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| Economy |
| How Are Those Government Subsidies for HealthCare and Education Working Out? |
| 2011-11-02 |
| When President Obama announced changes to rules on repaying college student loans, he said his goal was to ease the financial burden of getting a degree. "We've made it a priority to make college more affordable, reduce your student loan debt," he told students in Denver, unveiling his plans to make it easier for college graduates to get out from under their debt obligations. But if the history of college financial aid (and other government attempts to protect consumers from costs) is any guide, Obama's plan will likely backfire. Over the past three decades, financial aid has rocketed up 438% after inflation, says the College Board. That's largely due to huge hikes in more than a dozen federal grant and loan programs. "By providing aid and subsidized loans, the government is trying to protect students, but the effect is perverse," said Jane Shaw, president of the John W. Pope Center for Higher Education Policy in Raleigh, N.C. "They increase demand and enable colleges to hike tuitions virtually without restraint." An increase in the average student loan of $1 was associated with net tuition that's 93 cents higher at public schools and 55 cents higher at private schools, according to Andrew Gillen of the Center for College Affordability and Productivity. A 2007 study by University of Oregon economists concluded that colleges "tend to absorb most federal student aid by increasing their tuition revenue," according to the Chronicle of Higher Education. That doesnÂ’t necessarily mean students are getting a better education. From 1993 to 2007, per-student spending on administration climbed twice as fast as spending on instruction, a Goldwater Institute study found. The same phenomenon has occurred in health care, where government for decades has worked to shield consumers from direct costs, fueling health care cost inflation by encouraging demand and giving doctors and hospitals greater license to raise prices. Today, the government pays directly for over 44% of care, according to data compiled by the Centers for Medicare and Medicaid Services. And federal tax policy encourages generous employer-provided insurance by deducting premium costs from taxable income, a $100 billion-plus annual subsidy, according to the Joint Committee on Taxation. The 2,156 state benefit mandates further insulate consumers from the direct costs. Consumers now pay just 12% of the nation's health care tab out of pocket vs. nearly half in 1960, fueling much of the nation's health care inflationary spiral. "Providers aren't competing for business based on price," said John Goodman, president of the Dallas-based National Center for Policy Analysis. "And if they're not competing on price, they have no reason to lower cost." And education and health care fixes almost always add to these existing subsidies, providing still more inflationary fuel. ObamaCare will further cut out-of-pocket spending by expanding insurance coverage and requiring more generous benefits. When it comes to college education, the last three presidents all passed huge increases in aid,with each boasting that theirs was the biggest investment in college "since the G.I. Bill." Shaw said, "Government will keep doing what it's doing until there's a broad understanding by the public of the adverse effects produced by these attempts to shield consumers from costs." |
| Posted by:Beavis |
| #12 My firm is encouraging enrollment in high-deductible health care savings account plans this year. I've been in one since the gummint started allowing regular employees to do so. I have a large deductible, so pay for any healthcare and/or medicines I need, and have the fall-back insurance (with a limit of what I would have to pay out-of-pocket) for hospitalization. Besides the deduction for the insurance and for the medical savings account (from which I can be reimbursed for health care costs) from each paycheck, I also put aside a little bit of money each paycheck to pay for medical care. I've put in for reimbursement once - when I had a checkup, eye doctor visit and new glasses (mine have to be pretty expensive), and a shingles vaccination in one year, all of which (along with bufferin and some other OTC stuff) came to around $800. Other than that, I'm letting the medical savings account build up in case I need it later. That's how it's supposed to work. I pay for it, and know what it actually costs (surprise! it's not $20), so I don't run to the doctor (or the hospital) every time I have a hangnail. |
| Posted by: Barbara 2011-11-02 22:49 |
| #11 The same phenomenon has occurred in health care, where government for decades has worked to shield consumers from direct costs, fueling health care cost inflation by encouraging demand and giving doctors and hospitals greater license to raise prices. They've left out regulation. Imagine a health care plan trying to comply with all fifty states, plus federal. |
| Posted by: Pappy 2011-11-02 22:13 |
| #10 And some of those with junk degrees will make it onto future faculties. |
| Posted by: lotp 2011-11-02 20:31 |
| #9 Plus the subsidies have created an army of unemployables with junk degrees. For me as a university professor, that's the worst part about this. Yes, I dislike excessive numbers of administrators, and I despair sometimes of what the academy does to enforce orthodoxy. But to encourage young people to borrow large amounts of money to study subjects that won't help them into a productive career is madness. And it can't be excused by saying that it's all about 'self enlightenment' or 'personal fulfillment'. Those you do with your own money, not with someone else's. These are the excesses that will turn the public against us. |
| Posted by: Steve White 2011-11-02 18:04 |
| #8 Plus higher education subsidies are the worst kind of middle class welfare. Plus the subsidies have created an army of unemployables with junk degrees. |
| Posted by: phil_b 2011-11-02 17:39 |
| #7 "From 1993 to 2007, per-student spending on administration climbed twice as fast as spending on instruction, a Goldwater Institute study found." That is why our schools, both college and primary are so bloody expensive and don't produce any higher grades or quality learning than they did 20 years ago. Cut out most of the administrative costs (see regulation) and maybe we could get more education for our buck. |
| Posted by: DarthVader 2011-11-02 17:03 |
| #6 "We know that, they know that. So why do they lie?" They can't help it, BP - it's as natural to them as breathing. And just as important. >:-( |
| Posted by: Barbara 2011-11-02 16:15 |
| #5 IIRC, the plan was that a potential student had to serve two years in a federal civil service role, the civic version of the military, to qualify for that student loan and/or gift. I think the current form is to get the fed loan and pay it back at low rate, cheaper rates if working at a fed approved, remaining balance waived after x years. Not sure how that would work, garnish paycheck I guess. |
| Posted by: swksvolFF 2011-11-02 15:35 |
| #4 My first reaction about the possibility that our government would be the agent for student loans was the following: "No, you can't get the loan unless you take the specific courses we've laid out for you. Gender Studies, White Guilt, American Imperialism,..." Add whatever lefty course list you may have. Still feel the same way as I did at first. |
| Posted by: Mullah Richard 2011-11-02 15:13 |
| #3 Just keep handing out OPM, Obean. As the experts predicted long ago, people tend to accept free money. College used to be relatively affordable. Why can't the tuition from a class size of 40 kids or so pay for the professor and a whole heck of a lot more? |
| Posted by: gorb 2011-11-02 14:25 |
| #2 "By providing aid and subsidized loans, the government is trying to protect students, but the effect is perverse," said Jane Shaw, president of the John W. Pope Center for Higher Education Policy in Raleigh, N.C. "They increase demand and enable colleges to hike tuitions virtually without restraint." I've been telling people this for several years now. Same thing happened in the housing market which drove the 2008 financial crisis. Same thing will happen to healthcare or already is. Government steps in under the guise of "helping" or "the common good" and totally distorts the market things go out of whack. It's not rocket science and it doesn't take a genius to understand how it happens. Which can only mean one thing: the politicians (Nancy Pelosi, Barney Frank, Harry Reid, et al.) who promote this "well-intentioned" but ultimately harmful programs are either felony stupid or are simply buying votes to stay in power. I can't decide which is worse. |
| Posted by: eltoroverde 2011-11-02 13:53 |
| #1 Subsidy makes something more expensive, not cheaper. We know that, they know that. So why do they lie? |
| Posted by: Bright Pebbles 2011-11-02 13:28 |