The dearth of media coverage regarding the federal takeover of the federally funded student loan program (i.e. Sallie Mae) and the elimination of private lending via the Federal Family Education Loan (FFEL) program, is astounding. Americans were caught off-guard, when the political debate seemed to be about healthcare. After the fact, most assumed it was Washington padding the bill to make the healthcare numbers look more favorable.
With the government now the only lender to students, do you believe tuition increases will be permitted to continue unabated? "The National Association of Independent Colleges and Universities (NAICU), says...the average annual increase in tuition and fees has been 6 percent over the last 10 years... Do the math and you'll see that an average annual increase of 6% leads to an 80% rise in tuition costs over just one decade!" [Money and Markets and Federal Reserve Bank of St. Louis]
Our government is already in hoc up to its proverbial eyeballs to foreign debtors and in danger of losing its triple AAA credit rating. Why would it choose to take on more long-term debt, especially with student loan default rates reaching a nine year high of 6.5%? Defaults typically increase in tough economic times; consider the last recession, in 1989, when default rates reached 22%. Given that less foreign creditors are showing up at Treasury Department auctions, and the Federal Reserve is now monetizing the debt (buying unsold Treasuries at auction) - Why would the government choose to become the sole provider of funds for federal loans [Stafford and PLUS] at this time?
With money tight in the public sector and credit tight in the private sector, wouldn't it make better sense to reform the interest subsidy and loan guarantee process to guarantee more loans for less money ( paying only on the unrecoverable amount of the defaulted loans), Rather than tie up money directly laying out the entire sum of the loan? After all, we do not have a sovereign wealth fund with money lying around to invest, as some countries do.
Given that all federal student loans will be subject to and administered by the Department of Education, which is funded at Congress' discretion, and given this Congress' track record for deal making - do you believe that these will continue to be distributed without favoritism to all those in need? As money gets tighter, will some states receive preferential treatment? Will the alma maters of certain politicians receive favoritism? Will certain degree programs receive preference? Where will osteopathic medical schools fall in this mix? Will physicians receive less favorable terms going forward if they are training in specialties or geographic areas which are not deemed shortage areas? What happens when the government decides to apply a Sustainable Growth Rate (SGR) formula to tuitions because there is not enough money to go around?
Given the current trends in Washington to "never let a crisis go to waste" - was this good economics, concern for students or control?
I invite your comments -
Wednesday, March 31, 2010
Tuesday, March 23, 2010
The Real Arithmetic of Health Reform
Below are excerpts from a former director of the CBO who lays out the math in a NYTimes Op-Ed:
THE REAL ARITHMETIC OF HEALTH REFORM
"On Thursday, the Congressional Budget Office reported that the latest health care reform legislation would, over the next 10 years, cost about $950 billion, but it would also lower federal deficits by $138 billion. In other words, a bill that would set up two new entitlement spending programs — health insurance subsidies and long-term health care benefits — would actually improve the nation’s bottom line. Could this really be true? [Not according to Douglas Holtz-Eakin, former director of the Congressional Budget Office (CBO) and president of the American Action Forum.]
How can the budget office give a green light to a bill that commits the federal government to spending nearly $1 trillion more over the next 10 years? The answer, unfortunately, is that the budget office is required to take written legislation at face value and not second-guess the plausibility of what it is handed. So fantasy in, fantasy out.
In reality, if you strip out all the gimmicks and budgetary games and rework the calculus, a wholly different picture emerges:
The health care reform legislation would raise, not lower, federal deficits by $562 billion," says Holtz-Eakin.
"...The bill front-loads revenues and backloads spending...(meaning) the taxes and fees it calls for are set to begin immediately, but its new subsidies would be deferred so that the first 10 years of revenue would be used to pay for only 6 years of spending."
"...To operate the new programs over the first 10 years, future Congresses would need to vote for $114 billion in additional annual spending, but this so-called discretionary spending is excluded from the CBO's tabulation."
"...In perhaps the most amazing bit of unrealistic accounting, the legislation proposes to trim $463 billion from Medicare spending and use it to finance insurance subsidies, but Medicare is already bleeding red ink and the health care bill has no reforms that would enable the program to operate more cheaply in the future..."
"The bottom line is that Congress would spend a lot more; steal funds from education, Social Security and long-term care to cover the gap; and promise that future Congresses will make up for it by taxing more and spending less," says Holtz-Eakin.
Excerpted from: Douglas Holtz-Eakin, "The Real Arithmetic of Health Care Reform," New York Times, March 20, 2010.
For full text of article: http://www.nytimes.com/2010/03/21/opinion/21holtz-eakin.html
THE REAL ARITHMETIC OF HEALTH REFORM
"On Thursday, the Congressional Budget Office reported that the latest health care reform legislation would, over the next 10 years, cost about $950 billion, but it would also lower federal deficits by $138 billion. In other words, a bill that would set up two new entitlement spending programs — health insurance subsidies and long-term health care benefits — would actually improve the nation’s bottom line. Could this really be true? [Not according to Douglas Holtz-Eakin, former director of the Congressional Budget Office (CBO) and president of the American Action Forum.]
How can the budget office give a green light to a bill that commits the federal government to spending nearly $1 trillion more over the next 10 years? The answer, unfortunately, is that the budget office is required to take written legislation at face value and not second-guess the plausibility of what it is handed. So fantasy in, fantasy out.
In reality, if you strip out all the gimmicks and budgetary games and rework the calculus, a wholly different picture emerges:
The health care reform legislation would raise, not lower, federal deficits by $562 billion," says Holtz-Eakin.
"...The bill front-loads revenues and backloads spending...(meaning) the taxes and fees it calls for are set to begin immediately, but its new subsidies would be deferred so that the first 10 years of revenue would be used to pay for only 6 years of spending."
"...To operate the new programs over the first 10 years, future Congresses would need to vote for $114 billion in additional annual spending, but this so-called discretionary spending is excluded from the CBO's tabulation."
"...In perhaps the most amazing bit of unrealistic accounting, the legislation proposes to trim $463 billion from Medicare spending and use it to finance insurance subsidies, but Medicare is already bleeding red ink and the health care bill has no reforms that would enable the program to operate more cheaply in the future..."
"The bottom line is that Congress would spend a lot more; steal funds from education, Social Security and long-term care to cover the gap; and promise that future Congresses will make up for it by taxing more and spending less," says Holtz-Eakin.
Excerpted from: Douglas Holtz-Eakin, "The Real Arithmetic of Health Care Reform," New York Times, March 20, 2010.
For full text of article: http://www.nytimes.com/2010/03/21/opinion/21holtz-eakin.html
Monday, March 22, 2010
House Passes Sentate Health Bill
Last evening the House passed the Senate's health bill, H.R. 3590, the Patient Protection and Affordable Care Act. Over 38 states are now stating they are in process and will file suit regarding the procedures and processes, as well as substance and constitutionality issues once the bill is signed into law. This law, along with H.R. 4872, the Health Care and Education Affordability Reconciliation Act which follows, will greatly expand Medicaid. Unlike Medicare, Medicaid requires states to chip in a percentage of the costs as well as administer the program. As mentioned in the January 4th posting, 43 states are facing financial deficits. Not every state was fortunate enough to get the nearly $600 million each in supplemental Medicaid deals to which Vermont and Massachusetts were privy, let alone the cornhusker kickback that Nebraska did which covered the state's required Medicaid contributions in perpetuity. (This provision for Nebraska will supposedly be eliminated in the yet to be passed by the Senate reconciliation bill.)
Last Thursday, Arizona's new budget signed by the governor dropped coverage for childless adults and the child health insurance program (CHIP) instate, leaving 357,000 Arizonans without coverage. The governor stated the "budget is a vivid reflection of how the fiscal crisis affecting state governments is cutting deeply into healthcare."
Politicians may choose to ignore the will of the people and pass legislation, but ultimately someone must pay for it. Given the present economic crisis, tax revenues are falling for both state and federal governments. It seems Washington has forgotten the fiscal realities of those outside of the Beltway. If the checks and balances built into our Constitution do not cause this legislation to be rethought, the financial realities will.
