Explaining the Consumer Price Index

Source: Adam Weber and John Peterson, Economic and Budget Issue Brief, Congressional Budget Office, June 20, 2007

The consumer price index for all urban consumers (CPI-U) is the best-known official measure of inflation. Published monthly by the federal Bureau of Labor Statistics (BLS), the CPI-U tries to approximate changes in the cost of living–that is, changes in the cost of maintaining a constant standard of living from one month to the next. To construct the CPI-U, BLS surveys the prices of thousands of goods and services (the index has more than 200 categories of items) in 38 regions, averaging the results to form a nationwide estimate of inflation. Over the past five years, the cost of living, as measured by the CPI-U, has varied but, on average, has risen by about 2-3/4 percent per year.

The purpose of this brief is to explain some of the methods used to construct the CPI-U and why, in some cases, the index’s estimates of inflation may differ from consumers’ perceptions of how much prices are rising.2 The brief focuses on six aspects of the CPI-U’s construction: averaging regional price indexes to create a nationwide index; estimating the expenditure weights that BLS assigns to the major categories of prices in the CPI-U to account for the categories’ relative importance; allowing for shifts in relative prices, a phenomenon known as economic substitution; adjusting for changes in the quality of various goods and services; measuring prices for medical care; and measuring prices for shelter.

Health Care and the Budget: Issues and Challenges for Reform

Source: Peter R. Orszag, Health Care and the Budget: Issues and Challenges for Reform, CBO Testimony, Congressional Budget Office, June 21, 2007

Rising health care costs and their consequences for federal health insurance programs constitute the nation’s central fiscal challenge. Rising costs also represent a critical issue for employers—who sponsor most private health insurance coverage—and for the enrollees and patients who ultimately bear the costs of health insurance and health care. At the same time, substantial concerns exist about the number of individuals who lack health insurance, about the quality of care that is provided both to the uninsured and to the insured, and about trends in health such as the growing prevalence of obesity.
+related presentation: Health Care Issues and Challenges for Reform
+related presentation: Challenges of Health Care Costs

The Problems With Property Tax Revenue Caps

Source: Karen Lyons and Iris J. Lav, Center on Budget and Policy Priorities, June 21, 2007

Several states (Connecticut, Florida, Minnesota, New Jersey, Rhode Island, and Texas) have recently considered imposing severe caps on property tax revenue. These caps restrict the amount that property tax revenue can increase from year to year to a low fixed percentage, a formula based on the inflation rate, or some combination of the two.

While such caps may hold down property taxes, they are likely to impair local governments’ ability to provide education, public safety, and other services residents demand and need. They also are likely to make the local revenue system more regressive.

Property tax caps do nothing to change the main drivers behind higher property taxes. They cannot slow the increase in the cost of health care or fuel, for example, which reflects forces outside of the control of local officials. Nor do they change the demand for local public services, such as quality K-12 education, public safety, and good roads.

Tax Incentives as a Solution to the Uninsured: Evidence from the Self-Employed

Source: Gulcin Gumus and Tracy L. Regan, Institute for the Study of Labor, IZA DP No. 2866, June 2007

Between the years 1996 and 2003, a series of amendments were made to the Tax Reform Act of 1986 (TRA86) that gradually increased the tax credit for health insurance purchases by the self-employed from 25 to 100 percent. We study how these changes in the tax code have influenced the likelihood that a self-employed person has health insurance coverage as the policy holder of the plan. The Current Population Survey (CPS) is used to construct a data set corresponding to 1995-2005. The empirical analysis is performed for prime-age men and women, and accounts for differences in family structure and potential eligibility. The difference-in-difference estimates suggest that the series of tax credits did not provide sufficient incentives for the self-employed to obtain health insurance coverage. Estimates of the price elasticity of demand confirm the limited response to changes in the after-tax health insurance premium. The effect was largest, however, among the single men and women in our sample, suggesting that a 10 percent decrease in the after-tax price increases the likelihood of coverage by 0.68 and 1.02 percentage points, respectively.

The Illinois Public Pension Funding Crisis: Is Moving from the Current Defined Benefit System to a Defined Contribution System an Option That Makes Sense?

Source: Jourlande Gabriel and Chrissy A. Mancini, Illinois Retirement Security Initiative, A Project of the Center for Tax and Budget Accountability, 2007

from the press release:

Springfield, IL (Monday, May 7, 2007) – A new study released today at the Statehouse has found that – contrary to widespread perception – switching from Illinois’ current defined benefit system to a defined contribution system will do nothing to solve the state’s $40.7 billion unfunded pension liability and would likely result in much lower retirement benefits for public employees and higher costs for taxpayers.

The study, “The Illinois Public Pension Funding Crisis: Is Moving from the Current Defined Benefit System to a Defined Contribution System an Option that Makes Sense?”, was conducted by the Illinois Retirement Security Initiative, a project of the Center for Tax and Budget Accountability. The study finds that the conventional wisdom that switching to a defined contribution system will solve the state’s massive unfunded public employee pension liability is provably false.

Health Care Report Card Compendium

Source: Agency for Healthcare Research and Quality

This Compendium is a searchable directory of health care “report cards” which provide comparative information on the quality of health plans, hospitals, medical groups, individual physicians, nursing homes, and other providers of care.

Designed to be a resource for those interested in creating health care report cards for their organizations, the Compendium includes over 200 examples that demonstrate a wide range of approaches to reporting data. Report card developers can use these examples to explore the scope and types of information they might want to cover as well as various approaches to presenting comparative data.

The Compendium includes a variety of printed and Web-based reports produced since the mid-1990s by a wide range of sponsors. In every case, a primary purpose of the information is to help consumers and patients better understand and choose among their health plan or provider options.
+ FAQ

The Condition of Education 2007

Source: National Center for Education Statistics, 2007

The Condition of Education 2007 summarizes important developments and trends in education using the latest available data and by presenting 48 indicators on the status and condition of education and a special analysis on high school coursetaking. The indicators represent a consensus of professional judgment on the most significant national measures of the condition and progress of education for which accurate data are available. The 2007 print edition includes 48 indicators in five main areas: (1) participation in education; (2) learner outcomes; (3) student effort and educational progress; (4) the contexts of elementary and secondary education; and (5) the contexts of postsecondary education.

New Chartbook Provides the Essentials of Medi-Cal

Source: California Health Care Foundation, May 2007

Summary
The main source of health insurance for one in six Californians, Medi-Cal is the nation’s largest Medicaid program covering 6.6 million people. Medi-Cal pays for nearly half of all births in the state, two-thirds of nursing home residents, and brings in more than $20 billion in federal funds to California’s health care providers.

The third edition of Medi-Cal Facts and Figures provides the essential elements of this massive program, including new information on enrollment, benefits and cost sharing, program spending and cost drivers. It also features key trends and comparisons with other states, describes the important role that Medi-Cal serves in California’s health care system, and examines several challenges facing the program.

Mental Health Screens for Corrections

Source: Julian Ford and Robert L. Trestman, and Fred Osher, Jack E. Scott, Henry J. Steadman, and Pamela Clark Robbins, National Institute of Justice, NCJ 216152, May 2007

This National Institute of Justice report provides information on two projects designed to create and validate mental health screening instruments that corrections staff can use during intake. Included in the report are questionnaires that accurately identify inmates who require mental health interventions.

Innerworkings: A Look at Mental Health in Today’s Workplace

Source: Partnership for Workplace Mental Health, May 2007

Employee Benefit News, a leading publication for HR professionals, and the Partnership for Workplace Mental Health, are proud to release the results of a national survey in which employers from across the country selected mental illness as the health issue that has the most effect on indirect costs. The Innerworkings: A Look at Mental Health in Today’s Workplace survey points to an overwhelming need for better education of frontline managers and employees on this critical health issue.
+ Press Release