We simply spend too much. The taxes we all must pay to support this bloated 2018 RI budget will continue to drag down our state

Analysis: Center Slams 2018 RI Budget as Deceptive, Not a Game-Changer

$692 million increase in spending over past two years
Center demands fulfillment of promise to cut sales tax

With no major reforms and by capitulating to the progressive agenda, the proposed 2018 state budget will become even more destructive for the people of Rhode Island. Despite disingenuous claims that no broad-based taxes were imposed and that spending has been cut, Ocean Staters will once again bear increased burdens to pay for the pet-projects of political leaders and advocacy extremists.

Conspicuously absent from public discussion is that the 2018 budget contains $32.2 million in new Internet taxes ($15 million from Amazon alone); this in addition to millions more in new cigarette taxes, all of which will be paid for by Rhode Island families and businesses. These tax increases outpace the proposed car tax cuts, as the proposed budget will increase state general fund spending by over $67 million.

“We simply spend too much. The taxes we all must pay to support this bloated budget will continue to drag down our state. Unlike the town of East Greenwich, which bravely cut actual year-to-year spending in its recent budget so as to avoid new tax hikes, this state budget will once again include tax increases and higher spending,” commented Mike Stenhouse, CEO for the Center. “Working class Rhode Islanders do not feel that heralding economic progress because of continued handouts to wealthy special interests will do anything to enhance their ability to move up the income ladder.”

The Center also maintains that state politicians are breaking a promise made to the people of Rhode Island to cut the sales tax rate. In addition to paying its already high 7.0% brick-and-mortar sales tax rate, Rhode Islanders in recent years have also been subjected to a new “use’ tax on our tax forms; a way to pay taxes on presumed out-of-state and internet purchases. Legislation was passed a few years ago in Rhode Island, whereby if the federal government imposed an internet sales tax mandate, our state would cut its sales tax rate to 6.5%. Now, with the state of Rhode Island aggressively collecting internet sales taxes from resident families and businesses, to the tune of over $30 million per year, it is time for the State to honor the spirit of the law and fulfill its promise to reduce the sales tax rate.

In a state already saddled with the 50th ranked business climate, 48th on the Jobs & Opportunity Index (JOI), and 45th on the Family Prosperity Index (FPI), when combined with other legislation expected to pass this session, the 2018 budget has no game-changing tax or regulatory reforms that would substantially improve Rhode Island’s weakened competitive status. In fact, it appears as if the progressive left will achieve at least three of its four job-killing “fair shot” agenda items, which will likely make these dismal national rankings even worse.

Rhode Island spends taxpayer money at a significantly higher rate — at $9,276 per capita, compared with $8,604 for Massachusetts and, more starkly, $4,097 for New Hampshire. These two states ranks significantly higher than Rhode Island on the above cited national indexes. Further, on net, high spending and high taxes have driven out of state 11 towns’ worth of population, or over 80,000 Rhode Islanders, over the past 12 years.

There are also other deceptions put forth by political leaders. In what is become an annual pattern, a few strategies for apparent misinformation are coming into focus. First, the annual June baseline budget is adopted at a lower level, then revised upward during the mid-year budget conferences — a stealth cover for spending increases. Just this year, the 2017 budget is on track to be revised upward by $265 million, largely under the radar. That is on top of the increase of the originally enacted 2017 budget of $434 million over actual 2016 spending, for a whopping 8% increase in two stages.

Rhode Islanders can have no confidence that the same process will not be followed with the budget for fiscal year 2018, especially with gimmicks like $25 million in “undistributed savings.”

The second disingenuous claim is that certain spending programs have been “cut”, where in reality there is more spending in that area (e.g., as compared to the Governor’s original free-tuition program); or that cuts have been “restored” to politically sensitive constituents, such as Medicaid payments to hospitals and other providers. In fact, spending in these areas continues to rise. No cuts ever occurred. Instead, some of the governor’s proposed increases have been reduced to smaller increases.

Third, is a process referred to as “scooping.” Scooping is potentially a deceptive practice as it moves off-budget funding from specific state agencies or quasi-publics (e.g., $5 million from the Narragansett Bay Commission) into the general fund. Over time, these agencies may seek to recoup lost funds by shifting the burden to municipal taxpayers or other sources via increased fees (e.g., sewer taxes).

As with all budgets and legislative sessions that the Center has analyzed since 2012, there are more negative provisions than positive provisions:

On the negative side, with spending on the rise once again: increased Internet and cigarette taxes, increased minimum wage mandates that depress job growth, increased renewable energy mandates that increase energy costs, a likely paid-time-off mandate that further deteriorates the business climate, free college tuition handouts, enshrined healthcare mandates that restrict patient choices, scooping of vehicle registration fees, more state government workers, and the continued budget for targeted corporate welfare incentives.

On the positive side are: limited car tax cuts, decreased corporate welfare spending, and prioritized pro-family spending programs such as free RIPTA passes for low-income individuals and increases spending for Davies Career and Technical High School, both of which would be unambiguously positive if the budget were itself flat or going down.

Stenhouse to Attend White House Meeting, Part of Two Day Conference on the President's Reform Plans

Stenhouse to Attend Private Meeting at the White House to Review President’s Tax Reform Plan

STATEMENT FOR IMMEDIATE RELEASE
June 8, 2017

Stenhouse to Attend White House Meeting

Part of Two Day Conference on the President’s Reform Plans

Providence, RI – Mike Stenhouse, CEO for the RI Center for Freedom & Prosperity, will attend a two-day conference this week in Washington, D.C., which includes a private meeting at the White House on Friday morning.

The conference, hosted by Grover Norquist’s D.C. based Americans for Tax Reform (ATR), will update about two dozen think-tank and coalition leaders from across the country with advance details on President Trump’s soon to be released regulatory and tax reform proposals.

“In order to evaluate the impact of the proposed tax and regulatory cuts on Rhode Island families and businesses, I am thrilled to learn about the President’s programs, first-hand, from his team,” said Stenhouse, who expects to be briefed by White House staff as well as some of the President’s economic advisors . “Just as our Center was briefed earlier this year on the truths and myths about the pending federal healthcare reform by the AHCA legislation’s actual authors, I expect to be in a strong position to help our state craft related reform policies in light of a potential major shift in the federal tax and regulatory codes, as well as to counter uninformed, second-hand fear-mongering by local opponents of reform.”

Do you see RI as providing opportunities for prosperity? Families are fleeing from our borders. The equivalent of 11 cities and towns wiped off map as people vote with their feet.

Eleven Towns Wiped Off Map as RI ranks 45th on 2017 Family Prosperity Index

Eleven Towns Could be Wiped Off Rhode Island’s Map As State Ranks 45th Nationally on Updated 2017 Family Prosperity Index

 

Crippling out-migration problem demands a new policy approach. Perhaps nothing is more telling about whether Americans see a state as providing sufficient opportunities for prosperity and a better quality of life than whether or not they are flocking to or fleeing from its borders. No other measure paints a more realistic picture of whether or not a particular state is an ideal place to raise a family or build a career than how people “vote with their feet.”

In this regard, Rhode Island is losing the state-to-state migration competition. Shockingly, since 2004, the State of Rhode Island has lost the equivalent population of 11 of its 39 cities and towns to out-migration. On net, over 80,000 more Rhode Island residents chose to leave our states than residents of other states chose to move here.

While America’s population grows, the Ocean State’s population remains stagnant because of such out-migration losses. Combined with the widely reported fact that the incomes of those coming to Rhode Island are lower than those leaving, Rhode Island’s overall tax base is on an ominous downward spiral. Some would call it a “death spiral.”

Out-migration losses are a contributing factor Rhode Island’s total labor force actually experiencing a decline in recent years. Although labor force decline is a negative factor, counter-intuitively, it has improved the state’s increasingly unreliable unemployment rate metric.

Strong families are the backbone to a free and thriving society. The root of this out-migration problem can best be captured by the Family Prosperity Index (FPI). As the most in-depth research on family well-being ever conducted, the FPI compiles 60 national indexes into 30 secondary categories as part of six major categories: Economics, Demographics, Family Self-Sufficiency, Family Structure, Family Culture, and Family Health.

This out-migration problem was highlighted in the Center’s original 2016 Rhode Island Family Prosperity Index report, where the Ocean State ranked a dismal 48th among all states.

In the updated 2017 FPI , while Rhode Island improved to 45th nationally, up three spots from 2016, the state suffers from a bottom-third ranking in five of six major categories and 16 of 30 secondary categories. The state ranked in the top-third in just six of the 30 secondary categories.

Despite this mild improvement, a more disturbing long-term trend is emerging. In the past five years, Rhode Island’s score in the important major category of Family Self-Sufficiency has declined by 9.8%. Over this same period, the Ocean State also saw declines in Family Structure, Family Health, and its overall FPI score, albeit with increased scores in Economics, Demographics, and Family Culture.

Combined with a separate measure that saddles Rhode Island with the worst-ranked business climate in the  nation, this one-two punch to the gut has been insurmountable hurdles for many Ocean State families and businesses to overcome.

Todd Sandahl family

Todd Sandahl and family

Todd Sandahl is one of those 80,000 individuals who felt compelled to make the difficult personal choice to uproot his family and move to another state that offered more financial security. An electrical engineer by trade, Sandahl couldn’t find meaningful employment in Rhode Island and became tired of his long commute to Massachusetts. He decided to pack his bags and head to Colorado for more opportunities, when he saw no future in the Ocean State.

FPI: a strategic roadmap. Rhode Islanders understand that better opportunities for prosperity can only be realized if more and better businesses create more and better jobs. Connecting the dots, it appears that Rhode Island’s poor opportunity for prosperity is a major reason why more people choose to leave our state than those who choose to come.

Rhode Island’s Family Prosperity Index not only highlights the state’s many specific problems, but the FPI can also be used as a roadmap to reverse these troubling trends. There is no single “silver-bullet” solution to the Ocean State’s many shortcomings. As it took hundreds of pieces of misguided legislation and regulation over recent decades to sink the state into a hole, it will take dozens, if not hundreds, of strategically aligned positive steps to pull us out.

Clearly, a new strategic policy direction is required for our state — a direction that the political class and civil society can largely agree upon. The high levels of taxation and regulation demanded by the state’s budget have led to the subsequent negative impacts on the business community and on family finances, as illustrated by Rhode Island’s out-migration losses. Yet the state’s political leaders continue to adhere to a misguided fealty to a budget that actually harms the very people they are sworn to serve. Indeed the state budget itself, and the policies that support it, could be considered to be the enemy of the people.

The FPI shows us the way. The major lesson of the original 2016 RI FPI report is that strong families lead to a strong economy, and vice versa. The clear, empirical evidence from a detailed analysis of reams of data from government and publicly available private sources confirms that a focus on pro-family outcomes, via policies that promote work and marriage, can lead to improved economic outcomes for the entire state.

By looking to improve each of the 60 FPI indexes, one at a time, the Ocean State can begin to turn its ship around. This focus will be at the core of the Center’s ongoing public policy advocacy and will be the primary mission of the recently formed RI Families Coalition.

