Grassroot Perspective – Aug. 5, 2003-Big Business Wants Universal Coverage; Manipulating Numbers by the Health Care Establishment; Tufts Health Plan Committed to Consumer Driven Plan; Boston Employers Trying Out Consumer Driven Plans; Race, Poverty and Personal Injury Awards; The D.C. Teachers' Union Scandal: A Commentary

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“Dick Rowland Image”

”Shoots (News, Views and Quotes)”


– Big Business Wants Universal Coverage

Kent Hoover had an article in a number of local “Business
Journals” headlined “Big Businesses Call for Universal
Health Care Coverage.” The article says the National
Coalition on Health Care is predicting “the average
premium for family coverage in employer-sponsored plans
will reach $14,545 in 2006,” and the numbers of uninsured
will be 54 million by then. SBC president Bill Daley
is quoted as saying, “The present course we are following
is unsustainable.” The article notes that though the
group hasn’t settled on prescriptions, it has agreed
on five principles:

*Health Insurance For All

*Improved Quality of Care

*Controlling Total System Costs and Stopping Cost

*Creating a More Viable and Equitable Mechanism for
Financing, and

*Simplified Administration

While the prescriptions have not been specified, the
article provides a hint in the form of a quote from
Dick Baird, the CEO of Dutch-owned Giant Foods. He
says, “All we ask for, and what we need, is a ‘level
playing field’ where every employer pays their fair
share, and where a company’s competitive advantage
is achieved by means other than avoiding the provision
of medical care coverage and shifting the costs towards
those companies who do provide that coverage.” Translation
– “We’ve caved in to union demands for ever-richer
benefits for decades, so now we want the government
to mandate the same burden on our competitors.”

– Manipulating Numbers by the Health Care Establishment

Well, now. This was fairly provocative, so I decided
to dig a little deeper and look up this report by the
National Coalition on Health Care titled “Charting
the Cost of Inaction.” You will surely be shocked —
shocked! — to learn that the numbers are cleverly manipulated
to achieve a pre-determined conclusion. The report
uses 1998 as the beginning point of a “trend” in premium
changes, and compares that trend to 1993, “when there
was widespread agreement that the health care system
was in crisis.” I don’t have premium changes handy,
but I do have rates of increase of National Health
Expenditures (NHE), which are a more reliable measure
of health care inflation since changes in premium costs
fail to account for changes in benefits. As it turns
out, 1998 was close to an historical low point in health
inflation (at 5.4 percent), exceeded only by 1997 (at 4.9 percent),
and 1996 (at 5.0 percent). These years of the mid-1990s are
a huge anomaly, since at no time between 1961 and 1994
was the growth in NHE less than 7.0 percent, and often exceeded
10 percent. The authors may believe the system was in “crisis”
in 1993, but at 7.4 percent, 1993 had the second lowest rate
of increase up to that point, exceeded only by 1986
at 7.2 percent. In fact 1993 was the fifth year in a row that
the rate of increase dropped (from 12.1 percent in 1988, to
11.8 percent in 1989, 11.8 percent in 1990, 9.5 percent in 1991, 8.6 percent in
1992). It is intellectually dishonest to project future
trends by selecting as a starting point an historically
low point.

That is not to dismiss the concern about the growing
costs of coverage. But a straight-line projection from
the past few years tells us next to nothing about the
future. Later in the discussion, the report drops its
reliance on projected premium trends, relying instead
on CMS projections of NHE. They compare these projections
to an estimate of “how much the United States would
spend on health care: if total expenditures grew at
a rate of (population growth and general inflation),”
and conclude we could save $418 billion in three years.
This is what they say “an effective cost containment
strategy could potentially save.” Yikes! Can you imagine
the draconian rationing that would be involved in holding
health care costs down to the rate of population growth
and general inflation? That completely disregards the
aging of the population or any of the other uncontrollable
factors that contribute to rising health care spending.
And somehow, they suggest, having universal coverage
will help lower the rate of health care spending.

