More Reason for Cynicism about Medicaid Expansion

More than 300,000 Virginians have something today they didn’t have last year — health insurance through Medicaid, observes Virginia Public Radio. What they don’t have is a primary care physician. Many are still seeking primary care treatment at hospital emergency rooms.

Admissions to the emergency room of Norfolk General Hospital have increased 7% this year. One hoped-for benefit of Medicaid expansion is that more patients would seek treatment outside the emergency room, one of the most expensive settings for medical treatment. Clearly, that benefit has not materialized. “There’s a whole behavior modification and teaching and education that needs to happen,” says Sentara Norfolk General President Carolyn Carpenter.

Yeah, that…. and there’s a Medicaid-patients-finding-a-doctor thing that needs to happen, too. Due to low reimbursement rates, many primary care physicians cap the number of Medicaid patients they treat.

One would think that Governor Ralph Northam, a physician, would appreciate this. But other than allowing more latitude for nurse practitioners to treat patients, I have seen no remedies proposed by Virginia’s ruling class to address the most significant of all barriers to health care. The inaction calls into question how serious people really are about expanding real health care coverage for the poor.

In retrospect, Medicaid expansion increasingly looks more like a gimmick designed to accomplish two goals: (1) generate a major new income stream for special interests in the health care sector, while (2) allowing the ruling class to pose as champions of the poor.

Virginia hospitals are now flush with Medicaid cash. An oft-touted benefit of expansion was that hospitals would reduce their losses from charity care and uncompensated care, which would allow them to… Well, it was never clear exactly what hospitals would do, but the results were implied to be socially beneficial. However, as recent news reports have highlighted at Mary Washington hospital and the University of Virginia health system, at least some hospitals have been pursuing collections as aggressively as ever. (Trust me, they aren’t the only ones.) Due to lengthy reporting delays, Virginians won’t know the impact of Medicaid expansion on hospital profitability for another couple of years, but I’ll hazard a guess — revenues and profits will surge.

Meanwhile, hospitals are helping finance Medicaid expansion (the bulk of the funds are coming from the federal government) through a tax on revenue. No word yet on how the industry is absorbing that tax. But I’ll hazard a guess — they’re passing on most of it to payers of private insurance.

Another beneficiary of Medicaid expansion is the medical insurance industry. Rather than rely upon the inefficient fee-for-service system, DMAS is outsourcing managed care programs to private insurers. Maybe those plans will provide enrollees superior access to primary care physicians, maybe they won’t. We’ll have to wait and see. But I’ll hazard a guess — emergency room visits will continue growing.

This commentary originally appeared in the September 18, 2019 edition of the online Bacon’s Rebellion.

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I-66 HOT Lanes Working Better This Year

During the Q&A at a presentation I gave in June, a questioner cited $40 tolls on the I-66 (inside the Beltway) high-occupancy toll (HOT) lanes as an example of what driving would be like if tolling were more widely used. I had to explain to the largely non-Virginia audience why occasional peak-period I-66 tolls get that high—and why this situation is unique to this particular tolled roadway. The good news is that its average tolls this year are lower than last year, and rush-hour throughput has increased.

This 15-mile stretch of I-66 was built later than the rest of that Interstate due to fierce local (Arlington County) opposition to a new freeway. The final compromise that allowed it to be built limited it to two lanes each way (very low for an urban Interstate) and required it to be HOV-only during AM and PM peak periods—the only such urban Interstate corridor in the nation.

As the DC metro area is now well along in developing a regional express toll lanes network—especially with a $3.5 billion, 21-mile project under construction to add express toll lanes (ETLs) to I-66 outside the Beltway—Virginia DOT made the sensible decision to open the inside-the-Beltway segment of I-66 to paying customers. This converted it during peak periods from HOV-only to a HOT lane system instead. But unlike the HOV policy of the emerging ETL network, which permits only HOV-3s to go free, VDOT continued the pre-existing policy of HOV-2 for I-66 inside the Beltway, but promises to change this to HOV-3 once the outside-the-Beltway ETLs open in 2022.

