December 4, 2012
Host: Ted Simons
Arizona Health Insurance Exchange
- ASU Professor Marjorie Baldwin, who teaches in the Economics Department for the W.P. Carey School of Business, explains the ramifications of Arizona’s decision not to create a State-run health insurance exchange under the Nation’s health reform law.
- Marjorie Baldwin - Professor of Economics, ASU W.P. Carey School of Business
| Keywords: medical
Ted Simons: The Governor's recent decision not to set up a state run health insurance exchange for Arizona means that the Federal Government will provide one for us, instead. Here to explain what that means for individuals and businesses wanting to purchase health insurance is professor Marjorie Baldwin, a health policy expert who teaches in the economics department at ASU's, WP Carey School of Business. Thank you for joining us.
Marjorie Baldwin: Glad to be here.
Ted Simons: There particular decision, what does it mean to businesses, and individuals? I get the impression a lot of folks don't know what the exchange is.
Marjorie Baldwin: The exchanges are going to be web-based marketplaces for health insurance. That can pick up the gaps in coverage for people who are not able to get their insurance through private insurance, their employer. Or a Federal program such as Medicaid or Medicare. And the fact that the state did not set up its own exchange means the Federal Government, as you said, will come in and set it up. It's unclear if the Federal Government will have the authority to penalize businesses, who don't opt in to providing insurance. For their employers. Any business with more than 50 employers is mandated by the law to provide insurance, or they face fines and penalties. If the state can't levy those, or if the Federal Government can't levy those fines and penalties, as the state would have been mandated to do, the employer mandate is weakened.
Ted Simons: I was going to say it, sounds like the mandate is weakened to the point not being effective.
Marjorie Baldwin: It could very well be, except that you can imagine that there are employers who have, have 50 to 100 employees who would like to provide health insurance as a benefit to their employees, have not been able to find it at an affordable rate because of the size, and they may still be able to do so in the exchange.
Ted Simons: Now, as far as what Arizona gains from not running the exchange, one could argue that small businesses could avoid that particular penalty. That sounds like litigation wait to get happen there. But, what else? Just the cost of running a state run exchange. Is the state saved from that, or not necessarily?
Marjorie Baldwin: Well, it's unclear. The law says that the Federal Government will cover the planning costs for the exchange. The establishment costs for the exchange. And operating costs for the first year. Through January 1st, 2015. After January 1st, 2015, the exchanges are supposed to be self-sustaining. That means they will take in enough in premiums to cover their costs. Probably the only safe bet in what's going to happen is it is going to cost more than expected because that's always what happened in health care. Presumably, if the state ran the exchange, and there were cost overruns it would be the state budget that had to pick it up. Presumably, it the Federal Government is running it, they will pick up the cost overruns.
Ted Simons: And this may be a dumb question here, but it sounds as though national program, a national risk pool, if you will, would be better certainly, bring lower costs and lower costs for citizens, than maybe a state-run. Isn't a bigger risk pool better?
Marjorie Baldwin: That's the whole idea of the exchanges, to pool individuals and small businesses who don't have a large enough base to get the, the discounts, and the, the lower premiums, that large employers can have. But, it's unclear if the Federal exchange is going to be a, Federal exchange, or if it's going it be state-based Federal exchanges for the various states that haven't signed on. In the regulations that have been put out, it says that the Federal Government will work with the state to tailor that state's exchange to the needs of the people in the state. But the extent to which that happens remains to be seen.
Ted Simons: As far as what Arizona loses with this particular decision, some would say no state regulation, no real control to create the exchange, but how much control would the state have had anyway.
Marjorie Baldwin: The big criticism of the Governor's decision has been that we lose control. But, it's, again, because the regulations haven't been finalized, it's unclear how much control we would have had. The law already specifies specific types of plans that and cannot be in exchanged. Specifies what must be covered in the benefits package. Specifies that there must be subsidized, subsidies for low income families. So, and this is just the law. As the regulations come out it will be further rules and regulations. So, I think that this was the big, the big point in Governor Brewer's letter, led the declining to create the exchange. But it's too unclear how much the state could control.
