The Shriver Brief

The Importance of Cheap Clean Energy

Dan Lesser — Fri, 19 Mar 2010 11:50:59 -0600

The United States transformed itself into an industrialized nation through the use of cheap, convenient fossil fuels. Now nations like Brazil, China, and India are pulling their countries out of poverty and becoming industrialized in much the same way. Access to cheap energy is generally a good thing: it affords innovation in labor and development, clean water, warm homes, and stable infrastructure.

Furthermore, millions of people living in poverty rely on dangerous solid fuel alternatives when they do not have access to fossil fuels. One third of the global population burns wood, crop waste, and dung to meet their basic human needs. According to the World Health Organization, the use of solid fuel causes 1.6 million excess deaths each year, and is the fourth largest risk for death in developing countries after malnutrition, waterborne diseases, and unsafe sex. It is unconscionable that people have to resort to solid fuel to survive. Although fossil fuel has become the cheapest alternative, we know that unless, as a global community, we reduce our fossil fuel emissions the result will be catastrophic.

In the next forty years, the demand for energy will double as developing countries continue to build industrialized societies, but at the same time we must significantly reduce greenhouse gas emissions. Richard Smalley, the 2005 Nobel Prize-winning physicist, called this the Terawatt Challenge: “Increasing global energy production from roughly 15 terawatts in 2005 to 60 terawatts annually by 2100 in a way that simultaneously confronts the challenges of global warming, poverty alleviation, and resource depletion.” (One terawatt is equal to one billion kilowatts).

Ending global poverty is a moral imperative. But how do we tell our global neighbors that we want them to pull their citizens out of poverty without the use of fossil fuels? Particularly when we used fossil fuels to develop, and we continue to struggle to wean ourselves from them today. So what is the solution? The fastest way to solve this problem is to close the price gap between clean and dirty energy. Developing and deploying cheap clean energy has the potential to alleviate global poverty on a massive scale, while stabilizing the world’s climate. The real issue is how to catalyze this shift.

The United States House passed landmark climate change legislation last year that uses a cap and trade model for reducing carbon emissions. The theory behind cap and trade is that as carbon becomes more expensive, certain industries will look for more cost effective alternatives. Thus, clean energy alternatives will naturally emerge as the price of carbon goes up.

Others argue that in addition to a cap and trade system, the federal government must actively invest money in research and development of clean energy alternatives. Some climate change experts argue that the revenue from selling carbon permits should be used to invest in clean energy alternatives, while others argue that those revenues should be used to subsidize energy bills for low-income citizens. Ultimately, for climate change legislation to turn the tide on climate change, in a fair way, it must do all three: reduce carbon emissions, encourage the development of new energy technology, and protect low-income families.

This post was coauthored by Carrie Gilbert.

"Let's Make a Deal" Reruns

Karen K. Harris — Tue, 16 Mar 2010 11:45:03 -0600

Remember the show, Let’s Make a Deal, with Monty Hall? Well, it's back--sort of. For more than a year, Congress has been saying that it’s close to making a deal on legislation to overhaul America’s health care and financial systems.

The original Let’s Make a Deal show was based on the show’s host, Monty Hall, offering deals to members of the audience. The contestants usually had to weigh the possibility of an offer being for a valuable prize, or an undesirable item. In its simplest format, a contestant was given a prize of medium value (such as a television set), and the host offered the contestant the opportunity to trade for another prize. However, the offered prize was unknown. It might be concealed on the stage behind one of three curtains, or behind "boxes" onstage, or within smaller boxes brought out to the audience.

Congress seems to have brought this classic TV game show back. “We’re close to a deal,” on health care legislation. “We’re close to a deal,” on financial reform legislation.

Health Care Reform

The need across the country for health insurance reform has not abated. Americans agree that the nation's health insurance system is broken, but Congress still hasn’t sent a bill to President Obama to fix it. The current deal on the table is for the House to pass the Senate’s bill and then for both chambers to pass a budget reconciliation bill that resolves their differences. The proposed deal would ban insurance companies forever from denying coverage to children with preexisting conditions and from dropping coverage when an individual becomes sick. Insurance companies would no longer be able to randomly hike premiums or to impose lifetime or annual limits on the amount of care someone can receive. All new insurance plans would be required to offer free preventive care so that illnesses may be caught early. Young adults will be able to stay on their parents’ insurance policies until they are 26 years old. Uninsured individuals and small business owners would have the same kind of choice of private health insurance that members of Congress get for themselves. And individuals who do not have insurance coverage through a large group could be part of a bargaining pool that negotiates lower rates. Also, if an individual is ineligible for Medicaid but still can’t afford the insurance offered through the pool, she or he would receive a tax credit to assist with this cost. Finally, this deal would provide a new, independent appeals process if a claim has been unfairly denied.

It’s time for Congress to take the deal and make health insurance available and affordable for all.

Financial Regulation Reform

After the catastrophic financial crisis, President Obama called for the creation of an independent Consumer Financial Protection Agency, which would have as its sole mission the protection of consumers. It would create and enforce clear rules to ensure fairness of credit card terms and conditions, overdraft loan programs, payday and car title loans, and mortgages. In the fall, the House of Representatives passed legislation creating such a new Consumer Financial Protection Agency, which would provide the type of consumer protections that should have been in place all along. The Senate, however, has been debating the issue for months.

Specifically, Senate Republicans and the financial-services industry have opposed the creation of such an entity. Instead they would prefer that the Federal Reserve continue to be responsible for consumer protection as part of its regulation of nationally chartered banks. The central bank has always been responsible for the health of the nation's largest banks and the safety of American borrowers; however, its failures in both roles have been well documented. For years, the Federal Reserve primarily focused on monetary policy over bank supervision and often made consumer protection an afterthought. As a result, millions of American families have been left unprotected and financially unstable.

Additionally, the Federal Reserve only regulates banks, which would mean that the so-called shadow banking system of payday lenders, debt collectors, and loan originators and servicers would remain unregulated. The power of these entities has been demonstrated by the huge role they had in the current economic crisis. Allowing them to continue their predatory practices without being regulated would not be a deal on reform but rather a continuation of the status quo. Lawmakers have repeatedly said that they are close to a deal on this very divisive issue. Yet, proposals to let the Federal Reserve remain the primary regulator of consumer protection laws, is not a deal, it’s just the status quo.

Well Monty, Where’s the Deal?

Congress seems to be weighing the possibility of whether reforming health care and financial systems will ultimately be valuable prizes, or undesirable items. Yet, rather than holding onto its existing undesirable prizes, Congress should choose Door #1, quality, affordable health insurance reform NOW and a dedicated agency to monitor and rein in the reckless behavior of financial institutions.

Well Congress, where’s the deal?

Illinois Governor Proposes Big Cuts to Services for Some of the State's Most Vulnerable

Dan Lesser — Thu, 11 Mar 2010 16:42:01 -0600

Gov. Quinn made a grim budget request today. His proposed budget includes $2.2 billion in spending cuts and again relies heavily on borrowing ($4.7 million) and not paying the state's bills ($6.3 billion). $1.3 billion of the spending cuts would be in the area of education with a 17 percent across-the-board cut.

As an alternative to cutting education spending by $1.3 billion—unimaginable in an election year—Gov. Quinn proposed increasing the individual income tax rate by one percent of income, from three to four percent. The $3 billion in proceeds from this increase would all go to education—$1.3 billion to eliminate the proposed cut and $1.7 billion to pay back bills.

Gov. Quinn has not proposed any means to avoid the $900 million in spending cuts he proposes to non-education programs.

Equally disappointing, Gov. Quinn's proposed budget includes no long-term plan for eliminating the state's $13 billion revenue shortfall and getting out of our fiscal mess. Rather, it appears to be a "take what you think you can get" budget built on diminished expectations of what can be accomplished in an election year.

All of which means big cuts in services to some of our most vulnerable populations. For example, mental health services will be cut by over $50 million. The Illinois Department of Human Services estimates that as a result, 70,000 people, including 4,200 children, will lose their mental health services; 4,000 mentally ill people will have to leave their state-subsidized housing; 3,800 mental health jobs will be lost; as many as 87 mental health agencies may close; and persons not eligible for Medicaid, such as the formerly incarcerated, will be unable to access mental health services.

The Governor's proposed budget now goes to the General Assembly.