 

Jobs & Opportunity Index: (Jobs April 2017)

Jobs & Opportunity Index (JOI), April 2017: Improvements May Reflect Sunny Estimates & Failing UHIP

Rhode Island experienced substantial improvement on the Job Opportunity Factor of the RI Center for Freedom & Prosperity’s Jobs & Opportunity Index (JOI), although the state’s overall rank remained the same. That improvement reflects positive quarterly data addressing alternative measures of unemployment (such as long-term unemployment and involuntary part-time work). The state also did well with a decrease in SNAP enrollees, which may be indicative of distribution problems, rather than a decrease in residents’ need for the service.

Eight of the 13 datapoints used for the index are newly updated. Employment was up 1,460 from the previously recorded number, while labor force rose 1,436. (This represents a continuation of an annual surge in these numbers that typically revised away.) RI-based jobs saw no change. Meanwhile, SNAP enrollment decreased for the second month in a row, by a huge 6,585, which may reflect problems the state has had distributing the benefit. Medicaid enrollment more than compensated, with an increase of 7,217. Regarding alternate employment measures, long-term unemployment was down 600 people, involuntary part-time employment was down 1,400, and marginally attached workers were down 1,300.

The first chart shows Rhode Island still in the last position in New England, 48th in the country. Three other New England states remained in their ranks, with New Hampshire 1st in the country, Maine 19th, and Connecticut 35th. Massachusetts and Vermont both moved up one slot, Massachusetts to 32nd and Vermont to 20th.

Jobs & Opportunity Index: Jobs April 2017 Race To First

The second chart shows the gap between Rhode Island and New England and the United States on JOI. Both gaps closed slightly. Switching to the official unemployment rate, Rhode Island made up some ground in New England but slipped slightly on a national scale.

Jobs & Opportunity Index: Jobs April 2017 Scores

Jobs & Opportunity Index: Jobs April 2017 Unemployment Rate

Results for the three underlying JOI factors were:

  • Job Outlook Factor (measuring optimism that adequate work is available): RI jumped six, to 29th.
  • Freedom Factor (measuring the level of work against reliance on welfare programs): RI remained at 42nd.
  • Prosperity Factor (measuring the financial motivation of income versus taxes): RI held at 46th.
For decades, Rhode Island state politicians have practiced allegiance to a budget that has failed its people; a budget that requires unhealthy levels of taxation and regulation. This, as opposed to the allegiance they are sworn to uphold to the people of Rhode Island.

Massive Deficits: The State’s Budget is the Enemy of the People

BACKGROUND:

Should the hopes, dreams, and aspirations of Rhode Island families be limited by an arbitrary, politically driven budget number at the bottom of a spreadsheet? Unfortunately, our state is now suffering the consequences of such an approach, dragged-down by the progressive-left’s big-spending agenda; as projected economic growth has not materialized, leaving the state with massive budget deficits.

Failure of Budget-Centric Apporoach. Yet, for decades, state politicians have practiced allegiance to a budget that has failed its people; a budget that requires unhealthy levels of taxation and regulation. This, as opposed to the allegiance they are sworn to uphold to the people of Rhode Island.

Despite the false hopes expressed by lawmakers based solely on a reduced unemployment rate, on broader measures, in 2016 the Ocean State suffered the worst business climate and the 48th rank in family prosperity in the nation. Furthermore, Rhode Island was the only state in New England to see its labor force decline in size in recent years, as hundreds of thousands of people have chosen to leave our state since 2004. This is not a recovery. The RI Center for Freedom & Prosperity maintains that the high levels of taxation and over-regulation imposed for the sake of the state budget are the primary culprit in causing this stagnant performance.

It should now be plainly clear that this progressive-left, big-spending, budget-centric approach is not working. Indeed, the state budget itself, could be considered the enemy of the people! Put another way, overspending by a government that primarily seeks to perpetuate and grow itself, actually works against the best-interests of the very people it is supposed to be serving. Instead of seeking to grow prosperity, government seeks to grow itself. This approach must end.

A battle of visions. The progressive-left vision measures compassion and progress by how many people are enrolled in — and become dependent upon — public assistance programs; and by how much money is thrown at a perceived problem. Conversely, the Center believes that Rhode Island families can improve their quality of life and increase their level self-sufficiency only if more and better businesses are free to create more and better jobs and if families can keep more of their hard-earned incomes!

To realize this latter vision — and for true prosperity to be realized — the size of government via budget spending must be cut, so that taxes can be decreased.

What is really in the best interests of Rhode Island families? Is dependence on an unreliable and inefficient government what people hope and strive for? Or, should it be the American dream; where promised freedoms and opportunities abound so that we can increase our own own personal wealth and quality of life?

Deficits: An Opportunity to Reverse Course. Rhode Island’s budget spending rises every year — far beyond the rate of inflation and population growth — as lawmakers are resistant to spending cuts, even when such cuts could lead to increased prosperity for its residents!  If phasing out the car tax and cutting the state sales tax to 3.0% would keep more money in the pockets of residents … and could create thousands of new jobs and better opportunities at the same time … why should any budget number stand in the way?

The state budget should be constructed to reflect the opportunities we want for our people; it should not be the tool to restrict those opportunities.

The nearly $134 million budget deficit presents a new opportunity for our state and a test for lawmakers to determine if they will be wise enough to begin to reverse this budget-centric trend, and move toward an approach that will free its families and business to become more self-sufficient. To bridge the gap, our Center urges lawmakers NOT to continue to seek to extract new revenues from the people they represent; instead we ask them to appreciate our state’s recent history lessons and cut spending instead.

