Unelected bureaucrats could be empowered with unchecked authority to set rates for Medicare reimbursement and block access to prescription drugs, the Goldwater Institute warns in a lawsuit filed against the Patient Protection and Affordable Care Act (PPACA).

The legal challenge now pending before the federal district court for Arizona challenges the constitutionality of the 15 member Independent Payment Advisory Board (IPAB) created as part of the new federal health care law. IPAB has unprecedented authority to make public policy without any meaningful oversight from the legislative, judicial or executive branches of government, according to the suit.

Although the U.S. Supreme Court has ruled that it is permissible for Congress to create administrative agencies, it may not surrender its authority to make law, Diane Cohen, a senior attorney with the Goldwater Institute explained in testimony before the U.S. House Committee on Energy and Commerce earlier this year. The Supreme Court has established an “intelligible principles” test to determine whether a particular agency’s decision-making conforms to constitutional standards.

“IPAB fails this test,” Cohen told House members. “This agency is an unelected, unaccountable independent authority, which is ‘independent’ in the worst sense of the word: it is independent of Congress, independent of the president, independent of the judiciary and independent of the will of the people.”

IPAB is charged with developing proposals to “reduce the per capita rate of growth of Medicare spending,” according to PPACA. The Board’s authority is activated whenever Medicare’s future spending is expected to increase faster than the target rate, which is the average of the change in the Consumer Price Index (CPI) until 2018. At that point, the target rate is set to the nominal Gross Domestic Product (GDP) per capital plus one percentage point. The Secretary of Health and Human Services (HHS) must implement the Board’s proposals, unless Congress intervenes.

In reality, there are few limits on IPAB’s ability to legislate, Cohen points out. PPACA calls for a 3/5 supermajority vote in the U.S. Senate to change or repeal any proposals from the IPAB. It also prohibits administrative and judicial review of IPAB laws.

Since ObamaCare has already imposed $145 billion in cuts to the Medicare Advantage program, the IPAB will most likely target prescription drugs, the Pacific Research Institute (PRI) concluded in a recent report. IPAB’s actions could have a “chilling effect” on innovation in the pharmaceutical industry, PRI suggests. Hospitals, nursing homes and hospices are exempt from Medicare cuts until 2020.

“The way the law [ObamaCare] is written the Board has authority over Congress, not the other way around,” Rep. John Fleming (R-La.) observes. “Under the law, the Board won’t have anything to do so long as Congress meets these spending targets, but for at least 20 years now Congress has never met these spending targets. We also have coalitions and individuals in Congress who want the Board to make these decisions, which will provide an incentive to avoid solving these problems on the congressional level.”

Between 1984 and 2009, medical inflation has increased faster than the CPI in every year, with the exception of 1997, according to the Congressional Research Service (CRS). If ObamaCare remains in place, Fleming expects IPAB to be active.

“We are modeling our health care system after Europe’s,” Fleming said. “The IPAB is very similar to what has been set up in Great Britain. We are moving step by step toward a system of greater government control.” Policymakers have closely patterned the IPAB after the National Institute for Health and Clinical Excellence (NICE) in Great Britain, Fleming noted.

Unless the U.S. Supreme Court steps in and rules ObamaCare unconstitutional, he anticipates that it will be difficult to unwind the law’s key provisions including IPAB. In fact, PPACA includes language to protect against any legislative effort aimed at eliminating the board. In order to repeal IPAB, Congress must enact a Joint Resolution, but it is prohibited from introducing such a resolution until 2017, and must act no later than Feb. 1 2017. The resolution must be in place no later than Aug. 15, 2017. In the event that a resolution is introduced, PPACA calls for a super-majority vote, meaning 3/5 of all elected members of Congress, must support the resolution. Even if a resolution is passed, the Board would not disband until 2020.

“It is a maxim of representative government that one Congress does not have the power to bind the hands of a future Congress, which is precisely what IPAB’s anti-repeal provision does,” Cohen, the Goldwater attorney said in testimony. “The Constitution states that `All legislative powers herein granted shall be vested in a Congress of the United States.’ IPAB’s anti-repeal provision denies future congresses these basic legislative powers, thereby diminishing Congress’ constitutional powers via statue.”

Although a number of bills have been introduced to either repeal or amend ObamaCare provisions that relate to IPAB, Fleming is not certain this is the best long-term strategy.

“Suppose we do repeal the IPAB before ObamaCare is implemented,” he said. “This means we will have taken the fangs out of the snake and is that really what we want to do? Wouldn’t it be better to leave the legislation as poisonous as it is, so that when it comes time there will be no doubt that it should be repealed? The last thing in the world we want to do is to improve ObamaCare.”