Rx for Illinois Budget: Responsibility, Not Ideology

John Bouman — Tue, 09 Mar 2010 13:52:07 -0600

There is something almost purely ideological about opposition to the revenue reforms that knowledgeable analysts agree Illinois needs right now – not only to escape its fiscal crisis but to make its tax system more fair and sustainable.

I suppose ideological biases are fair enough among some anti-government zealots and politicians who hope to use them and lead them. But somehow one would hope for a more balanced and dispassionate approach from mainstream media, such as the Chicago Tribune.

It can only be ideology that justifies the anti-tax position by reference to taxpayers “already devastated by the recession.” In fact, under leading revenue-reform plans, many lower- and moderate-income households would pay no increased income tax or a modest increase; the lowest-income households would pay less.

But for those who’d pay a few dollars more per paycheck in income tax – is that more weighty than maintaining state-assisted care for their elderly relatives, safe roads and bridges, schools with a full complement of teachers and educational programs, or the public health programs that protect us from epidemics?

This crisis demands a balanced approach that includes significant new revenues raised in a fair way. Polling and history show that, while nobody likes to pay higher taxes, people appreciate honest leadership in a crisis and understand and support a balanced approach. We already are suffering from severe cuts; we are already borrowing; we will continue to seek as much help as possible from the federal government. But those measures are not enough. We need significant, new revenue to complete the balance and navigate out of the crisis with a sounder future in store.

Why We Should Care About Park National Bank

Karen K. Harris — Fri, 05 Mar 2010 16:09:32 -0600

In 2009, the Federal Deposit Insurance Corporation (FDIC) announced it was taking over First Bank of Oak Park (FBOP) Corporation, a privately held bank holding company. A few months later, Park National Bank, a community branch of FBOP, was sold by the FDIC to U.S. Bank. Although these types of transactions happen every day in the corporate banking world, it’s important to understand the national implications this has on community banking.

Park National Bank was a staple to both Oak Park and Chicago’s Austin neighborhood. Known as one of the most philanthropic banks in the Chicago area, Park National successfully offered banking services to low-income families and gave them an alternative to payday lenders, currency exchanges and subprime loans. Its accomplishments included bottomless funding for local nonprofits and social service agencies, underwriting costs for new schools, donations to community causes, rehabilitation of countless foreclosed homes that were sold back to residents at affordable rates, a lead role in neighborhood revitalization and economic growth, and countless small dollar loans to help fund local entrepreneurs. For 30 years, Park National Bank provided an infusion of projects, cash, jobs and morale to the community it served.

In 2008, when the government seized Fannie and Freddie Mac, FBOP took a loss of $855 million because of the loans it had underwritten. Initially FBOP was approved for Troubled Asset Relief Program (TARP) funding to help it recapitalize, however, it never received any money because no guidelines for TARP funding of small, privately held banks were ever created. Then Chase bank, which had been lending money to FBOP for years, decided not to extend FBOP’s line of credit and sued them for $246 million.

In 2009, regulators told FBOP that it needed to raise between $500 million and $1 billion to recapitalize. Mike Kelly, the owner of FBOP, raised $600 million just a week shy of the deadline. Nevertheless, federal regulators seized FBOP's nine banks in four states, descended on FBOP’s headquarters, declared it insolvent, and announced its assets were being transferred to U.S. Bank. In a clear case of the right hand not knowing what the left hand was doing, on the very same morning that the FDIC seized Park National’s assets, U.S. Treasury Secretary Timothy Geithner was in Chicago presenting $50 million in federal tax credits to Park National for its community development projects.

Historically, U.S. Bank’s community efforts have paled in comparison to Park National’s. Twenty-eight percent of Park National’s profits went to community causes compared to less than 1% by U.S. Bank. Oak Park’s Wednesday Journal has reported that U.S. Bank already has plans for massive layoffs at FBOP banks, yet claims to be giving notices for “positions” not “people.”

This issue strikes at the heart of Americans' mistrust of corporations and commercial banks. Americans calling for banking reform and bailouts for Main Street have been following the thread about Park National Bank. Public outrage is clear: why aren’t community banks considered as important as large banks to receive federal assistance? In protest, Oak Park and River Forest High School closed two student accounts at U.S. Bank, totaling $300,000, and transferred the funds to the Community Bank of Oak Park River Forest. School representatives say if U.S. Bank hesitates to make the same community commitments Park National made, they will remove their remaining funds. Others are calling for a review of how FBOP was treated by the federal government during the takeover and asking regulators to individually assess each bank’s overall value to the surrounding neighborhood, including its knowledge of the community, as well as its record of commitment to investing and supporting its neighbors.

Since Park National was sold, busloads of Chicago residents traveled to Washington, D.C., to support Mike Kelly as he testified before a House finance subcommittee. Kelly argued that, in the future, the federal government shouldn’t treat other community banks the same way as Park National. New legislation has also been introduced in Congress. Senators Merkley (D-OR) and Boxer (D-CA) have proposed the Bank on Our Communities Act, which would allocate TARP funds to community banks. This bill is currently being reviewed in the Committee on Banking, Housing and Urban Affairs. Although it’s too late for Park National, enactment of this bill will ensure that such a travesty doesn’t happen to other community banks.

For more information contact the Shriver Center’s Community Investment Unit.

This article was co-authored by Susan Ritacca.

Regulating the Refund Anticipation Loan Industry

Karen K. Harris — Wed, 03 Mar 2010 09:48:00 -0600

What are RALs?

The dreaded tax season is back and so are notorious refund anticipation loans (RALs). RALs are short-term, high-interest-rate bank loans sold through tax preparation sites like H&R Block and Liberty Tax. The problem with RALs, in part, is how they are advertised. To the consumer it appears that the refund is a service of the tax preparer rather than a loan from the bank. Yet, in actuality Chase Bank is the largest provider of RALs in the country and contracts with 13,000 independent tax preparers to supply RAL products. Following close behind is HSBC, provider to H&R Block; and Pacific Capital Bank, provider to Liberty Tax Service.

The allure of RALs is that they provide taxpayers an immediate advance on their anticipated tax refunds. However, customers are often not aware of the usuriously high interest rates and hidden fees associated with the loan. Triple digit interest rates ranging from 50% for a $10,000 RAL to 500% for a $300 RAL are not unheard of.

High Costs to Low-Income Families

RALs are particularly toxic because they are heavily marketed in low-income neighborhoods. According to a recent report by the National Consumer Law Center, recipients of Earned Income Tax Credits (EITC), the government’s largest anti-poverty program, constituted 63% of the 8.76 million Americans who took out RALs in 2007. EITC recipients receive an average credit of $1,600, yet they often spend $500 or more in interest, typically a third of their refund for RALs.

A separate report from the Woodstock Institute states RALs pose a threat to the opportunity of wealth building among EITC recipients. According to Woodstock, EITC recipients are driven to high cost tax preparation sites because of the complexity of filing for EITC and they purchase RALs to pay for the upfront costs of such tax preparation.

Reforming RALs

On the state level, New York, Arkansas, and Maine have enacted laws prohibiting tax sites from charging add-on fees to RAL products, while Michigan mandates specific disclosure requirements for RALs. Sixteen other states are regulating RALs through their general consumer protection laws. In Illinois, the law actually prohibits consumer installment lenders, or payday lenders, from originating RALs.

Nationally, the IRS is in the process of creating a task force to review loans issued by tax preparation sites in order to regulate the industry. No rules, regulations, or recommendations have been issued yet. Meanwhile, in 2007 the Office of the Comptroller of the Currency (OCC) acknowledged that RALs posed a considerable threat to consumers and therefore established banking requirements to monitor tax preparers’ advertisement and sale of such loans. Monitoring by consumer advocates from 2007-2010, however, revealed that bank compliance with these OCC guidelines was negligible. Pressure from community organizations and consumer advocates, including the Shriver Center, recently resulted in the OCC issuing new guidance on the delivery of RALs in February of this year. As a result major banks and providers have revised their RAL programs: Jackson Hewitt agreed to stop selling RALs to its customers, Santa Barbara Bank stopped the sale of all RALs, and the FDIC mandated a cease and desist order for Republic Bank & Trust’s RAL program until reforms were implemented.

While the IRS, OCC, and FDIC should be applauded for these efforts, continued monitoring must occur. If no action is taken, RALs will continue to pose a threat to taxpayers and particularly diminish the possibility for low income families to save and pay down debt.