Ted Simons: And you had hospitals, business groups, and insurance companies, and they all wanted the state run choice. Why?
Marjorie Baldwin: Mostly for this reason that the state would have control.
Ted Simons: Ok.
Ted Simons:: So control.
Marjorie Baldwin: Assuming that --
Ted Simons: Even though no one knows how much they would have.
Marjorie Baldwon: Exactly.
Marjorie Baldwin: But, in the, the responses that I have read, from, from the Arizona hospital and health care association, although they favored a faith-based exchange, it said we understand why the Governor didn't go at it that way because of the uncertainty.
Ted Simons: Do we know what this decision means to funding for access for Medicaid?
Marjorie Baldwin: The funding for, for access, or Medicaid has to stay the same for, for the currently covered population. That was what that, that Supreme Court case decided. Originally, the, the legislation said that states had to expand their Medicaid coverage up to 133% of the poverty line. And that if they did not, they would lose the Federal cost-sharing, not only for those additional people, but for everybody covered now. The Supreme Court said that that was two onerous burden on the state. So, the state is not at risk of losing its current Medicaid funding and still may opt to expand coverage to 133% and get the Federal cost-sharing for that. So no, it does not affect that.
Ted Simons: Ok.
Ted Simons:: And that's a good point. The Governor said no, and it's no right now, may not be no year or two from now.
Marjorie Baldwin: And you know, this is a 2000-page law that we're just, as Nancy Pelosi said, we're just finding out what's in it when it's enacted. So how the exchanges are going to work or what Federal-state partnerships going to evolve or whether it may be turned over to the state, we don't know.
Ted Simons: Last question, could all -- this is a wild question -- but could all of this event lead to single payer system? Could this turn around and come back the other direction and become something that everyone says, forget about it? We want national health care?
Marjorie Baldwin: I suppose that that is a possibility. I think, though, that, that the Americans, while they might think we want national health care, I don't think that they would be particularly happy with that. If we had national health care, we're turning over a lot of decisions to the Federal Government. And Americans are not real comfortable with that. We like to be in control of our lives, and we are used to this Federal system of Government where much of the control over our lives comes not from a centralized authority, but from the state. If health care decisions about, about, you know, what kinds of services are going to be covered by insurance and available, to people, were made at the Federal Government level, I think that Americans might be unhappy with that.
Ted Simons: And thus the idea of the Feds running an exchange more palatable than the Feds running the whole shebang.
Marjorie Baldwin: Right because the insurance will still come from private insurance companies.
Ted Simons: All right. Very good. Good to have you here and thanks for joining us.
Marjorie Baldwin: Thanks for asking me.
Land and Housing Forecast
- The Land Advisors Organization is hosting its annual Metro Phoenix Land and Housing conference December 5th in Downtown Phoenix. Get a preview with Land Advisors President and CEO Greg Vogel and Mike Orr, Director of ASU’s Center for Real Estate Theory and Practice.
- Greg Vogel - President and CEO, Land Advisors
- Mike Orr - Director, ASU Center for Real Estate Theory and Practice
| Keywords: housing
Ted Simons: Good evening and welcome to "Arizona Horizon." I'm Ted Simons. The Maricopa County judge says Arizona's medical marijuana law is constitutional. Superiority court judge Michael Gordon ruled that Federal drug laws do not prohibit state officials from implementing Arizona's medical pot initiative. Today's ruling means that the state's first medical marijuana dispensary could open as early as this week in Glendale. The landholder’s organization is holding the fourth annual land and housing conference tomorrow at the downtown Phoenix Sheraton. It is titled fact or fiction, and we'll explore issues that affect Arizona's real estate industry, here to talk about those issues is Greg Vogel, the founder and CEO of the land advisor's organization. Valley real estate brokerage firm. And Mike Orr, the director for the center for real estate theory and practices ASU The future of the valley land and housing market, why that particular title?
