizable impact on results.

So what did Education Next find?

  • Almost everybody reports paying at least some attention to education issues
  • 79 percent of Americans would grade the nation’s public schools no better than a “C”
  • 54 percent of Americans, and 43 percent of parents, would grade their communities’ public schools no better than a “C”
  • Even when told how much their district spends per pupil, 46 percent of respondents think funding should increase. But that’s down from 59 percent when the current expenditure isn’t given
  • Pluralities of Americans favor charter schooling and government-funded private-school choice (without mention of the sometimes toxic word “voucher”), and a close majority supports tax-credit-based choice   
  • A huge majority, even after having been given the average teacher salary, thinks teachers should get paid more or about the same as they currently do
  • A plurality thinks teachers should pay 20 percent of the cost of their health-care and pension benefits
  • Large pluralities – and for one question a majority – support judging and rewarding teachers based on performance, as well as easing credentialing and tenure rules
  • The public is about evenly split on whether teachers’ unions are good or bad for their districts
  • Big majorities support federal testing demands (without mention of the often-toxic No Child Left Behind Act) as well as states adopting the “same set” of standards and tests (without mention of federal incentives to do so)
  • A plurality of Americans oppose taking income into account when assigning students to schools
  • Only 16 percent of respondents think local taxes for their district should decrease

All of these results demonstrate good reflexes by the public. They know, for instance, that overall the public schools are performing poorly, but they are a little happier with the districts they often chose when selecting homes. They want to spend more money on schooling because education is generally a good thing, but that drops when they are told how much is actually being spent (a slippery figure few hard-working Americans have time to pin down themselves). They recognize the need for choice, something they benefit from in almost every other facet of their lives. They believe in judging and rewarding people based on their performance. They oppose forcing physical integration – in this case based on income – on students and communities. And they even, reasonably, want all states to have the same academic standards.

About that last point: Intuitively, it seems to make sense. Why should kids in Mississippi be asked to learn less than those in Massachusetts? If I didn’t get paid to analyze education policy – if I had to do other work for 40-plus hours a week – I, too, would probably support national standards because I wouldn’t have time to look at the evidence, or cogitate over the politics behind such a fair sounding proposal. But I do analyze education policy full time, and I know that (1) there is little evidence supporting calls for national standards; (2) many states have adopted national standards mainly in pursuit of federal money; (3) even if you can get initially high standards, they’ll be dumbed-down by politics; and (4) states can perhaps be standardized, but unique, individual students never can be.

Of course, the good-intentions problem is not unique to education. The huge opportunity costs – among other disincentives – that keep members of the public from being able to sufficiently analyze complicated political issues is a major problem in all public policy matters. That’s why good intentions – which the public demonstrates in spades in this poll – can often lead to bad outcomes. But we cannot blame the public for that. We must, instead, inform the public as best we can.