Twenty-six states, including Louisiana, have filed suit arguing that the individual mandate included in President Obama’s health care law is unconstitutional. In August, the 11th Circuit Court of Appeals sided with the states and ruled that Congress exceeded its authority under the Commerce Clause. Previously, Florida District Judge Roger Vinson and Virginia District Judge Henry Hudson also ruled against the individual mandate. The Goldwater Institute’s suit is unique in that it challenges the constitutionality of IPAB, as opposed to the individual mandate.

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org and follow him on Twitter.

NEW ORLEANS, La. – Heightened concern with a lack of federal accountability may lead to the first state-initiated constitutional convention since the original ratification. In their efforts to shift the balance of power, a variety of organizations are working to bypass federal approval and amend the constitution directly.

State leaders have the authority (from Article V of the Constitution) to hold a convention and, upon ratification by three fourths of the states, amend the Constitution. However, uncertainty surrounding such a convention and the two-thirds threshold for initiation have prevented such a convention from being called. All 27 amendments to the Constitution have gone through Congress before ratification.

Momentum is building for that precedent to end. The Goldwater Institute, an independent, Arizona-based policy institute, has been publishing substantive research into how the constitutional convention process would proceed. And newly proposed amendments have received endorsements from numerous coalitions of state leaders, including the American Legislative Exchange Council, the Council of State Governments, the National Conference of State Legislators, and the National Association of Secretaries of State.

James Booth, cofounder of RestoringFreedom.org and a promoter the National Debt Relief Amendment, asserts that bipartisan support makes this a unique and opportune time for a convention. His amendment would place a check on federal deficits, and he anticipates that at least five states will pass supporting resolutions in their next legislative sessions.

“We’ve met with groups of Democrats. We’ve met with groups of Republicans… Both sides dislike the [federal] debt, but there’s a lack of discipline in Washington, D.C… Americans, and even our state legislators, realize that Congress is probably unable to address this. They’re addicted to debt.”

The proposed amendment reads:

“An increase in the federal debt requires approval from a majority of the legislatures of the separate States.”

The Madison Amendment seeks to address fears of a “runaway convention” by requiring that future constitutional conventions be constrained to a single issue. This would increase the likelihood of state-initiated conventions and has garnered bipartisan approval from prominent legislators. Noble Ellington, a state representative from Louisiana who recently switched to the Republican Party, is a notable endorser, particularly since he is the incoming chair of ALEC.

“ALEC is perfectly positioned,” says Ellington, “to work with the states on common-sense, conservative legislation that will protect citizens from the far reaching arms of the government.” With one third of all state legislators – nearly 2,000 members – ALEC is the nation’s largest nonpartisan, individual membership association of state legislators, advocating for the Jeffersonian principles of free markets, limited government, federalism, and individual liberty.

“It’s always difficult to pass constitutional amendments, but based on what’s happening across the country right now and the concern of the people, I think these types of constitutional amendments may have a better chance than they have at any other time that I can remember.” In the case of Louisiana, Ellington believes the legislature will be favorable to constitutional amendments.

The Repeal Amendment, which would allow a two-thirds majority of state legislators to veto federal laws, has garnered national attention and was introduced into the Virginia House of Delegates in December with the support of the state’s governor, lieutenant governor, and attorney general. The Republican Study Committee of the U.S. House of Representatives, a coalition of 115 members, has provided further support at the federal level. Representative Bob Bishop (R) of Utah, founder of the committee’s Tenth Amendment Task Force, introduced the Repeal Amendment to the U.S. House of Representatives, albeit with a low probability of passing.

Matthew Spalding of the Heritage Foundation is one constitutional scholar who has doubts regarding a state-initiated convention. Since such a convention is yet to occur and not tightly defined in the constitution, Spalding describes it as a dubious process.

“The unknowns are extensive; it is not at all clear who controls the process; and it’ll probably be litigated all along the way. It may be one element of a strategy to threaten Congress to act, but the idea that we can and should actually hold such a convention – that it is an easy and pretty straightforward matter – is wildly mistaken and distracts us from the focus of achieving a constitutional amendment.”

Of the proposed amendments mentioned, Nick Dranias of the Goldwater Institute believes the National Debt Relief Amendment has the greatest likelihood of coming to fruition and making an impact. He sees 34 state resolutions within three to seven years as realistic. Already 49 states have their own form of balanced budget amendment, and he cites debt restraint as nonpartisan and nonideological.