Last Thursday, Arizona's new budget signed by the governor dropped coverage for childless adults and the child health insurance program (CHIP) instate, leaving 357,000 Arizonans without coverage. The governor stated the "budget is a vivid reflection of how the fiscal crisis affecting state governments is cutting deeply into healthcare."
Politicians may choose to ignore the will of the people and pass legislation, but ultimately someone must pay for it. Given the present economic crisis, tax revenues are falling for both state and federal governments. It seems Washington has forgotten the fiscal realities of those outside of the Beltway. If the checks and balances built into our Constitution do not cause this legislation to be rethought, the financial realities will.
Thursday, March 18, 2010
CBO Report Released Today on Cost of ObamaCare is Incomplete
The CBO Report is out on ObamaCare [H.R. 4872, the Reconciliation Act of 2010 combined with H.R. 3590, the Patient Protection and Affordable Care Act (PPACA), as passed by the Senate], stating that it will cost $940 billion over 10 years. Whether this forecast is realistic is for another day’s discussion. Never mind that it uses 10 years of premiums to pay for 6 years of claims.
What is not included is “the doctor fix” for Medicare, which is estimated to be $247 billion. This means that the present health bill is NOT budget neutral, but ADDS to the deficit.
Last evening on Special Report, Bret Baier interviewed the President [transcript]:
“BAIER: And you call this deficit neutral, but you also set aside the doctor fix, more than $200 billion. People look at this and say, how can it be deficit neutral?
OBAMA: But the — as you well know, the doctors problem, as you mentioned, the "doctors fix," is one that has been there for years now. That wasn't of our making, and that has nothing to do with my health care bill. If I was not proposing a health care bill, right — let's assume that I had never proposed health care.
BAIER: But you wanted to change Washington, Mr. President. And now you're doing it the same way.
OBAMA: Bret, let me finish my — my answers here. Now, if suddenly, you've got, over the last decade, a problem that's been built up. And the suggestion is somehow that, because that's not fixed within this bill, that that's a reason to vote against the bill, that doesn't make any sense. That's a problem that I inherited. That was a problem that should have been solved a long time ago. It's a problem that needs to be solved, but it's not created by my bill. And I don't think you would dispute that.”
This bill was to be a comprehensive bill. We were told it could not be done piecemeal. We had to have one bill. Suddenly, paying doctors for their services is somehow irrelevant to providing care for our elderly citizens.
Ignoring the facts, failing address the real access to care issues and failing to add up ALL the costs of in one bill because it isn’t convenient seems more than a little disingenuous, doesn’t it?
What is not included is “the doctor fix” for Medicare, which is estimated to be $247 billion. This means that the present health bill is NOT budget neutral, but ADDS to the deficit.
Last evening on Special Report, Bret Baier interviewed the President [transcript]:
“BAIER: And you call this deficit neutral, but you also set aside the doctor fix, more than $200 billion. People look at this and say, how can it be deficit neutral?
OBAMA: But the — as you well know, the doctors problem, as you mentioned, the "doctors fix," is one that has been there for years now. That wasn't of our making, and that has nothing to do with my health care bill. If I was not proposing a health care bill, right — let's assume that I had never proposed health care.
BAIER: But you wanted to change Washington, Mr. President. And now you're doing it the same way.
OBAMA: Bret, let me finish my — my answers here. Now, if suddenly, you've got, over the last decade, a problem that's been built up. And the suggestion is somehow that, because that's not fixed within this bill, that that's a reason to vote against the bill, that doesn't make any sense. That's a problem that I inherited. That was a problem that should have been solved a long time ago. It's a problem that needs to be solved, but it's not created by my bill. And I don't think you would dispute that.”
This bill was to be a comprehensive bill. We were told it could not be done piecemeal. We had to have one bill. Suddenly, paying doctors for their services is somehow irrelevant to providing care for our elderly citizens.
Ignoring the facts, failing address the real access to care issues and failing to add up ALL the costs of in one bill because it isn’t convenient seems more than a little disingenuous, doesn’t it?
Subscribe to:
Posts (Atom)