BUDGET CUTS: Over $250 million previously identified

The RI Center for Freedom & Prosperity recommends that, to balance the 2018 state budget, spending cut must be implemented. Further, now is the exact time to consider even greater spending reductions so that bold, pro-growth tax cuts can benefit every Rhode Island resident and business. Only budget and tax cuts can spur the economic growth.

The obvious question then becomes: Where can be spending be trimmed without adversely affecting our people? Over recent years, the Center has put forth many specific ideas that can easily account for hundreds of millions of reductions to unnecessary spending items.

If there’s a will, there’s a way. In its 2014 Spotlight on $pending report, as well as in its 2013 recommendations on how to pay for sales tax reduction and in its 2015 PayGo policy brief on how to pay for bridge and road repairs without imposing new tolls, the Center has suggested many items for reduction or elimination.  Some of the numbers or programs may have changed in the years since, but the following examples (based on the former budget value) give an indication of what can be done:

  • $116 million in handouts. Legislative and Community grants; Workforce Board and Training grants; subsidies to film, television, motion pictures, and the arts industries; historic tax credits, etc.
  • $44 million in other corporate welfare. WAVE and other Brookings Institution-inspired economic development corporate subsidies and tax credits.
  • Up to $80 million in Medicaid and Social Services waste and fraud.
  • $22 million in government operations savings. Facilities management; Convention Center (net $15M annual operating loss; level fund this loss-leader while state arranges to sell), Corrections and inmate-related expenses, excessive administrative expenses, etc.
  • $30 million in personnel savings. Executive and Legislative branch staff, excessive overtime pay, non-essential departments and offices; etc.
  • $6 million in government overreach. UHIP contributions, pre-K and full-day kindergarten, Commerce Corp. administration, etc.
  • $8 million for shutdown of HealthSource RI. If the U.S. Congress passes its AHCA legislation, there will no longer be a need for a state-based exchange.

Additionally, newly adopted or proposed spending programs can also be reduced or eliminated.

  • Up to $35 million for free college tuition.
The Rhode Island Center For Freedom & Prosperity announced it has completed an advertising purchase for its second "Hey Dude" ad-spot, after its first spoof spot went viral on social media and earned a front-page Providence Journal headline.

Center Announces Radio & TV Advertising Buy for “Hey Dude 2” Spoof Campaign Against Paid-Time-Off & Progressive Agenda

FOR IMMEDIATE RELEASE: May 18, 2017

Center Purchases 128 Spots on Radio and Television Networks Across the State

Providence, RI – The Rhode Island Center for Freedom & Prosperity announced today it has completed an advertising purchase for its second “Hey Dude” ad-spot, after its first spoof spot went viral on social media and earned a front-page Providence Journal headline. Both spots can be found at RIFreedom.org/SaveRI.

128 ads will be run on four television and radio networks over a three week period, beginning May 22 and ending on June 9. Advertising purchase agreements have been signed by the Center with the following media entities:

  •  Cox Media (TV ads to run on Fox News Channel)
  •  iHeartMedia (radio ads to run on B101)
  •  630-WPRO radio
  •  1540-WADK radio

The ad-spot that will be run, the second in the Center’s “Hey Dude” series, portrays an up-beat full-time worker welcoming out-of-state shoppers in a dynamic state economy that boomed after lawmakers cut the sales tax and rejected the free-paid-time-off mandate and other anti-employer “no shot” legislative items. The young man earns enough to pay off his own college loans, even while his employer pays him a reasonable wage. He honestly loves his home state of Rhode Island for the real opportunities he’s been afforded.

This is opposed to the the negative vision of the progressive-left painted by the original “Hey Dude” spot. Featured in that spot is a stoned young woman, disinterested in her part-time job. Instead, she decides not to show up for work and laughs about how she can take advantage of recently passed laws that allow her to skip work without notice, still get paid a mandated high wage rate, and even have her college tuition paid for by the state… all while she sits at home and does nothing. She sarcastically wisecracks how great she thinks this is.

The ad-spots are part of a campaign by the Center and other groups to Save Rhode Island from the destructive policies being advanced by progressive left lawmakers. Both spots and other information can be found at RIFreedom.org/SaveRI.

Center Submits Written Testimony Regarding A Carbon Tax H5369

The following testimony was submitted by CEO Mike Stenhouse of the Rhode Island Center for Freedom & Prosperity to the RI House Committee on Finance on House Bill 5369. Click on the button below or here to view the testimony as a .pdf.

 

Justin Katz to Receive Prestigious "Lumen Gentium" Award from the Diocese of Providence

Center Congratulates its own Justin Katz for Lumen Gentium Religious Award

STATEMENT: May 16, 2017
For Immediate Release

Justin Katz to Receive Prestigious “Lumen Gentium” Award from the Diocese of Providence

Providence, RI — Referring to his work as “subtle evangelism,” Justin Katz will be honored this Wednesday evening by the Diocese of Providence with the fifth-annual “Lumen Gentium” award for communication of the Catholic faith at the Twin River Event Center in Lincoln, Rhode Island.. Translated as “Light of the Nations,” the prestigious award will be presented to Katz, who serves as research director for the RI Center for Freedom & Prosperity and editor of its online journalism website, The Ocean State Current.

“Articulating the beautiful logic and practical wisdom of a worldview rooted in Catholic belief and tradition can be the force of revelation,” said Katz. The award for Katz coincides with and complements the Center’s recent “family prosperity” initiative, which takes into account social and cultural issues, along with economic and demographic factors, when considering overall family well-being and public policy. Religiosity, or church attendance, is one of dozens of factors that make up the Family Prosperity Index, in which Rhode Island ranked a dismal 48th in 2016.