The unfortunate result of this is that HOV-2s take up nearly a majority of road space on the inside-the-Beltway I-66, leaving far fewer spaces available for paying customers than would like to use it during rush hours. Basic supply/demand economics results in the price during certain time segments, especially in the morning rush, to be occasionally driven to $40 or above. Tolling opponents then take that price as typical, assume that a commuter uses that corridor twice a day 5 days a week, and is forced to pay $400 a week, or $20,000 a year. That’s a great propaganda technique, but is totally bogus.

Since we have ample data showing that most of those who pay to use HOT lanes and ETLs use them only occasionally, it is far more meaningful to focus on the average toll rather than the occasional peaks. On the I-66 HOT lanes last year, the average was $8.31 in the AM and $4.43 in the PM period. VDOT tweaked the tolling algorithm late last year to maintain a somewhat lower speed target, and as a result, for the first quarter of 2019 the AM average toll dropped to $6.35 and the PM average to $4.14. As word got around about lower tolls, more people tried using the lanes as paying customers, with morning trips up 11.1 percent this year and afternoon trips up 8.6 percent. Speeds are somewhat lower, but more people can use the lanes to save time, compared with alternative routes. There are still some tolls above $40, though, with 1,072 such trips in first-quarter 2019. With 13 weeks of 5 workdays each, that amounts to only 16.5 such high-cost trips per day. That’s how un-typical such extreme tolls are.

Incidentally, more space may be opened up for paying vehicles in the I-66 lanes, which would further reduce average toll levels. As of Sept. 30, the only “clean” vehicles allowed in HOV/HOT lanes without meeting the HOV occupancy requirement will be plug-in hybrids and all-electric vehicles; all others with clean fuel license plates will have to either pay the toll or meet the occupancy requirement.

This commentary originally appeared in the September 10, 2019 edition of Surface Transportation News.

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Labor Force Participation Decline Might Be A Telling Story

The jobless rate is at historic lows and certainly is an important economic barometer.

But looking at the labor force participation rate might be a more telling story.

That rate, which calculates the number of people employed or unemployed looking for work as a percentage of the total adult working-age population, has been steadily falling since 2000.

And based on the latest participation rate data, one has to wonder where has all the labor gone?

The labor participation rate is important because it is a broader measure than the unemployment rate in identifying the workers available to produce goods and services in an economy. In other words, it points to the potential of all productive workers in a society.

In addition, because overall economic growth is driven by increases in productivity and the labor force, the labor force participation rate is a driver of long-term economic growth.

The labor force participation rate also can impact wages.

A low unemployment rate is historically associated with rising wages because a reduced supply of available workers causes firms to raise wages to attract qualified workers. If the unemployment rate is low and the participation rate is rising, however, then more people are coming into the labor force to apply for the job openings and this new supply of workers can hold back wage growth.

The labor participation rate rose from 58.6% in January 1948 to a peak of 67.3% in the first three months of 2000 as baby boomers and more women entered the labor force.

Higher education levels, which are associated with increased participation in the economy, also rose over this period.

The percentage of people 25 years and older who completed high school or college rose from 33.1% in 1947 to 84.1% in 2000, according to U.S. Census Bureau.

Since the peak in 2000, however, participation rates have generally decreased.

The pace of decline accelerated after the Great Recession and hit a 38-year low of 62.4% in September 2015.

The declining labor force participation rate contributed to the slow economic recovery and tepid growth since the Great Recession.

Labor force participation stabilized in 2016 and the rate now stands at 63%, according to the latest data from July.

With these lower participation rates, wage growth has only recently begun to accelerate.
Many researchers have considered the reason behind the decline in participation and point to demographics as the main reason driver.

Economist Alan Krueger found that 65% of the decrease in the labor participation rate from 1997 through 2017 was caused by an aging population, according to a 2017 article published in the Brookings Papers on Economic Activity.

Partially due to the continued aging of the population, the U.S. Bureau of Labor Statistics projects the labor force participation rate will decline further to 61% in 2026.

Low labor force participation implies that some of the labor resources in our economy are not being fully utilized. Those individuals could become productive members of the economy if the barriers they face are removed.

Participation rates vary across the country and the state.

When considering the prime-age labor force, 81.6% of the civilian population ages 25 through 54 were participating in the labor force in 2017, based on the American Community Survey estimates. During the same year, the participation rate was 83.2% in Virginia and 83.5% in the Richmond metro area.

