NCPA - National Center for Policy Analysis
NCPA - National Center for Policy Analysis
Barry is a Senior Economist with the National Center for Policy Analysis, one of the most influential think tanks in America today.

The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. The NCPA's goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector. Topics include reforms in health care, taxes, Social Security, welfare, criminal justice, education and environmental regulation.

NCPA Motto - Making Ideas Change the World - reflects the belief that ideas have enormous power to change the course of human events. The NCPA seeks to unleash the power of ideas for positive change by identifying, encouraging, and aggressively marketing the best scholarly research.

Daily Policy Digest

Provided courtesy of: NCPA

Daily Policy Digest

Has the ACA Slowed Health Care Spending Growth?
23 Jul 2014 07:00:58 CDT -

Reforms in the Affordable Care Act are likely to increase health care demand and spending, write Andrew J. Rettenmaier, Thomas R. Saving and Zijun Wang of the Private Enterprise Research Center in an issue brief for the National Center for Policy Analysis.

The Centers for Medicare and Medicaid Services released data in January 2014 indicating that national health spending expenditures declined from 2009 to 2012, dropping from 17.4 percent of GDP to 17.2 percent of GDP. Pundits cited the news as evidence that the Affordable Care Act was slowing health care growth. However, the slowdown is one of several recent periods in which health care spending as a share of GDP has been relatively stable.

Additionally, an examination of health care spending as a share of GDP reveals that spending rose from 1960 to 1993, but began a stair-step rise thereafter, leveling off then rising again. So, the authors ask, are we in a permanent plateau or will spending move upward again? More recent data from the Bureau of Economic Analysis indicates that the recent 2009 to 2012 slowdown in health spending may, in fact, be reversing:

  • Real per capita GDP growth from the first quarter of 2013 to the first quarter of 2014 was 0.8 percent, but real per capita health care spending grew at 2.2 percent.
  • Preliminary estimates indicate that health care spending as a share of GDP will increase from 17.2 percent in 2012 to 17.4 percent in the first quarter of 2014.

The authors also looked to employment growth within the health care sector, finding that health care employment has continued to grow faster than the economy as a whole:

  • From 1990 to the present, health sector employment grew at 2.5 percent per year, the highest rate among all industries.
  • Health sector employment grew 3.3 percent during the Great Recession, while total nonfarm employment fell 5.4 percent from the peak to the trough of the recession. Employment in the construction and manufacturing industries fell a respective 19.8 percent and 14.7 percent.

Additionally, stock prices are a reflection of investors' expectations of future profitability, and the market is very sensitive to industry-specific events. Again, health care sector stocks have performed better, and have been less volatile, than stocks within the broader market:

  • From January 1998 to the recession trough of June 30, 2009, the monthly total return in the health care sector was more than twice the average return of stocks in the S&P 500.
  • The health care sector yielded monthly returns of 1.6 percent after the recession, while the S&P 500 monthly return was 1.4 percent.

These observations indicate that future health care spending is likely to outpace GDP growth.

Source: Andrew J. Rettenmaier, Thomas R. Saving and Zijun Wang, "Has the Affordable Care Act Slowed the Growth of Health Care Spending?" National Center for Policy Analysis, July 2014. 

For more on Health Issues:

Court of Appeals Strikes Down Obamacare Subsidies
23 Jul 2014 07:00:57 CDT -

In a long-awaited decision, the D.C. Circuit Court of Appeals struck down an Internal Revenue Service Regulation granting subsidies to low-income purchasers of insurance on the federal exchange, the Wall Street Journal reports.

The text of the Affordable Care Act grants subsidies to qualifying consumers who purchase insurance from exchanges "established by the State." But, contrary to that language, the Obama administration made health insurance subsidies available to all low- and middle-income purchasers, whether they purchased insurance from exchanges established by a state or established by the federal government.

The plaintiffs -- four individuals and three employers -- challenged the administration's decision to give subsidies to all enrollees, arguing that the law only provided for subsidies when insurance was purchased on state exchanges. The D.C. Circuit agreed, ruling plainly that "a federal Exchange is not an 'Exchange established by the State'" and deeming the IRS regulation an impermissible reading of the Affordable Care Act.

The federal government runs some or all of the insurance exchanges in 36 states. Of the 5 million Americans who have selected insurance plans through federal health exchanges, the majority of them have received subsidies. On average, the subsidies reduce their monthly premiums to $82, 76 percent less than the full cost of the premium.