Greg Vogel: Well, we originally established this conference for the idea of really looking at how the press is really viewing real estate, especially in 2008 and 2009. It was very frustrating to read headline after headline. The first conference we had was more of a positive outlook in the, of the future growth. As this recovery has taken really hold now, the question is, is it going to last, and we have seen really a, what we believe is a firm foundation for recovery for the balance of the decade. But, there is so many facts, many of which Mike Orr has studied heavily, things that we study heavily, that leave questions to be answered.
Ted Simons: As far as land is concerned, is the recovery back, and how long can it last.
Greg Vogel: As we look decade-by-decade, and we think about what recovery means, and what it means to whom, if you talk about Gilbert or Chandler or southeast valley related land and lots, it's beyond recovery. It's in a full run. If we look to other areas of the valley, further out areas, we're still seeing the recovery, and part of that is starting much of the way the southeast valley did.
Ted Simons: As far as real estate is concerned, would the median price be going up, and up again?
Mike Orr: They are going up again. We had a slight hesitation during the hot months of summer, which is quite normal, but this year has been fairly quiet, amazing for the increase in Phoenix home prices.
Ted Simons: I want to go back to the idea of fact and fiction. Has there been much fiction regarding housing in Phoenix?
Mike Orr: Well, I think it really goes back to 2008 and 2009. We had a terrible year in 2008 because the market was being flooded by bank-owned homes, but when prices stabilized in 2009, a lot of people refused to believe it. They thought, prices were just going to go way, way lower, and in fact, we had a bit of a bounce that year, although it did not really last very much in terms of an increase, it did not go down very much more, either. We, actually, have had a stable pricing from really April 2009 through to, to the middle of last year.
Ted Simons: But that stability, that stable pricing, that was pretty low compared to where we were.
Greg Vogel: It was quite fall from 180 or so a square foot on the retail side, new homes have fallen not as much. And that's a factor as it relates to just the cost of production. What's it worth to build home. So, the new housing didn't fall as much as the resale, but also the activity in terms of its share of the market fell to nil.
Ted Simons: As far as new home sales are concerned, though, those are up big-time.
Mike Orr: Yes. The October numbers were about 85% higher than the previous October last year, which is impressive, but it is from low numbers, last year was quiet.
Mike Orr: The new home Production is, is really accelerating now.
Ted Simons: Why do you think that's happening?
Mike Orr: Well, there is still a lot of demand for houses, even at the higher prices, we have got more buyers than have sellers, that's pushing people to look for new homes. It's competitive out there if you are trying to buy resale home, and if you go to look for new home, at least you know you can get it, if you can get the funding.
Ted Simons: Talk about new home prices, new home sales, and what that means to land, what that means to developers trying tore buy upland.
Greg Vogel: Well, sure. And I think one of the things that relates to this demand for new homes and why, keep in mind, in 2008 and 2009, there was direct competition with that 2006 speck home that was all, all done up with all the upgrades. And now, we are six years later, that home has been rented or sold twice, and we're really dealing with a different environment. So, the new homes have lots of new features, and they have much more economy to them as it relates to the, the green side of things, the net zero homes, the technology, the floor plans, and bright and shiny, but the other factor is how easy is it to buy home today, and if you go to new home subdivision, there is lots of help there in terms of getting financing. You are not competing with investors. There is a lot of stability in that new neighborhood, versus buying within a neighborhood that lab full of resales and rentals.
Ted Simons: As far as housing in general, talk about that. The ability to buy home now as compared to couple of years ago.
Mike Orr: Well, credit standards are pretty high. People are still in the process of repairing their credit, but we are starting to see people come back into the market, and that's actually a significant source of new buyers now.
Ted Simons: As far as foreclosure starts and completions, what are we seeing in there?
Mike Orr: They are down, and they are still headed downwards, no sort of real surprises there, drifting down to going back to normal levels, I think, by the time we get through next year.
