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January 2005 • Volume 15, Issue 1

Living Liberty

January 2005

A PRELIMINARY LOOK AT THE 2005 SESSION outline for a major tax hike. In public, he and other legislative leaders are making it seem as if they are cutting spending. Don’t believe a word of it! Here are the “LOCKE WANTS facts. TO INCREASE

by Bob Williams he Democrats’ challenges to Dino Rossi’s November 2004 certification as governor have shortened the allimportant time frame for effective transition from the Locke administration to the new one. Key positions must be filled and a budget developed. All the while, Democrat leaders in the House and Senate have been firming up their plans for the upcoming legislative session. They have been talking with media and floating trial balloons about how to get more revenue.


With this chaotic backdrop in mind, and with new leadership determined to spend more money, the upcoming legislative session promises to be a doozy! No matter what happens concerning budget, taxes, education, regulatory reform, health care, unemployment insurance reform, and teacher paycheck protection, EFF will be there as your eyes and ears. Though the 2005 Legislative Session hasn’t started yet, EFF is happy to report that many legislators are using our specific recommendations in bills they have drafted on performance audits, public records law reform, health care reform, fraud prevention, and the state budget. The following are key issues we believe the governor and legislature must address in the 2005 session. 1. Build a no-tax-increase budget Governor Locke has released to release a budget that completely undermines the Initiative 601 spending limit and provides the


The forecasted inflation rate for the $3.3 BILLION, next two years is OR 14.3 3.7 percent, and PERCENT.” for the same time period, revenue will be up 6.7 percent. But Governor Locke is considering a 14.3 percent increase in spending; hence, if he ends up proposing to spend less than 14.3 percent, it will be called a “cut.” Many in the media are reporting this scenario just as Locke describes it. For example: I was recently asked by a major newspaper editor where I would cut the budget to balance it. This is the trap, though the editor, didn’t mean it as such, because only in government is a reduction of an increase considered a cut. Review the numbers with me again, and perhaps it would be good if you review them with your lawmakers as well. The new budget will likely have $1.5 billion in new revenue. Locke wants to increase spending by $3.3 billion or 14.3 percent. 2005 continued on page 8

Living Liberty

A publication of the Evergreen Freedom Foundation

Letter from Lynn

by Lynn Harsh



ow about this idea? Next Christmas, we can shop for all our gifts in one store: a box store—the one closest to our house. If it doesn’t have exactly what we need, we can go to the next closest store, if it isn’t too crowded. The merchandise in the different stores will be similar, since they will be owned by the state. The store supervisors will think ahead on our behalf and select items they know we need or want. They will be specially trained by people in Ivory Towers who have spent years studying what we should need and want. Should some of us be dissatisfied with what we find at the big state box stores, we can go to smaller, more personalized establishments, or we can shop on-line. But we will still have to pay pre-established annual user fees to support the big state stores. This is because some people won’t shop wisely, so the annual user fee will be necessary to help pay for those people’s purchases at the box store. We should be prepared for annual fee increases, since the money collected for gifts is likely never to be adequate. There may be inflation and increases in family size. Additional store staff will be needed to find and monitor the increasing number of families with special gift needs. Some shoppers roaming through the stores can be expected to behave badly, and extra clerks will have to be hired to manage them. Still other shoppers will come to the store without eating. They will have to be fed! Some of us may find the selections in the state store unsettling to our intellectual or religious convictions. But there are


always trade-offs, and we just can’t have everything. Besides, we Americans have a bad habit of thinking we know what’s best, when in reality, we are usually unqualified to make important decisions affecting our lives. Some naysayers will express concern over this plan. They will argue that quality will suffer and prices will skyrocket, since most customers won’t be able to go somewhere else if their neighborhood box store doesn’t meet their needs. They will say stores will begin mixing shoddy merchandise in with the good stuff, and that some of the clerks in the store won’t care about serving customers well, because their job doesn’t depend on pleasing customers. Underperforming clerks will have mandatory customers and, therefore, guaranteed jobs, opponents will say.

while decreasing or stabilizing costs. Their shallow argument will assert that stateowned stores are a monopoly that will drive prices up and quality down. They will never acknowledge that privatized giftbuying is really a risky scheme. We already have a model that exposes the ignorance of these extremists: It’s called our public education system. There we can see where choice in academic services and competition for students and staff is completely unnecessary, because quality is high and prices are low—too low, in fact. And the unions running this statemonopoly are doing a fine job! Back to the gift-buying plan: I hope we can enact it, because it wears me out every year to make so many choices on my own. Besides, the greater public good would be enhanced if my friends and family had the benefit of state employees choosing their gifts, instead of me.

On the other hand, opponents will argue that the best clerks will be discouraged from seeking employment at these stores because everyone is paid the same Tired of waiting for your monthly whether they are mediocre, newsletter for the latest news? poor, or excellent. We can count on hearing arguments from these rightwing, extremist, gift-hating opponents that, if we must have a subsidized gift program, each shopper should have a coupon entitling consumers to the average amount it costs to buy appropriate gifts so they can shop wherever they find merchandise that suits their requirements. They will claim this approach will increase choices and quality,

On occasion, we send out press releases, policy briefs or issue updates. If you would like to be on our email list, please register your email address for our Alert Mailing List. Budget and Taxes? Education? Health care? You can sign up to hear about only those issues that interest you, and your email address is completely confidential. You can also unsubscribe from any of our lists automatically online. To learn more, visit today!

January 2005 • Volume 15, Issue 1



of the month

It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong. -Thomas Sowell

Living Liberty

Contents 1 2005 Session Though the 2005 Legislative Session hasn’t started yet, EFF is happy to report that many legislators are using our specific recommendations in bills they have drafted on performance audits, public records law reform, health care reform, fraud prevention, and the state budget.

4 TPP Update Labor unions are a powerful force in national, state and local politics, funded as they are from dues and forced fees. This election cycle saw record-setting efforts.

5 Provider Networks Renewed interest in consumerism for health care has stirred up quite a debate, and the dust has not settled. Consumer directed health plans (CDHPs), like Health Savings Accounts and Health Reimbursement Arrangements (HRAs), have placed pricing disclosure, patient choice, and affordability in the spotlight.

Evergreen Freedom Foundation PO Box 552 Olympia, WA 98507 (360) 956-3482 Fax (360) 352-1874 • Living Liberty is a publication of the Evergreen Freedom Foundation.

6 The Emperor’s Naked! We’ve made the comparison before between our state’s government education bureaucracy and the fabled “emperor with no clothes.” It still fits. Every year our state’s Superintendent of Public Instruction (SPI) issues back-patting proclamations about immense student progress in our government schools.

7 State Fraud Investigators On the basis of strict confidentiality, frustrated fraud investigators from various state agencies have contacted the Evergreen Freedom Foundation (EFF). They are voicing dismay that politics often override and interfere with their ability to effectively investigate fraud committed against the state and taxpayers.

Editors: Lynn Harsh Marsha Richards

Publisher: Joel Sorrell


EFF’s mission is to advance individual liberty, personal responsibility, and limited and accountable government.

For the past decade, a small cluster of trees has been our logo. We like trees, but they don’t say anything about the mission of the Evergreen Freedom Foundation. Next month, you will see a new look—one that reflects our deep love of liberty, and our determination to pass it to the next generation. ...because freedom matters!


Living Liberty

A publication of the Evergreen Freedom Foundation

to battleground states in the presidential election, including Florida, Michigan and Ohio. The July NEA Representative Assembly in Washington, D.C., was little more than a mini-convention for the Democrat Party, with criticism of President Bush’s No Child Left Behind Act, speeches from Senator Hillary Clinton and Senator John Kerry, and a viewing of Michael Moore’s documentary Fahrenheit 9/11.

TPP Update:

U NION P ARTISANSHIP AND THE E FFECT ON E LECTIONS by Michael Reitz abor unions are a powerful force in national, state and local politics, funded as they are from dues and forced fees. This election cycle saw record-setting efforts.


