Tag: direct payments

Oral Contraceptives Should be Free (From the Third-Party Trap)

An argument will soon erupt over the fate of the Affordable Care Act’s mandate that requires health insurance to cover oral contraceptives at no direct out of pocket cost to the patient. This mandate was never explicitly listed in the ACA as one of the “essential health benefits.” Its inclusion was made at the discretion of the HHS Secretary. According to press reports, the Trump Administration is about to relax the requirement.

The arguments made in favor of loosening the mandate mostly revolve around the employers’ right to freedom of conscience. Meanwhile, some advocacy groups fear this will mean many women won’t be able to obtain affordable oral contraceptives. As I recently wrote in Morning Consult, it can help temper the concerns of all parties to the argument if the Food and Drug Administration (FDA) followed the recommendation that the American Congress of Obstetricians and Gynecologists (ACOG) has been making for decades, and reclassify oral contraceptives from prescription to over the counter (OTC). Birth control pills are already available over the counter in 102 countries.

But health insurance plans usually only cover prescription drugs. Making birth control pills available OTC means that women can purchase them directly, like they purchase aspirin, ibuprofen, antihistamines and antacids.

In my Morning Consult piece, I point out that the average cash price of prescription birth control pills runs from $20 to $50 per month but can range as low as $9 per month. Various community health centers across the US, as well as Planned Parenthood, offer free oral contraceptives for those unable to afford them. If birth control pills are made available over the counter prices are likely to drop. That’s because oral contraceptives will be liberated from the third-party spending trap.

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Distortions versus Outlays

My friend Gawain Kripke at Oxfam posted a very good blog entry yesterday on the proposed cuts to agriculture subsidies. In it, Gawain elaborates on a point that I made briefly in a previous post about Rep. Paul Ryan’s 2012 budget plan: that cutting so-called direct payments—those that flow to farmers regardless of how much or even whether they produce—is only part of the picture.

Here’s Gawain’s main point:

Most farm subsidies are price-dependent, meaning they are bigger if prices are low and smaller if prices are high. Prices are hitting historic highs for many commodities, which means the bulk of these subsidies are not paying out very much money. Over time, the price-dependent subsidies have been the bulk of farm subsidies. They also distort agriculture markets by encouraging farmers to depend on payments from the government rather managing their business and hedging risks.

So—these days there’s only about $5b in farm payments being made, and these payments are not considered as damaging in international trade terms because they are not based on prices…

Still, Congress will probably make some cuts. But these cuts won’t really be reform and won’t produce much long-term savings unless they tackle the price-dependent subsidies. Taking a whack at those subsidies could save taxpayers money later and make sure our farm programs don’t hurt poor farmers in developing countries. (emphasis added)

I will be delighted if direct payments are abolished, thereby saving American taxpayers about $5 billion a year. But we should not be content with that, nor should we fool ourselves that we have tackled the main distortions in agricultural markets. If the price- and production-linked programs are not abolished, too, then taxpayers and international markets will pay the price if/when commodity prices fall.

Surprise, Surprise

Last year I wrote about the intriguing proposal by the North Dakota Farm Bureau to do away with federal farm subsidies. I expressed at the time my doubt that the proposal would find much traction with the national American Farm Bureau Federation and, indeed, the group voted yesterday (at their annual conference in Atlanta) against the milder proposition to cut direct payments – the approximately $5.2 billion per year of your money that flows to farmers regardless of what, or even whether, they farm. Those payments are becoming increasingly politically contentious at a time of growing unease about record deficits, and some farm groups had said defending (let alone receiving) them was a threat to farmers’ broader interests.

Well, despite some discord among the group, the AFBF – you’ll be shocked, shocked to hear – voted largely for the status quo. From Brownfield (in an article that contains interesting analysis of how support for various programs breaks down on state/regional lines):

By a comfortable margin, the delegates passed a resolution calling for ‘a strong and effective safety net that consists of direct payments, crop insurance and a simplified Average Crop Revenue Election (ACRE) program.

Hopefully Congress can prove me wrong and cut farm subsidies when the farm bill comes up for renewal in 2012.

Conrad: Just Don’t Cut My Programs!

Prompted by my blog on Senator Kent Conrad’s Task Force to reduce the federal deficit, my assistant Amy Mandler dug up some interesting information on the good senator.

Conrad has nurtured his image as a “deficit hawk” for decades, but when it comes to subsidies for millionaire farmers he demands that the federal gravy keep flowing.

Earlier this year, for example, President Obama proposed cutting one type of farm subsidy (“direct payments”) for farmers earning over $500,000 a year. I suspect that about 95 percent of Americans would support that tiny nod toward fiscal sanity and deficit reduction. But not Senator Conrad, who helped shoot the proposal down. See here and here.

You Don’t Say

President Obama recently indicated that he would cut the fiscally irresponsible (yet minimally market distorting) direct payments that flow to farmers regardless of their production. An outcry from farming groups has, predictably, ensued.

Just as predictably: “A source in the administration says the proposal is being reconsidered because of the opposition it has received.