Competing for Students, Not Federal Funding, Is Still the Best Preschool Policy

school-choice-300x199Washington, DC, is not exactly known for being on the cutting edge of innovation—especially when it comes to competition in education.

Nearly three years ago the Department of Health and Human Services’ Administration for Children and Families (AFC) made headlines for its “controversial” plan requiring Head Start preschool providers to compete for renewed federal funding. The rule changes:

... implement statutory provisions of the Improving Head Start for School Readiness Act of 2007 to establish a system of designation renewal to determine if Head Start and Early Head Start agencies are delivering high-quality and comprehensive Head Start and Early Head Start programs that meet the educational, health, nutritional, and social needs of the children and families they serve and meet program and financial management requirements and standards. This system of designation renewal will determine which grantees must compete for on-going funding.

Prompting this change, in part, were 2005 findings from the GAO documenting widespread financial “improprieties” due to questionable oversight by the ACF of some $6.8 billion that were supposed to help more than 900,000 Head Start students in fiscal year 2004. According to the GAO:

Head Start grantees who were judged out of compliance in a review by ACF in 2000 with one or more of the program’s financial management standards were about as likely to remain out of compliance as attain full compliance over the succeeding 3 years. ...After working with one grantee to correct severe financial management problems for 3 years—including failure to account for over $400,000 in grant funds that were not spent on Head Start services to children and their families—ACF notified the organization that it no longer would receive funding. While ACF may terminate grantees with serious financial weaknesses such as recurring failure to comply with federal management standards, this process is rarely used: ACF most often encourages grantees to voluntarily relinquish their grants. In a small number of cases, ACF must proceed with formal termination, which can be difficult and lengthy owing, in part, to grantees’ right to continued funding during its appeal, regardless of merit, and their ability to finance appeals with grant funds.

For all the tough-sounding talk, not much has really changed under the Designation Renewal System (DRS) implemented in 2011. Most Head Start providers will have their five-year grants almost automatically renewed. Just the worst offenders will have to compete to keep them, roughly 125 (here and here) out of more than 1,600 total grantees, and most of them will likely have their funding renewed, too.

Evidence shows that federal Head Start program funding hasn’t noticeably improved preschoolers’ academic outcomes. Yet President Obama wants universal government preschool for all American four-year-olds—whether parents want it or not.

A better solution is universal options for all. Let taxpayers keep the money that would otherwise be funneled into failing fed ed programs such as Head Start. Let parents save for the preschool options they prefer. Keep them in charge of whether their children’s schools are performing or not. And, make preschools compete for students and their tuition dollars.

But this kind of liberty for parents is the last thing DC politicians or their (virtually lifelong) federal grantees want.

Medicare Fees: The RUC Is Bad, but There’s No Point in Regulating It

priceless_180x270Politico recently ran an interesting story on the Relative Value Scale Update Committee—the “RUC”—a body convened by the American Medical Association that fixes the fees that Medicare pays physicians. It describes the absurdity of a committee of physicians fixing fees that the government pays physicians, and demonstrates how the RUC pays primary-care practitioners much less than specialists. Here is how it works:

William Hsiao, the economist who designed the Medicare Prospective Payment System, determined Medicare’s fees as follows: “He put together a large team that interviewed and surveyed thousands of physicians from almost two dozen specialties. They analyzed what was involved in everything from 45 minutes of psychotherapy for a patient with panic attacks to a hysterectomy for a woman with cervical cancer. They determined that the hysterectomy takes about twice as much time as the session of psychotherapy, 3.8 times as much mental effort, 4.47 times as much technical skill and physical effort, and 4.24 times as much risk. The total calculation: 4.99 times as much work. Eventually, Hsiao and his team arrived at a relative value for every single thing doctors do.” (Rick Mayes and Robert A. Berenson, Medicare Prospective Payment and the Shaping of U.S. Health Care, Baltimore: Johns Hopkins University Press, 2006, p. 86.)