In the hysteria of the gubernatorial recount, labor unions in Washington have abandoned all attempts to appear nonpartisan in an effort to count every “Gregoire” vote. In early December, the WEA sent out an urgent memo asking its members to sign up to serve as recount observers for the Democratic Party. The Washington State Labor Council went even further by soliciting contributions and encouraging local unions to donate paid staff to the Democrat Party’s efforts. This “urgent” effort is one more indicator that the union does not make decisions on political expenditures by member consensus as it claims. These expenditures are just the tail end of the unions’ aggressive political operation. In Washington alone, the Washington Federation of State Employees gave contributions of $285,000 for state elections and initiatives in 2004. The Washington State Labor Council gave $239,000. The Service Employees International Union gave $605,000 from the in-state council, while the out-of-state


The NEA teamed up with, Campaign for America’s Future, ACORN, the NAACP Voter Fund, and the U.S. Hispanic Leadership Institute and actively recruited members to host “house parties” on September 22. The house party effort was an anti-Bush campaign complete with a video from

“The July NEA Representative Assembly in Washington, D.C., was little more than a mini-convention for the Democrat Party, with criticism of President Bush’s No Child Left Behind Act, speeches from Senator Hillary Clinton and Senator John Kerry, and a viewing of Michael Moore’s documentary Fahrenheit 9/11.” union gave $1,160,000. According to Public Disclosure Commission reports, the Washington Education Association gave $1,053,000 in cash and in-kind contributions from its general fund, including giving $364,457 to its own PAC. Labor unions were a powerful force nationwide this election cycle. All told, the AFL-CIO spent $44 million to mobilize voters. AFSCME spent $48 million, and SEIU spent $65 million. Organized labor gave some $148.4 million to “527” groups. The National Education Association once again demonstrated that the leadership does not reflect the will of a majority of its members in pursuing its radical political agenda. For example, this year the NEA spent several million dollars in an attempt to defeat President George Bush, while acknowledging that only a third of its members are Democrats. The NEA began its election mobilization early this year, rather than in the fall as usual. Political operatives were disbursed

Evergreen Freedom Foundation president Bob Williams signed up and hosted an “NEA House Party.” He reported to the NEA that his “house party” had concluded that the union was the major obstacle to education reform in America, and this was picked up by some of the national media. We doubt NEA officials appreciated these findings. The good news is that the NEA was able to get less than 0.1 percent of its members to voluntarily host this event. That means more than 99.9 percent of NEA’s members did not listen to their radical union leadership. Unfortunately, 100 percent of the members had to pay for the material that was used for this antiBush effort. The NEA Bus Tour kicked off in October, traveling across the country to discuss the importance of education in the elections. NEA president Reg Weaver and other NEA officials traveled on various portions of the tour, which logged more than 7,000 TPP Update continued on page 10

January 2005 • Volume 15, Issue 1



enewed interest in consumerism for health care has stirred up quite a debate, and the dust has not settled. Consumer directed health plans (CDHPs), like Health Savings Accounts and Health Reimbursement Arrangements (HRAs), have placed pricing disclosure, patient choice, and affordability in the spotlight. (Please access our website for detailed discussions on CDHPs and HRAs.)

Two of the quickest ways to empower consumers is through information and greater control over where dollars are spent. Disclosure to consumers of medical and insurance pricing is the single most potent health care reform element. But, pricing transparency—disclosing base costs, reimbursement rates and discounts given to providers—touches a raw nerve due to the confidentiality of contracts between insurers and providers. A lot of money and power is at stake, with health care expenditures in the U.S. reaching levels over $1.6 billion per year. Unless the price structure becomes transparent, premium-weary consumers have no way of knowing whether the discounts negotiated between insurer and provider for medical services are based on a non-inflated cost base. Consumers need to compare whether the amounts they pay for co-insurance and out-ofpocket maximums are truly a good value. This is power in the hands of consumers when they shop for insurance and compare plans. Prescription co-pays are an example. Do you know whether your 50 percent copay is based on the retail pharmacy’s charge or a price schedule from your insurer? You could actually be paying more than 50 percent of the cost of your medicine. Start asking your pharmacist what you would have had to pay for your prescription without your insurance discount. As pricing transparency emerges to support consumerism, provider network fee schedules and the Preferred Provider Organizations (PPO) health plan model will undoubtedly be under increasing scrutiny. For the past 20 years insurers have structured benefits, premiums and co-insurance on confidential “in-network” and “out-of-network” pricing strategies. Most consumers shopping for health insurance have experienced the ritual of checking a new plan’s physician directory to see if their doctor is listed. Many insurers today are incorporating existing PPO networks into new Health