The ruling has implications beyond mere inappropriate receipt of subsidies. The ACA also forces penalties on employers who fail to offer affordable coverage when those employees receive federal subsidies on an exchange.

The Obama administration plans to ask for a rehearing of the case with all judges on the D.C. Circuit court participating.

Soon after the decision, the Fourth Circuit Court of Appeals issued its own decision in a separate case upholding the IRS rule.

NCPA Senior Fellow John Graham responded to the decision on the Health Policy Blog.

Source: Brent Kendall, "Court Deals Blow to Health-Law Subsidies on Federal Exchanges," Wall Street Journal, July 22, 2014.

For more on Health Issues:

Tesla Prepared to Fight Long Battle against Car Dealers
23 Jul 2014 07:00:56 CDT -

Tesla Motors has already begun to revolutionize the automotive world with its innovative electric vehicles, explains Daniel A. Crane of the Cato Institute, but it is facing challenges from the car dealers' lobby.

Indeed, Tesla is unusual in that it does not utilize car dealer networks but instead sells its cars directly to consumers, through its own showrooms and over the Internet. Car dealers are using old laws, and seeking new ones, that limit direct distribution sales to fight the company. So far, the lobby has been successful in Texas, South Carolina and New Jersey.

Why are there laws restricting direct distribution in the first place?

  • From the 1930s to the 1950s, car dealers claimed that the few large car companies that existed were imposing harsh contract terms on dealers.
  • They sought legislative fixes in all 50 states, including passing some laws prohibiting direct distribution -- the concern being that car dealers might begin distributing their own vehicles, competing with dealers and slashing their prices.

The Internet has the potential to change the car distribution business:

  • A 2009 report from an economist in the Justice Department suggests consumers could save up to 8.6 percent of a car's cost through direct distribution.
  • In Brazil, where online car purchases are allowed, customers can easily customize their purchases and often receive their cars in a single week.

When Ford Motor Company tried to sell used cars over the Internet, Texas lawmakers forbade the practice, passing a 1999 law that made serving as an automobile dealer without a license illegal and made it illegal for manufacturers to obtain licenses.

Dealers claim to be fighting Tesla to protect consumers from manufacturer price gouging, to ensure that customers are served adequately and to make sure that consumers are safe. However:

  • A manufacturer with market power will extract a profit regardless of whether it sells to dealers or directly to consumers. In fact, outsourcing distribution to dealers, writes Crane, could actually increase prices.
  • The idea that local dealers are more likely to be committed to satisfying customers ignores the fact that Tesla, and other manufacturers, have just as strong an interest in satisfying their consumers, as they invest billions of dollars in their technologies.
  • Dealers point to recent GM recalls to support dealer distribution models. Yet, the failure of GM to issue a recall took place while GM was distributing to dealer networks, says Crane. Furthermore, both dealers and manufacturers can service recalls -- it is not the case that recalls produce only income for dealers but costs to manufacturers.

Direct distribution is efficient, and manufacturers should be allowed the choice to distribute their vehicles directly to their consumers. Car dealers can protect their own interests through contract negotiations -- not through protectionist legislation, writes Crane.

Source: Daniel A. Crane, "Tesla And The Car Dealers' Lobby," Cato Institute, Summer 2014

For more on Economic Issues:

Large Retailers Provide Higher Wages, More Opportunities than Small Retailers
23 Jul 2014 07:00:55 CDT -

Big-box retailers have been criticized for offering low wages, and many have been concerned that minimum wage retail jobs are growing and replacing American manufacturing work. But a report from Brianna Cardiff-Hicks, Francine Lafontaine and Kathryn Shaw published by the National Bureau of Economic Research shows that the growth of large chains and retailers raises wage rates relative to smaller, mom-and-pop establishments.

The number of "modern retailers" (large firms and chains) in the United States is growing -- a positive development for retail employees:

  • As firms grow in size, wages increase, even after controlling for worker quality and work conditions.
  • Large firms (those with 1,000 or more workers) pay high-school-educated employees 15 percent more than do small firms (those with less than 10 employees). They pay those with at least some college education 25 percent more than small firms.
  • At establishments with 500 or more workers, pay for high-school-educated employees is 26 percent higher than at establishments with less than 10 workers. Employees with at least some college education receive pay that is 36 percent higher at large establishments than at small ones.

