Welcome to the Policy Today Archives

“Governments Like Clocks, Go From the Motion Men Give Them”

31 July 2017

Welcome to the archives of Policy Today, a historical treasure chest of articles and ideas that dominated the political, economic, and social worlds in the first decade of the new millennium. We launched the magazine in the summer, 2004, when President George Bush was seeking his second term; and published our last edition in July, 2008, when Hillary Clinton and Barack Obama were battling for the Democratic presidential nomination, and John McCain arose from the middle of the pack to win the Republican nomination.  The country wasn’t as politically divided as we are now, and PT did its best to stay the course and focus on the issues as they presented themselves.

We published out of San Francisco so looked at both the Nation and California.  The leading issues of the day included health care, education, and immigration.  Sound familiar?.

Those we interviewed included California Assembly Leader Kevin McCarthy (now Majority Leader in the US House of Representatives); US House Minority Leader Nancy Pelosi (still there); former CA Governor Arnold Schwarzenegger (now back in Hollywood); constitutional scholar Larry Sabato; and, financier Wilbur Ross (now US Secretary of Commerce)..

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Lead Story

Energy Policy: The Dark Night?

23 July 2008
The Bat-Signal
The Bat-Signal

Having saved the world from itself over 60 years ago and put a man on the Moon 25 years later, Americans are a proud lot. But, time waits on no one. As the country's vaunted financial infrastructure reports over $400 billion in write-offs and credit dries up, the transportation infrastructure watches its airlines charge for carrying a suitcase while bridges collapse, and its social security infrastructure sinks slowly into the abyss of insolvency, dare we ask, “what's next”? Try energy. Meeting America's energy needs and moving toward a low carbon future look increasingly distant.

This article could as easily be about the financial or transportation infrastructure as it is about energy. Or education or healthcare or immigration. We're reasonably good at fixing specific problems, considerably less adept at developing policy over broader areas. The reasons are many but one is key: our central government has sought—and failed—to fix and do everything. Blame it on the media, personalities, or simply good intentions gone bad. But, debate, compromise and principled consensus have become ever more difficult in Washington. The end result is the country's real challenges remain unsolved.

THE ENERGY CONUNDRUM

America knows it has an energy problem, but the question is, how do you fix it? The National Conference of State Legislators’ recent 2008 Energy Summit offered several ideas. Says Kentucky State Senator Rodky Adkins, “there is no strategy to get from A to Z. And as all of you know, the lead times on these projects are enormous.”

The fact is, says, Dr, Howard Gruenspecht, Deputy Administrator, Energy Information Administration, “we didn’t build much of anything in the 1990s. What’s been happening is that we’ve been living off the coal and nuclear power we built in the 1980s.”

Most (if not all) Americans care about what they pay at the pump. But, there’s a lot more: heating homes in the winter, cooling them in the summer; generating enough electricity to turn on light bulbs, run the dishwasher, and power up the computer; and, then there’s street lamps, Big Macs, shops on Main Street, and our entire industrial and commercial core.

Over centuries, fossil fuels have fully integrated themselves into the US and world’s economies. Says Gruenspecht, “coal dominates the energy mix in the US. Today, it is about 50%; natural gas is 21%, and nuclear accounts for 19%. Renewable energy is about 2.7%.” And over the next 25 years, those percentages won’t change much, though renewable energy could grow to about 7%. Some say these percentages are skewed, and that the percentage of renewables—solar and wind, for example—could increase to 20%. But, they offer little in the way of proof. And other than being a great investment for venture capitalists, that still leaves the US dependent upon fossil fuels for over 80% of its energy needs.

CLIMATE CHANGE

There is, of course, this problem—meeting the country’s energy needs. There is also the issue of, how do we do it? Naysayers abound, but there is a growing consensus that overuse of fossil fuels has endangered the planet’s survival. Dr. Michael Maddox, CERA, notes that, “there’s a huge conundrum as we try to deal with climate change and energy needs together.” Susan Tomasky, President, AEP Transmission, asks, “most basically, when are we going to reduce carbon emissions from the economy?”

