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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 17, Issue 6: February 11, 2015

  1. A Medicare Proposal That Rewards Smart Shopping
  2. Peter Thiel Luncheon Video Now Available
  3. California’s Proposed Water Tunnels Might Sink the State Budget
  4. Obama Opposes Even Clean Coal
  5. New Blog Posts
  6. Selected News Alerts



1) A Medicare Proposal That Rewards Smart Shopping

The rate of healthcare spending in the United States has long been a major concern. Although it has moderated in recent years, it will likely shoot up again as baby boomers continue to age. Independent Institute Senior Fellow John R. Graham has a novel solution for this problem: give Medicare enrollees strong incentives to help lower prices and reduce overall health spending.

Here’s how it would work. Suppose Medicare allowed an enrollee to shop around for medical services and offered a financial bonus for thrifty shopping. If the enrollee finds a price for a medial service that is below the amount that Medicare will pay the enrollee as a reimbursement, then a portion of that savings would be credited to the enrollee’s Social Security account.

Such a scheme isn’t all that far-fetched or unproven. Four years ago, California’s state employee retirement system, in cooperation with a major health insurer, introduced “reference pricing” for knee- and hip-replacement surgeries. This created a standard reimbursement schedule for those procedures and allowed retirees enrolled in the plan to add their own funds to those amounts. “As a result, high-priced facilities cut their fees by one-third,” Graham writes. It’s practically a no-brainer. Costs come down when shoppers can shop for less expensive alternatives. Applying this principle to Medicare enrollees would help improve the fiscal health of the nation.

How Domestic Medical Tourism Could Save Us All Money, by John R. Graham (The Washington Post, 2/6/15)

Priceless: Curing the Healthcare Crisis, by John C. Goodman

Healthcare Solutions for Post-Obamacare America, by John C. Goodman

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2) Peter Thiel Luncheon Video Now Available

On January 27, legendary investor and entrepreneur Peter Thiel wowed a sold-out audience at San Francisco’s prestigious Olympic Club with his insightful, often witty perspective on startups, innovation, and the prospects for material progress. The luncheon was Thiel’s first public event with the Independent Institute since its 2004 gala honoring another business and technology leader, former Motorola chairman Robert Galvin.

Ever since he helped found PayPal in the late 1990s, Thiel has come to be known in Silicon Valley and across the nation as one of our era’s pre-eminent contrarian thinkers, and his talk last month did not disappoint. Here’s one example (see the luncheon video for more). Do you think today’s world is awash in technological innovation? Thiel disagrees. Innovation, he argued, peaked around 1971. The fast growth of new products that we see around us is mostly limited to just a few sectors such as the computer industry, and that success is in no small measure the result of a lack of government regulation. In the world of physical objects, as opposed to the bits and bytes of computer software, government regulations are choking out innovation.

“[F]or the last 40 years, we’ve lived in a world where bits were relatively unregulated, atoms were more or less regulated to death,” Thiel said. “And that’s a political explanation for why we’ve had this strange dichotomy.” True, computer-related innovations are moving into “physical” sectors—just wait until your grandparents start buying high-tech home appliances and “wearables” featuring “the Internet of things” from QVC—but as this trend spreads, calls for increased regulation will mount, perhaps resulting in a state of stagnation or decline. Unless we take corrective action and keep government regulation at bay, the Silicon Valley of tomorrow could become the Detroit of today.

Video: Peter Thiel on “Developing the Developed World: Entrepreneurship, Liberty, and the Future” (Independent Policy Forum, 1/27/15)

Death Valley? Peter Thiel and Steve Jobs on What Could Kill Silicon Valley, by Lawrence J. McQuillan (The Beacon, 1/29/15)

Peter Thiel’s Contrarian Manifesto, by Aaron Tao (The Beacon, 1/23/15)

Books by Peter Thiel:

Zero to One: Notes on Startups, Or How to Build the Future (with Blake Masters)

The Diversity Myth: Multiculturalism and Political Intolerance on Campus (with David O. Sacks)

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3) California’s Proposed Water Tunnels Might Sink the State Budget

California Governor Jerry Brown says the construction of two massive water-diversion tunnels under the largest river delta west of the Mississippi—official cost estimate: $25 billion—could help quench the thirst of the Golden State’s biggest water users. But if Seattle’s experience is any indication, the final costs of Brown’s proposed 40-foot-high, 35-mile-long tunnels beneath the Sacramento-San Joaquin River Delta would likely be far bigger—perhaps totaling $250 billion, according to Independent Institute Policy Fellow K. Lloyd Billingsley.

Seattle broke ground on a water tunnel in 2009, at an estimated cost of $2.8 billion and a completion date of 2015. But the tunnel’s construction has defied official projections. It may not be ready until 2017—if it gets more funding. An estimated 70 percent of the initial budget has already been spent. Why would a massive water project in California—famous for its thickets of environmental regulations and hordes of politically organized “stakeholders” such as environmentalists, farmers, commercial fishermen, recreational water users, and urban dwellers—fare any better? It probably wouldn’t.

“Gov. Brown appears undisturbed by the financial, environmental and safety concerns of the tunnels,” Billingsley writes. “His brand of tunnel vision can’t reverse itself. It prefers to focus on the joys of spending and a glowing legacy down the road. The governor will be long out of office but California taxpayers, and their children, will be stuck with the costs.”

Brown’s Tunnel Vision Could Sink Taxpayers, by K. Lloyd Billingsley (Orange County Register, 1/30/15)

Aquanomics: Water Markets and the Environment, edited by B. Delworth Gardner and Randy T. Simmons

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4) Obama Opposes Even Clean Coal

The Obama administration says it will cut funding for FutureGen, a zero-emissions coal plant scheduled for Illinois. The news is both good and bad: It’s good because government subsidies to industry will be cut—that’s a victory for taxpayers, at least to the extent that it reduces pressure to raise taxes or go further in debt. But in another sense the decision is bad, because it further strengthens the hand of the nation’s anti-coal contingent.

President Obama can’t say with a straight face that he killed funding for the project because it would have been “bad for the environment.” After all, ultra-low-emissions coal technology—especially in a country where coal generates about four-tenths of the country’s electric power—leaves a smaller footprint on the environment. The president’s maneuver is just another in his long campaign against coal.

The White House “not only has abandoned FutureGen, but current policy is detrimental to environmental efforts to use coal more wisely,” writes Independent Institute Senior Fellow William F. Shughart II. “Rather than finding ways to burn coal without loading the atmosphere with carbon that could be emulated by other countries, the administration’s so-called Clean Power Plan provides no realistic model for the world.”

President Obama’s Tin Ear on Clean Coal, by William F. Shughart II (Deseret News, 2/6/15)

Taxing Choice: The Predatory Politics of Fiscal Discrimination, edited by William F. Shughart II

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

Bay Bridge Boondoggle Boss Escapes Accountability
K. Lloyd Billingsley (2/9/15)

A 52.6% Income Tax Rate for the Middle Class?
Craig Eyermann (2/5/15)

$13.2 Billion Bust Bilks Taxpayers
K. Lloyd Billingsley (2/4/15)

You can find the Independent Institute’s Spanish-language website here and blog here.

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6) Selected News Alerts

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