Living Liberty

Savings Account plans. This probably doesn’t pose much of a problem with the issue of “choice of doctor,” because most provider networks are fairly large. But confidential PPO rates as agreed upon between insurer and provider aims directly at the heart of a consumer’s ability to determine whether prices are acceptable. It remains to be seen whether the financing structure of an older system, which gives the insurer and providers control over rate negotiations, will fit into the new structure of consumer driven health plans, which puts greater control over resources into consumers’ hands. Consumer directed health care financially motivates patients to negotiate charges with their providers. If lots of patients begin doing this, it will shake up the health care world. Most insurers today want HSA consumers to use “in-network” providers for medical services, even when the charge for those services falls below the deductible level. Insurers will tell consumers they have negotiated better rates and discounts with their network of providers. Consumers with HSAs should begin to say, “show me.” They should ask: “Better than whose rates, and a discount off what base price?” After all, it is the consumer’s business to know, since financial motivation exists to pocket the savings in their tax-free HSA cash account. The age of consumerism brings new challenges. William R. Boyles, publisher of the “Consumer Driven Market Report, thinks pricing disclosure, PPOs and consumer directed health plans are a rough fit. He does not mince his article, “PPOs: Can They Survive the 21 st Century.” Mr. Boyles writes, “... PPOs are in the worst position ever to defend their unsustainable payment structure. ...PPOs protect physicians from price competition by giving them a guaranteed revenue stream as long as they play the game. Thousands of physicians in an area are guaranteed the same price ...with virtually no control over volume. Provider Networks Continued on page 10


Living Liberty

A publication of the Evergreen Freedom Foundation

THE EMPEROR’S NAKED! by Marsha Richards

We’ve made the comparison before between our state’s government education bureaucracy and the fabled “emperor with no clothes.” It still fits. Every year our state’s Superintendent of Public Instruction (SPI) issues back-patting proclamations abou t immense student

progress in our government schools.


ut the emperor has no robes, and the indecent truth is that we’re facing a crisis of low student achievement that is quickly destroying the futures of individual children and the community as a whole.

their tests to be considered proficient. It’s hardly a standard we would accept in the “real world.” The flip-sides of these proficiency rates tell us the number of students who failed to meet even the low standards required in reading, writing or math: 56.4 percent

Washington was recently ranked 8th in the nation for student achievement by the American Legislative Exchange Council (a national association of state legislators dedicated to free-market principles), partly because our NAEP eighth-grade math scores were higher than the national average. What these scores show is that 32 percent of our state’s eighth graders pass the math section of the test, meaning 68 percent do not. Even worse, a recent study conducted and published by the Brookings Institute shows that most of the questions on the eighth-grade NAEP math test can be solved with arithmetic skills learned by or before the third grade. Study authors remarked: “Problem solving items on the eighth grade NAEP only require knowledge of very simple arithmetic. Despite this, eighth graders have trouble getting them right.” Consider yet another measure of student achievement: the No Child Left Behind Act (NCLB). Last year, more than 400 schools in Washington state failed to meet the standards set by NCLB (standards that were defined by our state education officials).

Behind the headlines about gains on the Washington Assessment of Student Learning “. . . only 43.6 percent of fourth graders, (WASL) is the sad fact that only 43.6 percent of 36.4 percent of seventh graders, and 38.9 fourth graders, 36.4 percent of tenth graders passed the So what did our education “emperor” do percent of seventh this year? Lowered the standards, of graders, and 38.9 percent reading, writing and math portions of the course. The new standards allowed the of tenth graders passed test last year.” Superintendent of Public Instruction to the reading, writing and reduce the list of failing schools to less math portions of the test last year. of fourth graders, 63.6 percent of seventh than 300 this year. When EFF staff graders, and 61.1 percent of Even these low scores are inflated, since tenth graders. state education officials were able to “So what did our education ‘emperor’ register significant gains in fourth and Some people will be tempted do this year? Lowered the standards, seventh grade reading and math by to blame this on the WASL lowering the standards required to score itself, asserting that the test is of course.” proficient in those subjects. With no subjectively graded and actual change in academic achievement, inappropriately designed for various conducted an analysis to find out how the new standards allowed them to claim student groups. These criticisms have many schools would be on the failing list a seven-point gain in the number of fourth some truth, but are a symptom of the if the standards had not been lowered (an extremely time-consuming task), we graders meeting reading standards, and bigger problem. discovered the list would have topped 500. nine- and eight-point gains in seventh Consider another measure of student grade reading and math, respectively. achievement in Washington: the National One of the major provisions of NCLB What does it mean for a student to be Assessment of Educational Progress says that students in perpetually failing “proficient” in reading or math? Not (NAEP). Established in 1969, this test is schools (those that have failed to meet enough, unfortunately. Fourth, seventh administered by the federal government standards for three years or more) must and tenth graders must score somewhere between 58 and 75 percent accuracy on