Greg Vogel: And also finish answering your question as it relates to price, we had a low of 185,000 in 2009. It's now up to 260. So, the mix is also changing in terms of the areas which hems are being sold. Keep in mind, in 2009, 2008, we were selling, still, the remaining wreckage, the inventory of surplus new homes. We are out of any surplus of new homes. We're at a low in terms of that stock, and also the mix-up of where the homes are selling in terms 69 hot area being the southeast valley, the northwest valley. That mix is about to change.
Ted Simons: I think that people would be surprised because we kept hearing place like Maricopa and other areas where there was street after street of empty homes. And you are saying that does not exist anymore.
Greg Vogel: It does exist. The absorption of homes to date has been slow. The number of active builders in Maricopa dropped from almost every builder in town was down there, and that was by the dozen back in 2005 and 2006. It dropped less than half a dozen builders being active. Recently, though, there's been new purchases of lots in Maricopa, and it really has to do with supply, and supply of lots have dwindling dramatically in what these initial preferred quadrants was. And that's going to disperse growth. Much differently than occurred over the past three years.
Ted Simons: Are you saying that as far as where the dispersement of growth, are you seeing people moving to certain areas, buying resale homes in certain areas? We always hear that no one wants to live far away because of the gas prices, is that showing up on the numbers?
Mike Orr: It depends on how much cheaper they can get a home, you know. People will drive further if you can really get much nicer home for the same amount of money, so, they are constantly evaluating that.
Ted Simons: And as bottom line regarding supply of homes, up? Considerably?
Mike Orr: Well, we hit a low point at the beginning June. It generally rises most years, as we head to Thanksgiving and it falls off again, and this year we have had bit more significant increase.
Mike Orr: When the prices go up, sellers get more enthusiastic, and buyers lose bit of enthusiasm so that's been happening over the last few months.
Ted Simons: But we have seen enthusiasm from buyers, at least until the last few months?
Mike Orr: Well, they are still enthusiastic. One or two of the investors saying, ok, Phoenix is too expensive, let's go and find somewhere cheaper. But, there is still plenty of buyers, what I am now seeing is the sellers are coming out to meet them, and it's getting a bit more balanced.
Ted Simons: Real quickly regarding investors, still heavy, a big influence on the market. Is it a healthy influence on the market?
Mike Orr: It's been an influence that's stabilized the market. If there was none, there would nobody buyers but we have ordinary people buying. I kind of wish that the investors would quiet down a bit and let the owner copy --
Mike Orr: Pick up the slack.
Ted Simons: You mentioned new homes, people were looking for, developers building a different type of home, more ecologically, environmentally sensitive. Floor plans, what's changed? If you were looking for home five years ago and you are looking if new one now, how are they different?
Greg Vogel: A few things, one is the next jen home when you might have heard quite a bit about, and this idea of multiple generations residing in the same house, which hasn't been terribly common in America. It came common in the downturn. Especially with the sandwich generation of children and parents coming back home. That's big new idea. The other is a more open floor plan for sure. And clearly we are seeing more innovative housing, and you are about to see more things that relate to the smaller lots that became dysfunctional during the downturn. They are coming back with new and innovative design. So, that's relatively exciting of course especially for parts of the southeast valley. That's going to start, but that will spread surely to new and other areas.
Ted Simons: All right. Good stuff, interesting information. Good to have you here, thanks for joining us.
Both: Thank you.
Phoestivus Holiday Market
- Ken Clark of Get Your Phx provides a preview of the 3rd Annual Phoestivus Open-Air Market taking place in Downtown Phoenix December 5th and 12th.
| Keywords: holiday
Ted Simons: The third annual Phoestivus holiday market takes place tomorrow, and again, one week from tomorrow in downtown Phoenix. The event is inspired by a classic episode of Seinfield and will include such Phoestivus traditions as feats of strength, the airing of grievances, and if the first time, an original holiday brew. Mostly, though, Phoestivus is about celebrating and supporting local vendors. Here to fill us in on the details is Ken Clark of "get your fix." One of the co-sponsors. Give us better definition.