His concern with the Madison Amendment is that it plays on the “erroneous notion” that the state initiated amendment process could lead to a runaway convention – “very harmful to our effort to legitimize the state-initiated Article V process.” Whatever were to be decided at a convention would still need three quarters of the states to ratify it. In the case of the Repeal Amendment, it places the burden on the states to veto, rather than the federal officials, who may simply duck vetoes by rewording legislation.

“There is no evidence whatsoever that the federal government will tie its own hands… In the long run the idea of states invoking their Article V powers—even more than any particular amendment idea—is what will produce the fundamental power shift away from Washington, D.C. that we need to preserve our Republic.”

Fergus Hodgson is the capitol bureau reporter with the Pelican Institute for Public Policy. He can be contacted at fhodgson@pelicaninstitute.org, and one can follow him on twitter.

NEW ORLEANS, La. – A report from the Higher Education Research/Policy Center, released today, claims that more than one third of Louisiana’s higher education funds are wasted on non-graduating students.

Harry Stille Ph. D., author of “Louisiana: Public Institutions,” believes loose admission standards contribute to an estimated $440 million annual waste – an “enormous cost for little results.” Twenty-nine percent of Louisiana’s freshmen come from the bottom half of their high school class, and Stille believes that these unprepared students account for the state’s embarrassingly low graduation rates.

Eight percent of freshmen at Southern University at New Orleans (SUNO) complete their degree within six years, and the average across the state’s university system is 39 percent. That compares to 54 percent nationally and 53 percent in the South.

Even these numbers may be rosy given grade inflation, which Stille asserts is “rampant on college campuses throughout the United States.” According to the National Center for Education Statistics, the literacy of college graduates in 2003 had fallen from 1992 levels, and the same was true for graduate students.

The state’s flagship, LSU-Baton Rouge, is the only state institution to outdo the national average, with a graduation rate of 61 percent. However, even it accepts 17 percent of its freshmen from the bottom half of their high school class. Stille, a former South Carolina legislator and professor emeritus of Erskine College, describes this as a “travesty for a research institution,” and a “disservice to the better academically prepared students.”

Stille brought together admissions and graduation data from 1992 through 2009 for 13 of Louisiana’s public four-year degree granting institutions from that period. Only LSU-Alexandria was not included, since it began its four year program in 2003. His data can be downloaded here, along with his commentary on the findings.

His work on Louisiana is part of a broader study of taxpayer-funded higher education across the United States, which includes two sets of state rankings. Louisiana comes in at 39th in terms of admissions standards and 49th in on a broader scale, which also includes rates of completion, affordability, and student preparedness. (Here is the summary profile on Louisiana.)

Upon reflection, he believes “these public [four-year] institutions are the most wasteful agency in any state’s government process,” and he “wonders how the political leadership of [Louisiana] can support such a system with these poor results.” Without performance oversight since the G.I. Bill in the late 1940s, he believes the funding mechanism has incentivized poor results, focusing on the “numbers of students on campus… instead of academic quality in admissions.”

Stille’s findings also place a spotlight on the question of what the purpose of higher education is for taxpayers. Research from the Intercollegiate Studies Institute has demonstrated the inability of universities, even the most prestigious, to teach American civics. The goal of greater employment has also gone unfulfilled. Today, twice the proportion of American adults possess university education than did in 1970, and yet the rate of unemployment is also double what it was. In fact, according to the Bureau of Labor Statistics there are more than 5,000 janitors with PhDs or other professional degrees in the United States. 300,000 waiters and 18,000 parking lot attendants with bachelors degrees further highlight the mismatch between employability and higher education.

Further, America’s student loan debt has, as of September, surpassed its credit card debt – each nearing $1 trillion. “College costs [for individuals] have far exceeded all inflation rates for all consumer goods in the past ten years,” says Stille. “Where does it end?”

He advocates a slimmed down state system of higher education, with more students in two-year, technical colleges. These institutions are “not as wasteful as the [four-year] system,” since they do “not have all the frills,” such as tenure, ranks of faculty, and athletics.

The finding could hardly be timelier, given the state is facing its lowest general fund budget since 2006 and is in need of areas to cut. Since 2008, funding for the state’s higher education, from all sources, has already declined by 4 percent.* However, that came after a 23 percent increase in the three post-Katrina years, and Louisiana still ranks ninth in the nation for spending as a percentage of tax revenues. Additionally, Stille’s estimate of $440 million annually going to non-graduating students, on a per capita basis, puts Louisiana third highest in the nation.

Louisiana’s higher education budget has also been expanded by rapid growth in administrative spending. In a study published by the Goldwater Institute, “Administrative Bloat at American Universities,” Jay Greene analyzed spending and staffing trends at 198 top state and private colleges across the United States. Between 1993 and 2007, these universities increased the number of full-time instructors and researchers per student by 18 percent. But at the same time they increased full-time administrators per student by 39 percent, and these administrators now outnumber their teaching and research counterparts.

