SECTION 5: READING TEST
Directions: Read the following passages and then answer IN COMPLETE SENTENCES the questions which follow each passage. Use only information from the passage you have just read and write your answer in the corresponding space in your ANSWER BOOKLET.
According to legend, King Canute of Denmark facetiously tried to stop the rising tide by simply raising his hand and commanding the waters to roll back. The tide, of course, kept rising. Yet policymakers throughout history have followed Canute's lead. From Hillary Clinton and John Edwards to Mitt Romney and Arnold Schwarzenegger, politicians across the spectrum have tried or vowed to solve America's health-care woes by enacting an individual mandate-a law requiring every adult to purchase health insurance. Despite its bipartisan support, the individual mandate is bad policy, a vain attempt to command a better result while doing nothing to achieve it.
Individual mandate supporters typically justify the policy by citing the problem of uncompensated care. When uninsured patients receive health services but don't pay for them, the rest of us end up footing the bill one way or another. So advocates of insurance mandates contend, plausibly enough, that we should make the free riders pay.
But how big is the free-rider problem, really? According to an Urban Institute study released in 2003, uncompensated care for the uninsured constitutes less than 3% of all health expenditures. Even if the individual mandate works exactly as planned, that's the effective upper boundary on the mandate's impact.
Of course, it will not work exactly as planned. As anyone who has ever driven above 55 mph knows, mandating something is not the same as making it happen. Some people will not comply: 47 states require drivers to buy liability auto insurance, yet the median percentage of uninsured drivers in those states is 12%. Granted, that number might be even higher without the mandates. The point, however, is that any amount of noncompliance reduces the efficacy of the mandate.
None of this means the uninsured are not a problem. Yet the true issue isn't that they cost the rest of us too much. It's that they simply get less care than most people (one reason uncompensated care is such a small fraction of health-care spending). And if the real concern is making health insurance and health care available to those in need, we should focus on reducing health-care prices and insurance premiums. The individual mandate is, at best, a distraction from that goal.
Some proposals couple mandates with subsidies for the purchase of private insurance. As far as policies to encourage more private coverage go, you could do worse. But as long as the public has to subsidize the formerly uninsured, the problem with free riders has not been solved. We're just paying for them in a different way.
To enact any mandate, legislators and bureaucrats must specify a minimum benefits
package that an insurance policy must cover. Yet this package can't be defined in an apolitical way. Each medical specialty, from tumor treatment to acupuncture, will push for its services to be included. Ditto other interest groups. In government, bloat is the rule, not the exception.
Even now, every state has a list of benefits that any health-insurance policy must cover-from contraception to psychotherapy to hair transplants. All states together have created nearly 1,900 mandated benefits. Of course, more generous benefits make insurance more expensive. A 2007 study estimates existing mandates boost premiums by more than 20%.
If interest groups have found it worthwhile to lobby 50 state legislatures for laws affecting only voluntarily purchased insurance policies, they will surely redouble their efforts to affect the contents of a federally mandated insurance plan. Consequently, even more people will find themselves unable to afford insurance. Others will buy insurance, but only via public subsidies. Isn't that just what the doctor didn't order?
A better approach to health reform would focus on removing mandates that drive up insurance premiums. States ought to repeal some or all of their mandated benefit laws, allowing firms to offer lower-priced catastrophic care policies to their customers. The federal government could assist by guaranteeing customers the right to buy insurance offered in any state, not just their own, enabling patients to patronize companies in states with fewer costly mandates. Indeed, removing mandates would do far more to expand health-care coverage than adding new mandates ever could.
1.What is the individual mandate mentioned at the beginning of the passage? Why does the author say that "the individual mandate is bad policy" (para. 1)?
2.What does the author mean by saying" mandating something is not the same as making it happen" (para. 4)
3.What is the author's proposal about health insurance reform? What is his reason?
On Feb. 17, 2009, it could snow all across America. Not outside, but in living rooms, on TV sets. That's the date when broadcasters will switch to digital transmission, rendering millions of standard analog TVs useless. Consumers can avoid this whiteout, but only if they're prepared. And there's the challenge: How to inform the roughly 20 million households relying exclusively on analog sets that pull in their reception for free, through rabbit ears or a rooftop antenna. Analog TVs that receive cable or satellite will not be affected.
Consumers who own these sets don't necessarily need to know why the federal government is mandating the change (to free up the airwaves for other purposes, such as wireless and public safety communications-though added benefits are better pictures and more channels). But they do need consistent and unbiased information on what to do and they need to be able to act on it. With fewer than 18 months to go, though, 56 percent of viewers with analog sets have never even heard of the switch. The General Accountability Office, the government watchdog, is concerned that with two government agencies involved, "no one is in charge."
The Federal Communications Commission is worried, too. "If we don't do a better job of planning, we'll have one of the biggest outrages Congress has ever seen," FCC commissioner Jonathan Adelstein told US senators last month. The options for consumers are fairly straightforward. Starting with the least expensive one, they are: a) buying a converter box using government coupons b) subscribing to cable or satellite TV services, which will make the transition on their end, or c) buying a digital TV. But sharing this information is anything but simple. Because it has only $5 million to get the message out, the government is turning to the private sector for help with public-service announcements and educating consumers in stores.
