Joseph Krist

Publisher

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Hopefully, you’re reading this after an enjoyable holiday weekend. Before you do, take a minute to remember someone in your family who may have served our nation but was fortunate enough to come home. Take just a minute, and remember what they were willing to do. For you and me, even if they never knew quite who they were ultimately doing it for.  And then enjoy the country they left us in to show our appreciation.

It may also surprise you to know that it only became an official federal holiday in 1971. As a part of the process of creating the holiday, in 1966 the federal government declared Waterloo, New York, the official birthplace of Memorial Day. Waterloo—which first celebrated the day on May 5, 1866—was chosen because it hosted an annual, community-wide event, during which businesses closed and residents decorated the graves of soldiers with flowers and flags.

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BETTER HEALTH IS A CREDIT ISSUE

New research shows states that expanding Medicaid improves the health of women of childbearing age: increasing access to preventive care, reducing adverse health outcomes before, during and after pregnancies, and reducing maternal mortality rates. While more must be done, Medicaid expansion is an important means of addressing persistent racial disparities in maternal health and maternal mortality. Better health for women of childbearing age also means better health for their infants. States that have expanded Medicaid under the Affordable Care Act saw a 50% greater reduction in infant mortality than non-expansion states.

The uninsured rate for women of childbearing age is nearly twice as high in states that have not expanded Medicaid compared to those that have expanded Medicaid (16 % v. 9%). States with the highest uninsured rates for women of childbearing age are: Alabama, Alaska, Florida, Georgia, Idaho, Mississippi, Nevada, North Carolina, Oklahoma, South Carolina, Texas and Wyoming. Ten of these twelve states have not expanded Medicaid.

The research, from the Georgetown University Health Policy Institute, highlights the benefit of Medicaid expansion. Yes, expansion does result in some increased cost to the states but those increases are often more than mitigated by the significant reduction in maternal mortality as well as the lower level of expenditure associated with a healthier start in life.

For hospitals, the arguments in favor of Medicaid expansion are clear. The national rates of decline in the number of uninsured women of childbearing age from 2013-2017 were just under 9%. In states which expanded, all of the states with the exception of Florida saw rates of decline in excess of the national average. And what did all of those states have in common? They expanded Medicaid under the ACA.

THE HOSPITAL PAYMENT DEBATE

RAND Corporation researchers used data from three sources — self-insured employers, state-based all-payer claims databases, and health plans — to assess $13 billion in hospital spending in terms of hospital price levels, variation, and trends from 2015 through 2017 in 25 states. The study yielded results which highlight the many differences between individual markets making generalizations difficult. This has complicated the debate over health insurance.

The primary findings: relative prices varied twofold among states. Some states (Michigan, Pennsylvania, New York, and Kentucky) had relative prices in the range of 150 to 200 percent of Medicare rates; other states (Colorado, Montana, Wisconsin, Maine, Wyoming, and Indiana) had relative prices in the range of 250 to 300-plus percent of Medicare rates. However, eight states — Michigan, New York, Tennessee, Massachusetts, Louisiana, New Hampshire, Montana, and Maine — stand out as exceptions to this general finding, with relative prices that are roughly equal for inpatient and outpatient services.

Transparency by itself is likely insufficient to reduce hospital prices, and employers may need state or federal policy interventions to rebalance negotiating leverage between hospitals and employer health plans. Such interventions could include placing limits on payments for out-of-network hospital care or applying insurance benefit design innovations to target high prices paid to providers and allowing employers to buy into Medicare or another public option that pays providers prices based on Medicare rates.

The hospitals have real concerns around the issue of reimbursements. The data shows that a change to a single payer system would have real negative revenue repercussions for providers. The shift from private to public insurance also would produce a significant cut in hospital costs. We have yet to see robust analyses of the likely impact of a single payer system. The math regarding the issue is not straightforward. A single payer system may increase usage of services. That increased usage could replace some revenues through volume while incurring lower costs for care through reduced chronic illness demand and reduced acuity levels.

Hospitals will be central to the acceptance of any significant change in the US health insurance scheme. Hospitals were a crucial ally in the effort to pass the ACA, and they remain key to ongoing efforts to improve the 2010 health law. At present, the interests of the various hospital subgroups – rural, inner city safety net, for profit – do not converge. So a variety of different stances emerge.  More government-funded coverage could actually help safety net hospitals.  For the profit-based sector,  “A public option for us is a complete nonstarter. We are totally opposed and would fight it.” 

Whatever the result, the current environment will allow the debate to linger on well after the 2020 elections.

PENSION PROPOSAL IN ILLINOIS

This legislative session in Illinois is one of the more intriguing ones nationally as the Legislature attempts to deal with the impact of a new governor and his effect on policy. Most of the focus has been on his proposal to shift the state from a flat rate income tax to a graduated income tax and on the legalization of recreational cannabis. This has shifted attention away from other issues of import to investors. One of those issues – pensions. So it is meaningful to see what if anything legislators are willing to risk in making proposals to reduce the liability and shore up the state’s credit.

HJRCA0021 was offered earlier this year to deal with real and imagined legal barriers to real pension reform. The bill would amend the General Provisions Article of the Illinois Constitution. In a provision that specifies that membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired, limits the benefits that are not subject to diminishment or impairment to accrued and payable benefits. It also provides that nothing in the provision shall be construed to limit the power of the General Assembly to make changes to future benefit accruals or benefits not yet payable, including for existing members of any public pension or public retirement system. 

If ultimately adopted, the change would create a real basis for changing the state’s pension benefit outlook. Removing the constitutional impediment to changes (including those regarding future benefit terms for existing employees) would then eliminate a crutch which has been leaned on by both sides in this issue to explain away the failure to act. While the ability to act does not guarantee that action will occur, the change would nonetheless help to focus attention on the core issues at hand.

CARLESS IN SEATTLE

Seattle has ranked among the top four major U.S. cities in growth for five consecutive years. Since 2010, over 100,000 people have moved here– and more are on the way. Seattle–area jobs are projected to grow 28 % by 2035. This rapid growth will present some challenges, particularly when it comes to traffic and congestion. Recent experiences with the impacts (or lack thereof) of the closing of the Alaska Way viaduct have emboldened proponents of congestion pricing to encourage such fee in Seattle.

The City’s transportation department screened 11 tools based on four preliminary areas of focus (equity, climate and health, traffic congestion, and implementation). That process caused the department to identify four tools: cordon pricing, area pricing, fleet pricing, and a road usage charge. 

The department’s report on how it plans to conduct its study of congestion pricing alternatives highlights some of the difficulties in developing reliable data to present to support its plans. Data is limited and largely regional in scale, meaning fine-grained results are not yet possible. It also shows how these plans can be complicated by a desire to address not only transportation issues but larger socio economic concerns. Seattle’s program articulates a number of “social justice” goals which it is much harder to develop data on. For example, the report notes that structuring pricing to reduce the impacts on specific communities of concern, such as low-income households, can make a pricing program more equitable.

The issue is complicated and controversial enough as a simple transit issue but becomes almost unmanageable when implemented as a tool of “social justice” implementation. The City believes that 13% of workers who drive in the region would be affected by a downtown pricing program. The report devotes, for a transportation issue, a significant amount of time discussing race. Under the banner of equity issues, the report unwittingly emphasizes issues which could easily derail support for a plan. 

In the City’s own words “Implementing a pricing program is challenging: public support can be expected to rise and fall over the course of public conversation leading up to implementation, and to rise again after the public experiences the benefits of the project. Pricing policies often trigger the phenomenon known as “acceptability decreases with detail.”

The Seattle Transportation Benefit District was established in 2010, and the state authorizing legislation for transportation benefit districts provides the authority to charge vehicle tolls within the boundaries of the district. Tolls may not be imposed without the approval of a majority of the votes in the district voting on a proposition at a general or special election. This would seem to give the public an even larger role than is typical in the imposition of such a system.

PUERTO RICO ATTACKS DEBT HOLDERS AGAIN

The latest legal attempt by Puerto Rico’s Financial Oversight & Management Board (FOMB)  to claw back debt service payments on debt issued for the Employee retirement System. The actions filed by the FOMB intend to recover interest and principal from bondholders who own at least $2.5 million worth of bonds that the FOMB said the ERS was “never authorized” to issue to the public in 2008 because the issuance was not submitted to the Legislature.

The FOMB hopes to recover some $392 million in aggregate payments made to bondholders. The $2.5 million threshold for being exposed to the suit clearly establishes that the real effort is to target different classes of pari passu bondholders. It is one thing to issue multiple debt securities backed by clearly delineated sources of repayment. It is another to arbitrarily or otherwise change the rules of the game after you realize you are losing.

The Commonwealth is continuing on a path on which it acts like a bankrupt foreign country. Bankrupt not only economically but also politically. A small concentrated political class, supported by a vast employment network of local government, should know better than to play upon post-hurricane sympathy as an excuse to execute one of the most dishonorable restructuring efforts in the history of this market.

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