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What’s New

Lack of Freedom Limits Delaware’s Prosperity

 By: Jane Brady, Chair, A Better Delaware

Recently, the Cato Institute did a study on freedom in each of the 50 states, measuring economic freedom and personal freedom indicators. The Cato approach is more to the libertarian view of government intervention, and I part ways on the issues of marijuana and some incarceration policies, but the standard they apply is consistent: less government interference through regulation, taxation, and social policy means more freedom.

The study measured each state on multiple criteria over the period from the year 2000 to 2023. Delaware did not fare well, and ranked, overall, 44 out of 50. Indeed, the report noted that Delaware had an “all around poor performance” on all three dimensions of freedom that were measured.

One measurement of economic freedom was fiscal policy, such as the tax burden on citizens and businesses, how much of the budget the government “consumes” and how large the government workforce is. By their measure, the states with lower taxes and smaller government rank higher, and higher is better. Delaware is at the bottom and ranked 47th out of the 50 states. Our tax burden is high, and our overall tax burden is worse than average, about 12.7% of adjusted personal income. The State of Delaware is our largest employer, and a huge percentage of our budget goes to government programs. In fact, of all the categories, this is Delaware’s worst performance.

The second measurement of economic freedom was regulatory policy, including consideration of such factors as land-use restrictions, healthcare, labor regulations, like occupational licensing requirements, and policies related to the ease of bringing lawsuits. They compare the regulations in the states to the state and federal constitutional guarantees. When the regulations restricted those guarantees the impact of that restriction was weighed as greater than others. Delaware fared a little better in this category coming in at 33 out of 50, giving us an overall economic freedom rating of 42. But the authors noted that much of Delaware’s “touted advantage of corporate laws now is significantly overstated.” Our business climate is not what it once was. And the report noted our certificate of need requirements for health care facilities.

The evaluation of personal freedom included such factors as incarceration rates, gambling freedom, gun rights, tobacco freedom, education choice and marijuana freedom. Delaware ranked number 43 in the area of personal freedom, even with our expansive marijuana, marriage, and abortion laws. That means that a lot of our personal decisions are regulated by the government in Delaware. Our land-use and energy freedom has declined because of an aggressive, renewable portfolio standard.

We are ranked below average on gun rights. Our laws on gambling, and our expanded legal sports betting are rated high. Our civil asset forfeiture law is tied for the worst in the country with few protections for innocent owners of property seized by law enforcement. Everyone should care about these issues. Importantly, fiscal, and regulatory policies affect specific groups, certain types of businesses, or particular types of transactions, but personal freedom measures government intervention that affects every citizen.

A Better Delaware advocates for lower taxes, less regulation, and more open and transparent government. We believe that the gross receipts tax and transfer taxes on real estate transactions should be lower. We believe the obstacles to small businesses forming and thriving should be removed, and we believe that economic prosperity is adversely affected when government is the largest source of employment and contractual work in the state. We believe in school choice, and advocate against a certificate of need requirement.

A Better Delaware also advocates for transparency and accountability in government. While it is important to know the numbers in this report and to identify the issues holding Delawareans back from better economic success, it is critical that you can know the rules by which to seek and implement any change. Government transparency and accountability are essential to assure an informed citizenry and a responsive elected government.

I encourage everyone to read the report and to consider how government intervention has affected your life and work. Then, contact your elected officials and tell them you want more freedom, fewer taxes, and a more open and transparent process in our government so you can know what action is being considered and how you might affect it.

Jane Brady serves as Chair of A Better Delaware. She previously served as Attorney General of Delaware and as a Judge of the Delaware Superior Court.

EV BUSES—INVESTOR BEWARE

By: David R. Legates

 In August, Governor Carney signed into law House Bill 10, which “establishes targets for annual purchase of electric school buses through fiscal year 2030.”  Like Delaware’s school bus fleet, many transit agencies are moving to battery-powered buses as a result of the Biden Administration’s goal of having all transit and school buses be zero-emission vehicles by 2030.  So, if you are a venture capitalist, or just a kitchen table trader, maybe you thought that investing in a high-profile electric bus manufacturer might be a good bet.

And a pioneer and leader in the electric bus business, Proterra, might have been an excellent choice.  Proterra has been around for nearly twenty years, and it is so well-connected that the Biden Administration in February appointed Proterra’s CEO to serve on the White House Export Council, the principal national advisory board on international trade.  Energy Secretary Jennifer Granholm served on Proterra’s Board of Directors and owned shares of the company even after being confirmed to head the US Department of Energy.  In numerous speeches, the President has praised Proterra as a success story in the green energy movement; to wit, both the Vice President and the Transportation Secretary toured their facility.  Moreover, $5.5 billion was provided by the bipartisan infrastructure law and billions more through other federal grant programs to convert diesel-powered fleets to electric buses.

But hopefully you didn’t buy stock in Proterra because you certainly would have lost your investment.  In August, Proterra filed for Chapter 11 bankruptcy protection.  Its stock, which was selling at $7.30 a share in November of last year, is now worth $0.03 a share just a year later — much less than 1% of its peak value.  It had federal funding, it had administration backing, it had state and local legislation on its side.  So, what went horribly wrong?

Proterra noted that “contracts signed in 2021 proved to be priced below where the manufacturing costs were ultimately realized in 2022”. They also argued that transit companies want specialized buses, not simply ones available “off the shelf.” This requires tailoring each order specifically to the consumer which inflates costs.

But the real reason is that their buses have been plagued with problems.  Buses caught on fire or frequently broke down, batteries froze in the cold weather, and the drivetrains had issues pulling a bus load of children up hills.  But the most prevalent issue associated with Proterra’s buses is that when they break down, replacement parts are so difficult to get that the buses sit idle for months at a time.  Not very helpful—and potentially dangerous—when your children are forced to ride in electric buses to get to school.

State Representative Gray noted that two electric buses are required to replace a single diesel bus because it is impossible to recharge the bus from its morning run before the afternoon return run begins.  This would cost Delaware taxpayers an additional $2.6 million during just the first two years of HB10’s implementation.

Delaware’s legislature and the Governor’s Office has pushed electric vehicles as a way to make Delaware’s environment clean and green.  Although touted as being “clean and green,” electric vehicles aren’t. The process to mine the rare earth elements that are needed for the batteries creates copious amounts of toxic waste, destroys land and ecosystems through surface mining where vast amounts of rock and soil are removed, and utilizes child and slave labor in poor areas such as the Democratic Republic of the Congo and southeast Asia.

Proterra joins Solyndra, A123, Pink Energy (Power Home Solar), and Lordstown Motors (an EV truck manufacturer) on the ever-growing list of high-profile, federally backed companies that have wasted taxpayer money and gone the way of the dinosaur.  Our Delaware state legislature must learn that the free market is better at selecting true winners than a legislator or bureaucrat throwing away our hard-earned tax money by investing in these fly-by-night schemes.

David Legates is a retired tenured professor of climatology, geography, and spatial sciences in the Department of Geography at the University of Delaware and a retired adjunct professor in the Department of Applied Economics and Statistics. Currently Legates serves on the Advisory Board for A Better Delaware.

 

 

 

 

 

 

Consequences of Banning Greenhouse Gases

 By David R. Legates        

You have often heard: “As greenhouse gas emissions from human activities increase, they build up in the atmosphere and warm the climate, leading to many other changes around the world.”  We are told these consequences always will be devastating and, of course, they will become worse if we don’t take draconian efforts to stop the emission of greenhouse gases now.

This last session, the Delaware legislature passed, and Governor Carney signed into law House Bill 99.  Known as the Delaware Climate Change Solutions Act of 2023, the law implements Delaware’s Climate Action Plan to reduce net greenhouse gas emissions to 50% by 2030 and to 0% by 2050.  State agencies must “consider climate change in decision-making, rulemaking, and procurement,” which puts the decisions into the hands of state bureaucrats.

Greenhouse gases are called “trace gases” for a reason—they make up very little of the dry atmosphere by volume.  The three gases targeted by House Bill 99 are carbon dioxide (0.04%), methane (0.00019%), and nitrous oxide (0.00000015%).  Together, these three molecules comprise so little of our atmosphere that in a stadium of 100,000 people, the composition of these three molecules in the atmosphere would be the equivalent of just 40 people.

Moreover, these gases are not pollutants; in fact, an increase in carbon dioxide has been a huge benefit to the entire planet.  Over the last forty years, the majority of the planet has greened significantly.  Simply put, carbon dioxide is plant food—commercial greenhouses increase carbon dioxide concentrations by a factor of about four to enhance plant growth as plants grow faster under higher carbon dioxide concentrations.  In addition, plants use water more efficiently when carbon dioxide concentrations are higher.

But the Delaware General Assembly has labeled these gases as pollutants and has prescribed that we take draconian steps to curb their production. The electric vehicle mandate prescribes that we reduce the number of gasoline and diesel automobiles sent to dealers to zero by 2035.  House Bill 10 requires the phase in of electric school buses, House Bill 11 demands new commercial buildings be able to support rooftop solar panels, and House Bill 12 incentivizes the purchase and lease of electric vehicles through a rebate program.  Senate Substitute 1 for Senate Bill 103 calls for all newly constructed single- and multi-family residences in the State to include electric vehicle charging infrastructure.  All these bills are now the law in Delaware forcing Delawareans to solely rely on wind and solar energy. At the same time, Delaware’s Federal delegation and the Biden administration are pushing for restrictions to the production of NMP, (N-Methyl pyrrolidone) which is an essential processing aid for lithium batteries that are key to energy storage and electrification storage. Without batteries to store this energy, our houses go dark and cold when the wind stops blowing and the sun stops shining.

So, why demonize fuels that have made energy inexpensive and have led nearly seven billion people out of poverty?  As a climatologist, I can tell you that our climate is not becoming more deadly or more extreme because of increases in greenhouse gases in the atmosphere.  For this small fraction of gases, we are proposing to devastate our economy, send billions of people to live below the poverty level, and destroy our way of life. What are we thinking?