If you do something about climate that will dramatically change what you do about energy. Coal, for example, emits more C02 than other forms of energy. At higher prices, it takes a lot of natural gas to offset costs of substitution.

Power demand is increasing despite gains in efficiency. Says Gruenspecht, “over time, growth in demand for electricity has slowed down to about 1.1% annually because of market saturation and improved efficiency. But, we still expect it to grow. By 2030, it will be about 25% above today’s demand.”

The US has lost a lot of energy-intensive businesses to outsourcing. The decline also has to do with structural changes in who’s using electricity. For example, statistics show that electricity per individual has gone down. But, per household, it has gone up. Why? We live in bigger homes with smaller families. And, the saturation of other appliances has grown significantly.

CHANGE WE CAN BELIEVE IN?

Says Tomasky, “fundamental changes need to happen over the next several decades: it can be done piecemeal or as a country, but are we going to take an overall look at the issue(s)?” She adds, “we will have to use all sources to meet demand plus a significant component of energy efficiency.”

Dr. Brian McLean, US Environmental Protection Agency (EPA), notes that, “changing the path will require transformational efforts. It will require a portfolio of technologies and policy tools.”

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In terms of electricity, today’s grid was largely built in the 1950s and 1960s, mostly by local companies. It is outmoded and almost at capacity. Says Tomasky, “if we are to change the existing grid, we will need a new type of transmission system. We will need a sophisticated Extra High Voltage (EHV) network: one with a lot of off-and on-ramps to add load and generation resources.”

She cautions, though, “EHV has to serve a regional purpose. It will not get built if we have to go state-by-state. It also requires a conscious public policy decision—this is a critical part of our solution.” And, she notes, we will be making these decisions in the context of increasing commodity and material costs.”

Wind represents over 50% of the small percentage of renewable energy in the current mix, but its growth has been largely driven by the production tax credit. The main reason is that the numbers stand right on the cusp of commercial viability. Once that’s solved, we will have to move wind-generated power from the southwest to where the customers are. To that end, for example, Texas approved a $4.93 billion investment to integrate wind into the state’s power grid.

Have the resources been mobilized? Says Tomasky “we will have no problem building a transmission system if the path has been identified.”

ENERGY EFFICIENCY

Another big issue is energy efficiency. Policy initiatives include codes striving for zero net energy buildings; conservation and demand reductions; using clean energy like solar and wind; and advancing the use of ‘smart’ devices, programmable thermostats and heat pump water heaters for example. All of this will require considerable customer education.

And, then there are the policies that state governments have put in place: system benefit funds, high performance building requirements, energy efficiency resource standards, and appliance and vehicle efficiency standards for example. Then there are financial incentives — tax credits, for example.

PRICING

That leads to what all of this will cost—billions if not trillions. At a macro level, there are the policy questions. On a micro level, we have to make sure that use of an asset reflects its scarcity.

Dr. William Shobe, University of Virginia, says that it’s better to use a price signal that allows all users to understand what they get for what they’re paying. He thinks that we are currently underpricing electricity. “Why are electricity prices so low? It doesn’t reflect the true marginal cost of production,” namely the externalities of carbon emission.

Economists have historically advocated two acceptable price signals: charge for the goods directly or cap use and let those who need it trade the resource among themselves.

This has given rise to creating assets in CO2 via a cap. But, this has far reaching consequences: for starters, who “owns” the carbon asset—federal, state or local governments? And, things work against each other: there’s more efficiency but more appliances, higher incomes and more technology working against it.

What about fossil fuels? Should we encourage offshore drilling, coal mining, and natural gas exploration? Says Steve Bossart, US Department of Energy, “in the short term, the aim is to use all available resources. In the long term, we have to go to sustainable energy.”

What about nuclear energy? The lone plant that is far enough along in the US could be commissioned by 2015—seven years from now. The plutonium waste issue remains unsolved. And, granted that the waste problem exists, the world is currently building 30 nuclear plants: do we as a country want to be part of that debate?

ROLE OF THE STATES

Finally, there is the question of how these issues get solved. There’s tremendous variation across the country and between states. Congress has been gridlocked on energy policy, while certain issues are better dealt with at the state level, e.g., building codes and utility regulation. Broad participation will be needed. Action will be needed by federal, state and local governments, by industry and individuals.

So, where does all this leave the US? And, remembering, that energy is just one among many issues clamoring for attention and resources. Hard to say, but Commissioner Gordon might warn, “time to put up the Bat-Signal!”

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Feature Story

HEALTHCARE: A (Universal) Healthcare Plan that Works

12 June 2008

Q&A: MA State Senator Richard Moore, Senate Chair of the Legislature’s Joint Committee on Health Care Financing

MA State Senator Richard Moore

In 2006, Massachusetts passed the Health Care Reform Act, the first comprehensive health insurance plan in the United States. The plan requires all individuals to have healthcare, with the State stepping up for those unable to afford it. It creates a “Connector,” an agency that helps individuals to find an affordable plan, and allows individuals to opt out—for a while—with a set of defined reasons and a penalty clause.

Two years later, it’s working. Yes, “working.” PT spoke with MA State Senator Richard Moore, one of the program’s architects, to find out why.

PT: What is the basic theory underlying the Act?

Senator Moore: The theory behind the plan is the government is playing a role, which varies by people’s ability to pay. The plan is working with employers—it’s still an employer based plan. Therefore, they’re paying the fees. And finally, crucial to the plan is the individual mandate—that each person should be covered or provide a reason why they aren’t able to find an affordable plan.

We still have some people who haven’t signed up. The only people we could be missing are those who aren’t paying their taxes, but we usually catch up with them.

PT: The Massachusetts health care plan has—is—succeeding. Why?

Senator Moore: The enrollment is currently at 650,000, which is better than half of our uninsured number. These are people who had been using the emergency room as their primary care giver. The access issue has been improving as well.

The Urban Institute just released a report that covers the period between September 2006-September 2007. In 2006, we had 13% uninsured. A year later, that figure had fallen to 7%. Since the real push to sign people up was in the September-December period of last year, we think this figure is now much closer to 4%.

PT: Could you be more specific on the factors involved?

Senator Moore: There are several reasons for its success. The first is the cost issue: we have been able to keep it affordable — affordable for people at the lower end of the socio-economic scale. Second, through our Commonwealth Health Insurance Connector, we have been able to get people to find affordable plans that are not necessarily subsidized. The agency has worked with different plans to achieve this result. And finally, the individual mandate has been a factor. A number of people have opted to pay the penalty of $219 per person/per year. In January of this year, that started to get a little more expensive, up to over $900 per year. So, we’re hoping they will choose to be covered since each month the penalty will be imposed up to the maximum of $912 for the year.

PT: Have there been any problems?

Senator Moore: Well, it’s still an employer-based plan, and approximately 72% of employers have been cooperative. We’ll now start focusing on why some large employers are relying on encouraging their employers to access their health insurance through a taxpayer subsidized program. Employers are now paying $295 annually per person. We’ll look at seeing whether this amount is sufficient to cover the costs.

We’re also looking at an increase in the cigarette tax by $1 pack to help pay the difference.

PT: The other side of the issue is the increasing costs of healthcare. What is the State doing about that?

Senator Moore: Yes, we’re focusing on costs: legislation has been approved in the State Senate and will be taken up in the House in the next few weeks. We have proposed spending $25 million to help people get connected electronically—electronic health records, computerized physician order entry and e-prescribing. That will reduce errors and save money and lives.

Transparency is another issue: we’re asking insurers why they have a rise in costs. We’re seeking transparency in reporting of health care provider charge increases as well as looking at why health insurance premiums are increasing. We’re helping to educate the public and payers by asking the providers and insurers to keep them informed.

Through electronic records, transparency, and other issues, we’re seeking where the costs drivers are and hoping to get a handle on the high cost of care.

Doctor and patient

PT: Senator, you mentioned that success also has its costs—in this case the plan is costing the State more. Could you explain that?

Senator Moore: The costs are higher than anticipated, because we have successfully enrolled more than half of our uninsured population. There’s been no crowding out of private sector insurance. Compliance with individual mandates seems good. People are getting better care. There have been a number of inspiring success stories. Overall, the plan is working quite well

PT: Senator, could you quantify that number?

Senator Moore: We estimate that the program will cost $170 million more than we anticipated so about $859 million. And, that’s been incorporated in the budget. Healthcare in all forms—Medicaid, Commonwealth Care, state employee coverage—is about half of our state budget. Everything else competes with health care. So far, the Governor, Legislature, business community, and other stakeholders have all been behind it.

PT: Would you compare Massachusetts’s plan with those of California, and the Presidential candidates McCain and Obama?

Senator Moore: I really haven’t studied these other plans that carefully. California is certainly larger. The biggest difference between the plan proposed by Senator Clinton and the one by Senator Obama is the individual mandate. Otherwise, both plans have some of the features that are in the Massachusetts plan.

The reason for the individual mandate is that it’s necessary to get to universal coverage. People in the under 30 age category think they’ll never get sick or hurt. They need to be part of the plan. Rates in this group are less. Everybody must have insurance if they can find an affordable plan. If they don’t, they can seek a waiver that grants them exemption from any penalties. Most people who are qualifying for the waiver are in the 50-64 range. But, they are also at risk. [Editor’s Note: Senator McCain endorses a pre-tax subsidy to individuals to pay for their health insurance.]

PT: MA has taken the lead where the Federal government has been unable to put together a plan. Any thoughts on that?

Senator Moore: We didn’t see the Federal government solving the problem any time soon. There are so many different interests competing at that level. Our primary hope is that the Federal government continues to be a partner in the health reform plan. We have our Section 1115 waiver to help pay part of the plan. [Editor’s Note: Section 1115 waivers exempt states from certain provisions of the federal Medicaid plan.]

We will continue to be partnering through the Medicare waiver. Our concern is that there are so many restrictions. We’re hoping to make these less restrictive and continue a reasonable level of financial support.

PT: How does the program interact with Medicare/Medicaid?

Senator Moore: There’s not a direct interaction with Medicare. New programs don’t go beyond age 65.

Certainly, some of the programs in Medicare are important such as assistance with graduate medical education. Healthcare is heavily dependent upon Federal assistance. The degree to which the Medicaid gets more restrictive, it creates problems for states in addressing the primary care issue. There is need for both Medicare and Medicaid to increase reimbursement rates for primary care providers since they are critical to holding costs down and promoting prevention and screening.

Prescriptions are also an issue. We need to move more to electronic prescribing to reduce errors and save money. Drug enforcement agencies are still wed to paper for controlled substances. The bill that Senate Baucus (MN) is currently pushing to cut Medicare costs includes electronic prescribing incentives that Senator Kerry (MA) and others have co-sponsored that will provide for reimbursement of electronic prescriptions.

PT: In closing, what would you say is the plan’s most important aspect?

Senator Moore: The most important part of the success of the plan is the near universal support among the stakeholders. Everybody wants to see it work. Every time we hit a snag, we seem to be able to work around it.

PT: Senator Moore, thank you for your time.


Socialized health care
written by AlanR, June 17, 2008
It's not surprising it went over-budget, government has no incentive to stay within when the bureaucrats can just request that the legislature steal... tax more money for the short fall. In fact, the Governor has upped the estimate; 2008-2009 costs will be more like $1.1 billion––a 50% increase over the original estimate from less than two years ago!

And now they've succeeded in driving even more low-cost insurance companies out of Massachusetts with the increased regulation... even less choice for everyone else.

The program has increased demand for health care services without increasing the supply of providers. As a result, patients are having trouble finding providers and waiting lists (Canada here we come) are beginning to develop.

This would be a horrible thing to see happen here in California. I don't want to be forced to have health insurance and be fined if I don't comply. What happened to liberty?

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