to gauge education progress nationwide. Emperor continued on page 9

January 2005 • Volume 15, Issue 1


Living Liberty


by Jason Mercier


n the basis of strict confidentiality, frustrated fraud investigators from various state agencies have contacted the Evergreen Freedom Foundation (EFF). They are voicing dismay that politics often override and interfere with their ability to effectively investigate fraud committed against the state and taxpayers. Some local law enforcement officials have also expressed similar concerns. At a September 20, 2004, Senate hearing on the Department of Social and Health Services (DSHS) Mattawa daycare scandal, Grant County law enforcement officials testified that one way to avoid the lack of cooperation from agencies like DSHS is to separate oversight of agency fraud investigations from the agency’s policy officials. This would eliminate any real or perceived conflict of interest. It would free state fraud investigators to do their job without fear of political repercussion. The consequences of the current structure are significant. Grant County prosecutors, for example, are running up against the statute of limitations to prosecute individuals they believe have committed daycare fraud in Mattawa. The prosecutors say lack of timely cooperation from DSHS is primarily to blame. In 1999, then-Representative Marc Boldt offered a proposal to help fix this on-going problem: HB 1126—creating the Office of Inspector General (OIG) in the State Auditor’s Office (SAO). Based on concerns expressed by Grant County law enforcement and those agency fraud investigators who have contacted EFF, we dusted off HB 1126 and incorporated some of those suggestions into our recommendations for a remedy. We think it’s a good idea, for example, to ask agency fraud inspectors to report to the state auditor’s office, rather than agency directors who are political appointees. Modeled after Rep. Boldt’s HB 1126, the reform bill could read: To protect the people’s investment in their government by ensuring the integrity of agency fraud investigations, an office of inspector general is established in the state auditor’s office to: (1) Conduct and supervise investigations relating to allegations of fraud or abuse; (2) Provide leadership and coordination in recommending policies and procedures designed to detect and prevent fraud and abuse; and (3) Provide a method of informing the auditor and the legislature about vulnerabilities and deficiencies relating to the detection and prevention of fraud or abuse as may be discovered as a result of completed investigations conducted or coordinated by the office.

The legislature declares that all powers, duties, and functions of all state agency fraud units pertaining to the investigation of fraud and abuse are transferred to the office of inspector general of the state auditor’s office. All state fraud investigators shall have direct access to all agency records and information as necessary to conduct thorough fraud investigations. Upon completion of an investigation, the office of inspector general shall provide full cooperation to the office of attorney general or any division of law enforcement in any fraud prosecutions. Such a change would not increase bureaucracy. Rather, all current agency fraud investigators would remain within their various agencies, but would report to the state auditor. Funds currently allocated to agencies for fraud oversight would be transferred to the state auditor’s office and earmarked for use by the inspector general (similar to the manner in which agency assistant attorney generals operate). Agencies would no longer be able to divert funding from fraud investigation to other programs, and fraud investigator staffing levels would be determined by the state auditor. Similar practices are routine in many other states, counties, and cities. Such reforms would allow agency directors to focus on policy concerns, while ensuring that the integrity of state fraud investigations is not compromised or dictated by any consideration other than compliance with law. Taxpayer confidence in oversight of public funds is of the utmost importance and is essential to the effective operation of state government. By ensuring state fraud investigators are able to do their jobs independent of political conflicts, state officials will take a major step toward restoring trust in government. An office of inspector general within the state auditor’s office to oversee agency fraud investigations would go a long way toward achieving this goal.