For more contact the Shriver Center’s Community Investment Unit.

This article was co-authored by Susan Ritacca.

Meeting the Legal Needs of Military Veterans, Servicemembers, and Their Families

Jason T. Vail — Fri, 19 Feb 2010 13:46:23 -0600

Today we are seeing the needs of military families being raised to level of national importance. First Lady Michelle Obama, along with Dr. Jill Biden, has made improving the lives of military families her signature issue, and this is reflected in a proposed expansion in funding for military support programs in the president’s 2011 budget. Improving the focus on military family issues is welcome, as the burdens placed on the men and women of our armed forces have increased throughout the past decade, where active-duty servicemembers have become accustomed to frequent and lengthy deployments overseas. This trend has imposed great challenges on our military families, which may not end upon the servicemember’s discharge into our already-sizable veteran population. These include, unfortunately, a full range of legal issues, many of which are unique to those currently and formerly serving in the armed forces.

As these legal needs have grown, they have been met with many local, state, and national initiatives enabling attorneys to step forward to deliver much-needed legal help to active-duty sevicemembers and veterans. And where military culture had historically adopted a “we take care of our own” attitude when it came to providing legal services to its members, the military legal assistance establishment is now grateful for the support of and collaboration with the private bar to act as a “force multiplier” to extend the range of services and legal counsel available to servicemembers, often delivered at a reduced cost or free-of-charge by the civilian attorneys.

There is much that a private bar attorney can to do aid our current and former servicemembers. Many military families encounter civil legal needs, such as:

landlord/tenant matters, including deposit recovery problems related to Servicemember Civil Relief Act (SCRA) lease terminations;
family law issues, especially child custody disputes arising around overseas deployment;
credit and lending problems, which can include payday loans, auto sales contracts, and interest rate reductions under the SCRA;
employment issues, particularly for National Guard members and Reservists needing to enforce reemployment rights;
guardianship needs, or estate matters on behalf of families of deceased servicemembers; and
securing vitally-needed benefits for veterans from the Department of Veterans Affairs.

In the fall of 2009, the Shriver Center published a special issue of Clearinghouse Review featuring articles written by military and civilian attorneys on these and other topics affecting veterans, servicemembers, and their families. This issue of the Review is an important tool supporting work done to expand access to justice for current and former military members, and it is available online for subscribers; nonsubscribers may purchase individual articles, or order the entire special issue. Any military legal assistance attorney may have free access to the issue through the American Bar Association Military Pro Bono Project website. Attorneys, whether in legal aid, pro bono, or private practice, can do much to help military families, and this issue of the Review illuminates how such assistance can be provided.

For more discussion on these issues and the important role that can be played by members of the civilian bar, please join our Shriver Center Dialogue on Accessing Justice: Military Veterans, Servicemembers, and Their Families, Friday, February 26, 2010, at DLA Piper 203 North LaSalle Street, Chicago, IL 60601, at 8:15 a.m. Presenters will include advocates working to meet the legal needs of this important population. We hope you will join us to find out how you can get involved with giving back to those who have sacrificed so much for us.

Economic Downturn, Health Care, Budget Crises: Where's a Clearinghouse Review Editor to Start?

Ilze Sprudzs Hirsh — Mon, 08 Feb 2010 16:16:17 -0600

Federal and state governments are overwhelmed solving the unprecedented combination of problems caused by the distressed economy, health care reform, and crises in state and federal budgets. Even the experts cannot easily answer the complicated and overlapping questions raised by these difficulties. These same problems intensify the hardships of people already struggling in poverty. They lead to more people going hungry, and losing their jobs or homes.

Clearinghouse Review editors are looking to lighten the load of advocates whose hands are full helping struggling families and seeking social and economic justice for their client communities. For 2010, we plan to publish articles that will assist advocates in solving client problems related to income, jobs, housing, budget crises, and racial justice. Here are a few examples.

Pursuant to the settlement of a nationwide class action, the income of thousands of older adults and people with disabilities may be increased by more than $500 million in retroactive social security benefits. Attorneys from the National Senior Citizens Law Center describe the settlement in a recent Clearinghouse Review article. This article is part of a major outreach effort to ensure that eligible clients receive the benefits that they were illegally denied under the Social Security Administration’s “fleeing felon” policy.

As foreclosures continue and more people lose their homes, advocates across the country are experimenting with different ways to help their clients. In two recent articles, one resourceful author makes the case for a right to counsel in foreclosure actions. In another article, authors from California approach advocacy from a different angle. They recommend that advocates explore the importance of “frames”--the stories and explanations embedded in our thought patterns about the way society and the world work--in how they communicate about the issues that matter to their clients and in their advocacy. Giving specific examples of what language to use and what to avoid, they present the theory and application of framing as an advocacy tool, in particular in race equity advocacy.

We are interested in your feedback on these article topics and your ideas for other topics we might cover this year. I invite you to connect with us by:

commenting on this blog;
signing up for one of our occasional readers' conference calls (look for dates in the free Clearinghouse Review News enewsletter);
participating in our discussion group on Facebook;
filling out the online readers' survey for the most recent issue of the Review.

Through Clearinghouse Review we hope to offer innovative and effective legal strategies in representing low-income people and their communities. The more we hear and learn from you, the better we are able to plan content that is meaningful and relevant to your practice.

President's Budget Proposal: A Strong Tightrope Walk

John Bouman — Thu, 04 Feb 2010 11:29:25 -0600

Earlier this week President Obama announced his budget proposal for the coming year. These are precarious times with conflicting demands. Most economists agree that more government spending is needed to help speed the end of the recession and bring down unemployment. But there is also mounting concern that that federal deficit is getting too large, which weighs against added longer term spending. The President’s proposal walks the tightrope between these concerns and promotes both the short term “jobs” goal and the longer term deficit-reduction goal. It contains important policy and spending priorities and deserves support.

Help for states and working families

The President proposes to extend the life of crucial enhanced payments to states under Medicaid, the state fiscal stabilization program, and the TANF Emergency Contingency funds. These three funding streams created by the American Recovery and Reinvestment Act (ARRA) stimulus law have helped states patch their budgets, save and create jobs, and protect health coverage. It is important that as much of this relief as possible be included in the immediate “jobs” proposal (some call it a “second stimulus”) being debated for passage in Congress in the next weeks, rather than waiting for the next federal fiscal year.

Improve revenues overall while protecting middle-class tax relief

The budget proposal allows the Bush-era tax credits for the wealthy to expire as scheduled, and it closes a number of tax loopholes. It also makes permanent the improved middle-class tax relief that was put in place by ARRA through the Earned Income Tax Credit, Child Tax Credit, and the American Opportunity Tax Credit.

Targeted discretionary spending freeze, but program increases

The discretionary spending freeze got the most press. It is a “global” freeze, in that the overall number is frozen, but within that number there are important priorities. Some programs actually get increases, while less effective programs will be cut. Child care would get a $1.6 billion per year increase. Housing Choice vouchers (Section 8) would get a $1.3 billion increase, enough to fully fund renewal of all 2.1 million current vouchers. Pell Grants would increase by over $7 billion and would be taken out of the “discretionary” category altogether. And Head Start would increase by $1 billion.

Assumes passage of health reform

By making financial decisions that assume that health reform measures are in place, the budget proposal corroborates the frequent statements of the President and others that the Administration intends to complete the health care reform process.

The budget proposal walks the difficult line between short-term stimulus and long-term deficit reduction, while setting important priorities for low- and middle-income working families.

2009 Poverty Scorecard Grades Members of Congress

Jennifer Hrycyna — Mon, 01 Feb 2010 11:39:22 -0600

As millions lose their jobs, homes, and health insurance during this recession, they look to Congress to come through and help them in their time of need. But does it? Are the representatives in Washington really looking out for the interests of the people who were laid off by a plant closing, lost their health insurance, or face crushing debt as a result of a medical emergency? The 2009 Poverty Scorecard grades the performance of each member of Congress on the most important poverty-related issues that came to a vote in 2009.