“We congratulate Justin for his great honor. It was his steadfast belief that social and religious issues cannot be separated from economic issues that led to the revelation that our Center should adopt the more holistic Family Prosperity Initiative as the central core of our policy advocacy moving forward,” said Mike Stenhouse, CEO for the Center.

Readers are encouraged to personally congratulate Justin Katz at @JustinKatzRI.

You're Hired! A Positive Vision for RI Stands In Contrast To The Progressive Agenda

Center Announces “Hey Dude 2” Spoof Ad Campaign Against Paid-Time-Off & Progressive Agenda

FOR IMMEDIATE RELEASE: May 15, 2017

Hey Dude Spot #2 Portrays Positive Vision for RI vs. Progressive’s Negative Vision in Original Spoof

Ad Buy Announced

Providence, RI – Imagine businesses popping-up all over the state with happy and gainfully employed workers.

This is the positive vision for Rhode Island put forth by the RI Center for Freedom & Prosperity, which today published its second “Hey Dude” ad-spot, after its first spoof spot went viral on social media and earned a front-page Providence Journal headline. Both spots can be found at RIFreedom.org/SaveRI.

The 2nd spot portrays an up-beat full-time worker welcoming out-of-state shoppers in a dynamic state economy that boomed after lawmakers cut the sales tax and rejected the free-paid-time-off mandate and other anti-employer “no shot” legislative items. The young man earns enough to pay off his own college loans, even while his employer pays him a reasonable wage. He honestly loves his home state of Rhode Island for the real opportunities he’s been afforded.

This is opposed to the the negative vision of the progressive-left painted by the original “Hey Dude” spot. Featured in that spot is a stoned young woman, disinterested in her part-time job. Instead, she decides not to show up for work and laughs about how she can take advantage of recently passed laws that allow her to skip work without notice, still get paid a mandated high wage rate, and even have her college tuition paid for by the state… all while she sits at home and does nothing. She sarcastically wisecracks how great she thinks this is.

The ad-spots are part of a campaign by the Center and other groups to Save Rhode Island from the destructive policies being advanced by progressive left lawmakers. Both spots and other information can be found at RIFreedom.org/SaveRI.

Advertising Buy. The Center also announced today that it has successfully raised enough funds to run the 2nd spot on multiple radio stations, on cable television, and on social media, likely beginning within a week. More details will be provided after all advertising purchases have been finalized. Social media ads for the original spot have been running for weeks.

Does Rhode Island want a transparent healthcare market that relies on the free-enterprise system and that enables providers and patients to craft and choose their own plans, driving down the price for consumers? How will the new federal healthcare law change they way Rhode Islanders receive care?

Is Rhode Island Prepared to Best Serve its Citizens Under the Shifting Federal Healthcare Landscape?

Click here for the press release

Center Calls on Lawmakers to Responsibly Consider AHCA Implications for RI; Desist with Fear-Mongering 

FOR IMMEDIATE RELEASE: May 9, 2017

AHCA: Center Calls on RI Lawmakers to be Responsibly Proactive vs. Reactive Fear-Mongering
Recommends Public Process to Consider State Options

Providence, RI – Healthcare is among the most personal and important issues any family may ever deal with. Similarly, evaluating the realities of the shifting federal and state health care landscapes is among the most important tasks our state lawmakers may ever consider.

Instead of irresponsibly spreading false fears about the proposed federal health care reforms, the Rhode Island Center for Freedom & Prosperity today calls on lawmakers to work together to establish a responsible process to evaluate – in between legislative sessions – the many options states may soon be empowered to make if some version of the American Health Care Act (AHCA) were to become law this summer.

“It is a gross public disservice for Rhode Island’s Governor and Congressional delegation to falsely claim that thousands of people will lose health coverage or may die in the streets due the new law,” warns Mike Stenhouse, CEO for the Center. “We need their leadership right now to ensure that serious discussions about serious issues will be systematically conducted by serious people. Enough of the shameful and unproductive partisan talking-points.”

In a policy brief it also issued today, the Center poses a number of question and vital decisions that Ocean State policymakers may soon be empowered to make to serve the best interests of the people of Rhode Island.

-What do we do with HealthSource RI?
-How should RI evolve its Medicaid program under a per capita cap? Should it apply a Medicaid block-grant waiver?
-Should RI opt for a federal waiver to set up its own high-risk pool?
-Should RI reduce mandated coverages and allow cross-state sales?
-Should work requirements, cost-sharing arrangements, or time limits be placed on Medicaid benefits?

“Assuming that some version of the AHCA will not become law until after our legislative session is closed for the year, it is important that Rhode Island political leaders put in place some kind of process so that before the 2018 session we can properly, fully, and publicly consider the new law and the many decisions we will have to make as a state,” concluded Stenhouse, who has participated in numerous national conference calls with some of the U.S. Congressman who actually wrote the House AHCA bill and with local health care experts such as Gary Alexander, former health and humans services director for the states of Rhode Island and Pennsylvania.

The policy brief also discusses myths about the AHCA, as well as some of its intended goals and features dealing with Medicaid and pre-existing conditions.

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OVERVIEW

If the final federal healthcare law that eventually emerges from Washington, D.C. is similar to the version that passed the House of Representatives in early May of 2017, Rhode Island lawmakers will find themselves in the middle of largely reshaped federal and state healthcare landscape. Soon they may be faced with multiple important questions; and they will also realize that they will be newly empowered to make state-specific decisions for the people of Rhode Island.

  • What do we do with HealthSourceRI?
  • Should RI opt for a Medicaid “block grant”?
  • How should RI evolve its Medicaid program under a per capita cap?
  • Should RI opt for a waiver to set up its own high-risk pool?
  • Should RI reduce mandated-coverage and allow cross-state sales?
  • Should work-requirements, cost-sharing arrangements, or time-limits be placed on Medicaid benefits for some populations?