The Politico story also described a lawsuit which asserts that the RUC should be regulated like a Federal Advisory Committee, and not allowed to operate in secret as if it were just another committee of a private professional society. The American Medical Association’s rebuttal of the Politico feature is exactly what one would expect from an inside-the-Beltway mindset:

When providing input to Medicare, the RUC and others must follow principles established decades ago by economists at Harvard University that are required by federal law and regulations.

In recent years, the committee has evaluated (AMA login required) more than 1,700 medical services accounting for $38 billion in Medicare spending. The committee has sent recommendations to the Centers for Medicare & Medicaid Services for reductions or deletions of 935 services, resulting in a redistribution of more than $3 billion in the Medicare program.

In fact, the committee’s complicated work has long garnered the praise of government officials.

Imagine that: The RUC not only fixes prices, but fixes prices according to regulations “established decades ago”! What could go wrong with that? Substitute “groceries”, “auto parts”, “clothing”, “athletic equipment”, or anything else for “physicians’ fees”, and you immediately see how ridiculous the whole thing is. Can you imagine a committee where hockey coaches and baseball coaches get together to give the government advice on the relative prices of pucks versus baseballs?

Nevertheless, regulating the RUC as a Federal Advisory Committee would not solve the fundamental problems. First, the federal government should simply not be fixing medical prices, any more than it should fix prices of groceries for people receiving food stamps (SNAP). Second, I do not pretend to know the value of a family doctor versus another specialist, but it is certain that a third-party payer (government or private insurer) will have a much harder time understanding what a primary-care doc does during an office visit than an orthopedic surgeon does during a knee replacement. Specialists will always be paid more when prices are fixed this way, whether the process is transparent or not.

* * *

For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

California Senate Arrest Rate Higher Than Any Large California City

24931026_MThree California state senators have been arrested this year.

In February, State Sen. Ron Calderon was arrested for accepting bribes, wire fraud, money laundering, and falsification of tax returns. In March, State Sen. Leland Yee was arrested for gun trafficking and taking bribes. In August, State Sen. Ben Hueso was arrested for driving drunk.

As the graphic below shows by the Sacramento Bee, the California Senate arrest rate is higher than any of California’s 25 largest cities and more than twice the statewide rate. The Senate’s arrest rate would be even higher if State Sen. Roderick Wright was included, but he was arrested last year, and ultimately convicted this year of perjury and voter fraud.

Where is anchorman Ron Burgundy when you need him: “Stay classy California Senate.”

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Price Transparency Lowers Healthcare Costs

priceless_180x270study recently published in Health Affairs describes how price transparency drove down the cost of MRIs by almost twenty percent from 2010 to 2012. Compared to patients who did not have the advantage of transparent pricing, patients who knew what their MRI procedure would cost saw a cost reduction of $220 per procedure. Further, price transparency was associated with a significant shift from hospitals to outpatient facilities.

This result is just the beginning. It was not a result of true consumer-driven health policy, but an intervention by an insurer. When a physician referred a patient for an MRI, the insurer required prior authorization before paying for it. When the patient called for prior authorization, the customer-service rep was able to give the patient the choice of a lower-cost provider in the same area. Importantly, the insurer’s rep was able to tell the patient how much he or she would save by using the lower-cost provider.

This is something that healthcare providers resist mightily—for obvious reasons. As a consequence, more expensive providers, especially hospitals, dropped their fees significantly. This resulted in a 30 percent compression of prices.

It is a step in the right direction. The Health Affairs article notes that government dictating price transparency has no effect—as discussed previously at this blog. Nevertheless, there is a lot further to go. For example, one-third of the patients had zero co-pay or deductible, and so were completely insensitive to price. Also, it still requires too much bureaucratic intervention. Why should a patient have to call the insurer to figure out the best price for the service?


Chicago Teachers Union Boss and Classic Champagne Socialism

indexIt’s a busy time of year for Chicago Teachers Union President, Karen Lewis. Two years ago just in time for Labor Day, she was helping organize the city’s first teachers’ strike in more than 25 years—a move that was highlighted at the Midwest Marxist Conference. Last year she was busy blaming the Chicago Public Schools district’s $665 million budget hole on rich people, and blasting Rahm Emanuel for being, as she put it, “Mayor 1%.”

