John C. Goodman

There is a…mandate in California that 85 percent of total school spending must be devoted to instruction, but the mandate is so riddled with exceptions that it allow funds to be diverted to nearly any program district officials see fit."

With respect to private charities, an often used rule-of-thumb is that 85% should be spent on programs and 15% on “fundraising” and “administration.” My advice: Forget the formal accounting and ask: Does the organization own its own airplane? Does the CEO have his own car and driver? Is there an executive dining room? Do they do a lot of direct mail? These questions are far more important than whether the organization is clever enough to classify the expenses as “program” or “marketing” or “human relations.”

So what exactly is “administration?” Nobody really knows. And in competitive markets, none of us have reason to care. Do you care how much McDonald’s spends on administration? I don’t. But when the federal government applied the new rules to McDonald’s the company threatened to cut its “mini-med” insurance for 30,000 workers.

Overall:

·The administration has granted 2.7 million workers waivers, so they could avert the loss of their health insurance — because of the new federal regulations.

·Maine has received a waiver to allow insurers to spend 35% of their premium dollars on items other than patient care — to keep all its commercial insurers from leaving the state.

·Three other states (Kentucky, New Hampshire and Nevada) have filed similar waiver requests, and an additional 11 states are reportedly preparing to file them.

But waivers make the problem go away only temporarily. What’s really at issue is a difference of vision about how the health insurance market should be organized.

As Scott Gottlieb has pointed out (in a study we covered here), regulation of how ensurers allocate expenses stifles innovation and competition. They are part of a regulatory approach in which health insurance companies are turned into public utilities. On this view, it doesn’t matter that only one or two competitors are left standing.

Regulation, not competition, is what ObamaCare officials are counting on to make health reform work.


John C. Goodman

John C. Goodman is Senior Fellow at The Independent Institute and author of the widely acclaimed book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts."