Why It’s Time for the EU to Slim Down • Who’s Afraid of Health Exchanges?

The EU needs to establish priorities before asking for more money

As in many marital disputes about spending, the argument over increasing the European Union’s central budget isn’t really about the money. It’s about domestic politics and differing visions for Europe. And ultimately, the EU institutions don’t deserve the extra cash they’re asking for.

The European Commission is asking for a combined 2014-2020 budget of €1.033 trillion ($1.32 trillion), a 4 percent to 6 percent increase, depending on whether an EU friend or foe has his finger on the calculator. The U.K. comes up with the highest estimate and is asking for a budget freeze in real terms. European Council President Herman Van Rompuy has proposed a budget of €973 billion, with €25 billion of savings to come from spending on agriculture. France, which received 17 percent of all EU farm aid last year, has rejected that plan out of hand.

Still, it’s a good place to start. Rather than just bicker over the numbers, Europe’s leaders should use the pressure of the economic crisis to restructure the budget so it maximizes added value and growth. The commission’s budget would reduce farm spending from 44 percent of the total budget in 2013 to 37 percent. It needs to fall further. Similarly, rebates to members — such as the one British taxpayers receive so they don’t subsidize French farmers — should disappear, and the budget should be redesigned so wealthy countries no longer cross-subsidize each other.

The EU institutions’ 40,000-plus staff soak up only 6 percent of the EU budget, yet inexcusable anomalies remain. To name the worst example, the European Parliament still spends roughly €180 million a year maintaining a second, purposeless home in Strasbourg, France, to which the 754 members of parliament, their aides, and documents have to decamp from Brussels for one week in every month.

Until the EU budget is revamped, with anomalies ended, agriculture spending slimmed, and development funds made more effective, the EU isn’t likely to get public support for increased budgets. The EU needs to make voters feel it uses money better and more cleanly than their own governments do.

When it comes to health reform, GOP governors should get with the program

Ever since the Patient Protection and Affordable Care Act was passed in 2010, Rick Perry of Texas, Bobby Jindal of Louisiana, Scott Walker of Wisconsin, and several other prominent Republican governors have vowed not to create the state insurance marketplaces, known as exchanges, the law requires.

Many state officials say it’s impossible to comply with the law because the U.S. Department of Health and Human Services has not yet given them enough information to move forward. Governor Bob McDonnell of Virginia, writing on behalf of the Republican Governors Public Policy Committee, has sent President Barack Obama a list of 17 questions asking exactly what the exchanges will look like.

This seems a bit of a smokescreen. It’s well established that the exchanges will take the form of websites, designed to lead people through the process of selecting an insurance plan, based on price and coverage. At the end of the process, users will be able to determine whether they qualify for subsidies or for Medicaid. (The already existing Massachusetts Health Connector is a model for what most exchanges are expected to be.) To design and plan such a website doesn’t require knowing, as McDonnell demands, for example, how the federal government will manage high-risk pools.

It’s true that HHS waited until Nov. 20 to issue guidance on which benefits insurance plans will be required to provide. It’s also true the department was a little slow to come out with its rules on enrollment periods, rate increases, catastrophic care plans, and the ways in which premiums can vary. It’s highly possible these delays are attributable to politics (that is, a presidential election). Yet this information has arrived in plenty of time. The plain fact is that states didn’t need it to decide whether to go ahead with an exchange.

HHS has been eager to assist states in exchange building and to be flexible about deadlines. The department has disbursed some $2 billion in grants to help states plan and design their websites. And it had delayed by one month the recent deadline for states to declare their intention to create their own exchanges.

Any state that opts out of the overall effort will be stuck with a one-size-fits-all insurance exchange that, paradoxically, will be built by the federal government. In effect, states that don’t create their own exchanges will abdicate their traditional authority over health-insurance operations and will be powerless to tailor their exchanges to suit the desires of either residents or local insurance companies.

Such a state wouldn’t save money either, as the federal government is footing the bill for creating exchanges. Under the law, once exchanges are in operation, they are to be self-supporting through fees paid by insurance companies.

At this point, a state that has done absolutely nothing to prepare probably has too little time to create its own exchange before October 2013, when the HHS says it must be ready. Still, there is time enough to join in partnership with the department; the deadline for deciding to do that is not until mid-February.

States have the information they need to move on insurance exchanges. Governors who care about fiscal responsibility, strong state government, and the basic welfare of their residents would do well to get with the program.

To read William D. Cohan on Jon Corzine and Simon Johnson on banking reform, go to: Bloomberg.com/view


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