Living Liberty

A publication of the Evergreen Freedom Foundation

2005 Session continued from page 1 . . . If they only spend the new money (the $1.5 billion), bigspending legislators, agency directors, special interest groups and many in the media will call it a devastating cut of $1.8 billion. They will construct the end result as subtraction not addition. We are very sorry to see Governor Locke abandon the Priorities of Government (POG) budget model that won him national awards two years ago. We hope the next governor and legislature remain committed to the POG process, which means they will balance the budget within forecasted revenue. To help assist this effort, EFF will be publicizing ways to save money, including better efficiencies and finding waste in government. We will urge legislators to adopt performance audits. In Texas, performance audits have identified more than $14 billion in savings over the past decade. Governor Arnold Schwarzenegger’s California Performance Review identified $32 billion in potential savings over the next five years, and they weren’t even looking at fraud. Similar savings opportunities exist in this state. 2. Improve business conditions EFF has written a great deal about the unhealthy business climate in this state. Many of the conditions hampering small businesses are agency rules (not state law). EFF is hoping the next governor will appoint excellent agency directors who will clean house and make Washington an example of a state with a healthy climate for small business. We have written many specific recommendations on this, all of which are available on our website. 3. Snuff out the death tax Governor Locke resurrected the death tax from the grave by administrative rule. The Supreme Court is expected to rule on his action shortly. EFF is hopeful the next governor will have the Department of Revenue repeal this rule. Please see the November newsletter for an article describing what has occurred. 4. Advance education reform If the next legislature and governor believe more money is the solution to increasing student performance, we are in for a pitiful repeat performance of nearly all legislative sessions for the past two decades. Over the past ten years, we have spent 16.5 percent more per pupil on K-12 education (inflation adjusted dollars). We have increased the number of teachers with Masters Degrees, designed special programs for nearly every category of struggling students, and changed and aligned our curricular and testing expectations. The results have not been good in terms of student achievement. The legislature should budget by outcomes: graduation rates, dropout rates, success in bilingual education, etc. Poor performance should not be rewarded, and more dollars should


get through the clogged pipeline to classrooms. We will be encouraging school districts to put support services up for competitive bidding to get the biggest bang for every education buck. Virginia’s Governor Warner (D) and Texas’ Governor Perry (R) are saving millions of dollars by competitively bidding education support services. In higher education, we need to fully implement performancebased budgeting. This means changing from an input system (“We need more money.”) to an output system (“What are we buying?”). Universities and colleges should clearly define and prioritize their activities and suggested expenditures and provide valid and reliable evidence to justify their recommendations. The governor and legislature should review and approve the expenditures and implement strong accountability measures to ensure results. EFF will be providing specific recommendations to the legislature on how to improve results in higher education. 5. Build a consumer-driven heath care model EFF will be urging legislators to adopt consumer-driven heath care. This includes reducing the many mandates in basic health insurance policies sold in this state so small businesses can afford to buy basic policies for employees. The new health savings accounts are very consumer friendly, and over time will reduce long-term health care needs. But customers in Washington state need access to more insurance products—something this legislative body should address. 6. Institute performance audits Over the past few years, both the Senate and House passed various versions of performance audit bills, but failed to reconcile them for a final vote. This was probably a good thing as the bills would not have permitted the state auditor to conduct truly independent and comprehensive performance audits. Instead, political boards would have established the scope of the audits before they even began. As you know, we drafted model language for a real performance audit bill and circulated it to state candidates in the form of a performance audit pledge. The pledge asked legislators to state whether they support the model language EFF recommends. Since many members of the House and Senate signed EFF’s model language, it is our hope that complimentary bills will be introduced in both legislative bodies. 7. Revive the public records law While not related to EFF’s current public records struggle with the state concerning the Boeing agreement, two separate state Supreme Court rulings this year significantly impeded the people’s right to access public records.

January 2005 • Volume 15, Issue 1

Living Liberty

One of the rulings provided state agencies a new exemption not found in law, which allows them to deny a records request for being “overly broad.” Sadly, several governmental entities are currently seizing on this new exemption to deny records requests. That same court ruling also allows records denial on the grounds of attorney-client privilege. Such an exemption is rather odd, since the clients of government attorneys are taxpayers!

consider to be delaying tactics by DSHS. They believe the less than full cooperation they’ve received from DSHS in their investigations is due to DSHS’s political concerns.

A second court ruling this past year also limits the financial pain agencies face for violating the state records law.

Conclusion The 2005 Legislative Session will be tumultuous. Most legislative leaders will try to procure more money to spend, rather than get serious about finding efficiencies and waste. Special interests, especially the unions have already pledged to their constituencies that they will be here to demand more money.

