Latest Study
Move to Defend: The Case against the Constitutional Amendments Seeking to Overturn Citizens United
Featured Event
May 17
Featuring Benjamin H. Friedman, Research Fellow in Defense and Homeland Security Studies, Cato Institute; Spencer Ackerman, Senior Writer, WIRED Magazine; and Julian Sanchez, Research Fellow, Cato Institute; moderated by Laura Odato, Director of Government Affairs, Cato Institute.
Featured Publication
In the new issue of Cato Policy Report, Cato President and CEO John A. Allison argues that the Federal Reserve is increasing the long-term risk in our financial system through both its monetary and regulatory policies. Also in this issue, James D. Gwartney looks at the incomplete “public choice revolution,” and explains how mainstream economics is leaving both current students and the general public with a misleading, false, and romantic view of government and the operation of the democratic political process.
Latest Multimedia
May 17, 2013
May 17, 2013
Latest Commentary
Featured Book
More Bang for Your Buck
The Cato Institute tops a new measure of think tank performance in the United States, according to a recent report. Cato bested all other U.S. think tanks in the main category of “Aggregate Profile per Dollar Spent.” “I’m grateful to the Center for Global Development for showing that Cato gives its sponsors something I wish government gave more of to taxpayers: bang for the buck,” said Cato CEO John Allison.
The front-page story on tariff suspensions in today’s Washington Post has to be one of the worst examples of economic policy reporting that I’ve ever seen – and I work in health policy.
(Cato’s trade policy scholars convey that they were particularly suprised that such an article appeared in the Post, whose reporting is normally quite trade-literate.)
A couple of years ago, Congress created a $1 billion fund to reimburse providers for emergency medical care delivered to illegal immigrants who don’t pay their bills, but providers aren’t signing up for the free money.
According to the Chicago Tribune, “In Illinois, one of six states slated to receive the bulk of the money, just 6 percent of the $12.1 million available to hospitals, doctors and ambulances has been spent.” Why so little?
The biggest deterrent to applying for the money, [hospital officials] explain, is concern about time-consuming paperwork that can offset any money gained…
Another problem for some is more of a moral issue, a concern by hospital officials that questions about immigration status will scare off already worried immigrants. These hospitals are uneasy with the requirement that they document whether their patients are eligible for the federal money.
If winning congressional approval of this handout required loading it down with so much red tape that even its intended beneficiaries don’t want the money, then might this be a government program that Republicans could eliminate? Maybe?
Don’t hold your breath. One of the program’s biggest supporters is conservative Republican Jon Kyl of Arizona, a member of the Senate leadership. Back in 2004, Kyl boasted that he had secured $42 million for Arizona through this program. (Only $5 million of that has so far been spent.)
Dr. Mark McClellan recently announced his intention to resign from the position of administrator of the Center for Medicare and Medicaid Services (CMS).
Finding a replacement shouldn’t be hard. The job description is simple. The next Medicare administrator must run a sprawling program that buys health care for approximately 42 million Americans in every state of the union, and he must simultaneously:
The last item on the list is obviously a stretch, but the next administrator of CMS will face all of the other challenges.
How did the Medicare program – born of such high hopes and good intentions – end up in this mess? What can we do to address these problems?
For some answers to these questions, along with a satirical perspective on the Medicare program, attend the book forum for Medicare Meets Mephistopheles at the Cato Institute on September 21, 2006. Sign up here.
This item is a month old, but worth taking the time to read – especially if you work on health policy in the states. Paul Gessing is the president of New Mexico’s Rio Grande Foundation. That state’s governor, Bill Richardson, is planning a run for the presidency and recently proposed expanding New Mexico’s Medicaid program. In an article for National Review Online, Gessing does a superb job of explaining why that is the wrong approach. Other state think tanks should take note.
On Thursday, Cato will host a book forum for Medicare Meets Mephistopheles, a new book by Cato adjunct scholar David Hyman. Medicare Meets Mephistopheles takes a satirical look at the crown jewel of President Lyndon Johnson’s Great Society.