The participation rate was slightly higher, at 86.8%, in Northern Virginia, presumably because of the higher education level of its population as well as the abundant opportunities.

In contrast, the participation rate of the prime-age labor force was 68.8% in Southside Virginia in 2017 and 69.7% in the southwestern part of the state where education levels are lower and job opportunities less plentiful.

This commentary originally appeared in the September 1 issue of The Richmond Times-Dispatch.

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Remembering Mike Thompson

The Thomas Jefferson Institute has lost its Founder.

Mike Thompson, Founder, Chairman and Past President of the Thomas Jefferson Institute, passed away at Johns Hopkins the evening of September 7, surrounded by those he always knew were the most important people in his life — his family.

Mike was diagnosed with leukemia in October, 2018 and underwent a variety of treatments including a bone marrow transplant. Ironically, at his death, there were no longer any cancer cells in his bloodstream. But complications took their toll.

A visitation will be held from 2:00 pm to 4:00 pm and from 6:00 pm to 8:00 pm on Thursday, September 19th at the Fairfax Memorial Funeral Home, and the memorial service and reception will be held at 3:00 pm on Friday, September 20 at St. Andrews Episcopal Church. In lieu of flowers, donations can be made in Mike’s name to the Leukemia and Lymphoma Society.

Mike Thompson got his start in youth politics, as a leader in the “Youth for Goldwater” movement, later joining the National Board of Young Americans for Freedom and leading the Student Committee for Victory in Vietnam. A passion for youth involvement continued throughout his life, especially as vice chairman of The Fund for American Studies which teaches the principles of limited government and free-market economics to students and young professionals in America and, indeed, throughout the world.

Nothing thrilled Mike more than to see a high school or college student actively engaged in conservative politics and advocacy.

To him, it was the hope of a better future.

Mike started and built his own company — the Thompson Creative Marketing Group — which helped advance the conservative cause by marketing ideas and candidates throughout the country. His vocation echoed his leadership in the Virginia Republican Party, and he was named by Campaigns and Elections magazine as one of the 30 most influential Republicans in Virginia.

His advocacy of the free market system also found him as chairman of the Virginia Leadership Council, the state’s Board of Directors for the National Federation of Independent Business (NFIB), the nation’s largest small business organization.

Active in his community, service on several Fairfax County commissions and task forces, and a three-time president of the Springfield District Council (an organization representing over 200 homeowner associations), the man was tireless – as anyone who received his emails time-stampled at two o’clock in the morning already knows.

Most men, when they retire …. retire. Instead, Mike launched the Thomas Jefferson Institute for Public Policy, where he continued the battle to make a difference by developing Virginia-oriented public policy solutions based on free markets, limited government and individual responsibility.

The breadth of Mike Thompson’s ideas and interests was stunning. The lives he touched and inspired are countless. And the stories he could tell were without limit.

Mike is survived by his wife Katherine, daughter Liza Graves, son Michael Junior, and five grandchildren.

All of us at the Thomas Jefferson Institute are profoundly saddened at the passing of our friend and Founder, Michael W. Thompson.

But we take comfort in remembering the words of Walter Lippman: “The final test of a leader is that he leaves behind him in other men the conviction and the will to carry on.”

From Youth for Goldwater to the Thomas Jefferson Institute, Mike Thompson left hundreds, if not thousands, with those same convictions and the same will to carry on.

May he Rest In Peace.

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Voters Should Say “No” to New Carbon Tax

Virginia should not join the Regional Greenhouse Gas Initiative. 

Virginia’s participation in the Regional Greenhouse Gas Initiative (RGGI) carbon tax is now fully authorized under a new state regulation, and the deadline to appeal that regulation has passed with no appeal filed.  Only the one-vote Republican margin in the two General Assembly chambers keeps Virginia out of RGGI at this time.

The text of the regulation is here. With full participation in RGGI a key Democratic campaign promise in the November elections, the Thomas Jefferson Institute for Public Policy has prepared a summary document providing additional information on just what that entails and how the RGGI process might work in Virginia.  You can read or download that here.

This is too important an issue to be decided by regulation. The Virginia General Assembly has acted correctly in voting on RGGI membership (voting no, so far).  It will be equally within the legislature’s purview to vote yes in 2020 for Virginia to move forward.  