So, who are the luminaries who have endorsed this report? In addition to the big corporate fat cats who are
hoping for a taxpayer subsidy there are the Communications
Workers (get the SBC connection?) and AARP. The web
site also lists a host of prestigious “individual supporters”
including former Presidents Jimmy Carter, George HW
Bush, and Gerald Ford, former Congressional heavyweights
like George Mitchell and Robert Michel, much of the
academic health care establishment, and such liberal
intellectuals as Henry Aaron, Marcia Angell, Arnold
Relman, and Uwe Reinhardt. Here is the real Ruling
Class of American health care. I can’t wait to find
out what solutions they have up their sleeves for us

– Tufts Health Plan Committed to Consumer Driven Plan

Meanwhile, the “Boston Globe” reports that Tufts Health
Plan is solidly committed to a consumer driven model.
Reporter Charles Stein quotes Tufts Sr. VP Jon Kingsdale
as saying, “I think potentially what we are talking
about is as radical in innovation as HMOs were 30 years
ago.” Tufts will cover hospital care and drugs for
chronic conditions, but use an MSA-type arrangement
for more discretionary spending. The article notes
that the product design is taken from South Africa’s
Discovery (and its American affiliate Destiny) and
says company president Adrian Gore “has reams of charts
that show his plan slows the growth of health spending
but doesn’t discourage people from seeking preventive
care. Compared to people covered by traditional insurance,
Gore’s customers spend less on dermatology, drugs and
physical therapy but get more Pap smears, mammograms,
and cholesterol screenings.” The article quotes Brandeis’
Stuart Altman (one of the “individual supporters” of
NCHC) as saying, “It will be a niche product. People
are too risk averse to go for it.” Mr. Stein rebuts,
“I don’t agree. The plan will catch on because employers
are desperate for something that might work.”
SOURCE: The article was published on May 25, 2003.
There is a fee for accessing it through the archives
at but I’ll wager that Mr. Stein
would send it to you if you e-mail him at

– Boston Employers Trying Out Consumer Driven Plans

Also in Boston, Mary Pratt writes that employers are
responding to rising health costs in a number of ways.
“Some employers are passing on more of the rising costs
to employees, while others are dropping the level of
benefits being offered in order to keep costs in check.
And a relatively small number are adopting a plan model
designed to expose employees to the true cost of care.”
She cites a local broker who had “three clients purchase
new consumer-driven plans, which tout savings of about
15 percent for employers.” She adds, “Many of the major
health insurance companies have either introduced or
are now rolling out versions of these plans to help
employers cope with the escalating premiums.”

Above articles are quoted from The Galen Institute, Consumer Choice
Matters #18

– Race, Poverty and Personal Injury Awards

For years lawyers have talked about “the Bronx effect,” the idea that
juries from high-poverty areas with large minority populations favor
injured plaintiffs. But anecdotes aside, little hard evidence has
been brought forward one way or the other. The paucity of analysis on
the role of race and poverty in the American tort system — and
growing interest in tort reform — makes a new study published in the
JOURNAL OF LEGAL STUDIES (v. 32 (1), Jan. 2003) all the more

According to the study’s authors, economists Eric Helland and
Alexander Tabarrok, research director of The Independent Institute,
tort awards are significantly higher in counties and jury districts
that have high black and Hispanic populations and poverty rates.

Among Helland and Tabarrok’s findings:

*As white poverty increases, jury awards decrease; but as black poverty increases, jury awards increase.

*A 1 percent increase in the black poverty rate is associated with a three to 10 percent increase in the average size of a personal injury award.

*A 1 percent increase in the Hispanic poverty rate is associated with a 7 percent increase in the average size of a personal injury award.

*Forum shopping for high-poverty minority counties could raise awards by hundreds of thousands of dollars.

See “Race, Poverty, and American Tort Awards: Evidence from Three
Datasets,” by Eric Helland and Alexander Tabarrok
(Requires university subscription to the Journal of Legal Studies).
(Scroll down for link to working paper pdf.)