Should Rhode Island have a transparent healthcare insurance market that relies on the free-enterprise system and that enables providers and patients to craft and choose their own plans, driving down the price for consumers? Or should we continue with a government-controlled market that mandates what individuals, employers and insurers must provide and buy, with continually increasing premiums and deductibles?

Are Rhode Island lawmakers and bureaucrats prepared to honestly analyze the new law and make decisions based on the best interest of our residents? Or will political ideology prevail, with high-cost, limited-option insurance plans as the result?

Given that any official signing into law of the new federal healthcare law will likely occur after Rhode Island’s 2017 legislative session is closed, the Center encourages state leaders to establish a firm process for the summer or fall, whereby these and other questions, as well as potential solutions that may be offered from all perspectives, can be publicly and fully debated.

BACKGROUND

Now that the U.S. House of Representatives has passed its American Health Care Act (AHCA), it is likely that another major federal healthcare reform will eventually be signed into law out of Washington, D.C.  and in state capitols.

The question for Rhode Island, and for all states, is whether or not we are ready to take advantage of the new federal healthcare  law to best serve the healthcare interests of our residents.

The answer depends on what we think really is in people’s best interests.

Do we believe that the goal should be to maximize enrollment Medicaid and limited other government-mandated and subsidized insurance programs? Or should the goal be to offer as many Ocean Staters as possible, the most options as possible via affordable and higher-quality private insurance.

Should Rhode Island measure compassion simply by measuring the number of people enrolled in government insurance? Since the passage of ObamaCare, many people have raised legitimate concerns that simply having an insurance card does not always translate in health care accesss. For example, with its Medicaid expansion straining doctors’ schedules, many of the most medically needy have experienced unbearable wait times, sub-standard care, or simply suffered mismanagement by the government.

ObamaCare was premised on the government-centric model; it distorted the insurance market with artificial product mandates and forced purchasing; and states had little control or flexibility over their insurance markets.

Conversely, the Republicans’ American Health Care Act is premised more on the patient-centric model. It seeks to restore many market forces and normalize insurance offerings from which consumers will be free to choose. Under the AHCA, states may have significant latitude even as they will have to make multiple decisions when it comes determining how healthcare insurance will be offered within their borders.

The Center believes that Rhode Islanders should be able to choose their own plans and doctors, not those mandated by the federal or state government.

The differences between the ObamaCare and the AHCA models represent a significant shift in thinking, thinking that may be difficult for our government-focused political class to get its head around. But new thinking must take place if our state is to maximize benefits for Rhode Islanders. Rhode Island officials must not stick their heads in the sand and wish it wasn’t so; they must honestly seek to understand the new federal law and openly and rigorously discuss the options soon to be available to them.

Given that the final AHCA bill from Washington will not be signed into law until after Rhode Island’s 2017 legislative session has closed, it is appropriate to ask if Rhode Island lawmakers have put in place a process to evaluate and make these vital decisions.

The Center is concerned that, without such an open and transparent process, Rhode Island will either rush into decisions when its legislature reconvenes in 2018 or will make decisions behind closed doors, with a focus  only on the same government-controlled options that created insurance-market disruptions in the first place.

The Center years ago accurately predicted the UHIP debacle and warned about the lack of coverage, rising premiums, exploding Medicaid rolls, and high budgetary-cost problems that have subsequently been caused by ObamaCare and its HealthSourceIRI state exchange. We now strongly urges state lawmakers to put in place an open and systematic process that can evaluate the new federal healthcare law and how Rhode Island should best respond. A process that appropriately debates all points-of-view, dispenses with fear-mongering myths, and that puts the interests of Rhode Islanders ahead of any philosophical agenda.

The American Health Care Act – Looking Ahead

While the final AHCA legislation will likely include significant modifications from the current House version, a number of principles and features are not likely to change.

Our RI Center for Freedom & Prosperity has participated in multiple recent conference calls with national healthcare experts and with the actual lawmakers who have written the AHCA legislation and has conferred with local health and human services experts. Our Center has a clear understanding of the goals of the AHCA, what major components will be included and will not be included, and how to make it work best for Rhode Islanders.

ObamaCare is not sustainable. While more Americans are technically covered, the costs have been enormous across the board. Insurance buyers are facing rapidly increasing premiums and deductibles; federal and state taxpayers are paying more and more into an ever-deepening money-pit; insurers are losing money and are rapidly dropping out of the system, leaving consumers with far too few choices. The AHCA reform would stop forcing Americans to buy insurance they can’t afford to use. In Rhode Island enrollment has exploded in costly and low-quality government Medicaid as compared with those purchasing private insurance. The AHCA seeks to provide more cost-efficient options for more Americans to acquire quality insurance that best fits their individual needs.

AHCA Myths and Facts. First, it is important to dispel some of the myths that opponents of AHCA healthcare reform are attempting to propagate, if we are to hold legitimate statewide debate:

  1. MYTH: Tens of thousands of Rhode Islanders will lose their Medicaid. FACT: No one will be “thrown off” Medicaid. Medicaid will continue to serve as a safety-net for America’s most vulnerable populations. Despite public claims by politicians that tens of thousands of Rhode Islanders will lose their Medicaid coverage, under the AHCA, no American will be thrown off Medicaid. While the expanded eligibility funding currently offered by ObamaCare will eventually be returned to pre-Obamacare levels for new enrollees, anyone enrolled in Medicaid at the time the AHCA is signed into law will be grandfathered-in and will remain on Medicaid as long as they continue to meet their original eligibility requirements. The AHCA expects overall Medicaid rolls to be reduced over-time through attrition – as people naturally increase their incomes or otherwise acquire private insurance from their employer as they re-enter the workforce – or by other means.
  1. MYTH: The AHCA will cause premiums to spike. FACT: The mechanisms in the AHCS will lead to lower premiums. Unlike ObamaCare, which sought only to fund high-priced insurance and did little if anything to address actual core healthcare or health insurance costs, the final AHCA implementation (including future administrative regulatory fixes) will implement a number of market-based provisions that will create downward pressure on insurance premiums. By reducing the number of required-coverage mandates, by increasing competition via cross-state sales, and by not forcing insurance buyers to pay for other people’s insurance, market forces will naturally bend the cost-curve down.
  1. MYTH: Those with “pre-existing conditions” will be denied access to insurance. FACT: the AHCA takes great pains to ensure coverage for this population. The final negotiated piece to the House version of the AHCA guarantees that those with pre-existing conditions will not be denied coverage. In fact, the invisible risk-sharing program in the AHCA functions like a pre-exisiting condition “protection fund”, allowing this population to purchase insurance at roughly the same rates as those that are healthy. How such high-risk individuals would pay for insurance is discussed later in this paper.

The AHCA, in reality. The AHCA seeks to responsibly transition away from government insurance by providing more US citizens with higher-quality, less-costly private insurance options.

This will be achieved through elimination of many federal healthcare mandates on states, individuals, and employers, in addition to a new program of tax-credits and/or payroll deductions that will give Rhode Islanders more choices and multiple new options when it comes to purchasing an insurance plan that best fits their needs. This as opposed to the one-sized-fits-all government mandated coverage that American are now forced to purchase.

Under the new federal plan, gone would be many of the top-down federal intrusions into state markets that have led to the implosion of ObamaCare’s government-mandated insurance strategy. Soon to be extinct will be the onerous individual and employer mandates and penalties, many of the costly taxes, inefficient state and federal exchanges, and unlimited expansion of Medicaid.

Without the oppressive ObamaCare employer mandate, companies will no longer be at financial risk if they increase the size of their workforce beyond the 50-employee threshold and will no longer have to be concerned about limiting weekly worker hours to 30 hours or less. Elimination of this mandate alone should increase employment and incomes across America.

Maintained, will be the age-26 insurance provision for young adults on their parents’ policies, and limits on lifetime out-of-pocket expenses.

Healthy, young people should be able to purchase policies at greatly reduced premium levels, as they will no longer be asked to partially pay for policies for more elderly and unhealthy patients.

Instead of complex Obamacare health-insurance subsidies, calculated via state or federal health insurance exchanges, to be applied to reduce premiums for limited insurance-policy options … a more simplified tax-credit system will be favored by the AHCA so that patients can freely shop in a larger, open market.

Also under consideration is a “no additional premium insurance” provision that may be inserted during Senate deliberations of the AHCA. Under this provision, insurance companies will be required to offer policies, reduced in scope as they may be, with premiums that do not exceed the tax-credit levels being offered under the new law. This way, individuals can essentially be guaranteed to be able to purchase private insurance, if they so choose, with the premiums paid for exclusively with federal tax credits.

Medicaid. “The new law will mean significant changes and a long-term reduction of funds to Rhode Island’s health care industry, including Medicaid,” said Gary D. Alexander, adjunct scholar to the Center, who formerly held the positions of Secretary of Health and Human services for Rhode Island and Secretary of Human Services for Pennsylvania. “The state should quickly analyze the impact and begin planning how to change course and move to a more of a market-based system that ensures greater budget certainty, higher care quality, affordable access, and true transparency.”

It is also likely that health savings account (HSA) plans will become more of the standard. HSA plans normally feature lower monthly premiums – that cover major medical problems – but requires individuals to be more involved in seeking-out value providers for elective and other diagnostic care, paid for with previously saved, typically tax-exempt HSA funds.

Prescription drug prices are being looked at separately and are not part of the AHCA discussion.

As the Center warned months ago, state lawmakers must find a way to be smarter with state and federal funds. Under the new federal approach, the state-run exchange will likely become a relic of the past. It also appears that some of the very same market-based approaches the Center has recommended in the past will now be in synch with federal law and must be considered as part of Rhode Island’s healthcare future.

Preserving States’ Rights Increases States’ Choices. The AHCA properly recognizes the rights of states to choose to act independently and free of federal mandates on issues that are not constitutionally granted to the federal government.  Under the AHCA, each state will be given significant flexibility to choose the insurance method it determines best serves the needs of its residents. This feature will allow states to innovate, much as Rhode Island did in 2008 when it pioneered the Medicaid “block-grant” waiver; and such as Maine has initiated with its newly implemented high-risk-pool model.

Similar waivers and other options will be presented to states, each of which is designed to lower premiums and increase access.

State Choices Under the New Federal Healthcare Landscape?

With the passage of the House Republicans’ plan to repeal and replace ObamaCare, the RI Center for Freedom & Prosperity  today calls on state lawmakers to proactively consider how they will consider the options for our state. While the final passage of the AHCA in Washington, D.C. will likely occur too late to fashion the state’s 2018 fiscal budget, it would be a disservice to Rhode Islanders if their lawmakers were to wait until January 2018 to begin public debate on such an important issue.

This new flexibility will allow states to design insurance frameworks and new Medicaid offerings that are right for their unique populations, providing superior care and lowering costs for patients.

The Center suggests that the state – perhaps by forming a joint-legislative commission or a gubernatorially created task-force, or even via a planned special fall legislative session – should proactively and immediately put in place some process to begin consideration of the multiple choices Rhode Island will soon have to make.

Among the likely decisions to be considered by state lawmakers:

  • Medicaid Per Capita Cap? How should the state evolve its Medicaid program to deliver the best possible care at the lowest cost? Under the AHCA, the unlimited 90% federal funding rate for continued state Medicaid expansion will revert to pre-Obamacare federal reimbursement levels for new enrollees. Therefore, will have to decide how many state funds they want to devote to a single program as a percentage of its state budget going forward.
  • Medicaid block grant? Should the state apply for a new version of a Medicaid block grant? By agreeing to free itself from many ObamaCare mandates, Rhode Island could decide how best to spend a fixed amount of federal funds in anyway it chooses, so that it can provide Medicaid services to whomever it defines as the most vulnerable of our state’s residents.
  • Medicaid “work” or “cost sharing” requirements? In addition to re-considering Medicaid eligibility requirements, states may choose to consider whether or not to design a “work requirement” for able-bodied recipients. Medicaid was originally designed as a safety-net to provide government insurance for low-income single parents, for low-income elderly, and for disabled Americans. It was not designed to become permanent and free insurance for those who are able to work and provide for themselves. Under the ObamaCare Medicaid expansion, many non-disabled childless adults of working-age qualified for Medicaid for the fist time. In many states, these expanded Medicaid populations seem to be prioritized over the most-needy, creating increased burdens on state and federal taxpayers and decreasing care for the truly needy. Similarly, should working Rhode Islanders on Medicaid, who earn above a specified income level, share in some healthcare costs – such as co-pays – or be subject to some kind of Medicaid time limit?
  • Shut-down HealthSourceRI to save state operational funds? With federal subsidies calculated and dispersed by state and federal exchanges soon to end, and with no future need for government-mandated insurance policies to be purchased, there soon will be no further need for the state to assume the burden of operating its HealthSourceRI ObamaCare state exchange. When and how HealthSourceRI is phased-out or shut-down is another decision Rhode Island lawmakers will have to consider.
  • Reduced insurance mandates? In order to provide a wider array of options for lower-cost insurance, Rhode Island should consider whether it should reduce the number of state-mandated coverages. Prior to ObamaCare Rhode Island imposed the highest number of insurance mandates in the nation, which artificially drove-up premium costs because individuals had to pay for coverage they would never use. With reduced mandates, insurers will have greater flexibility to craft a variety of plans and pricing levels that meet the demands of would-be enrollees. Also, fewer mandates would likely mean that more insurance companies might choose to compete in Rhode Island, in turn providing a broader array of insurance offerings for patients.
  • Cross-state sales? If there eventually is a related federal provision, should Rhode Island allow out-of-state insurers to compete in our state? One of the reasons auto, home, and life insurance premium rates are relatively low is the national competition naturally created by an open-market. Conversely, Rhode Island and many other states restrict competition and innovation by mandating one-size-fits-all policies, making them unprofitable for insurers. This tends to create monopolies or oligopolies that drive up premium rates.
  • Medicaid accountss? If coverage mandates are reduced, and if cross-state health insurance sales are allowed, states could decide to provide even greater flexibility for patients by creating a Medicaid account system. Such a system would allow individuals who qualify for Medicaid to take the value of the premium for this government insurance and allow them to apply that sum towards the purchase of private insurance of their choosing.
  • High-risk pools and/or invisible risk-sharing for those with pre-existing conditions? While those with pre-existing conditions will still be guaranteed coverage under the AHCA, the new federal healthcare law would allow states to apply for waivers from current federal insurance regulations that increase premiums and, instead, place these individuals into separate high-risk pools. Or the could run an “invisible” risk-sharing program that keeps everyone in the same market, similar to a successful program that was recently implemented in the State of Maine, which reduced premiums for all age groups and kept premiums low for those with pre-existing conditions. Under a completely free-market system, these individuals, who because of their pre-conditions are considered a higher risk, would naturally incur higher insurance premiums. However, depending on the final version of the AHCA, the federal government may implement two risk-sharing programs designed to reduce premiums. The first would provide subsidies to reduce premiums to a more affordable level for those states that opt to establish such a pool. A second measure under the AHCA, aimed at stabilizing premiums and reducing risk for this group and for their insurers, is to further subsidize insurance companies directly for actual healthcare costs above a specified level for those in the pool. As an added protection for those who are currently insured with pre-existing conditions, in states that opt for this waiver, individuals who maintain continuous insurance would not be subject to increased premiums in the high-risk pool.
  • New Models of Care? As the Center suggested many years ago, should Rhode Island begin a discussion on new models of care that drive transparency, allow consumers to shop for services, and provide direct patient access to providers without a middle man? For example, models like Direct Primary Care (DPC) are gaining legal momentum at the state level as a viable means for physicians to provide primary care to patients at a lower cost than traditional practice models or traditional insurance. Already, over a dozen states have enacted laws that recognize the DPC model and have made it easier for physicians to operate within it.

In conclusion, those on the Left will have to learn to cope with the new reality that driving people towards government-provided or government-mandated insurance will no longer be funded by the federal government and that not as many people will be enrolled in Medicaid.

Conservatives, on the other hand, must learn to cope with the reality the new AHCA law still positions federal healthcare as a form of an “entitlement” program, and that taxpayer-funded subsidies, in many different forms, are a political reality and likely to increase over time.

Now is the time for Rhode Island to begin careful planning for each of these eventualities and to lead the nation when it comes to devising the most innovative plans that will provide quality, patient-centered healthcare at the lowest possible cost. As Thomas Paine once wrote, “government should cost the least and do the most.”

Why should Rhode Islanders expect anything less from their elected officials?