Voting yes would be a mistake.  The stated goal of RGGI, reduced carbon emissions from electrical generation plants, is already being achieved.  There is little or no marginal benefit to Virginia from RGGI membership and the carbon taxes imposed will harm the economy.  It will just be one more General Assembly-initiated increase in homeowner and business electric bills. 

In fact, RGGI’s carbon taxes will be only one way a new Democratic legislature might boost your energy costs.  Probably the best reason to ignore RGGI is that the environmental activists have moved beyond it, with bigger plans and higher consumer costs in the making. A 2019 bill labeled “Clean Energy Mandates” represented Virginia’s version of the various Green New Deal proposals around the country, and would have prohibited:

  • All new fossil-fuel generation in Virginia (natural gas as well as coal)
  • New fossil fuel import or export facilities in Virginia (a coal exporting state)
  • Fossil fuel exploration or drilling in Virginia

The bill would have required that 80 percent of electricity generation be from clean sources by 2028 and 100 percent by 2036, a far more aggressive goal than RGGI.  Similar promises are appearing in 2019 Democratic campaign literature, here in Virginia and around the country. Some version of the 2019 clean energy bill will likely pass in 2020 if the legislature changes hands.  

New Jersey had been a RGGI member, dropped out, and is now back in as of June, with its stated goal being 100% carbon-free electricity by 2050.  Here is New Jersey Governor Phil Murphy’s announcement on returning to RGGI last month, decrying all the lost carbon tax revenue since former Governor Chris Christie withdrew from RGGI.  Yes, RGGI is about carbon, but it is also about taxes. 

Virginia is part of an interstate wholesale electricity marketplace, PJM Interconnection LLC, which does not overlap with the RGGI states.  RGGI will not force Virginia utilities to buy power only from other RGGI states, and in fact the non-RGGI states will often be the source. The carbon emissions may merely migrate to those other states, a process called “leakage.”

The Virginia Manufacturers Association and the Virginia Coal and Energy Alliance had opposed the regulation during its adoption and filed notices of intent to appeal it to the Richmond Circuit Court. Both groups confirmed in late July that no appeals would be filed after all.  The next signal will come from the voters. 

Virginia coal and natural gas-fired power plants are the target of the regulation, which seeks to rapidly reduce the reliance of Virginia’s electricity generation plants on fossil fuels.  Virginia’s participation in RGGI starts with a cap of 28 million tons of CO2 emissions from the covered facilities, to be reduced by 30 percent over ten years. All electric customers large and small would feel the higher prices which some (but not all) expect RGGI to cause

The most recent RGGI auction was held June 5, with a price for CO2 allowances set at $5.62 per ton, up slightly from the previous auction and the highest price since $7.50 at the end of 2012.  Virginia’s regulation calls for the revenue from the purchase of allowances to return to utilities and eventually back to ratepayers, but another new provision in the state budget designates it as state general fund revenue.  Most other RGGI states spend the money on various programs, cementing its status as a carbon tax. 

Many in the Virginia General Assembly have similar plans.  Both the House and Senate considered and rejected 2019 bills to take the funds away from ratepayers and spend them on environmental priorities.  Those bills will also return and likely pass with a Democratic takeover. 

The General Assembly votes which inserted and then sustained the RGGI roadblock in the budget were straight party line, as were the votes on two other, vetoed bills that would have prevented any participation in RGGI without direct legislative approval.  Election rhetoric from both sides since indicates no softening of the positions. 

Virginia voters should tell legislative candidates that Virginia should not join RGGI. 

  • The carbon reduction goals are being achieved without it, in response to market demand. If carbon emission is a problem, the problem is shrinking in the electricity industry. 
  • Because not all the PJM Interconnect LLC states are also part of RGGI, carbon emissions will just move from Virginia to other nearby states (leakage).
  • The carbon tax will be paid by consumers, raising the cost of electricity.
  • Capital costs for early retirement of fossil-fuel plants and their replacement with non-carbon plants will be paid by consumers, raising the cost of electricity. 
  • The carbon-reduction goals of environmental activists are far more stringent than the reductions under RGGI. Their goal in joining RGGI is the tax revenue. 


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