Ken Clark: Well, Phoestivus is about supporting local businesses. We have -- I just -- we have up to 100 vendors now. We did not expect it to get that big. We are going to sandwich them in, but we know that they want to be there, and small vendors, locally owned businesses, and I will do all my shopping here. We want to keep those dollars in Arizona.
Ted Simons: As far as the third year of -- third year, correct?
Ken Clark: Yes.
Ted Simons: What have you learned from the first couple of years?
Ken Clark: We have learned that there is an increasing amount of interest in it every year. We are trying to grow it slowly and/or organically. My vision for it is that 20 years from now, people won't know, they will just assume it's always been here.
Ted Simons: That would be great. It's a central Phoenix tradition.
Ken Clark: Central Phoenix tradition, yes.
Ted Simons: So, we have the Phoestivus poll, correct? What is that.
Ken Clark: The largest Phoestivus poll as far as you know.
Ted Simons: And is it just -- what is if?
Ken Clark: It's just a poll.
Ken Clark: Have you watched the Seinfield thing?
Ted Simons: A lot of folks have, and a lot of folks understand that Phoestivus means feats of strength. How will those be defined?
Ken Clark: This year, there is a downtown business called core cross fit, and they are going to have some of their trainers do some feats of strength. The airing of grievances is going to be done by some ASU downtown students that are going to do a great job. We're going to air people's grievances. You can write them down, we'll put them in the air, and by the end of the event it will be this display of, I don't know, grievances.
Ted Simons: Of complaints.
Ted Simons: The thing about the show, what's so funny, the arear airing of grievances is family members stand up and tell the rest of the family why they are upset.
Ted Simons:: So how do you do that when it's a more public set something you look out to Phoenix and say, I have got a bone to pick with you?
Ken Clark:: Yeah. And we'll take -- it's all written up, very tasteful pieces of paper, and we'll hang them up.
Ted Simons: The Phoenix public market is closed. And that was kind of a loss for a lot of folks downtown. How has that impacted what you are trying to do now?
Ken Clark: The indoor market is, with its own business. The outdoor market is, is run by a, a nonprofit called community food connections, and that's what we're also doing here, supporting that nonprofit because we believe that the sixth largest city in the country needs downtown markets. And they do that market on Wednesdays and Saturdays, thus, why we do our, our Phoestivus on two successive Wednesdays so we want to plug into what they are doing. And make it easier on them, so the outdoor market has continued, and will continue, and the indoor market will hopefully in the next four months be new restaurant.
Ted Simons: And exactly where is the Phoestivus market?
Ken Clark: Right outside your door down here at downtown. It's at Pierce and, and central.
Ted Simons: Now, have you had any -- obviously, Phoestivus, when you think of that, you think of Seinfield, and it turns out that it's really one guy's dad came up with this years ago. Have you had any pushback from the Seinfield people? Lots of people are doing Phoestivus obvious but we wonder if they are not getting antsy.
Ken Clark: They have all these hits to their website. It's fun for them and good for everybody.
Ted Simons: And you spell yours differently.
Ken Clark: Ours is with a ph and theirs is with an f, so I don't see the problem.
Ted Simons: Last question, kind of, touched on this earlier, the state of downtown Phoenix, what are you seeing?
Ken Clark: I think that, you know, downtown Phoenix will continue with density, you have got the Cronkite school here, ASU downtown, and people want to be here. And I think that, that the Phoestivus market helps that, along with plane other things that go on here. All the time. And we did not mention the beer gardens.
Ted Simons: Oh, beer, too.
Ken Clark: The Phoenix ale brewery is hosting our beer garden, and they have come up with a special seasonal ale called Phoestivus ale. I tried it yesterday. It's amazing. Very good.
Ted Simons: That's good news, and happy Phoestivus to you. Good luck with it.
Ken Clark: Good.
Ted Simons: Good to have you here.