The Shriver Center's Poverty Scorecard compiles Congress's votes on 20 bills that have the most significant impact on the 40 million Americans living in poverty. The issues covered include economic recovery, health care, asset-building, housing, and climate change. The Scorecard shows that Congress did more to fight poverty in 2009 than in the two preceding years, and passed major anti-poverty initiatives that were signed into law by President Obama. But despite successes like the American Recovery and Reinvestment Act and the Lilly Ledbetter Fair Pay Act, Congress could have done much more--only 7 of 17 poverty-related bills made it through both chambers and were signed into law. Paradoxically, representatives from many states with the highest poverty rates had the poorest voting records in fighting poverty.

The Scorecard's purpose is to hold U.S. Senators and Representatives accountable for either advancing or derailing efforts to ensure equal opportunity for all Americans. Our nation's political leadership must take even more aggressive action to address the many complex structural causes of poverty, by adopting the right priorities, enacting needed laws, and adequately funding essential programs, so that the current devastating trend will be reversed and there will be decent living standards in every region of the country.

Medicaid Plays a Critical Role in Illinois's Economy: A New Report by the Center for Tax and Budget Accountability

John Bouman — Mon, 18 Jan 2010 13:46:19 -0600

Medicaid is a vital safety net for Illinois residents who cannot afford increasingly expensive private health insurance and fills the gap in employer-provided insurance for the growing ranks of the unemployed and their families. But a recent report by Heather O’Donnell, of the Center for Tax and Budget Accountability (CTBA), Medicaid Plays a Critical Role in Illinois’ Economy, reveals the tremendous additional impact that Medicaid dollars have in bolstering our economy. The report shows that Medicaid not only provided health care coverage to 2.6 million Illinoisans (over half of whom were children) in 2008, it also supported “wages, employment, business income, consumer spending, state tax revenue, and overall economic output.”

The Medicaid program is financed by both the state and federal government. In fiscal year 2008, 53% of the total funding for Medicaid came from the federal government. Under the federal American Recovery and Reinvestment Act (ARRA), states receive increased federal funding through December 2010 to help during the recession. The CTBA report explains that, with this enhanced federal share, if Illinois cuts Medicaid spending by $10 million, it will actually lose $16.2 million in federal matching funds.

But that would only be the beginning of the impact of such a cut. Medicaid spending reimburses health care providers, and then providers pay employees’ wages. The employees then purchase goods and services in the local economy. According to the CTBA report, Illinois’s 2009 state and federal Medicaid spending resulted in approximately $46 billion in additional business activity and supported about 385,742 jobs. This would mean that a cut of just $10 million in state Medicaid spending would result in an estimated loss of more than $80.4 million in business activity and $27.6 million in lost wages across Illinois.

This positive ripple effect of Medicaid spending means cuts to Medicaid programs would hurt the Illinois economy, increase unemployment, and prolong the recession. Cuts to Medicaid would not only deprive people of health coverage and health care, but also exacerbate the financial strain felt by businesses and workers and cause Illinois’ economy to further deteriorate.

Beyond Copenhagen

Jessica Sklarsky — Mon, 11 Jan 2010 11:46:10 -0600

Co-authored by: Lissa Domoracki and Carrie Gilbert

[Part 4 in the Shriver Center’s series on Climate Change and Low-Income Communities.]

Climate change and policies to combat it are subjects that have yet to appear on the radar screens of low-income people and their advocates. It is essential that this hands-off attitude change quickly since Congress has already started to make momentous decisions that will dramatically affect low-income people and communities for decades to come. At the end of this article we will tell you how you can get involved.

Climate change has a disproportionately negative impact on low-income communities. These populations bear the brunt of the physical changes, such as dangerously high temperatures, yet they lack the resources to combat them. Additionally, the transition to renewable energy sources will increase consumer costs, crippling the purchasing power of low-income people unless adequate and appropriately targeted consumer relief is provided. Climate change legislation must protect low-income families and individuals from these harmful effects. In addition, climate change legislation must guarantee that low-income people can access the jobs and economic opportunities created by the new green economy.

This past June the House of Representatives took a significant step by passing the American Clean Energy and Security Act of 2009 (H.R. 2454). H.R. 2454 addresses key climate change issues by proposing the establishment of a cap and trade system for carbon emissions as well as the implementation of heightened emissions, efficiency, and renewable energy standards. It also provides adequate levels of consumer relief to protect low-income people from increased costs and provides the access to green jobs that is needed.

Senator Kerry, the Senate’s leader on climate change issues, predicts spring passage of climate change legislation. Currently, there are several proposals on the table in the Senate:

The Clean Energy Jobs & American Power Act, S. 1733, sponsored by Senators Kerry (D-MA) and Boxer (D-CA), which has already emerged from the Senate Environment and Public Works Committee.
The Carbon Limits and Energy for American Renewal bill filed by Senators Cantwell (D-WA) and Collins (R-ME).
The “tripartisan” “Framework for Climate Action and Energy Independence in the U.S. Senate” recently unveiled by Senators Kerry (D-MA), Graham (R-SC), and Lieberman (I-CT), outlining their efforts to move forward in pursuit of climate change legislation.
The Clean Energy Act of 2009, sponsored by Senators Alexander (R-TN) and Webb (D-VA), which focuses primarily on the development of nuclear energy.
A power-plant focused bill introduced by Senators Voinovich (R-OH) and Lugar (R-IN).

Days before the conference in Copenhagen, the Environmental Protection Agency (EPA) declared carbon and several other greenhouse gases health hazards under the Clean Air Act. With this declaration, the EPA signaled its intent to implement and enforce regulations on carbon emissions, if necessary. The EPA regulations would be much less flexible than the market-based solutions currently under debate in Congress, and are generally viewed as a “second-choice” plan to combat climate change if the effort to pass legislation fails.

As negotiations continue, we all must do our part to ensure that the resulting climate bill reduces carbon emissions enough to reverse the effects of climate change while at the same time providing adequate consumer protection for low-income households and meaningful assurances that low-income and minority individuals will benefit from the job opportunities that emerge out of this country’s new green economy.

Click here to see the letter the Shriver Center recently sent to Senator Durbin (D-IL) urging him to support sufficient reductions in carbon emissions, adequate consumer relief, and job opportunities for low-income and minority individuals in the ongoing negotiations. We sent a similar letter to Senator Burris (D-IL).

Over the crucial next few months, the Shriver Center will continue its efforts to ensure that comprehensive climate change legislation becomes law and that such legislation adequately addresses the needs and concerns of low-income people and communities. We invite you to join us in this effort. If you would like to be kept apprised of advocacy opportunities, including possible group sign-on letters, please contact Carrie Gilbert (CarrieGilbert@povertylaw.org) or Lissa Domoracki (LissaDomoracki@povertylaw.org).

News from Copenhagen

Dan Lesser — Mon, 21 Dec 2009 11:55:36 -0600

[Part 3 in the Shriver Center’s series on Climate Change and Low-Income Communities.]

After a chaotic two weeks, the 15th United Nations Climate Conference concluded on December 19th with a joint statement of intention that is not legally binding but nonetheless addresses the major global climate change issues and establishes a framework for future negotiations. The agreement was negotiated by five key nations – the United States, China, India, Brazil and South Africa – and then approved by the vast majority of the 193 nations that participated in the conference.

President Obama, who personally negotiated the terms of the final agreement, called it “an unprecedented breakthrough” while acknowledging that it is only a “modest step” in the right direction.

The agreement sets up a flow of financing for poor countries to adapt to climate change, with the U.S. pledging to pay its share towards increasing this fund to $100 billion a year by 2020. The agreement also provides a system for major carbon-emitting nations to monitor and report their progress towards meeting national pollution reduction goals, an issue that had been a major sticking point with China.

On the other hand, the agreement contains no firm medium or long term targets for each nation’s greenhouse gas emissions reductions. Moreover, the overall goal of limiting global temperature increase to two degrees Celsius above pre-industrial levels, which would require deep cuts in climate-altering emissions, would not, according to the nations most vulnerable to the physical effects of climate change, be sufficient to ensure their survival. And, scientists warned that even if the nations of the world achieved this collective goal it would still not be enough to reliably avert the risks of disruptive changes in rainfall and drought, ecosystems and polar ice cover from global warming.

As for the future of global climate change negotiations and agreements, the next UN conference will take place in Mexico City in November 2010, approximately one year from now. However, the joint statement of intention that concluded the Copenhagen conference did not include a commitment to reach a binding legal agreement by the Mexico City conference, as many had hoped it would. There are also strong signs that given the unwieldy nature of trying to include 193 nations in the negotiations, future climate change agreements may be negotiated by the roughly 30 countries responsible for 90 percent of the world’s carbon emissions outside of the UN process.

Whether the commitments President Obama made in Copenhagen will be kept hinges on Congressional action later this spring. As we have just seen with the national health care debate, if the Republicans in the Senate remain unified in opposition, and all signs are that they will, passing such legislation will be very difficult. In addition, regulating carbon emissions has sharply different regional impacts, complicating the political process. In spite of these obstacles, Sen. Kerry, the Senate’s leader on climate change issues, predicts spring passage of the necessary legislation, which has already passed in the House.

Climate change and policies to combat it are subjects that have not yet appeared on the radar screens of low-income people and their advocates. It is essential that this hands-off attitude change very quickly since Congress has already started to make momentous decisions that will dramatically affect low-income people and communities for decades to come. Look for our upcoming blog regarding work at the Congressional level and how you can get more involved.

Debt Arising from Illinois' Criminal Justice System: Making Sense of the Ad Hoc Accumulation of Financial Obligations

Marie Claire Tran-Leung — Tue, 15 Dec 2009 10:18:52 -0600

A person who has done time in prison or jail often finds that he still owes a debt to society. Well known are the collateral consequences that abound in areas such as employment, housing, and voting rights. Debts for people with criminal records, however, are not only figurative. Literal debts can also come from the numerous financial obligations imposed within the criminal justice system and scattered through state statutes. These financial obligations can be difficult to identify, and yet, when a person exits the criminal justice system, they can often converge to create a significant barrier to successful reentry.

With generous support from the Public Welfare Foundation, the Shriver Center has begun to explore ways to reduce this type of debt and its negative impact on people who leave – and intend to stay out – of the criminal justice system. Last month, the Shriver Center released a report entitled “Debt Arising from Illinois’ Criminal Justice System: Making Sense of the Ad Hoc Accumulation of Financial Obligations.” The report is part one of a two-year study of how this system works as well as how it compares to systems in other states. The report focuses on identifying the different types of financial obligations that exist within the criminal justice system, any mechanisms that might relieve low-income defendants from debt that they cannot pay, and the devices that government agencies use to collect overdue debt in Illinois.

The numbers can be striking. For example, if a person is convicted for class four felony drug possession for the first time in Cook County, Illinois, he will incur a minimum of $1445 in financial obligations. Because this figure includes only financial obligations whose amounts are fixed by statute, it does not reflect those whose amounts are variable, such as the mandatory fine equal to the street value of the controlled substance or the additional $14 imposed for every $40 already assessed in fines. Nor does the $1445 figure include correctional fees, such as monthly probation fees and fees assessed by jails and prisons.

Compare the amount that a class four felony drug possession conviction triggers to the frequency with which it occurs in the Illinois criminal justice system. It may be the lowest level drug offense in Illinois, but class four felony drug possession also accounts for the highest percentage of the Illinois Department of Corrections’ incoming population. In 2004, for example, more people were sent to Illinois prison for possession of controlled substance than for any other single criminal offense. A high dollar amount assessed against a large number of people with convictions, however, does not necessarily mean increased revenue for the state, especially given that many of the people within the criminal justice system are poor.

The report also found that the numbers are not only high, but in some cases, they are also rapidly growing. Take the fees that people convicted of a criminal offense in Cook County must pay to the clerk of the circuit court. Today, a felony defendant owes over four times as much in these fees as he would have owed in 2004. Where he would have paid $35 in 2004, the amount due today would be $165. This growth is the result of a trend of imposing more fees on people with convictions. Out of the nine fees that Cook County imposes, four were created between 2005 and 2008, while a fifth was expanded to cover all criminal convictions, thus essentially acting as a new fee. During that same time period, the sixth and seventh fee tripled, while the eighth fee increased by 66 percent. Only the ninth fee remain constant. These increases, though, are not limited to Cook County. Rather, they reflect a trend in the state as a whole because Cook County cannot increase these fees without authority from the Illinois General Assembly to do so. Each of these increases, therefore, reflect a decision by the General Assembly to impose more fees on people in the criminal justice system. Given that the trigger for these fees is a conviction for any offense, it is time for both legislative bodies to consider the cumulative impact of these fee increases.

To learn more about these and other findings from the Shriver Center regarding debt arising from the Illinois criminal justice system, see its report here.

The Health Insurance Reform Finish Line:

Andrea Kovach — Mon, 07 Dec 2009 16:44:22 -0600

Co-authored by Carrie Gilbert

Over the last several weeks, we have looked at the different proposals coming through Congress to achieve comprehensive health insurance reform. Congress is now modifying two versions – one in each – the House and the Senate. We have come quite a long way since the beginning of this series, however before health reform is signed into law, there are several more important steps. The Senate has officially begun debate. In order, to take a final vote and pass health reform, they will need 60 votes to end debate on the floor. Then they need a simple majority to pass it out of the Senate. Once each house has a passed a version, it will go to conference committee so that the differences can be resolved and a final bill written. Your Senators and Representatives will need to hear from you every step of the way. Reassure those that support health reform that they are doing the right thing and let the fence-sitters and naysayers know that as their constituent you would like to see them support health reform. Here is the number to call 1-800-828-0498 to let your representatives know how you feel.

Here is our final installment of the homestretch series: The Finish Line. We wrap up the previous issues we have looked at and offer insight into unresolved issues.

Children’s coverage:

House bill
H.R. 3692 would ultimately dissolve the Children’s Health Insurance Program (CHIP) as of December 31, 2013. Children below 150% of the federal poverty level (FPL) would then move into Medicaid and those above would be moved into the new Health Insurance Exchange or employer-based insurance. While CHIP is still in place, HR 3692 eliminates waiting periods for children who were previously covered by employer sponsored insurance. By the end of 2011, the Secretary of HHS will have to conduct a study for what the Exchange will look like and make recommendations to Congress for improving the Exchange for children’s coverage.

Senate bill
H.R. 3590 maintains CHIP for children above 133% FPL through 2019. However, it does not allocate funding past its current renewal date of September 30, 2013. If Congress does not fund CHIP after 2013 then families may enroll in the Exchange and may qualify for subsidies.

Thoughts
Some advocates fear that moving children out of CHIP without first ensuring that the Exchange is comparable in price and benefits, would harm families and children. They fear that CHIP goes well beyond what private plans in the Exchange would offer in terms of benefits and covered services. However, others argue that moving entire families into the Exchange would simplify the process and increase the likelihood that children get coverage. Studies have found that when the parents are covered, the children are more likely to be covered and receive necessary benefits. Additionally, there would be an “essential benefits package” requirement in the Exchange that would serve as a benefits floor for private plans. Finally, in the Exchange all families up to 400% FPL would qualify for subsidies, whereas one state has CHIP eligibility to 400% FPL, thereby covering more families. On the Senate side, Senator Bob Casey (D-PA) introduced an amendment to protect and ensure health care coverage for low-income children, including continued full funding for CHIP through 2019.

Medicaid Expansion:
House bill
The House bill expands Medicaid to 150% FPL in January 2013 with 100% federal financing for 2 years and 91% federal financing beginning in year 2015 for new eligibles (such as childless adults) and some current eligibles covered by a waiver. States with Medicaid levels above 150% will be required to maintain their current levels. The House bill’s additional funding is geared towards helping states transition to the expanded Medicaid program. Additionally, the House bill would increase Medicaid payment rates to primary care providers to 100% of Medicare rates by 2012.

Senate bill
The senate bill expands Medicaid to 133% FPL and includes childless adults. The bill requires that the expansion occurs by 2014, but states could begin expanding as early as 2011. Some individuals who qualify for Medicaid could also receive subsidies in the Exchange, although people below 100% FPL could only receive subsidies if they do not qualify for Medicaid.

Thoughts
Health Affairsdid a study about a year ago, which found that average medical expenses are lower per person under public programs than under private insurance. When controlling for demographics and income, the medical expenditures for the same adult would be 26% higher under private insurance than Medicaid. Additionally, out-of-pocket costs are vastly higher under private insurance than under Medicaid. A Medicaid enrollee would spend 6 to 7 times more on out-of-pocket costs under private insurance than under Medicaid. The CBO estimates that Medicaid expansion to 150% FPL will cover 15 million people. This is not to say that we should balk at the Senate’s Medicaid expansion to 133%, and both bills expand Medicaid to previously ineligible childless adults, which finally addresses a longstanding gap in public coverage for those who often do not qualify or cannot afford private insurance.