Hyman is a rising star in the field of health law and policy. A lawyer and a doctor, he is professor of law and medicine at the University of Illinois Urbana-Champaign. In 2004, he was the lead author of Improving Health Care: A Dose of Competition, the first joint report by the Federal Trade Commission and the Department of Justice. This year, he guest-edited an issue of the Journal of Health Policy, Politics and Law devoted to that report. Prof. Hyman also has a habit of quoting Austin Powers in his law review articles.
Ted Marmor, one of Medicare’s leading advocates, will comment, as will Robin Wilson, a visiting professor of law at Washington & Lee University.
The forum will be held at noon this Thursday at the Cato Institute, and will be followed by a luncheon. Other details, including how to preregister, are available here.
My former research assistant is now pursuing a master’s degree in public health at Harvard. She recently blogged about her economics course:
During econ class today, the professor explained in great detail the ways in which the federal government tinkers with agricultural output, like price floors and crop restriction and so forth. A lot of my classmates were genuinely surprised at the extent to which government messes with food production to placate the farm lobby, and that, in turn, surprised me. I thought most people — or most well-educated grad students and medical residents, who make up my class — knew all about concentrated benefits/diffuse costs, and why we probably pay more for milk than we should. At one point, a student from India, astonished, said, “You mean the government actually sets aside these funds every year for this purpose?” Professor: “Of course not. We run deficits.”
Again, these students made it all the way to Harvard without any exposure to such things. Makes me wonder if any research has been done on the economic literacy of the public health profession. (E-mail me mcannon [at] cato [dot] org" href="mailto:mcannon [at] cato [dot] org">here if you’re aware of any.)
Let’s just hope that Adrienne’s econ class is a required course.
CHICAGO—The only nice thing about being stuck on an airplane (aside from free soda) is the chance to catch up on one’s reading. On this trip, I (finally) turned to Jason Furman’s article “Our Unhealthy Tax Code” from the premiere issue of Democracy. I address Furman’s objections to health savings accounts in a recent paper. (Refreshingly, we actually agree on one or two things.) But Furman also commits what I think is an important error when discussing tax deductions for health care.
Congress exempts employer-provided health benefits from income and payroll taxes, which costs the federal government an estimated $200 billion per year in lost tax revenue. Furman describes this as the federal government “spending approximately $200 billion annually in subsidizing employer-provided insurance.” But that is flat incorrect. A tax deduction allows workers to keep more of their own income, provided they engage in a desired behavior — in this case, obtaining employer-sponsored health insurance. It is not government spending because the government cannot spend money that it never possesses. Nor is it a subsidy, because to subsidize means to transfer resources, and again the government never possesses those resources. The tax deduction may have the same effect on government revenues (and the economy) as government spending for the same activity. But that still doesn’t make it spending.
Suppose I robbed Peter and gave his money to Paul. Suppose alternatively that Peter gave his money to Paul because I threatened to punch him in the nose unless he did. In the first scenario, I would be spending Peter’s money on Paul. But in the second, Peter would be spending his money on Paul. I wouldn’t be spending anything. I merely would be threatening to assault Peter unless he did what I said.
A more precise way of describing such tax deductions would be to say that they create price distortions between favored and non-favored activities. If a health insurance policy and a plasma TV each have a nominal price tag of $5,000, the fact that health insurance is tax-deductible reduces its price relative to the TV. (If the price distortion is greater than my preference for the TV, the tax deduction will induce me to consume the less-valued option, creating economic losses.)
The distinction might seem semantic, but it has important normative implications. Furman despises the tax deduction for employer-sponsored health insurance on equity grounds: The wealthy get larger tax deductions than lower-income workers. (I despise it too, for different reasons.) A government spending program that disproportionately subsidizes upper-income workers would be offensive to more people than a policy that merely lets some workers keep more of their own money. The former description suggests (assumes?) that the money belongs to the state, and that the state has the right to spend it on something else at its discretion. The latter suggests (correctly) that the money belongs to the people who earned it, and for the state to spend that money would require a $200 billion tax increase.
To anticipate a predictable objection, I am aware that the federal government itself prefers the former description, and the term tax expenditures. It is hardly surprising that the federal establishment chooses the description that presumptively increases its claim on society’s resources. That it is a convention makes it no less incorrect.
This work by Cato Institute is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.