This year Lewis is considering a mayoral run, and it turns out she too is near the dastardly top percent. The Chicago Sun Times reports:

Karen Lewis, the Chicago Teachers Union president now considering whether to run for mayor, has frequently railed against the influence of the wealthy....

Lewis isn’t as wealthy as Emanuel, a multimillionaire who made his fortune during a short stint as an investment banker. But she makes more than $200,000 a year and has an ownership interest in three homes, records show.

That includes vacation homes in Hawaii and in the upscale “Harbor Country” area of southwestern Michigan, where Emanuel has a second home, property records show.

In all, Lewis earns just $15,000 less than Emanuel. About $156,000 of Lewis’ compensation and “non-taxable benefits” comes from the CTU, plus tens of thousands more from the Illinois Federation of Teachers, where she serves as executive vice president.

Lewis’ earning practice is a far cry from what she was preaching a few years ago, as the Chicago Sun Times continues:

When she first ran for CTU president four years ago, Lewis promised not to make more than the highest-paid teacher....Chicago Public Schools’ payroll records show no teacher makes as much as Lewis’ $136,890 CTU base salary.

... Lewis said she didn’t break her promise not to make more as union president than Chicago’s highest-paid teacher makes, saying her CTU salary is for working the full year, rather than a 39-week school year.

Lewis admits she is indeed among the top 5 percent of Americans in terms of income, but she makes no apologies for it:

I don’t live extravagantly. ...We [Lewis and her husband] are comfortable...We are not poor. We have never been poor. Does that mean I don’t have the pulse of [the poor]? I don’t live in luxury. I don’t hang out with wealthy people. I have always been solidly middle class. ... I’m not going to apologize for [my salary]. I don’t think that’s wrong. I did what we are told to do. You are supposed to go to school, become educated. I have an Ivy League diploma. I have two master’s degrees.

Three homes, two advanced degrees, and an Ivy League education is hardly having a “pulse” on the poor. What’s more, the way Lewis gets her pay indicates she has taxpayers of every income bracket by the jugular.

Under current law, the Chicago Public Schools system acts as a government collection agency for the CTU by withholding “agency fees” from classroom teachers whether they’re CTU members or not.

Based on the latest available information from the CTU website, during the 2013-14 school year both annual dues paid by members and “agency fees” withheld from non-members both amounted to $1,052.49 per year.

No one who believes in the free market should begrudge Lewis or anyone else the opportunity to earn a living or spend one’s hard-earned income as he or she pleases.

The reason Lewis’ hypocrisy is making national news is that she could never hope to enjoy the fruits of other people’s labor as she does now if taxpayers and rank-and-file teachers weren’t compelled into bankrolling the lucrative government monopoly that pays her so handsomely.

Parental Choice, Not Common Core, Is the Key to Academic Accountability

school-choice-300x199The more the public learns, the less it likes Common Core national standards, based on findings from various polls throughout this year. Two new national polls add even more fuel to the anti-Common Core fire.

The first by Gallup and PDK International notes that last year only around one-third (34 percent) of American adults had even heard about Common Core. That figure has jumped to 81 percent this year, and fully 60 percent of respondents now say they oppose it—largely because the standards are rigid and lack academic rigor.

The second poll was released by Education Next. It finds a smaller proportion of Americans opposes Common Core, but that opposition has doubled from 13 percent last year to 26 percent this year. Meanwhile, about one out of five Americans remain “undecided,” 22 percent last year and 21 percent this year.

Significantly, the Education Next poll shows that opposition to Common Core national standards is intensifying across the board. Comparing results from 2013 to 2014, opposition among Democrats grew from 10 percent to 17 percent. Opposition among Republicans more than doubled from 16 percent to 37 percent, while opposition among teachers more than tripled from 12 percent to 40 percent.

The phrasing of the questions relating to Common Core matters and helps explain differences in the results, and Education Next Editor-In-Chief Paul E. Peterson explains that while Americans generally favor academic standards, the term Common Core is “toxic,” responsible for around a 15 percentage point public approval drop.