Also see:

“Home Cooking a Class Action,” by Alexander T. Tabarrok (5/5/02)

The Independent Institute archive on litigation

Above article is quoted from The Independent Institute, The Lighthouse
June 2, 2003

”Roots (Food for Thought)”

– The D.C. Teachers’ Union Scandal: A Commentary

By Mike Antonucci

Mike Antonucci is the director of the Education Intelligence Agency,
which conducts public education research, analysis and investigations.
His work on the teachers’ unions has appeared in The Wall Street
Journal, Forbes, Investor’s Business Daily, The American Enterpise and
many other periodicals.

The District of Columbia public schools have a unique distinction: as
measured by the National Assessment of Educational Progress (NAEP)
tests, they rank last in math and reading for both fourth and eighth
grades … by a wide margin. These scores might be explained by a large
racial/ethnic minority enrollment, except the DC Public Schools still
rank last when the scores are controlled for race and ethnicity. They
might be explained by the fact that all of DC’s schools are inner-city
schools, except the DC Public Schools still rank last when the scores
are controlled for location.

They might be explained by the poverty suffered by many of the
District’s students, except the DC Public Schools still rank last when
the scores are controlled for income.

But the DC Public Schools do not rank at the bottom of every category.
The district ranks as one of the highest in the nation in spending with
a jawdropping $13,525 — nearly $2,500 more per-student than second-place
New York.

The average DC teacher made $48,704 last year, good enough for 7th in
the nation. But this amount is reduced by about 1.5 percent because of
the dues each teacher pays to the Washington Teachers Union (WTU).

During the summer of 2002, these teachers noticed something seriously
wrong with their paychecks. Instead of a deduction of $16 for union
dues, there was a deduction of $160. What seemed to be a simple clerical
error turned out to be the first crack in a 7-year-old conspiracy to
rob and defraud the District’s union members. Before long, three federal
agencies were investigating the misappropriation of more than $5 million
in dues.

When the mistaken $160 deduction was brought to the attention of WTU
President Barbara Bullock, she blamed the error on the district payroll
department. But rather than immediately refund the overpayment, Bullock
created a procedure by which the money would only be refunded to
teachers who requested it in writing. The rest would have the overage
applied to future dues. What the teachers didn’t know is that Bullock
was making a desperate attempt to cover up wholesale theft from the
union’s treasury.

For more than 18 months, WTU had failed to forward national dues
payments to its parent organization, the American Federation of Teachers
(AFT). AFT had long indulged this tardiness, but ultimately demanded
Bullock pay the bill or face the consequences. After the $160 “mistake,”
Bullock paid the national dues in full.

Unfortunately for Bullock, her balloon payment to AFT coincided with
complaints about the dues overcharge by WTU members reaching AFT
headquarters. Putting two and two together, AFT decided to audit WTU’s
books, something it had not done for years, though AFT is supposed to
audit its local affiliates regularly. AFT auditors discovered theft so
brazen they immediately turned their findings over to the U.S.
Attorney’s office. Bullock and several others were forced to resign or
were fired.

The fallout

After a lengthy investigation by the FBI, the IRS, the U.S. Department
of Labor and the District of Columbia Inspector General, federal
officials raided the homes and offices of Bullock, former treasurer
James Baxter and Bullock’s assistant Gwendolyn Hemphill. The list of
booty seized read, in the words of one reporter, “like the manifest of a
pirate ship.” FBI agents seized $500,000 worth of custom-made clothing,
a 288-piece antique Tiffany sterling silver set, a $6,800 ice bucket,
furs, alligator shoes, jewelry, artwork, wine, wigs, a 50″ plasma
television, computer equipment and an unregistered double-barrel shotgun
— all of which was evidently purchased with union dues. AFT subsequently
filed a racketeering lawsuit against the former officials, charging an
illegal diversion of at least $5 million in member dues. The extent of
the larceny is striking when considered against WTU’s annual budget of
$4.2 million. “How could such an allegedly massive misappropriation of
union funds occur over such a long period of time and under the noses of
so many people, including the union’s board of directors, the union’s
members and the American Federation of Teachers, which is the parent
organization?” is the parent organization?” asked the editors of The
Washington Post.

Everyone, from the AFT to the WTU vice president to the executive board
and staff, all claim to have had no knowledge of the massive spending.
However, at the same time, health care premiums on behalf of retirees
went unpaid, staff pension fund contributions went unpaid, rent and
utilities went unpaid, dues reimbursements to site reps never happened
and payroll taxes were paid late.

The FBI reviewed scores of union documents, and
discovered that meeting minutes, tax returns and Labor Department
disclosure forms contained no mention of the profligate spending. The
WTU treasurer and the outside accountant falsified the IRS and Labor
Department reports they prepared. The extent of the scandal was so great
that it created that rarest of events: outrage from the union’s
rank-and-file members. A grassroots movement emerged to dissolve the WTU
executive board and hold new elections. But days before a board meeting
that might have sanctioned this revolution, the AFT stepped in –
suspending the WTU constitution and appointing a hand-picked
administrator from AFT headquarters to oversee WTU. “It’s a culture that
is just unbelievable – of financial secrecy, of manipulation of
information,” was how one union activist described the atmosphere at WTU
headquarters to The Washington Post. “The problem is that everybody just
let it happen,” he added.

A system of misinformation

While theft on the scale of the WTU officers is rare,
the culture of financial secrecy and manipulation of information is all
too common among teachers’ unions. Members who ask too many questions
about union finances are treated with suspicion. They often receive
vague answers (spending for “organizational outreach” or “advocacy” is
subject to flexible definitions).Public disclosure laws are lax and
infrequently enforced. The U.S. Department of Labor claims that nearly
59 percent of America’s unions failed even to file their required
disclosure reports on time in 2001.

New efforts to demand greater accountability of union
spending are meeting with stiff resistance. The Labor Department
recently ruled that nearly all of the state affiliates of the National
Education Association (NEA) should be submitting annual financial
disclosure reports. The union’s reaction was to file suit against the
Labor Department, claiming the regulation was “unfair” and “motivated by
an ill-will toward unions in general, and NEA and its affiliates in

Teachers who are dissatisfied with their union have few options. They
can resign, but “agency fee” laws require them to support the union
financially anyway. The collective bargaining agreement forbids them
from negotiating on their own behalf, and exclusivity provisions prevent
them from seeking other representation. Even worse, antitrust laws do
not apply to labor unions. A “partnership agreement” between the AFT and
the NEA effectively thwarts any attempt even to move from one major
union to the other. Corruption can occur anywhere, but monopolies make
it much easier for corruption to go undetected and unpunished. Once all
the rhetoric is stripped away, teachers are engaged in a commercial
relationship with their unions. Unless they can take their business
elsewhere, teachers have no leverage to ensure they receive the most
value for the dollars they spend … or even that those dollars aren’t
being spent on alligator shoes. A new proposal by President Bush would
use $75 million in new funds to support a school choice pilot program in
the District of Columbia. Parents whose income falls below the poverty
line would get up to $5,000 in vouchers to send their children to the
school of their choice. This proposal would provide some welcome relief
to parents who are tired of their children receiving a substandard
education at Tiffany prices. If it succeeds, many DC teachers would
follow their students, exercising their own school choice. Such an
exodus of the union’s “consumers” would more effectively police union
spending and end corruption than any government regulation. ?

Mike Antonucci’s e-mail address is

Above article is quoted from Milton & Rose Friedman Foundation, The
School Choice April 2003

”Evergreen (Today’s Quotes)”

“A committee is a group of people who individually can do nothing but
together can decide that nothing can be done.” — Fred Allen

“Office-holders should confine themselves within their respectice
constitutional spheres, avoiding in the exercise of the powers of one
department to encroach upon another. The spirit of encroachment tends to
consolidate the powers of all the departments in one, and thus to
create, whatever the form of government, a real despotism.” — George
Washington, Farewell Address [September 19, 1796]

”’Edited by Richard O. Rowland, president of Grassroot Institute of Hawaii, 1314 S. King Street, Suite 1163, Honolulu, HI 96814. Phone/fax is 808-591-9193, cell phone is 808-864-1776. Send him an email at:”’ ”’See the Web site at:”’