This partnership makes sense, if done right. Certainly, the broadcasting industry wants viewers to keep on watching. However, there's a danger in their self-interest. Naturally, retailers also want-people to buy new digital televisions instead of opting for low-cost converters, and cable and satellite providers want new subscribers. And industry may not have enough of a financial incentive to reach out to certain analog viewing groups, such as the poor or elderly (seniors make up 40 percent of analog households).
Other serious issues remain. One is whether the converter boxes will be uniformly available in stores. Beginning in January, households should be able to apply to the Commerce Department's National Telecommunications and Information Administration for up to two $40 coupons to offset the costs of converter boxes expected to be priced from $50 to $70. But some retailers may not stock the boxes if they don't have much demand for them.
And what about recycling analog televisions, of which there are an estimated 70 million? More than anything, what's needed is oversight and coordination of the conversion. Congress should designate one of the two government agencies involved in this project to take the lead, or empower an independent group to oversee the transition.
4.What is the major topic of this passage? Give a list of the serious issues related to the topic.
5.Why does the author say that "But sharing this information is anything but simple." (para. 3)
6.Explain the statement "However, there's a danger in their self-interest." (para. 4)
What a triumph. Bank shares are rising, the FTSE 100 index is back where it was a week ago, and the queues have evaporated. Not many people are putting new deposits in Northern Rock, but a few are taking a punt on its shares. Order is restored. Actually, that 8% rise in Northern Rock's share price is very embarrassing for the authorities. It reflects the fact the bank is worth more because its deposits are guaranteed by the Treasury. That looks like a straightforward bail-out for Northern Rock's shareholders, exactly the outcome the Bank of England has warned would store up trouble for the future.
The Bank is right, of course. If all deposits at all banks were to be guaranteed-which seems to be the implication of the chancellor's statement-the state is potentially accepting an enormous liability. Worse, an odd incentive is created: managements who are insulated from a run on their bank might be inclined to take wilder risks with the cash. The chancellor and the Bank also know that, which is why Monday's emergency sticking plaster will be replaced by something more permanent and more sensible once the storm passes.
The US model seems to be the one the Bank has in mind. Over there, 100% guarantees are given on sums up to $100,000 (?50,000) and deposits are returned within days of a bank's failure. There is little need to fill in forms, which seemed to be another worry for those queueing at Northern Rock's branches. The US-style system seems infinitely fairer on customers, who can't reasonably be expected to assess the merits of various banks' business models before deciding where to place their savings. It should also prevent bank runs that last for days and provoke panic at more solid outfits.
But what about the incentive to managements to bet such guaranteed deposits in wacky ways? That is where reform becomes complicated. If deposits, up to a certain sum, are to be guaranteed by the state, then the state needs to be compensated for taking on that risk. How about a higher rate of tax on banks' profits, or some other form of annual charge based on a bank's capital ratios? Banking bosses and their investors would scream at the idea, but it's perfectly logical. In fact, as part of the deal, the state should probably also demand tighter regulation of banks' activities. That means rethinking the role of the Financial Services Authority, which has responsibility for banking supervision. Until now, the FSA's "light touch" approach has been applauded around the world, especially on Wall Street, where bankers look enviously at a British system based on the sensible application of principles rather than hard-and-fast rules.
But Northern Rock is not a terrific advert for the FSA's style of doing things. It is unfair to say the regulator was asleep-it has warned as much as anybody of the risks posed by the complexity of modern financial markets. But it is fair to say that banks and financial institutions are less inclined to listen to a watchdog that prefers to bark rather than bite. Overkill would be even worse, but the balance may have to be addressed.
Over in the US, they have a different way of dealing with the global credit crunch which caused so many problems for Northern Rock. They cut interest rates at the first sign of trouble. True to form, the US Federal Reserve cut rates by 0.5% last night. The stock market loved it. But snap reactions are often wrong. The Dow Jones Industrial Average soared at news of the cut. It was reminiscent of January 2001 when a cut of the same size-designed to ease the effects of the deflating dotcom bubble-provoked a one-day, 299-point rise in the Dow. Over the next eight weeks, however, the Dow fell by 1,600 points. Why? Simply the realization that the Fed's fears of a recession were well-founded.
Could we see a similar storyline this time? Quite possibly. The danger in a 0.5% cut is that Ben Bernanke, the Fed chairman, does serious damage to the value of the US dollar, which is already at an all-time low against the euro. The US is struggling to attract investment from overseas to fund its current account deficit; Bernanke has just made the task harder. He is also sending a direct signal that the risk of recession in the US is real. The idea that an aggressive cut is good news may not last long, and indeed the Fed's statement spoke about promoting economic growth over time. The phrasing was hardly bullish.
7.Why does the author mention the bank of Northern Rock at the beginning of the passage?
8.What does the author mean by saying that bankers on Wall Street "look enviously at a British system based on the sensible application of principles rather than hard-and fast rules" (para. 4)?
9.Paraphrase the underlined part in the sentence "But it is fair to say that banks and financial institutions are less inclined to listen to a watchdog that prefers to bark rather than bite", (para. 5)?
10.Explain the sentence "The idea that an aggressive cut is good news may not last long', (para. 7)?