That pay premium decreases, though is still present, after controlling for worker quality, indicating that higher quality workers are funneled into larger firms and larger establishments:

  • High-school-educated workers and workers with some college education moving from a small firm to a large firm see an 11 percent pay increase and a 9 percent pay increase, respectively.
  • When moving from a small establishment to a large one, pay rises by 19 percent for high-school-educated workers and by 28 percent for employees with some college education.

Large retailers also offer more opportunities for promotions to supervisory or managerial positions than do mom-and-pop stores, and those promotions also bring higher wages.  Across ability levels, high-school-educated managers earn 23 percent more than non-managers, while college-educated managers earn 21 percent more than non-managers.

The authors write that the results "contradict the image of the retail sector as one comprised of the lowest paying jobs in the economy." Modern retail chains have increased retail wages and given employees more opportunities for promotion (and subsequent wage growth).

Source:  Brianna Cardiff-Hicks, Francine Lafontaine and Kathryn Shaw, "Do Large Modern Retailers Pay Premium Wages?" National Bureau of Economic Research, July 2014.

For more on Economic Issues:

Non-Compete Agreements Limit Growth
23 Jul 2014 07:00:54 CDT -

New companies are responsible for the majority of net new job creation, but non-compete agreements can keep individuals from moving in and out of jobs, explain Jason Wiens and Chris Jackson in a report from the Kauffman Foundation.

Some companies require their employees to sign non-compete agreements as a condition of their employment, agreements that generally restrict the ability of that employee to work for a competitor for a specific amount of time or within a specific geographic area. The enforceability of these clauses depend upon state law, as some states (such as California) rarely hold employees to the restrictions, while other states (like Florida) strictly enforce them.

Non-compete provisions are important for employers, who seek to protect their ideas, talent and trade secrets. On the other hand, the clauses restrict labor mobility, which in turn makes the labor market less dynamic, hindering growth and the development of new businesses.

According to the report:

  • Workers in states that strictly enforce non-compete agreements report having lower compensation in their next job.
  • Firms with non-compete agreements in strictly enforcing states have lower rates of return on capital investment than in states that do not enforce the provisions.
  • Firms are more willing to pursue riskier research and development strategies, as well as invest in more worker training for employees, when states strictly enforce non-compete agreements.
  • Workers are less likely to switch jobs when non-compete agreements are stringently enforced.
  • Wealthier individuals may be less affected by these provisions than other individuals as they wait for the restrictions to expire.

Rather than use non-compete agreements, Wiens and Jackson write that non-disclosure and confidentiality agreements can provide employers with trade secret protections without stifling innovation and growth.

Source: Jason Wiens and Chris Jackson, "Rethinking Non-Competes: Unlock Talent to Seed Growth," Kauffman Foundation, July 21, 2014. 

For more on Economic Issues:

Can State Medical Boards Keep Competitors Out?
22 Jul 2014 07:00:53 CDT -

Modern Healthcare reports that the U.S. Supreme Court will soon address an important question for the medical community: Can state boards of medicine and dentistry make scope-of-practice determinations? 

State medical and dental boards regulate the practice of their respective industries. But as Devon Herrick, senior fellow at the NCPA, explains, members of these boards are usually doctors and dentists -- the very people being regulated by the boards' rules. As such, the boards can produce self-interested regulations.

The Supreme Court case arises out of North Carolina, whose state dental board began issuing cease-and-desist letters to hygienists (not dentists) who were whitening consumers' teeth at spas and mall kiosks. The letters accused the recipients of the illegal practice of dentistry. Dentists offering teeth whitening in their offices, Herrick explains, often supervise the whitening work, which is done by technicians and hygienists. "Allowing those same dental technicians and hygienists to perform the work without the supervision of a dentist undercuts dentists' prices and reduces their profits," Herrick writes.

In response, the Federal Trade Commission accused North Carolina's state dental board of keeping competitors from the teeth-whitening market, insisting that scope-of-practice decisions that affect those making the decisions should be supervised by the state.

Those in the medical community have come out in support of the state boards, insisting that public health should trump antitrust law and claiming that the FTC does not have authority over state medical boards.

While medical licensure is intended to protect the public, Herrick notes that economists often argue that licensure cuts down on supply and limits competition.

Source: Joe Carlson, "Should state medical boards be allowed to set scope-of-practice? Supreme Court will decide," Modern Healthcare, July 15, 2014; Devon Herrick, "Should Doctors and Dentists Regulate Their Competitors?" Health Policy Blog, National Center for Policy Analysis, July 21, 2014.

For more on Health Issues:

Health Policy Digest

Provided courtesy of: NCPA

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