“At the University of Louisiana at Lafayette, for example,” says Greene, “the number of full-time administrators per ??100 students grew by 44% between 1993 and 2007, while full-time employees engaged in ?instruction, research, and service grew by only 9%.” For the 2007 to 2008 academic year, the most recent with data available, thirty-five percent of Louisiana’s higher education funding went to instruction.

In the last legislative session, Governor Bobby Jindal did sign into law the LA GRAD Act (HB 1171). This goes into effect in this fiscal year 2011 and attempts to address the problem of the incentive for expansion. It allows universities to have greater autonomy, such as flexibility with regard to tuition, in exchange for graduation productivity. Additionally, the Louisiana Board of Regents is planning for slightly higher admissions requirements, although they will not begin until fall 2012, and not completely until 2014.

Stille has collaborated with the Evergreen Freedom Foundation, a non-partisan research organization, to report on how to increase accountability in higher education. The report, “Performance Audit Tools for Higher Education,” came out in September and is available here.

*This point has an edit to clarify that the 4 percent decline does not refer exclusively to the Louisiana state general fund budget, since one reader questioned the accuracy of the original statement. During that period, the decline of state funds for higher education was 13 percent – including interagency transfers and the American Recovery and Reinvestment Act – and 33 percent from the general fund budget. Here is an Excel file with the relevant data for 2010-2011 and the past three financial years.

Fergus Hodgson is the capitol bureau reporter with the Pelican Institute for Public Policy. He can be contacted at fhodgson@pelicaninstitute.org, and one can follow him on twitter.

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For instance, at the University of Louisiana at Lafayette between 1993 and 2007, there was a 44% increase in the number of full-time administrators per 100 students. In contrast, over the same time period, there was a mere 9% increase in the number of academics, researchers, and full-time teachers. Not coincidentally, over this time period in which growth was measured, college costs underwent a meteoric rise, which can be attributed to the “bureaucracy of the university,” as Dr. Jay Greene, leader of the study aptly calls it.

There is a clear correlation between the bloated administrative costs of taxpayer-subsidized universities and skyrocketing tuition. Further, the primary functions of our public universities are being neglected while our tax dollars are directed towards the inessential and the superfluous.

An article in the Indianapolis Star illustrates the long term implications of a government and taxpayer subsidized administrative bureaucracy within our universities: “There is a vicious circle: Universities pass along the cost of administrative bloat to consumers in the form of higher tuition, which causes families to demand higher subsidies from the government, which enables even higher administrative costs and tuition rates.”

This is obviously a vicious circle which needs to be broken up. Unfortunately, our current political leaders adhere to the pernicious philosophy that more spending, no matter how untenable, is the panacea for every problem. This valuable study should promote a push in the other direction.

The legislation spells out a number of findings that include:

• The U.S. Supreme Court in Printz v. United States, 117 S.Ct. 2365, 521 U.S. 898, 138 L.Ed.2d 914 (1997), has declared that states cannot be required by the federal government to provide services which are not compensated for by the federal government.

• Proposed federal mandates would require Louisiana taxpayers to pay for or subsidize all elective abortions and would be in conflict with state law.

• To coerce individuals to enter into contracts with private companies, particularly health insurers, would go beyond the authority of the Commerce Clause in Article I, Section 8, of the U.S. Constitution and, therefore, be unconstitutional.

• To require the citizens of Louisiana to pay for certain federally mandated services while exempting the taxpayers of certain other states is a violation of the Equal Protection Clause in the Fourteenth Amendment of the U.S. Constitution.

• The Tenth Amendment of the U.S. Constitution states that “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.” Issues regarding health care and health insurance were never delegated.

Louisiana is not the first state to propose such an action. According to the American Legislative Exchange Council, twenty-nine states have either proposed, or announced an intention, to propose similar legislation.

Ultimately, as has been proposed in other states, a constitutional amendment might have to be passed to facilitate implementation of such as law. In Louisiana, two-thirds of the members of both houses of the Louisiana State Legislature must either vote to put the issue on a statewide ballot, or call a constitutional convention.

The legal arguments that stem from this legislation will be lively. Clint Bolick, litigation director at the Goldwater Institute, argues that the case is “winnable”, and others, such as Mark A. Hall, a law professor at Wake Forest University, claim that there is “no way this challenge will succeed in court.”

Time will tell whether states have the ability to resist the continuing encroachments of the federal government into health care.