To address this problem and the others mentioned, a bipartisan and broad-based public records coalition was formed, of which we are a member. We met over the summer to work on a model bill to correct the problems created by the court’s rulings. That bill is now being considered by staff in the House. A second public records reform bill based on recommendations by EFF is also being drafted in the House. It concerns creating an office of public records ombudsmen within the state auditor’s office to serve as an advocate for the people’s right to public records. 8. Pursue fraud prevention reform You might remember the scandal we investigated and wrote about concerning the problems uncovered in the Department of Social and Health Services (DSHS) which was licensing illegal aliens as daycare providers (Mattawa). EFF recommended that all agency fraud investigators report to an office of inspector general within the state auditor’s office, rather than be overseen by policy officials in the agency where fraud is suspected. Grant County law enforcement officials who are now trying to prosecute the Mattawa daycare fraud cases are currently running up against the statute of limitations as a result of what they

Since other agency fraud investigators have contacted EFF to voice similar concerns within their agencies, EFF adapted Rep. Marc Boldt’s 1999 office of inspector general reform bill in the recommendations we published.

Regardless, we see light on the horizon. This is because we think the majority of citizens in our state have finally become concerned enough about the weight of government taxes and regulations to put their collective foot down. Witness how many voted for Rossi’s message of no new taxes and job growth. Note how the “one-penny tax increase for schools” was handily defeated. The Democrat governor of Oregon has already told that legislative body that they cannot solve their budget woes by raising taxes, because the people in Oregon won’t stand for it. If Democrat leaders in our House and Senate choose to further increase the tax burden for citizens, we believe the voters will throw many of them out of office in two years. Regardless, our job here at EFF is clear. We will be your eyes and ears and communicate our findings and recommendations as broadly as possible. Because...freedom matters!

Emperor continued from page 6 . . . be offered successful public and private sector alternatives. But the state’s decision to lower standards means many students in our state who would have had the option of moving to better schools are now trapped where they are, often in schools that made little or no academic progress this year, and in some cases even regressed.

deceiving parents, students and taxpayers about the true state of our education system. None of them are acceptable alternatives to putting the clothes back on and adopting reforms that work. Marsha Richards directs EFF’s Education Reform Center. She can be reached at or (360) 956-3482.

There are many reasons why our education emperor is denying obvious nudity: reputations are on the line, bureaucrats want taxpayers to trust them with even more money, special interest groups (like the unions) are loathe to lose their control. None of these reasons comes close to being an acceptable excuse for


Living Liberty

A publication of the Evergreen Freedom Foundation

TPP Update continued from page 4 . . . miles and visited more than 20 schools in seven key swing states. The NEA contributed some $1.8 million directly to Democratic congressional candidates, and spent more than $1 million for 67 mailings to support the Kerry-Edwards ticket and oppose Bush. In an effort to generate high union turnout, the NEA strategically supported key statewide initiatives across the by Lynn Harsh country, granting over $7,772,000 to initiative campaigns, including $500,000 to defeat Washington’s R-55 (charter schools). Another national labor organization, the AFL-CIO, boasting of “the largest member mobilization and political program in its history,” coordinated an aggressive get-out-the-vote effort called Labor 2004. The AFL-CIO estimated it had about 5,000 paid staff working full time by election day, up from 1,500 in 2000. Labor 2004 depended on training workers to visit households and motivate voters. The workers knocked on doors seven days

a week, called hundreds of thousands of union households and passed out millions of leaflets at workplaces. The AFL-CIO organized neighborhood walks on September 2, coinciding with President Bush’s GOP nomination acceptance speech. Trained canvassers handed out materials about state and federal candidates. The AFL-CIO is also running a program called “Target 5000” to actively assist 5,000 union members to run for elected office. In 2000, 2,141 union members held public office or ran. The AFL-CIO now reports more than 2,500 union members hold elected office. Not to be outdone, the Service Employees International Union (SEIU) set aggressive goals for the 2004 elections. More than 2,000 SEIU members and nearly a thousand staff worked full-time in the battleground states, many of them moving away from home temporarily. Combined with more than 50,000 members volunteering, SEIU logged more than two million hours worked, 19 million phone calls, and 10 million doors knocked in the battleground states.

SEIU made contributions to Americans Coming Together (ACT) ($28 million), the AFL-CIO ($8 million), and America Votes ($900,000), tripling the amount spent in 2000 ($65 million in 2004). These facts and figures are significant. Unfortunately, workers are generally not voluntary participants in these efforts. In states where union officials must seek consent before deducting money from workers’ paychecks to use for politics, workers generally refuse. Here in Washington state, voluntary contributions to the WEA have fallen to 6.1 percent of the membership, down from about 80 percent before I-134 was passed in 1992. This law was intended to deal with the unrestrained political spending of labor unions. Unfortunately, the Washington Attorney General and Supreme Court have undercut the will of the people who passed I-134, and failed to interpret the law by its common-sense meaning. We urgently need reform, but more importantly, aggressive enforcement is required before union officials will begin to respect their members.

Provider Networks continued from page 5 . . .

“...PPOS STAND LITTLE CHANCE OF SURVIVING THE ARRIVAL OF CONSUMER DRIVEN HEALTH CARE.” PPO discounts are a complete and total mirage.... The basis of consumer directed health care is price transparency and patient control over their own medical claims. ...PPOs stand little chance of surviving the arrival of consumer driven


health care. ...PPOs are the very opposite of price transparency. They freeze in the prices of virtually all practicing physicians in a market in a process that no actual consumer ever sees or controls.” (Source: ) From a different angle, the importance of pricing transparency was echoed last month by a health care advisory board of McDermott, Will & Emery, an international law firm that published a white paper titled, “Encouraging a Responsible Approach to Consumer Driven Health Care.” The contributing authors supported consumer driven health care and urged that it be given an “opportunity to demonstrate its viability.” They expressed a concern that “if CDHC plan design is subverted to the interests of nonconsumer stakeholders (i.e., employers,

insurers, or CDHC related vendors), then the CDHC industry could provoke the type of backlash experienced by managed care.” They urged CDHC plans to align incentives for choices of provider, services and treatments where possible, using price and quality measures to differentiate value. “Such pricing differentiation,” they wrote, “can influence members to make more responsible decisions.” Could the confidentiality of negotiated PPO rates prove to be a Trojan Horse in the consumer directed health care camp? Time will tell if PPO networks step up to the plate and disclose information on pricing and discounts.

Provider Networks cont. on next page

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Provider Networks continued from page 5 . . . In the meantime, some medical providers are discovering they can make a nice living outside an insurer’s preferred provider contract. Without the costly overhead of dealing with insurance claims, they can actually pass savings on to patients. Consider the story of Sean Kacsir, a local pharmacist in Duluth, Minnesota, who cut all ties to insurance companies and created a cash-only drug store. Kacsir has been able to slash his pharmacy’s operating costs by about 50 percent. Where most pharmacies charge upwards of $20 for inhalers filled with Albuterol, an asthma medication, Kacsir can sell them now for $7 a piece. Craig Johnson, one of Kacsir’s customers, could purchase twice the quantity of medicine he usually does for $17 less than he usually incurs in co-pays with his insurance company. (Source: “Pharmacy’s drugs are cash-only. Owner’s target is lowest prices” by Peter Passi, Duluth News Tribune, 12/11/04) Another example of changing times can be seen with SimpleCare physicians who have set up cash-only practices. Vern S. Cherewatenko, MD, President and CEO of SimpleCare, says

providers can usually reduce their rates by 30-50 percent while increasing their profitability. “There are no third parties to bill and, therefore, no hoops for doctors to jump through to get paid. SimpleCare patients pay in full at the time of the visit. This saves both time and money—time providers can now spend with patients instead of doing paperwork... .” (Source: PPO networks may have a more lasting role with specialist providers who more often deal with emergency care where a patient may not be able to comparison shop before medical care is delivered. Still, full pricing transparency should be a part of surgical and higher cost medical care, too, because such information helps consumers look at their co-insurance and outof-pocket risks more closely. With the arrival of consumer driven health plans, consumers are in a position as never before to become direct negotiators with medical providers regarding charges. Confidential PPO contracts have to become more open and give consumers information they need and deserve.


2005 Legislative Session begins

January 10, 2005


A few upcoming events . . .

Address service requested

2005 01 nl  
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