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Blanco insurance punt bodes ill for real solutions

Trying to follow Gov. Kathleen Blanco’s thoughts on having a special session of the Louisiana Legislature would give the observer whiplash, she changes directions so much. Now that idea is off in favor of going with the regular session to introduce an unspecified package of legislation that would encourage insurance companies to write policies in the state. Theoretically, more companies present create more competition and thus lower premiums.

But this approach misses the entire point of how a marketplace works. It’s not the number of competitors that determines price, it’s the actual costs of doing business, conditioned by the economic skill of the provider. No insurer will write policies if they do not believe they can make money doing it, and there’s little Blanco or anybody else can do about that save change existing weather patterns.

What’s scary is Blanco may rely upon the underlying philosophy of a plan supported by U.S. Rep. Charlie Melancon and his Democrat colleagues – trying to get the rest of the country to subsidize Louisiana, as well as other high-risk states with coastal areas. Their plan would create a nationwide risk pool where taxpayers who chose to live in lower-risk areas end up paying part of the bill for those who chose to live where the risk is higher.

Of course, something like that already exists, so these politicians merely would add on to it. Further, they would introduce more government regulation into the process – a guaranteed recipe to drive away potential insurers and, thus, force government with its higher-cost solutions to ratepayers and taxpayers to take up the slack.

So, in the end, Blanco may try to institutionalize permanently the temporary solution of using a budget surplus to reduce costs on ratepayers, which still represents a forced subsidization of taxpayers of homeowners who choose to live in higher-risk areas. However, at least as envisioned by its proponents that was not designed to be a permanent solution. Absconding with taxpayer dollars into a high-risk fund would be. And since Blanco is mum on what she proposes, this well may be what she intends as her “solution.”

Which is no solution at all. Introducing greater marketplace discipline is the only way to guarantee fair pricing on insurance in the state, as well as increasing efficiency in government regulation such as by abolishing one of the Insurance Commissioner or the Insurance Rating Commission, for starts on account of their redundancy. This would take political foresight and courage Blanco lacks; she seems more likely to take the convenient, populist route proposed by her Democrat cohorts which is a mere election stunt trying to play to areas of Democrat strength (Atlantic and Pacific non-Southern states, plus select districts like Melancon’s).

At this point, it seems only a special session which looks at insurance provision comprehensively (including commercial lines as well) along market-driven solutions will produce any favorable outcomes for Louisiana as a whole on this issue.


Blanco must eliminate sacred cow for real health care reform

The sound you hear may be that of Louisiana sharpening a knife to slaughter a sacred cow. But whether Gov. Kathleen Blanco and/or her successor actually does so is another matter.

Once again, reality has hit Blanco right between the eyes and she has found she must put aside politics for performance, although perhaps it took a bit of bribery to get her to see the light this time. Blanco and her
health care redesign panel finally in principle seem to agree that universal health care coverage around New Orleans should be attained primarily through a money-follows-the-person regime, rather than the “build-and-they-will-come” philosophy that produced Louisiana’s inefficient charity hospital system, unique among the states. As part of this, it appears that the federal government will commit additional funds for a few years to ease the transition statewide (the state claims it may cost as much as a billion bucks more a year at the start than under current state spending, while the federal government says the extra cost may be as little as ten percent of that figure).

With this, Blanco can position herself as fulfilling a campaign promise to reform the health care system in the state, something she badly needed to claim against her previous and likely future opponent, U.S. Rep.
Bobby Jindal who has had extensive experience in administering health care programs at both the state and federal level. Well … maybe.

Unfortunately, Blanco still insists on keeping as part of her plan the “medical home” concept, giving the uninsured the choice of whether to accept money from the government to subsidize health care decisions they make, or to be assigned to a provider that the state pay for their care. The questionable part of that is the charity hospitals would be a medical home, allowing Blanco and the state to continue to justify their existence as funded state entities.

While charity system chief Don Smithburg (which runs nine of the institutions, the other two run as a unit of LSU) opines that those hospitals will do well enough financially under this system (what wouldn’t given the state subsidies coming into them?), his assertion that outcomes produced would be more than adequate does not apply generally to the entire system, nor even uniformally to the institution to which he was referring, the Medical Center of Louisiana at New Orleans,
statistics show.

That institution performs comparably to private hospitals in its area (as well as in some areas, but worse in others); this also is the case for the other largely-teaching institutions in the state. But when comparing the smaller state facilities than exist mainly for service to local private entities, they do worse. In other words, the medical home idea would end up diverting some resources to less-efficient providers run by the state, costing more and/or reducing quality of care compared to the money-follows-the-person scenario.

This means that, as
previously noted, the state needs to consolidate teaching functions within four, maybe five at most, of the institutions, and divest itself of the remainder. Unless this is done, by the time the transitional period federal money runs out, system inefficiencies will pass on a cost increase to be borne by Louisiana taxpayers.