Most Americans would agree that students should achieve basic levels of literacy and numeracy, as well as have working knowledge and skills relating to civics, history, and science. That doesn’t mean, however, that the federal government has the constitutional authority or the expertise to impose national standards.

Common Core proponents insist that the standards are rigorous and prepare students for college and careers. Not true. Leading experts have publicly denounced those claims (see here, here, and here).

But the solution is not, as American Federation of Teachers President Randi Weingarten suggests, to abandon essential objective assessments that gauge students’ academic achievement. In a prepared response to the Gallup/PDK poll release, Weingarten stated:

Given this path, support [for Common Core] will continue to drop as people no longer see standards or standardized tests as helping children...They, like many teachers, see them instead as setting up public education for failure.

Standards and standardized tests do not set up public education for failure. Not educating students does.

Most Americans favor measuring student achievement against objective standards—not the say so of dues-paying, unionized teachers. In fact, as the Education Next poll suggests, the last thing most Americans want is a return to a by-gone era when parents and the taxpaying public were kept in the dark about how well (or poorly) American students were actually performing in core subjects.

On the other hand, federally-driven “accountability” under No Child Left Behind and its previous iterations dating back to 1965 resulted in student achievement scores based largely on games not actual gains in student learning.

As long as the federal government and powerful political special interest groups control education, parents and the taxpaying public will remain in the dark about just how well students are actually doing in school. Teachers’ union leaders fight objective measures of student achievement. Washington politicians and unelected bureaucrats devise elaborate, expensive testing regimes that purport to be objective, but in reality they’re based on benchmarks that are so low significant numbers of students are deemed performing when, in fact, they have not mastered basic knowledge and skills. (See also here, here, and here).

For all the PR to the contrary, federal laws intending to improve accountability in education have failed because parents are not empowered to choose their children’s schools. Even assuming publicly reported student and school performance results were accurate, that information is not actionable. Chances are, parents whose children have remained trapped in failing schools don’t need a federally mandated testing regime to tell them that. They’re likely painfully aware of that reality already.

Parental choice in education is the best approach to genuine accountability in education.

Let parents pick the schools they prefer for their children. Most will likely choose schools that regularly inform them of their children’s academic progress based on objective assessments that tell them how well their children are performing relative to their peers nationally and worldwide.

And those tests already exist. Homeschooling parents, for example, use a wide variety of rigorous and cost-effective assessments, including beginning and end-of-year tests to measure their children’s academic progress, standardized tests that assess basic skills, and norm-referenced tests so parents can compare their child’s performance to that of students nationwide.

There’s also no shortage of Advance Placement exams, college entrance exams, pre-college entrance exams, and international assessments can also be used to see how well students perform relative to their peers in dozens of countries around the world.

And, let’s not forget, standards previously in place by states such as California, Indiana, and Massachusetts were already widely considered among the strongest nationwide, so there was no need to reinvent the wheel with Common Core if improving student achievement were truly the goal.

Better incentives, not more imposed mandates, are what schools need to implement reliable measures of student achievement. Given the option, most parents would probably choose schools that test students in core subjects. Some parents may want more testing, some parents may not want any at all, but schools would feel powerful pressure to meet parents’ demand for reliable information about how their children are performing academically if the alternative is losing students and their associated funding to other schools.

Imposing Costs on Russia: How about a Food Embargo?

a17a39cc9aPresident Obama has threatened to impose costs on Russia for their intervention in Ukraine, but so far, his involvement has been high on rhetoric but low on action. Here’s a proposal that ought to hit Russia where it hurts: impose a food embargo on them.

Americans and Europeans of a certain age can remember the costs they felt due to the OPEC oil embargo of 1973. People need food more than they need energy. Think of how much more we could pressure Russia with a food embargo.

Of course, there would be objections to a food embargo, because it would impose costs and hunger on ordinary Russians, penalizing them for the actions of their political leader. It does sound potentially inhumane.