David Legates is a retired tenured professor of climatology, geography, and spatial sciences in the Department of Geography at the University of Delaware and a retired adjunct professor in the Department of Applied Economics and Statistics.

 

 

 

Why Hydrogen in Natural Gas Pipelines Makes No Sense, Particularly in Delaware

By: Lindsay Leveen

Okay, you are going to need to recall a little science for this one! Remember electrons? They are the little electrified bits of energy that circle the nucleus (center) of an atom. Atoms make up the elements of gas, liquid, and solids (for real geeks, the Periodic Chart may come to mind!)

Why do we need to revisit science class? Well, there is an effort to retrieve electrons from atoms of Hydrogen gas and add them to natural gas to make a “greener” supply of energy.  Delaware is among the seven states in the US which were awarded federal support to develop a “hydrogen hub”, which Delaware will share with New Jersey and Pennsylvania.  Several companies with ties to Delaware, including Bloom Energy and Air Liquide are involved in the effort.

The project has identified three classifications of hydrogen electrons they will seek to isolate: pink, which will be sourced from the nuclear power plant in New Jersey; green, which will use wind and solar sources from the three states; and orange, which will be retrieved by injecting water into deep hot iron formations in the earth.

There are significant issues that prevent this from making any practical sense at all. First, the plan is to use the existing pipelines for natural gas. The existing metal composition of the steel natural gas pipelines is incompatible with hydrogen, which will permeate the metal and cause the steel to become brittle, and which will, ultimately, cause the pipelines to rupture.  Replacing the pipelines has been deemed to be too expensive and, therefore, to preserve the pipes for use, only a small fraction of hydrogen will be added to the natural gas. That could be as little as only 1%.

And the use of the “clean” electrons is somewhat limited.  Using electrons in water electrolyzers loses half of the energy within the incoming electrons.  While some companies, including Bloom, claim 85% efficiency, they do not account for the energy lost in the steam nor the energy needed to compress and dry the hydrogen to make it useful.  Wet electrolyzers, such as those utilized by Bloom, produce wet hydrogen, at low pressure. This hydrogen is useless in that state. Any value in hydrogen is after it has been dried and compressed.

In this area of the country, the best return is to use these electrons for two things.  The first is for heat pumps.  Electric heat pumps gain energy from the surroundings and multiply the kilowatt hours of useful warming heat delivered.  This area of the country is ideal for heat pumps as the winters are not too severe.

The second, although not ideal, is electric vehicles.  The compressed hydrogen in the proposed hub will be used in part to power buses in Philadelphia.  However, these expensive hydrogen fuel cell buses are only 50% efficient.  Using renewable clean electrons for hydrogen manufacture, and then to fuel buses, yields only 25% of the electrons giving a return on the effort, that is, actually propelling the wheels.  It is less expensive to buy battery powered electric buses, as the return on those yields 90% of the electrons propelling the wheels.

But none of this really makes practical sense. Hydrogen only has a third of the energy per unit volume as natural gas, based on the higher heating value of natural gas.  Clients in the US who use natural gas are already overpaying by some 10%, since the real heating value of natural gas is approximately 90% of the higher heating value used to bill customers.  Hydrogen billing will be even more unfair to gas consumers, as the lower heating value of hydrogen is only 80% of the higher heating value that consumers will be charged.

The cost to provide a minuscule amount of hydrogen into natural gas to, in effect, pretend is it “greener” than simply using natural gas, is not justified.  The increased costs to customers are not providing a better service or product. The federal government’s support of this project will cease, and it will not be cost-effective for private industry to continue to provide hydrogen injected gas.  Consumers should object to these projects now, before we spend more money on a useless effort with no return to the consumer.

Lindsay Leveen has more than 40 years of experience in chemical engineering and executive management in high value-added process industries that extract value out of processes that transform chemicals, energy, labor, and capital into products that society needs and consumers will buy. He has consulted and worked in the areas of energy deregulation, alternative energy generation, traditional energy generation, power transmission and distribution, power quality and reliability systems, and on hydrogen and sustainability Lindsay received a B.S. in Chemical Engineering and an MBA from University of Witwatersrand, S. Africa and a M.S. in Chemical Engineering from Iowa State .His book on the hope and hype of hydrogen is translated into Japanese and is used in Japan as a university text for students of energy policy and sustainability. In 2011, the Northern California Chapter of the American Institute of Chemical Engineers (AIChE) gave Mr. Leveen their Professional Development award for his lifetime of work in the field of chemical engineering.

 

More Options Necessary to Meet Electric Demands

By: Kenneth J. Reuter, Jr.

Influential voices who have the ears of policy makers are advocating solar and wind generation to provide electricity supply to meet our country’s demands.  But it is important to respect the fact that technology must drive electric generation supply solutions, not government mandates.  This same notion also applies to the demand side of electricity as well.  For example, mandating EV’s by a certain date is also misguided.  Electric supply and demand must evolve and be driven by available and under-development technology. We also need to understand that our electric grid currently lacks the capability and stability to support a rapid, forced transition. Facts and science must shape our path forward to transition to our electric energy future. This article focuses on how best to address electric generation to support future US demand.

The US generates electricity from four sources distributed approximately as follows: Natural Gas (40%), Renewables (22%), Coal (20%) and Nuclear (18%) with coal as the most polluting.  As solar and wind technology emerge and evolve, we are expanding their deployment.  Both are renewable and neither emit pollution.  As beneficial as these emerging renewable sources have become, they will not solve the growing and massive US demand for a reliable supply. Generation cannot be dependent on daily amounts of sun and wind.  Primary generation must be supplied by predictable, reliable, and cost-effective power plants also known as base-load plants.  We know that coal is the most problematic with respect to pollution.  Clean coal and scrubbing solutions are under refinement.  But there are better solutions that can be further expanded or in development that show great promise.

If we want to meet the very aggressive goal of zero emissions by 2050, coal is not the answer.   It is, however, abundant, and inexpensive.  China’s reliance on coal gives them a huge economic competitive advantage over the US.  As a result, China is also by far the world’s single largest polluter. We are in a global competitive environment and cost is very important to ensure our competitive place in the world economy.

Natural gas, by a wide margin, produces a fraction of pollutants than that of coal by a wide margin does.  And when designed in Combined-Cycle (CC) configuration, meaning using that fuel to spin a generator and then capturing the heat emitted to spin another generator, is very cost-effective producing significantly lower pollutants to the atmosphere.

In highly populated coastal environments, wind has been proposed as a source of electric generation. If you   compare the cost of building a Combined-Cycle (CC) natural gas plant versus an Offshore Wind Farm, (OSW).  A 600 MW CC natural gas plant can be built for approximately $750 Million.  A 600MW Offshore Wind Farm costs in excess of $2 Billion and with much higher maintenance costs.  And remember, all these costs are built into the rate base which drives cents per KW at the meter.  The US has been expanding natural gas CC plants and decommissioning plants that are coal fired.  We have seen greater than a 65% drop in overall emissions from 2005 to 2019 and a 32% drop in CO2 emissions shifting from coal to natural gas. We need to continue the transition from coal to natural gas.

In order to provide consistent base-load electric power to meet future demand we must also revisit nuclear! Nuclear power is clean, emits no pollutants and can run base-load full power for extended periods without the need for refueling.  Most operators elect to refuel every 18-24 months. Nuclear technology is safe, effective and by far the cleanest, most efficient and the most non-polluting answer for us to reach our goal of Zero Carbon Emissions by 2050.

Small modular reactors (SMRs) are advanced nuclear reactors that have a power capacity of up to 300 MW per unit, which is about one-third of the generating capacity of traditional nuclear power reactors. SMRs, which can produce a large amount of low-carbon electricity, are:

  • Small – physically a fraction of the size of a conventional nuclear power reactor.
  • Modular – making it possible for systems and components to be factory-assembled and transported as a unit to a location for installation.
  • Reactors – harnessing nuclear fission to generate heat to produce energy.

Many of the benefits of SMRs are inherently linked to the nature of their design – small and modular. Given their smaller footprint, SMRs can be sited on locations not suitable for larger nuclear power plants. Prefabricated units of SMRs can be manufactured and then shipped and installed on site, making them more affordable to build than large power reactors, which are often custom designed for a particular location, sometimes leading to construction delays. SMRs offer savings in cost and construction time, and they can be deployed incrementally to match increasing energy demand.

No one generation solution is the answer.  The right answer?  All of the above, driven by technology, is the right mix of generation to meet both the growing US demand for electricity and strive to reach a Zero carbon emissions goal by 2050.

Kenneth J Reuter, Jr., has a BS In Economics and Business from the University of Delaware and  an MBA in International Finance from Northeastern University. He has worked for the past 40 years in the electric industry dealing with all methods of generation, transmission, and distribution. He has held positions as an engineer, Director, VP and CEO in global energy companies. He continues to consult globally through his business, Resilience Energy, LLC. 

 

 

 

 

 

Hospital Price Transparency in Delaware: The Ideal and the Reality

By: Dr. Stacie Beck

You usually know what you are going to pay for purchase before you buy. That makes sense. But have you ever tried to determine how much a medical procedure is going to cost before you undergo anesthesia? It can be frustrating.

Well, at last, the federal government has come to the rescue – sort of. The Center for Medicare & Medicaid Services (CMS) now requires hospitals to post all their prices in a machine-readable file (for the highly computer literate) and a selection of “shoppable services” (essentially, non-urgent procedures) in a consumer-friendly format (for the rest of us).

We compared the CMS ideal and the Delaware reality by pricing three procedures that may be familiar to readers: a colonoscopy, vaginal delivery of a baby without complications and a simple cardioversion. The third is an electric shock administered externally to the chest while under anesthesia to restore a regular heartbeat to a patient with a heart flutter.

The Ideal

              The CMS requires that a common price list of 70 shoppable services (or as many as the hospital provides) to be posted. An additional 230 or more, totaling 300 services, chosen by the hospital, must also be posted, reflecting the most common procedures done at the hospital based on local demographics or hospital specialization. Of the three procedures we considered, two (colonoscopy and vaginal delivery) are on the required list and one (cardioversion) is not.

The format can be either a cost estimator tool or a ‘flat file’ with links prominently displayed on the hospital website. The hospital is not allowed to require you to set up an account, use a password or any personal identifying information to access the list.  Four prices should be displayed: the cash price, the payer-specific price, and the minimum and maximum prices negotiated by the hospital with all its payers. ‘Payer’ usually means a health insurance company. Medicare/Medicaid prices are not required to be displayed because they are publicly available elsewhere, although CMS encourages these to be included.

Hospitals must identify and include ancillary services, such as laboratory tests, radiology, drugs, anesthesia services, etc., it provides as part of a shoppable service. Beware: hospitals differ in the ancillary services that are included. Moreover, their negotiated contracts with payers could differ in ancillary services that are included. Though not required, CMS ‘strongly encourage(s) and recommend(s), …(hospitals) indicate any additional ancillary services that are not provided by the hospital but that (hospitals) know the patient is likely to experience as part of the primary shoppable service, and to indicate that such services may be billed separately by other entities involved in the patient’s care’ that are not employed by the hospital.

CMS helpfully suggests a format for each situation, as depicted below.

If all ancillary services are included in the contract negotiated with Health Insurer X:

If ancillary services are included but negotiated separately by the hospital with Health Insurer Y, then:

If only some ancillary services are included by hospital in its contract with Health Insurer X:

While a health insurance plan member may be able to request an estimate of total cost from the insurer, the self-paying patient must be savvy enough to request the cost of all services: those provided by the hospital and those billed separately. The latter requires the patient get the contact information of those the hospital has contracted with (e.g., pathology and/or anesthesia practices, etc.).

The Reality

The hospitals surveyed here are: Christiana Care, Bay Health, Beebe, Chester County-Penn Medicine, and UM Upper Chesapeake Medical Center.

The good news is that all have links to a cost estimator tool on their main websites. However, they are mostly buried under obscure headings, sometimes at the top or bottom of the page in small print, e.g., Billing and Financial Information (Bayhealth) or Resources (Beebe). Christiana Care buries it the deepest, and one has to know whether a colonoscopy or vaginal delivery is an in-patient or out-patient, medical or surgical service. Upper Chesapeake’s link for ‘guests’ is inoperative.

It is important in most cases to have the billing (CPT or DRG) code rather than the procedure name. For example, there are several types of colonoscopies. Most cost estimator tools include statements that certain services may be billed separately, such as physician and anesthesia, but are not specific by procedure. No name or contact information for these outside services is listed, despite being contracted by the hospital, except for Bayhealth in an online brochure.

Few follow CMS’s suggested formats. Below the colonoscopy (CPT 45378) estimate for a self-paying patient is shown for our sample hospitals.

Christiana Care:

It appears that all ancillary services are included in the self-pay price but this is not clear. The cost of vaginal delivery (CPT 59400) without ancillary services is $4,430 and no estimate is provided for a cardioversion (CPT 92960)

Bayhealth

It is not clear what ancillary services are included from this estimator tool. No estimate was available for vaginal delivery and cardioversion costs $1737.

Beebe

No estimate was available for vaginal delivery and cardioversion costs $652. Again, it is not clear what specific ancillary services are included for each procedure from this estimator tool.

Chester County Hospital (Penn Medicine)

Penn Medicine provides estimates specific to each location (here Chester County Hospital) whereas Christiana Care and Bayhealth do not. However, it was easier to find the flat file than the estimator tool. Notice that the prices appear to be far apart for the cash-paying patient from each source. No estimate was available for vaginal delivery and cardioversion costs $688. The latter estimate was available in the ‘flat file’ but not the estimator. There were three entries under cardioversion (CPT 96920) with prices ranging from $1264 to $4477.

UM Upper Chesapeake Medical Center The cost estimator tool is unavailable to non-patients. Only the rather useless chargemaster list is accessible as a machine-readable file.

Conclusions

The CMS has made a valuable advance in health care price transparency. However, our local industry is dragging its feet in obeying the spirit as well as the letter of the law. All the hospitals here list phone numbers for patients to get more precise estimates, however this does not fulfill the intent of the regulation. The ideal is for information to be conveniently available for comparison shopping. Other industries with multiple and complex inputs, e.g., construction, education, etc. have achieved this. The health care industry can too.

Dr. Stacie Beck is an Associate Professor of Economics at the University of Delaware. She has a BS in economics from Boston College and a PhD in economics from the University of Pennsylvania. She has been published in many peer review journals and currently serves as an editorial board member of Eastern Economics Journal.

 

 

 

Health Care Commission: Lack of Independence from the Governor

By: Alexandre Kittila

The Delaware Healthcare Commission (DHCC) is the executive authority on healthcare in the state of Delaware. When it was established in 1990, the founding legislation stated that the Commission shall “serve as the policy body to advise the Governor and General Assembly.” To meet the DHCC’s important duties, members are “to collaborate with other state agencies and the private sector, to initiate pilots, and to recommend policy changes to the Governor and General Assembly.”

A substantial addition to that mission occurred in 2022, when the legislature granted additional authority to the Commission to “be responsible for establishing and monitoring the State of Delaware Health Care Spending.” Giving the Commission direct control over establishing pilot programs and affecting spending, grants what was an advisory board much more influence than the term “commission” would lead you to believe.

A real concern is not the establishment of the DHCC, nor its duties, but, rather, the fashion in which its board members are selected, and who is selected to serve. An executive commission separate from the branches of the Delaware government to establish pilots and spending could encourage decisive action and less entanglement in the bureaucracy; in its current state, however, it simply works as an extension of the Governor’s power over the healthcare industry in Delaware. Separation of the commission from the influence of bureaucrats in our government is crucial to ensure its proper function and fidelity to the goal of meeting the health care needs of Delawareans.

There are eleven members of the Commission. They are: the Insurance Commissioner, a representative of the Speaker of the House, a representative of the President Pro Tempe, the Secretary of Finance, the Secretary of Health and Social Services, the Secretary of Services for Children and Youths, and five individuals who are chosen by the Governor. Therefore, fully eight out of the eleven members are directly selected by the Governor. This compromises the independence of the Commission and can lead to the Commission becoming simply a rubber stamp for the Governor’s preferred policies and spending priorities.

If we truly want the best outcome for Delaware citizens who seek health care, the Commission should be a think tank to consider how we can best provide timely access and quality care at a fair and reasonable price. That is, the best way to spend the taxpayers’ money.

There is potential for independence of the Commission from the Governor in a provision of the Delaware Code that requires that “no more than 3 of the Commission members appointed by the Governor shall be of the same political party.” Of course, in Delaware, for nearly a decade now, the leadership of the House and Senate, and the Insurance Commissioner, have all be of the same political party as the Governor, And, given that the three cabinet members are appointed by the Governor, they will likely be of the same political party.  So, while the law may seem to create balance, consider that, even adhering to this requirement, the balance of the Commission could be 9-2. And, even if the Speaker of the House, the President Pro Tempe of the Senate, and the Insurance Commissioner are all of the opposite party of the Governor, and two of the five individuals selected by the Governor are of the opposite party, the balance would still be a majority of the Governor’s party, 6-5.

So, has the government followed their own laws? Currently, the cabinet members and government officials holding the designated positions are all members of the Democrat Party, and 4 of the 5 persons named by the Governor are Democrats, the only exception being the former Democrat mayor of Lewes, Theodore Becker, who is now registered as a “NO PARTY.” There clearly is no balance.

Additionally, many members of the Commission have a vested interest in the outcome of the decisions the Commission makes because they are affiliated with a health care provider or service in Delaware.  The Commission is mandated, in 16 Del. C.  §9903(e)(3) to act “in such a way that fosters creative thinking and problem solving.” A commission in which a nearly singular policy affiliation reigns does not “foster creative thinking”, but rather becomes an echo chamber effect, not receiving or considering competing or alternative viewpoints.

An executive authority on healthcare is not inherently a bad idea but the fact that nearly every member serves, for all practical purposes, at the pleasure of the Governor makes it dangerous. It allows the Governor and the government a more heavy hand into places it ought to be restrained. The Commission needs to be nonpartisan and independent, and motivated by the best interests in meeting the health care needs of our citizens.

So, what would be the best solution?  Perhaps we should make the five Commission members currently chosen by the Governor, selected and voted on by the General Assembly. Perhaps adopt an ethics rule to eliminate self-interest. Maybe allow a single selection by the Governor, other than his cabinet members, similar to the ones for the President Pro Tempe and the Speaker of the House.

All of those ideas will improve the Commission’s ability to meet the statutory mandate. But the most important takeaway is that since the DHCC is meant to be for the people, it should also be by the people. Establishing the DHCC in a more balanced structure will not only lead to more ideas, but also better ideas, hopefully leading to better healthcare for everyone in the state of Delaware.

.Alexandre Kittila is Senior at Tower Hill School. Kittila served as an intern for A Better Delaware in the summer of 2023.

Consolidation of Healthcare Services and Financing in Delaware: The Inherent Risk of Monopoly

By: Christopher Casscells, M.D.

Delaware is a small state, both by size and population. As our elderly population grows and the state’s economy shrinks, a larger percentage of our economy will be dedicated to healthcare because, necessarily, older people require more healthcare. None of this is disputable.

Delaware residents have limited choice of providers, especially of hospital systems: only Bayhealth, Beebe, Christiana and St. Francis are options. Christiana is dominant, and the others generally co-exist. Delaware’s certificate of need laws discourage further outside competition from entering the marketplace.

A predictable result of the implementation of the Affordable Care Act (Obamacare) is the trend of consolidation of healthcare providers, nationally. There are fewer and fewer independent practices, as they are bought up or driven out by the hospitals. Again, policy drives that result, as the hospitals are paid a larger premium by Medicare, Medicaid and private insurers for exactly the same service provided by an independent practitioner. So, the trend is toward a day when all healthcare is delivered by hospitals and their employees.

The issue looms large for Delaware patients.  In most places, patients still have choices between competing large systems, and oversight is in place to screen for price-setting collusion between these entities.

Delaware’s size, both geographically and in population, limits those “remedies”. There is very limited choice of hospital and provider, especially, regionally, in some of our rural areas.

Additionally, in Delaware, there is limited choice of health insurers. The state is dominated by Highmark Blue Cross Blue Shield (BCBS), a Pennsylvania company that acquired BCBSDelaware over a decade ago. Highmark is effectively the only health insurance company in Delaware. Highmark manages portions of Delaware’s sizable Medicaid and Medicare patient population in addition to being the sole health insurance contractor for the State of Delaware, its employees, and retirees. The State is the largest employer in Delaware. Several other entities have tried to make a go of it, including Aetna, Principal, Coventry, Cigna, Care First, US Healthcare and United Healthcare, to name a few, but none has been able to compete. There should be competition, however, Delaware law requires a minimum of 3 choices of health insurer, but the Delaware Insurance Commissioner simply ignores the mandate.

And, even with multiple hospitals, our choices are shrinking. Increasingly, there are “collaborations” between Highmark and Christiana Care, Beebe and BayHealth. Delaware policy leaders need to take note. In Pennsylvania, Highmark ‘collaborated’ with the Allegheny Hospital System in PA before taking over and creating a vertical monopoly which successfully competes against other insurers, hospital systems and combinations. While a system like Pittsburgh’s UPMC in Western Pennsylvania might be able to compete with that large a competitor, Delaware has no other competitive choices. If left unchallenged, a vertical monopoly would worsen an already less than ideal situation.

There are those that argue that such a collaboration would lead to economies of scale with better access, lower cost, and higher quality. But those metrics have been the goal of the Delaware Healthcare Commission for well over a decade, and the only result has been the steady worsening of all three metrics. According to Forbes Advisor, Nov. 2022, Delaware already has the 8th highest cost per capita of healthcare in the nation. Our wait times in Emergency Departments are dismal, and securing an appointment with a provider is increasingly difficult. Those advocates need to be asked to account for these results, in spite of the increasing consolidation of the healthcare marketplace.

Regardless of the intentions of those responsible for the oversight of the state’s health policy, the Department of Health and Human Services, the Insurance Commissioner, and the Healthcare Commission, they must be more vigilant to protect the options patients have for care.

History has demonstrated consistently that monopolies in a service industry are ill-advised. Delaware policy makers need to prevent further consolidation, bring more insurance options to Delaware citizens, and prevent a vertical monopoly that will adversely affect precisely those goals our policy makers are seeking to achieve.

Dr. Christopher Casscells, MD, Policy Director, Center for Health Policy, Caesar Rodney Institute. Dr. Casscells was one of Delaware’s leading Board-Certified Orthopedic Surgeons. He graduated from the University of Virginia School of Medicine and did his residency at Yale-New Haven Hospital. After a distinguished 30-year medical career, Dr. Casscells retired from practicing in January 2020.

Medicare Advantage Plans: Are We Doing Our Best for Our Seniors?

By: Glenn Brown, DPT, PT, MMSc, ATC

Medicare provides health insurance coverage for 65 million people in the United States.  But Medicare has changed, and today, over 30 million seniors, (nearly 51%) are covered under a Medicare Advantage Plan. The number of Special Needs Plans available has doubled since 2018.  Even government retirement packages are looking at Medicare Advantage as an alternative. It is well known that in Delaware, state retirees are facing a considerable battle over being forced into a Medicare Advantage Plan as opposed to the promised benefits of traditional Medicare and supplemental insurance coverage.

Given the increasing popularity of Medicare Advantage, we must consider how and if this transition in the Medicare market is beneficial to both patients and providers.  Significantly, we must consider the impact of the rising percentage of the Medicare market share captured by for-profit companies versus nonprofit, or government plans.  Currently, for-profit insurers account for 72.9% of all Medicare Advantage plans, with an annual growth rate of over 11%.

Medicare Advantage plans purport additional benefits and coverages for subscribers compared to traditional Medicare. These plans boast lower prices for prescription drugs and lower premiums with expanded coverage options such as vision, fitness, telehealth, hearing, and dental benefits. Despite these additional bells and whistles, beneficiaries in Medicare Advantage and traditional Medicare reported similar rates of satisfaction with their care. Regarding affordability, a slightly smaller number of beneficiaries in traditional Medicare with supplemental coverage than Medicare Advantage enrollees reported having cost-related problems.

However, many Medicare Advantage plans create cost and convenience issues for subscribers. These include limited network coverage, high out-of-network costs, prescription drug formularies that do not include their needed medications, preauthorization, and utilization management processes that can lead to delays in care and administrative burdens for both patients and healthcare providers. In my practice, Highmark Medicare Advantage subscribers encountered an unexpected increase in out-of-network copayments. These copayments, which previously were 20% co-insurance payments, now range from $35-$50 per visit depending on the plan selected by the subscribers.

While there are pitfalls for subscribers in Medicare Advantage, the challenges it creates for providers are so great that many providers are unwilling to accept their fee schedules and billing/reimbursement policies. Large provider groups are leaving the Medicare Advantage market because of low reimbursement and prior authorization hassles.  Providers also experience much greater complexity in the billing and collection process which involves greater resources allocated to obtain payment for services. They expose themselves to greater financial risk because of the increase in complexity and the risk of unpredictable plan changes, including reimbursement rates, utilization management programs, and other billing and collections process burdens.

Medicare Advantage plans give the perception of being an appealing alternative to traditional Medicare.  These plans promise additional benefits and cost savings, but they also come with a range of disadvantages. These disadvantages include limited network coverage, higher out-of-pocket costs, geographic and prescription drug restrictions, and the potential for plan changes and disruptions.  Additionally, a growing number of Medicare subscribers are covered by “for-profit” companies.  Recent evidence indicates that “for-profit” consolidated companies result in elevated physician charges and costs. Prudent and forward-thinking decision-making must occur now. We must drive more of these plans back to traditional Medicare or at least force them to operate in a manner similar to traditional Medicare.  Failure to do so will result in these profit-driven companies creating a system that transfers greater costs to those on a fixed income and greater limitation of provider access for a population that has notably more serious conditions and/or multiple medical issues. We owe it to our seniors to create a system that properly cares for them versus a system that sees only the GOLD in the “Golden Years”.

Glenn Brown DPT, MMSc, ATC, SCS is the co-owner of CORE Physical Therapy in Dover.  Dr. Brown has been in clinical practice for 38 years as a physical therapist and athletic trainer and has been a Sports Certified Specialist since 1993.  Dr. Brown currently serves as the Legislative Chair of the Delaware Chapter of the American Physical Therapy Association.

 

Are Certificate of Need Laws Relevant in Delaware’s Healthcare Marketplace?

By: Jane Brady, Chair, A Better Delaware

You may have never heard of a Certificate of Need (CON) if you do not work in healthcare in Delaware. Yet, these requirements within CON regulations can affect your access to, and the cost and quality of, patient care you receive.

The law adopting a Certificate of Need requirement, now called a Certificate of Public Review in Delaware, was intended to improve access, costs, and the quality of care for patients, generally in hospitals and nursing homes. The law has failed to achieve those goals.

A Certificate of Need is a regulation that requires healthcare providers to get permission from the state before adding or expanding the type of services they offer or before acquiring expensive equipment, building new facilities, or expanding existing ones. Upon passage of an Act of Congress, certificate of need laws were passed by 49 of the 50 states in the early 1980s.

Over the intervening years, research has shown that the goals the laws sought to achieve were not reached, and many states now have repealed the certificate of need statutes. In fact, even Congress repealed the law that compelled states to adopt a certificate of need law – in 1986!! Yet, like many other states, Delaware still has the requirement in place. It should be repealed.

There have been studies of the impact of certificate of need laws. The Kaiser Family Foundation did a study that found that states that have certificate of need requirements had 11% higher healthcare costs than states that did not have it. An additional study by George Mason University found that there were 30% fewer hospitals per 100,000 residents in states that had a certificate of need requirement. Additionally, rural areas, with smaller, localized populations, were more poorly served.

Certificate of need laws are structurally flawed. They limit competition. They allow the state to pick “winners” and “losers,” with the existing facilities having the political connections and favor to “win.” The certificate of need restricts who can participate in competing for your healthcare choices and as a result, there is no incentive to be innovative or even cost-conscious when they appeal to you as you make your health care choices. When businesses compete for you to choose their services, they will try and find the most cost-effective way to give you a product that you want, when you want it. Without competition, there is no need to be responsive to your demand for a specific service or to be more cost-effective. You get what they have decided to provide at the price they decide to charge.

Importantly, access includes timeliness. Recently, CMS, the company that manages Medicare and Medicaid nationally, conducted a study of emergency room wait times in all 50 states and the District of Columbia. Delaware ranked 47 out of 51, with an average wait time for emergency room services of over three hours.

It is good governance to eliminate certificate of need laws. Since the laws were passed, the government has taken a much larger role in providing health care.

In an attempt to assure continuing use of these competition – limiting laws, advocates claim they are necessary for more effective care for indigent patients. It was not one of the original stated goals of the legislation but has been used to try and justify retaining these laws on the books. However, if you wish to help the indigent access health care, and most would accept that is a desirable social goal, the best course is to require the expenditure of public funds for that purpose to be transparent and accountable. Currently, the way reimbursements are being made, the hospitals effectively become a smokescreen, and the public cannot discern easily where and how the money is being spent.

The absurd argument some of those who favor using certificate of need laws to help fund indigent services argue is that if you restrict the amount of healthcare available, the healthcare providers who are lucky enough to be in the market can charge higher rates to the people with private insurance, and that will subsidize the care for poor patients without any insurance.  Maybe a day long ago when providers actually decided what health care would cost.

Now, Medicare and Medicaid have changed the economic environment in which healthcare is provided and costs are highly regulated. In truth, Certificate of Need laws are now essentially outdated for any purpose. Delaware should repeal the laws providing for a Certificate of Public Review, our equivalent of a Certificate of Need, and allow the health care providers of our state compete fairly to provide the public, timely, the quality health care they need and want.

Jane Bady serves as Chair of A Better Delaware.She previously served as Attorney General of Delaware and as a Judge of the Delaware Superior Court.