Affordability:

House bill
HR 3692 requires all individuals to purchase coverage, but provides tax credits to individuals and families with incomes above Medicaid eligibility but below 400% FPL. A family of four headed by a 45-year-old making $44,000 a year would pay roughly $2,400 in premiums, or $200 a month, according to the Kaiser Family Foundation. The tax credits are awarded on a sliding scale based on income to limit premium contributions to an affordable percentage of income, starting at 1.5% of income for 133% FPL to 12% of income for 400% FPL. The House bill requires employers to provide health insurance or pay a tax on their total payroll. However, for businesses with annual payrolls less than $750,000 the tax is assessed on a sliding scale, and businesses with annual payrolls under $500,000 are exempt from the tax entirely.

Senate bill
Similarly, in the Senate bill individuals will receive affordability credits to pay for premiums. The credits would start at 4% of income for households at 134% of FPL and increase to 9.8% of income for households at 300%-400% FPL. The Senate bill also includes employer mandates and penalties, but exempts employers with 50 or fewer employees.

Thoughts
The Senate bill is more affordable for households between 250-400% FPL, but the House bill is more affordable for households under 250% of FPL. In the case of those at the bottom of the subsidy scale, under the Senate bill they could end up paying at least twice as much as what they would pay under the House bill. However, a recent analysis by MIT economist, Jonathan Gruber, found that the Senate bill makes health insurance for individuals purchasing in non-group market much more affordable. The same plan that would cost $5500 without reform would cost $4600 with reform. Gruber also found that the House bill would deliver a savings ranging from $200 for individuals to $500 for families, even without subsidies. The nonpartisan CBO and the Joint Committee on Taxation analysis of how the Senate bill might affect health insurance premiums concluded that the Senate bill will reduce premium costs for 57% of Americans who will receive subsidies by as much as 59%, and rates in large group market by as much as 3%. Rates may rise for individuals who have to purchase coverage on their own but do not qualify for subsidies, but this is mostly because the plans offered in the Exchange will be better plans than those currently offered and therefore slightly more expensive.

Public Option
House bill:
HR 3692 creates a National Health Insurance Exchange, where individuals and employers (employers would be phased-in beginning with the smallest employers) can purchase plans that meet certain qualifications in order to be considered an adequate plan. A public option would be included in the Exchange. The public option would follow the same insurance industry guidelines as private plans. The public option would negotiate rates with providers so that they are not below Medicare rates but not above the average rates for comparable private plans.

Senate bill:
HR 3590 creates a state-based Exchange for individuals and businesses with fewer than 100 employees. States can allow bigger businesses to buy insurance in the Exchange beginning in 2017. The Exchange would include a public option, which must comply with insurance industry regulations for private plans. The Senate bill permits states to choose not to offer the public option, but they would have to pass legislation to do so. The Senate bill would also create a program to foster the development of CO-OPS or non-profit health insurance companies.

Thoughts:
According to the CBO, the House bill’s public option would enroll less than 2% of the population (about 6 million customers over the next 10 years) and probably have higher premiums than private plans. The Senate’s bill would attract about 4 million customers. Nevertheless, the public option has become a heated topic. If Senator Reid can find a public option compromise that pleases all 60 democratic votes, then he can close debate and move toward the final vote. Republicans want six weeks of debate, but as soon as Democrats come to an agreement on the public option they can shut down the debate and avoid the Republican arsenal of stalling and bill-killing tactics. Finding this magical compromise is much easier said than done. Senator Joe Lieberman (I-CT) and other conservative Democrats, most notably Ben Nelson (D-NE), Mary Landrieu (D-LA) and Blanche Lincoln (D-AR) have voiced opposition to the opt-out public option. Landrieu has said that she would support the “trigger” option, which would activate the public option if the private industry does expand coverage fast enough. Sen. Olympia Snow (R-VT), the only Senate Republican to vote for health reform this year, has also voiced support for the “trigger”. Sen. Nelson supports an opt-in option for states, while Lieberman and Lincoln are going to be much harder to bring to the table on the public option. Meanwhile, Democrats on both the House and Senate side can be lost if there is not a public option. However, a potential compromise is beginning to emerge from negotiations between five liberal and five moderate Democratic Senators. The compromise would remove the public option and replace it with a network of non-profit health insurance plans, which the Office of Personnel Management would administer. The Office of Personnel Management currently administers the Federal Employee Benefits Program. In exchange for removing the public option, moderate Democrats would agree to expanded Medicare and Medicaid. Getting the 60 votes necessary to close debate involve negotiation on several issues, but the public option balancing act may be the single most important issue for getting to 60.

Insurance Market Reforms
House bill:
HR 3692 would require private insurers within the Exchange to guarantee coverage regardless of the policyholder’s health and renew the coverage each year, and insurance companies could not rescind a policyholder’s plan. Insurance companies would be required to issue plans despite pre-existing conditions. Variation in premium rates would be illegal based on gender and geography. Premiums can vary based on age but limited to a ratio of 2 to 1. Insurance companies could not impose annual or lifetime caps for medical care.

Senate bill
The Senate bill also guarantees issue and renewability. As in the House legislation, companies could not rescind coverage or refuse coverage based on a pre-existing condition. Premium variation is allowed based only on age and tobacco use within ratios of 3 to 1 and 1.5 to 1 respectively.

Thoughts
Insurance market reforms are some of the most needed and least debated aspects of health reform. Countless people have been denied coverage or had their coverage rescinded due to pre-existing conditions or post claims underwriting and rescission practices. These insurance reform changes are significant change to current insurance company business practices. However, even if one issue causes health reform to fail then even these widely agreed upon changes will get thrown out. These changes would mean significant improvements in care for lots of Americans who currently struggle to find adequate coverage. However, since insurance companies currently charge the young and healthy much less than middle-age people who are more likely to get sick, the young may pay more under both bills than they currently do, if their income is too high for them to qualify for public coverage or subsidies.

Impact on the deficits and paying for reform:
House bill:
The House bill uses a combination of penalties for lack of coverage, taxes on wealthy Americans and changes to Medicare payment to pay for reform. It is expected to reduce deficit by $109 billion over ten years.

Senate bill:
The Senate bill uses a combination of taxes on high cost insurance plans, increases to the Medicare payroll tax and a 5% tax on non-medically necessary cosmetic surgery. The Senate bill is expected to reduce the deficit by $130 billion over the first ten years and by more than half a trillion dollars in the following decade.

Thoughts:
Both bills offer positive elements to craft an affordable bill that curbs the cost of health insurance over time. The tax on wealthy individuals will raise considerable revenue, while the tax on high-cost insurance plans will slow health care growth over time.

Other Hot Issues:

Abortion: Federal funding for abortions became a contentious issue at the last minute in the House debate. The House passed their bill with language which makes it illegal for the public plan to cover elective abortions, and for individuals receiving subsidies to purchase plans which cover elective abortions. The Senate bill, on the other hand, allows individuals who receive federal subsidies to purchase plans which cover abortions, but insurance companies would have to segregate federal funds to ensure that only the policyholder’s money is used to pay for the procedure. It is expected that early this week Senator Bill Nelson (D-NE) will introduce an amendment to make the language in the Senate bill more like that in the House bill. Some House Democrats have said that while they voted for the amendment once, they will not do it again, and their votes could be lost if the language remains as restrictive as it now is. Speaker Pelosi has stated, however, that health reform will not fail on account of the abortion debate.

Immigration: The House bill allows undocumented immigrants to buy insurance in the Exchange; however they would have to use their own money to do so. The Senate bill, on the other hand, restricts access to the Exchange completely. Some Congressional Democrats, in particular the Hispanic Caucus, are disappointed with the language regarding immigrants, particularly in the Senate bill.

Homestretch 6: Paying for it and the impact on the deficit

Andrea Kovach — Mon, 30 Nov 2009 16:30:58 -0600

Co-Authored by Carrie Gilbert

[This is the sixth in a series of six articles summarizing the leading categories of issues at stake in the final stages -- the homestretch -- of the debate on national health insurance and health care reform.]