But, in this case, Putin has beaten us to it, and imposed an embargo of food from the US and EU on his own people!

Putin seems to be saying, if you keep up this pressure on us, we will deprive ourselves of food. Is this really a sensible tactic? Apparently, Putin thinks so, and is threatening not only to deprive Russians of food but also automobiles.

Embargoes have been used against adversaries throughout history. The US has maintained an embargo on Cuba for more than half a century and is pressuring Iran the same way. But it makes little sense for a country to impose an embargo on itself.

If the US and EU had imposed a food embargo on Russia, many would view it as a cruel and inhumane hostile act. For Putin to impose this embargo on his own people appears to be an act of stupidity. No wonder there has been barely any reaction to it in the West.

Putin has heard our empty threats, and appears to be saying that if we won’t follow through and impose costs on Russia, Putin will do it for us.

CalPERS Approves 99 New Ways to Spike California Public Pensions

CalPERS Headquarters, Sacramento

CalPERS Headquarters, Sacramento

Today, in yet another act of fiscal irresponsibility, the California Public Employees’ Retirement System (CalPERS) approved a list of 99 types of extra pay that can be used to calculate pension benefits for state and local government employees. The supplemental pay includes extra money that public employees earn when they briefly fill higher-paying jobs.

The regulatory decision by CalPERS’ board will allow public employees hired after January 1, 2013, to increase their pension checks by including special pay in their pension calculations. For workers hired after this date, pension checks are calculated using a formula based on a worker’s age at retirement, years of service, and the final three years of salary.

The list of approved supplemental pay includes higher pay for maintenance workers who replace street lamps from an aerial bucket, school district employees who supervise kids during recess, librarians who provide direction or resources to library patrons, and policemen who are good marksmen. Aren’t all cops expected to be good shots? Aren’t all librarians expected to assist the public?

These pay supplements are largely scams to grab more taxpayer money. And CalPERS’ decision to officially recognize these supplements for the purpose of calculating pensions undermines the 2012 pension reform law PEPRA, which disallows “ad hoc” payments being used to calculate benefits. The law states that pensions must be based on “the normal monthly rate of pay or base pay.” This language was intended to end “pension spiking”—the practice of boosting “pensionable” income using supplements such as overtime pay, unused vacation pay, allowances, and bonuses.

The intent of PEPRA was to end these spiking shenanigans, but CalPERS is now attempting an end-run around the reforms by authorizing higher pensions through pay upgrades, which employees can manipulate in the final years of their service. Unfortunately, this type of fiscal irresponsibility is routine for CalPERS.

In 1999, CalPERS’ board told the state legislature and Gov. Gray Davis that a generous pension increase bill, SB 400, could be implemented “without it costing a dime of additional taxpayer money.” The board claimed that “superior” stock market returns would cover the additional cost of the higher benefits for at least 10 years. Relying on this “expert” opinion, the legislature overwhelmingly passed the bill and Davis quickly signed it into law.

But CalPERS’ claims about SB 400 were quickly proven wrong, and the benefit increases blew a massive hole in CalPERS’ finances, which persists today. The Sacramento Bee analyzed data from CalPERS’ internal annual reports and found the average first-month pension payout for new retirees doubled between 1999 and 2012. CalPERS’ deputy chief actuary David Lamoureux has attributed at least 20 percent of the payment increase to the 1999 benefit enhancements alone.

CalPERS has proven to be a partisan political player, advancing public-employee interests instead of acting as an unbiased servicing agency—its true mandate. Today’s decision adds to CalPERS’ credibility gap when it comes to managing the pension fund with integrity and responsibility.

CalPERS’ new regulation is pension spiking by another name—“supplemental pay.” The governor and legislature must act swiftly to stop this abuse. If not, CalPERS will saddle our children and grandchildren with even more immoral pension debt, this time to pay for new pension spiking.

NSA “Fatigue”?

Washington Post: How the NSA is tracking people now

Washington Post: One of the many ways the NSA is tracking you

Last month I saw a New York Times account of the latest interview with Edward Snowden headlined, “Racy Photos Were Often Shared at N.S.A., Snowden Says“—yet not widely picked up elsewhere—and I wondered, “Oh dear, if sex isn’t selling continued interest in NSA spying revelations, we’re in trouble.”

Now, in an in-depth interview in Wired magazine, conducted by James Bamford (for whom we hosted an event in 2003 upon the release of his book, Body of Secrets: Anatomy of the Ultra-Secret National Security Agency), Mr. Snowden himself expresses the same fear:

Another concern for Snowden is what he calls NSA fatigue—the public becoming numb to disclosures of mass surveillance, just as it becomes inured to news of battle deaths during a war. “One death is a tragedy, and a million is a statistic,” he says, mordantly quoting Stalin. “Just as the violation of Angela Merkel’s rights is a massive scandal and the violation of 80 million Germans is a nonstory.”

There’s certainly no reason for such fatigue, as continuing revelations should be building continuing horror in anyone still paying attention.

In the in-depth interview from which the Times story drew, for example, Mr. Snowden provided further details of the programs that drove him to blow the whistle:

the officials who authorised these programs knew it was a problem, they knew they didn’t have any statutory authorisation for these programs. But instead the government assumed upon itself, in secret, new executive powers without any public awareness or any public consent and used them against the citizenry of its own country to increase its own power, to increase its own awareness.

And a recent Washington Post story culminated from a four month investigation of more than 160,000 intercepted e-mail and instant-message conversations, some of them hundreds of pages long, and 7,900 documents taken from more than 11,000 online accounts, mostly held by non-targeted American citizens—all retained by the NSA and released by Edward Snowden to disprove NSA’s claims—frequently repeated by President Obama—that it only retains “meta-data:”

They tell stories of love and heartbreak, illicit sexual liaisons, mental-health crises, political and religious conversions, financial anxieties and disappointed hopes. The daily lives of more than 10,000 account holders who were not targeted are catalogued and recorded nevertheless.

If the knowledge that the NSA collects and stores indefinitely all of your email, cell, online transactions—as well as tracking your whereabouts at any given moment—does the thought of 18 year-old voyeuristic NSA employees leering at pictures of your daughter, and finding their amusement in shared intimacies meant only for the eyes of friends cause you outrage?

Even if not a quote of Thomas Jefferson, the sentiment remains more valid than ever:

Eternal vigilance is the price of liberty.

Having now failed to pay for our liberty with vigilance, each must now decide to pay by being informed, informing others, and protesting loud and long until the NSA and its fellows are dismantled and disgraced forever.

The alternative—fatigue—means the death of liberty. The only question is how soon?

There Is a Market for Human Organs, Whether You Like It or Not

indexThe buying and selling of human organs was in the news this weekend, via an investigative report in the New York Times. People tend to be moved when they learn about someone donating an organ to someone else who needs it, but they also tend to be disgusted by the notion of a market where people can sell their organs to strangers. Naturally enough, this market consists of high-income patients and low-income donors.

The Times profiles an Israeli woman who bought a kidney from a Costa Rican donor, for a total cost of $175,000. A donor gets about $5,500. The rest goes to middlemen and medical staff. It doesn’t sound like a great deal for the donor, does it?

On the other hand, 4,000 people die waiting for kidneys in the United States alone. The only country where there is no waiting list for kidneys is the Islamic Republic of Iran, which allows donors to sell organs. Another way to clear the market is the Chinese way, which consists of harvesting them from prisoners—often sentenced on grounds unrecognizable as crimes by Westerners, such as practicing the spiritual discipline of Falun Gong.

China’s harvesting of human organs—from often living victims—is described in horrifying detail by Ethan Guttmann in his new book, The Slaughter. Outlawing a legal market of willing buyers and sellers will always result in a black market which will be exploited by gangsters. We also see this in the United States when jurisdictions hike tobacco taxes. The response is an increase in contraband.

A solution is a properly regulated market into which people can sell their organs. It’s best described by Sally Satel, MD.

[Editor's note: Also see the extensive writings on this topic by economist Alex Tabarrok and other fellows at the Independent Institute.]