Small Biz Health Care Daily: More from Ryan

Most politicians do not grasp what drives health care costs higher. But Congressman Paul Ryan (R-WI) gets it.

According to a Fortune report: "'The problem with both Medicare and private plans is the third-party-payer system,' says Ryan. 'Consumers, spending their own money, will drive down prices.'"

Absolutely correct!

Take note, however, that ObamaCare would accomplish the exact opposite, i.e., expanding third-party payments. That's a recipe for accelerating costs into the future.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: Ryan on ObamaCare

In case you have not read it, The Wall Street Journal does the right thing today by publishing the remarks of U.S. Rep. Paul Ryan (R-WI) from the President’s health care summit. Ryan offered something that was otherwise largely missing – sound, realistic economic and policy analysis.

Two summary points worth noting here:

• Since the Congressional Budget Office can't score your bill, because it doesn't have sufficient detail, but it tracks very similar to the Senate bill, I want to unpack the Senate score a little bit. And if you take a look at the CBO analysis—analysis from your chief actuary—I think it's very revealing. This bill does not control costs. This bill does not reduce deficits. Instead, this bill adds a new health-care entitlement at a time when we have no idea how to pay for the entitlements we already have.

• And so when you take a look at all of this; when you strip out the double-counting and what I would call these gimmicks, the full 10-year cost of the bill has a $460 billion deficit. The second 10-year cost of this bill has a $1.4 trillion deficit. . . . [P]robably the most cynical gimmick in this bill is something that we all probably agree on. We don't think we should cut doctors [annual federal reimbursements] 21 percent next year. We've stopped those cuts from occurring every year for the last seven years. We all call this, here in Washington, the doc fix. Well, the doc fix, according to your numbers, costs $371 billion.

In an accompanying editorial, The Wall Street Journal noted: “The President was (miraculously) struck dumb by Mr. Ryan’s critique…” The Journal also correctly pointed out that when the President invokes the authority of CBO, he “misses the reality that if you feed the agency phony premises, you are going to get phony results at the other end.”

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: More on Obama and HSAs

As noted in another entry on this blog, during his health care summit, President Obama was not exactly positive on the role of health savings accounts (HSAs) in health care reform.

In a follow up letter to congressional leaders, however, the President wrote the following:

Senator Barrasso raised a suggestion that we expand Health Savings Accounts (HSAs). I know many Republicans believe that HSAs, when used in conjunction with high-deductible health plans, are a good vehicle to encourage more cost-consciousness in consumers’ use of health care services. I believe that high-deductible health plans could be offered in the exchange under my proposal, and I’m open to including language to ensure that is clear. This could help to encourage more people to take advantage of HSAs.

Well, that at least provides some hope. But the proof will be in the actual wording of whatever legislation is put forward. After all, one can talk nicely about HSAs, but increased regulations and mandates, and various tax changes, would undermine the effectiveness of HSAs in the real world.

In the end, the President’s big government health care agenda stands in stark and direct opposition to the market-led reforms reflected in HSAs.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Small Biz Health Care Daily: Solutions at the Health Summit?

OK, so what exactly was the point of President Obama's televised health care policy event on February 25? Was anything really accomplished for small businesses?

At the start, the President urged congressional attendees to not let the event descend into "political theater." But the entire summit was nothing more than that from its original proposal - indeed, a glaring stab at political theater...

Read the rest of his SBE Council Cybercolumn by chief economist Raymond J. Keating here.

Energy Cost Index 2010

The Small Business & Entrepreneurship Council (SBE Council) released the "Energy Cost Index 2010," which ranks the 50 states and District of Columbia according to key energy costs. This is the second annual "Energy Cost Index 2010" report.


SBE Council President & CEO Karen Kerrigan said: "Too often, our elected officials choose to ignore the reality that politics affects energy costs for consumers and small businesses. They should consider where their state ranks, and examine how policy can be changed to help bring down energy costs."

SBE Council's "Energy Cost Index 2010" looks at two major energy costs affecting small businesses, individuals and families: 1) the price of regular gasoline at the pump, and 2) the cost of electricity (average revenue per kilowatthour). Each are calculated as indices and combined into one index.

At the top - or the lowest cost states - are: 1) Wyoming, 2) Kentucky, 3t) Missouri, 3t) Oklahoma, 5) Idaho, 6) West Virginia, 7) Louisiana, 8) North Dakota, 9) Iowa, 10t) Nebraska, 10t) South Dakota, and 10t) Utah.

At the other end are the highest cost states (including the District of Columbia): 42t) District of Columbia, 42t) Rhode Island, 44) New Jersey, 45) California, 46) New Hampshire, 47) Massachusetts, 48) New York, 49) Alaska, 50) Connecticut, and 51) Hawaii. The full rankings follow at the end of this release.

Raymond J. Keating, SBE Council chief economist and author of the report, observed: "While other factors certainly come into play, governmental actions explain part of the difference in energy prices from state to state. Quite simply, higher taxes, increased regulation and more mandates on the energy front translate into higher energy costs. It's straightforward economics that should not be ignored for the sake of political pandering."

Read the "Energy Cost Index 2010" here.