Last week the Senate released their combined bill which has been sent to the floor for debate. Many of the basic principles of the Senate and House bills are similar; however there are still major differences, including the method for paying for reform. For our final installment in our homestretch series we will compare these two proposals on how they will pay for reform and their impact on the budget deficit.

Covering millions of previously uninsured Americans obviously has an upfront cost; however given the current state of our broken health insurance system, the proposed reforms will actually reduce the deficit. Both bills have received deficit neutral scores from the Congressional Budget Office (CBO), despite having different methods for reducing the budget.

The House bill, called the Affordable Health Care for America Act or HR 3962, proposes a combination of mandate penalties, reforms to Medicare and Medicaid and a tax on wealthy individuals to raise revenue to pay for reform. The House bill is projected to save $426 billion over ten years by reforming Medicare and Medicaid. The federal government currently pays about $1,100 more per person to cover the same beneficiaries through Medicare Advantage, private Medicare plans, than through traditional Medicare. HR 3962 will reduce overpayments to Medicare Advantage plans. Overall, the bill attempts to reduce fraud and waste in both the Medicaid and Medicare systems.

In addition to extensive reforms to Medicare and Medicaid, H.R. 3962 includes a 5.4% surcharge on couples with incomes over $1 million, which would affect less than 1% of taxpayers, and amount to a moderate tax burden for these households. Some people fear that this new tax would harm small businesses that file taxes as individuals. However, the Tax Policy Center calculates that just 1.6% of taxpayers in this group would face the surcharge, and that many in this group are actually wealthy investors and not true small business owners. Ultimately, only 0.6% of taxpayers who derive more than half of their income from business sources would face this surcharge.

The newly released Senate bill, The Patient Protection and Affordable Care Act or HR 3590, may slow the growth of health care costs over time by, for instance, imposing an excise tax on high-cost health insurance plans, decreasing overpayments that private insurers receive through Medicare Advantage, and reducing the cost of prescription drugs in Medicaid. The new tax on high-priced health insurance policies (or Cadillac plans with yearly premiums of $8,500 for individuals and $23,000 for families) applies to self-insured plans and plans sold in the group market, and not to plans sold in the individual market (except for coverage eligible for the deduction for self-employed individuals). HR 3590 would also increase the Medicare payroll tax from 1.45 to 1.95% on individuals earning $200,000 per year and couples earning $250,000 per year. Both of these new taxes will yield considerable revenue.

HR 3590 imposes many fees to pay for the bill, including on pharmaceutical manufacturers, medical device manufacturers and the health insurance sector. Many of these fees do not apply to companies whose sales are below $5 million and the fees are allocated across the industry based on market share. Moreover, HR 3590 mandates that non-profit Blue Cross Blue Shield (BCBS) organizations have a medical loss ratio of 85% or higher to receive the special tax benefits provided to them. This means that they have to spend at least 85% of profits on their beneficiaries’ medical care.

Ultimately, the House bill will reduce deficits by $109 billion over the next ten years. The Senate bill will reduce deficits by $130 billion over the next ten years, and by about one-quarter of one percent of GDP in the decade thereafter, which amounts to about $55 billion in 2020 and several hundred billion dollars over the 2020-2029 period. The bill finances its expanded health coverage by redirecting existing spending and tax subsidies from less productive uses elsewhere in the health sector. Therefore, the Center for Budget and Policy Priorities’ and CBO report that the Senate Bill extends health coverage to 31 million more Americans, while keeping the total federal cost for all health care spending and tax subsidies in the decade after 2019 essentially where it would be under current law. Additionally, a group of economists sent a letter to President Obama last month advocating for many of the reforms in the Senate bill as a way to stem the costs of the health care industry.

This does not mean that the Senate bill is the better bill. There are provisions in both bills which are worth preserving the in the final bill. Over the next several weeks, as the Senate works to pass their version of the bill and then the two bills go to conference committee, there will be several opportunities for improving the bills and producing a superior final bill. Both bills contain key provisions for slowing the growth of health care costs and paying to insure more Americans. As always, the ultimate goal is affordable quality health insurance for all Americans.

Household Food Insecurity Growing in the U.S.

Jennifer Hrycyna — Tue, 24 Nov 2009 08:53:40 -0600

The USDA recently released its annual report for 2008 on food insecurity in the United States. As expected in this time of recession, food insecurity significantly increased, rising from 11.1% (13 million households) in 2007 to 14.6% (17 million households) in 2008, the highest levels since the study began in 1995. Food insecure households are defined as those who, at some time during the year, had difficulty providing sufficient food for all household members due to lack of resources. One-third of these households experienced very low food security, an episode in which food intake of some household members was reduced or eating patterns were disrupted.

Access to adequate nutrition affects many aspects of a child’s life, especially their learning and future health. As the nation focuses on the rising cost of health care, it is important to recognize that a large portion of every health care dollar is spent on preventable diseases, many of which are closely linked to nutrition. President Obama pointed out the importance of this issue to our nation’s strength: “Our children’s ability to grow, learn, and meet their full potential – and therefore our future competitiveness as a nation – depends on regular access to healthy meals.”

Fortunately, several programs exist to fight hunger in the United States. They range from the National School Lunch Program to Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), and include the Supplemental Nutrition Assistance Program (SNAP, formerly known as Food Stamps). By expanding these programs, increasing access to them, and reducing associated administrative burdens, we can make use of this existing framework and truly fight hunger.

SNAP is a massive program that reaches all ages and many working families (eligibility extends up to 130% of the Federal Poverty Level, or just under $24,000 per year for a family of 3). Utilization of this program is skyrocketing across the country, having increased by more than 37% in the past two years. In fact, a new study predicts that nearly half of all children in the country (and a shocking 90% of African American children) will receive SNAP benefits at some point during their childhood.

While the federal government fully funds the benefits in programs like SNAP, states are largely responsible for the administration. And, in light of state budget crises, the front-line workers administering these programs are not getting the support they need to deal with increasing demand. This leaves needy families without benefits, and leaves millions of dollars in Washington that could be funneled into local economies.

President Obama has declared a goal of ending childhood hunger by 2015. While it is understandable that the prevalence of food insecurity rises during a severe recession, the trend does not need to continue. We must commit to ensuring that everyone in this wealthy nation can meet their most basic needs and access an adequate diet. Improving access to our existing food and nutrition programs in a vital first step, and can go a long way toward achieving the President’s goal.

Cap-and-Trade: An Explanation

Jessica Sklarsky — Tue, 17 Nov 2009 10:04:16 -0600

Co-authored by Lissa Domoracki and Carrie Gilbert

[Part 2 in the Shriver Center’s series on Climate Change and Low-Income Communities]

The build-up of carbon and other green-house gas emissions in the atmosphere causes climate change. If this build-up continues, it is estimated that the average temperature in the United States could increase by as much as 9 degrees Fahrenheit by the end of this century. The negative effects of climate change are numerous: increased heat waves, increased incidence of heat-related disease and illness, increased risk of floods, droughts, and fires, rising sea levels, etc. With federal climate change legislation on the horizon, many people are talking about cap-and-trade and how it can reduce our carbon emissions. But, what exactly is cap-and-trade?

Cap-and-trade is a simple story of supply and demand. As of now, there is no limit on carbon emissions. Power plants, refineries, and industrial plants may emit as much carbon as they want without cost. Cap-and-trade changes this, putting a price on the right to emit carbon.

Under a cap-and-trade system, companies must turn in an allowance for every ton of carbon emitted the previous year. The number of allowances issued determines the level of or the “cap” on carbon emissions. Initially, some allowances are given to companies for free while others are auctioned off. If fewer allowances are issued, either for free or at auction, than tons of carbon currently emitted, companies subject to cap-and-trade will either have to reduce their carbon emissions or obtain more allowances.

Depending on a company’s circumstances, the company may find it more cost-effective either to reduce carbon emissions or to buy emissions allowances. Cap-and-trade systems create an open market where allowances may be bought and sold. For example, Company A may be able to very easily and cheaply reduce its carbon emissions beneath its allotted allowance level while it may be very difficult and expensive for Company B to reduce its carbon emissions at all. In this circumstance, Company A could reduce its carbon emissions enough to be able to sell its excess allowances to Company B on the open market. Regardless, carbon emissions are reduced sufficiently to meet the cap.

Over time, the number of allowances issued will decrease, lowering the cap on carbon emissions. As this happens, the purchase price of an allowance on the open market should increase. To illustrate, let’s go back to Company A and Company B. Both companies have fewer allowances allotted to them than at the onset of the cap-and-trade program, and Company A has already utilized the easy and cheap methods to reduce its carbon emissions. Therefore, if Company A is going to reduce its carbon emissions sufficiently to sell excess allowances, it must undergo more difficult and costly changes than before. In turn, Company A is only willing to sell its allowances at a higher price. Company B has made no changes, previously choosing to buy allowances on the open market. At some point, the price of allowances on the open market will exceed Company B’s cost to reduce carbon emissions, and like Company A, Company B will make the changes necessary to reduce its carbon emissions.

For some companies, this may mean closing a plant and shifting production to a plant that emits less carbon, constructing a new plant that emits less carbon, or ceasing operations altogether. Take, for example, the Fisk and Crawford coal-burning power plants located in the working-class Pilsen and Little Village neighborhoods of Chicago. Both of these plants, because of their age, are exempt from the Clean Air Act. As is often the case, low and moderate income people bear the brunt of the pollution from plants like Fisk and Crawford as they tend to be located in or near low and moderate income communities. According to a Harvard School of Public Health report, the air pollution from the Fisk and Crawford plants is linked to 40 deaths, 550 emergency room visits, and 2,800 asthma attacks annually. Under a cap-and-trade system, it will likely become prohibitively expensive to continue the operation of these heavy carbon-emitting plants, benefiting the low and moderate income communities situated near them.

Overall, a cap-and-trade system advances several climate change objectives. First, the cap allows for predetermined and definite carbon emission-level reductions through the issuance of a limited number of allowances. Second, the trading of allowances provides for the reduction of carbon emissions in the most cost-effective manner by encouraging the implementation of quick and easy carbon emission reduction strategies early on. Third, cap-and-trade will make heavy polluting plants cost prohibitive to continue operating, yielding important health benefits to the low and moderate income people who tend to live near such plans. Fourth, cap-and-trade, properly structured, can accomplish yet another essential policy objective -- the protection of low and moderate income households from bearing the brunt of added consumer costs that will result from limiting carbon emissions through cap-and-trade. More on this subject in a future article in our series on Climate Change and Low-Income Communities.

Homestretch 5: Health insurance market reform

Carrie Gilbert — Tue, 10 Nov 2009 10:37:47 -0600

[This is the fifth in a series of six articles summarizing the leading categories of issues at stake in the final stages -- the homestretch -- of the debate on national health insurance and health care reform.]

A recent Congressional Report initiated by Senator Jay Rockefeller found that while the insurance industry has long claimed that 87% of premium dollars go to pay for medical care, in fact, the average is 82% for the top six insurers. This five point difference equates to billions of dollars not being spent on hardworking families’ medical care. And these findings underscore the need for meaningful reform of the insurance industry. The three bills in Congress (H.R. 3962, Senate HELP and Senate Finance) include major reform to the private health insurance companies. These reforms will vastly change the way in which companies decide who qualifies for insurance and who does not. In a historic vote this past weekend, the House passed H.R. 3962, including many changes to the health insurance market. Senator majority leader Harry Reid (D-NV) has combined the two Senate proposals and sent a couple of different versions to the Congressional Budget Office (CBO) for consideration. He is waiting on the report from the CBO before releasing a final Senate bill, which will be the version sent to the Senate floor for debate. Until the final Senate bill is released we will offer comparison and analysis on the two Senate bills (HELP and Finance).

The three bills provide for significant reform to the health insurance industry, which would greatly expand access to health insurance. As discussed in Homestretch part 4, all three proposals create a health insurance Exchange, which would regulate the individual and small group insurance plans available in the Exchange. Benefit plans in the Exchange would be standardized. Plans would vary on the level of cost-sharing of co-pays and deductibles. Private insurance companies participating in the Exchange could not deny coverage based on pre-existing conditions. Additionally, premiums could not vary because of gender or pre-existing conditions.

The only characteristics that are permitted to factor into premiums are age, tobacco use, family composition and geography. The three proposals set ratios for premium variation based on age and tobacco use. The Senate Finance bill limits age variation to a 4 to 1 ratio and tobacco use to a 1.5 to 1 ratio. For example, a company can only charge its oldest customers four times that of its youngest customers. The Senate HELP bill limits age variation to a 2 to 1 ratio and tobacco use to a 1.5 to 1 ratio. H.R. 3962 limits age variation to a 2 to 1 ratio, but does not allow insurance companies to vary premiums based on tobacco use. The insurance companies indicated they will fight the limiting ratios, because they argue that they will raise costs to younger and healthier individuals.

The Exchange contained in the three bills would also require that insurance companies issue insurance to a consumer regardless of their health status. Additionally, an insurance company could not sell a consumer a plan that explicitly does not cover their pre-existing medical condition. Companies would have to guarantee that they will renew an individual’s policy each year. Additionally, each proposal sets limits for annual out-of-pocket costs to policy holders. Insurance companies would not be able to limit the amount of claims a policy holder makes either annually or in a lifetime. In other words, an insurance company could not suddenly tell a policyholder that they will no longer cover that policyholder’s claims.

Senator Rockefeller faced significant difficulties in getting the insurance companies to voluntarily divulge what portion of the premiums goes to medical care versus profit, administration, etc. This would change under all proposals. Both of the Senate proposals require insurance companies to report how much of the revenue from premiums goes toward paying for medical services. The House proposal requires that the Secretary of Health and Human Services sets a minimum percentage of revenue that must pay for medical services. If the companies do not meet this minimum then they must provide rebates to their customers.

The aforementioned reform is quite similar among the three proposals, but to whom they would apply differs. Senate Finance would apply these changes to the individual and small group market (businesses with fewer than 50 employees). Senate HELP and the House bill would apply reforms to all private insurance markets, including businesses of all sizes. And the Senate Finance bill would, however, require that all new policies, both inside and outside of the Exchange, meet the standards of one of four benefit levels set forth in the proposal.

These reforms will offer greater consumer protections and decrease insurance companies’ discriminatory practices. Some of these measures may face fierce debate an opposition in the coming weeks as the Senate sends a final bill to the floor for debate and final bill is composed for President Obama’s consideration. These reforms will mean containing costs, creating choices, upgrading care and ultimately covering all.

Climate Change's Added Impact on Low-Income People and Communities

Jessica Sklarsky — Tue, 03 Nov 2009 09:04:35 -0600

Co-authored by: Lissa Domoracki and Carrie Gilbert

[This is the first in a series of articles about climate change and its impact on people and low-income communities. These articles reflect the Shriver Center’s initiative to raise awareness about these issues and to advocate on behalf of these communities in the current debates surrounding federal climate change legislation.]

The images of polar bears hungry and stranded on a lone block of ice made notorious by Al Gore are heart-wrenching, but the tragedies and injustices of climate change exist here at home also. Hurricane Katrina and its aftermath put one facet of these inequalities on display and should serve as a wake-up call. Climate change affects us all, but there are several specific ways in which it will have an even greater impact on low-income communities than others:

(1) Heat waves brought on by climate change hit low-income communities hardest. Studies show a positive correlation between the presence of heat-trapping surfaces, like black asphalt, and community poverty. These studies also show a negative correlation between tree cover and community poverty. Less tree cover combined with more heat-absorbing materials in low-income communities raise the temperature, actually making it hotter in these communities. This is known as the “heat island” effect.

(2) Low-income individuals are more likely to live in poorly insulated homes and less likely to have air conditioning or easy transportation to cooling centers to cope with these elevated temperatures.

(3) Pollution is disproportionately concentrated in low-income neighborhoods and increased temperatures speed its transformation into harmful ambient ozone that aggravates respiratory conditions such as asthma. Additionally, low-income individuals are less likely to have health insurance or access to medical care, likely worsening the health problems associated with exposure to pollution.

(4) Low-income communities are the most vulnerable to natural disasters. Because of climate change, these extreme weather events are expected to greatly increase in frequency and severity. Low-income people are much less likely to carry disaster insurance that would allow them to quickly rebound from the damages caused by such events.

Climate change is a serious problem for everyone, but the consequences of climate change are even more severe for low-income populations.