For real reform to occur, Blanco must commit to this realigning. If she doesn’t, it’s up to those like Jindal to publicize this during her reelection bid in an effort to not allow her to falsely claim she has engaged in any meaningful health care reform, and thus, as happened in this latest incident, eventually to force her to do the right thing by eliminating the sacredness of the charity hospital system.


Browbeaten Blanco needs to make right call on call

Naturally, after I advocated a call for a special session of the Louisiana Legislature, Gov. Kathleen Blanco caved in and said she’ll now call one … actually, maybe it had something more to do with legislative Republicans mounting a serious effort to call the Legislature into session – a troubling concession by Blanco, demonstrating her weakened position as governor.

It’s the right idea, but neither the GOP nor Blanco has it correct. The former want it in November for 15 days to go over home insurance issues and a redo of state recovery authority and funding. That’s too much time, not at the right time, and not all the right stuff. It really needs to wait for the Revenue Estimating Conference to officially declare a surplus and in what areas, which is a month later. Further, with that much time to make preparations, the session should be much shorter to save taxpayers money. And, it needs to include the potentially bigger issue of spiraling commercial insurance costs which threaten to stunt any nascent recovery.

Blanco wants to wait, but perhaps too long for the solution of the state picking up part of the tab on the extra insurance assessment being made on homeowners to refund the state-owned insurer of last resort, pummeled with losses from the hurricane disasters of last year. But she has to include the commercial angle as well, else there’s no real need for a special session given other policy options.

Again, concoct solutions, wait for hard numbers, then dash in on Dec. 18 and dash out by Dec. 22. Follow the agenda outlined above, and for once we may actually get our money’s worth out of a special session.

Still, Republicans have beaten Blanco again. She never would have intended to call a special session without their pressure. Further, does anybody seriously believe she’s delaying the call just in case some companies locate operations in Louisiana? Firms know that if they negotiate a special deal, since it will be months before they start operating, that they can wait until the regular session to have them enacted into law. With this logic, we’d be having special sessions all the time – if, of course, Blanco had attracted more than a relative handful of jobs over her almost-three years as the state’s economic-recruiter-in-chief.


Policy must encourage redevelopment by private sector

While many potential problems plague the effort to be rebuild New Orleans, in part a result of heavy-handed government trying to negate the market’s superior, optimal decision-rendering, there is at least one way in which it can help sponsor a market-driven result to the city’s benefit.

A tug-of-war developed months ago regarding whether New Orleans out to give building permits to certain areas of the city regarded as likely to flood in the future. Proponents argued that the market should be left to determine how people wanted to use their property, with the warning that provision of city services may be left incomplete, while opponents claimed this would create patchwork redevelopment that would discourage rebuilding or, if it occurred, would make for inefficiency in service delivery, straining already sparse city resources.

Wisely, Mayor Ray Nagin chose not to limit rebuilding; however, the question of inefficient service delivery remains open. Yet a legal device, with state aid, may mitigate this potential problem.

The state could pass legislation encouraging property owners to form limited liability corporations regarding their blighted properties. Citizens would place their land in the hands of this corporation, for which they would receive shares commensurate to its actual appraised value. This would mean that, for those who wished not to rebuild, they could sell the land (shares) either to some other shareholder or to the corporation before outside parties could have the opportunity, while those who wished to rebuild could do so. If those who did later concluded that the lack of rebuilding reversed their desire to stay, they could sell their (more valuable now) shares back to other shareholders or the corporation.

Legislation could create simple, inexpensive ways for these corporations to form, and to create financial vehicles for these corporations to use to buy up land shareholders wished to sell. Setting up agencies to do so would create far less bureaucracy and cost than the existing Road Home program (already garnering its share of criticism for inefficiency), with a greater incentive for the land actually to be redeveloped, as incentives for combining ownership make it more easily marketable to larger developers.

The key, of course, is not to create large bureaucracy such as with the Road Home program, but to encourage private interests to organize themselves by elevating their potential profit, pecuniary or otherwise, from partaking of this regime with government-sponsored incentives. Such a plan would maximize redevelopment that occurs and increase the return to individuals whose lives were tremendously disrupted by Hurricane Katrina, either in getting on with their lives somewhere else, or, for those who return, in having greater control to shape their neighborhoods.


Instead of blaming, Blanco needs real redesigning

It’s been a recurring theme of Gov. Kathleen Blanco’s tenure in office – blame somebody or something else for the deficiencies of herself or her administration. She parades this again when it comes to the “redesign” of Louisiana’s post-disaster health care system.

We’ve seen it on reconstructing the state. We’ve seen it on housing rebuilding. Now we get an eyeful of Blanco complaining about how the federal government gives her “mixed signals” on the restructuring of state health care, beginning with New Orleans.

But the only way that perception has any credibility is if the federal government failed to communicate to Blanco, state Health and Hospitals Secretary Fred Cerise, and (some, but not all of the members of) her panel created to study the issue using the English language. Reading news accounts over the past month their message is clear and, as a public service to Blanco just in case she has trouble with English, I will spell it out for her as I understand it, just from media reports: