Tag Archives: Medicare

Playing Russian roulette with the country’s future.

We need more adults. Robert J. Samuelson brilliantly explains why:

The budget impasse raises comparable questions. Can we resolve it before some ill-defined crisis imposes its own terms? For years, there has been a “something for nothing” aspect to our politics. More people became dependent on government. From 1960 to 2010, the share of federal spending going for “payments to individuals” (Social Security, food stamps, Medicare and the like) climbed from 26 percent to 66 percent. Meanwhile, the tax burden barely budged. In 1960, federal taxes were 17.8 percent of national income (gross domestic product). In 2007, they were 18.5 percent of GDP.

This good fortune reflected falling military spending — from 52 percent of federal outlays in 1960 to 20 percent today — and solid economic growth that produced ample tax revenue. Generally modest budget deficits bridged any gap. But now this favorable arithmetic has collapsed under the weight of slower economic growth (even after a recovery from the recession), an aging population (increasing the number of recipients) and high health costs (already 26 percent of federal spending). Present and prospective deficits are gargantuan.

The trouble is that, while the economics of giveaway policies have changed, the politics haven’t. Liberals still want more spending, conservatives more tax cuts. (Although the tax burden has stayed steady, various “cuts” have offset projected increases and shifted the burden.) With a few exceptions, Democrats and Republicans haven’t embraced detailed takeaway policies to reconcile Americans’ appetite for government benefits with their distaste for taxes. President Obama has provided no leadership. Aside from Rep. Paul Ryan (Wis.), chairman of the House Budget Committee, few Republicans have.

What do we get from our elected leaders? “Scripted evasions.”

Liberals imply (wrongly) that taxing the rich will solve the long-term budget problem. It won’t. For example, the Forbes 400 richest Americans have a collective wealth of $1.5 trillion. If the government simply confiscated everything they own, and turned them into paupers, it would barely cover the one-time 2011 deficit of $1.3 trillion. Conservatives deplore “spending” in the abstract, ignoring the popularity of much spending, especially Social Security and Medicare.

So the political system is failing. It’s stuck in the past. It can’t make desirable choices about the future. It can’t resolve deep conflicts.

This article should be required reading for anyone running for public office.

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The incentives of a third-party payer system.

Ezekiel J. Emanuel, an oncologist and former White House advisor, writes this morning of “what is wrong with American health care today.” He cites the construction of two new proton beam treatment facilities at the Mayo Clinic, one of our greatest hospitals. These facilities are part of a “medical arms race for proton beam machines, which could cost taxpayers billions of dollars for a treatment that, in many cases, appears to be no better than cheaper alternatives.”

The therapy, which Emanuel describes, is roughly twice the price of other forms of radiation.

The higher price would be worth it if proton beam therapy cured more people or significantly reduced side effects. But there is no evidence showing that this is true, except for a handful of rare pediatric cancers, like brain and spinal cord cancer.

To justify the expenses, the facilities need more patients, thus doctors over promote the treatment for those with other forms of cancer, for which there “is no convincing evidence that proton beam therapy is as good as — much less better than — cheaper types of radiation for any one of these cancers.”
So why would the Mayo Clinic spend this money? Because several other hospitals have them. But is the competition really necessary? “With Medicare reimbursement so generous, and patients and doctors eager for the latest technology, building new machines is sane, profitable business for hospitals like Mayo.

But it is crazy medicine and unsustainable public policy.”

On that point, Dr. Emanuel and I agree: it is crazy and unsustainable. As usual, the disagreement is not over the cause but the solution.

The most promising option is a new approach called dynamic pricing. Medicare would pay more for proton beam therapy, but only for diseases that are proven to be treated more effectively by the therapy than by other forms of radiation. For cancers like prostate, it would pay only what it pays for the cheaper alternatives. But if studies were done showing that proton beam therapy was better than other treatments, the payment would go up. If no studies were done, or the new evidence demonstrated no advantages, then coverage would continue, but at the lower reimbursement.

I am not so convinced. First of all, there will be studies that prove the efficacy of all forms of treatment. The government would be left as an adjudicator, and will almost certainly cave in to pressure to approve more expensive treatments, if only in the name of equality.

Second, people are good shoppers; the government is not. There are innumerable health problems and treatments, not a few high-profile ones. How many bureaucrats will it take to monitor and adjudicate these therapies? Moreover, health care services would be slowed by the glacially slow speed of the federal government. Why put this additional burden on Washington?

People, contrary to the tenets of Western liberalism, are not stupid. They can shop and judge and discriminate between competing alternatives. My solution? Write them a check.

I do not know how much others value certain things; the government certainly does not either. If people had money that was theirs to spend as they chose in the form of a health savings account – partially funded by the government in accordance with a progressive formula – they would be able to choose what is and is not worth their money.

Under the current system, we the people are clients of the government and demand more and more but are willing to pay for less and less. Give us ownership of our health – it is ours, after all – and money to support ourselves, and then let us shop. We do it for care insurance and life insurance and home-owners insurance… and can do it for health insurance. We can shop for cars and schooling and housing… and health care. People will have the incentives to shop around for alternatives that provide a better value, based on innumerable relevant factors, instead of always demanding the latest and (unproven) greatest from the “generous” (and broke) Medicare program. This both controls costs and imparts responsibility to free citizens. Can bureaucrats in Washington do the same? Knowledge is decentralized; decision-making should be as well.


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Filed under Domestic Politics

Romney acts like an adult

Thomas Edsall, a professor of journalism at Columbia, in a critique of Romney’s campaign strategy, quotes the candidate:

Once we thought ‘entitlement’ meant that Americans were entitled to the privilege of trying to succeed in the greatest country in the world. Americans fought and died to earn and protect that entitlement. But today the new entitlement battle is over the size of the check you get from Washington.

But after reading Edsall’s summary, “The Anti-Entitlement Strategy,” I look upon Romney’s position more favorably. Why? First, I disagree with the very definition of the world entitlement. Second, ponder this little nugget of data from the recent Government Accountability Office’s fiscal 2011 financial statements, as noted by Bryan R. Lawrence, founder of Oakcliff Capital, writing in today’s WaPo:

In fiscal 2011, the cost of the promises grew from $30.9 trillion to $33.8 trillion. To put that in context, consider that the total value of companies traded on U.S. stock markets is $13.1 trillion, based on the Wilshire 5000 index, and the value of the equity in U.S. taxpayers’ homes, according to Freddie Mac, is $6.2 trillion. Said another way, there is not enough wealth in America to meet those promises.

Two points. First, I doubt that Romney would, if able, gut all of the entitlement programs. (He will not be able.) When asked during a debate which federal departments he would abolish, he gave a serious answer – that each department did some things worthwhile, and that we must not throw the baby out with the bath water. Thus, the valuable programs currently performed by a department must first be identified and then assumed by another department, agency or office, before the department could responsibly be abolished. I assume the same sobriety would apply to Romney’s position on entitlement spending.

Second, not all entitlement programs are transfers to “parasitic” “sloths.” He may have to trim down the rhetoric. Even so, he will be the adult in the room when debating Obama, who has responded to both the current depression and the forthcoming entitlement-fueled default by giving speeches and proposing to tax private jets.

Edsall again:

Romney’s adoption of an anti-entitlement strategy comes at a time when he appears to be looking up from the primaries toward Election Day, which suggests that his hard-line stance will be central to his campaign against Obama and not just a temporary maneuver.

Let’s hope that this is not only an election strategy, but a blueprint for governance.

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Filed under Domestic Politics, Election 2012

Romney Offers More Details

Mitt Romney, in a speech before a conservative group here on Friday, offered his most detailed plan yet to cut government spending and lower the federal debt, including an overhaul of Medicare and significant changes to Social Security.

Speaking at theAmericans for Prosperity Foundation’s annual meeting, Mr. Romney said his plan would cap spending at 20 percent of gross domestic product by 2016, and would require $500 billion a year in spending cuts. To accomplish this, Mr. Romney explained, he would eliminate all nonessential government programs, including Amtrak, return federal programs like Medicaid entirely to the states and improve the productivity and efficiency of the federal government. He would also immediately cut all nonsecurity discretionary spending by 5 percent across the board.

Mr. Romney’s proposal for Medicare is similar to the hotly debated plan that Representative Paul Ryan of Wisconsin, the chairman of the House Budget Committee, introduced in April. Mr. Ryan’s plan would replace Medicare and offer payments to older Americans to buy coverage from the private market.

Mr. Romney’s proposal would give beneficiaries the option of enrolling in private health care plans, using what he, like Mr. Ryan, called a “premium support system.” But unlike the Ryan plan, Mr. Romney’s would allow older people to keep traditional Medicare as an option. However, if the existing government program proved more expensive and charged higher premiums, the participants would be responsible for paying the difference.

This is certainly a good start, and appears to be correcting for some of the difficulties Ryan found in proposing his plan.

He presented his plan as offering more choice — though younger Americans would need to be prepared to possibly pay more, for instance, depending on which plan they selected.

“Younger Americans today, when they turn 65, should have a choice between traditional Medicare and other private health care plans that provide at least the same level of benefits,” he said. “Competition will lower costs and increase the quality of health care.”

He concluded, “The future of Medicare should be marked by competition, by choice, and by innovation, rather than by bureaucracy, stagnation and bankruptcy.”

His plans for Social Security did not include any privatization plans, which some of his Republican presidential rivals support. Instead, “for the next generation of retirees, we should slowly raise the retirement age,” he said. “And finally for the next generation of retirees, we should slow the growth of benefits for those that have higher incomes.”

We will have to see how this is scored by the CBO to see if it is sufficient to curb Medicare costs to a less ominous level, but that he’s speaking about it is a good first step. This problem will not age well.


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Filed under Domestic Politics, Election 2012

Romney Hints at Fiscal Plan

Here in New Hampshire, where Romney enjoys a big lead in the polls, he presented his prescription for the country’s growing debt. He said he would cut federal spending by about $500 billion during his first term by eliminating programs and services he doesn’t like (he cited President Obama’s health-care overhaul) and those he does like but doesn’t think the country can afford (he cited Amtrak).

Romney also pledged to turn responsibility for costly entitlement programs like Medicaid over to state governments, to “let states draft programs in a way they think best to care for their own poor.” He plans to reveal more details of his fiscal policy agenda during a speech Friday in Washington.

“There’s some who say when you talk about fiscal responsibility and cutting a program, you’re showing that you’re heartless,” Romney added. “We have to say, ‘No, no, no, you have to understand. We have a moral responsibility not to spend more than we take in.’ . . . It is a moral responsibility to believe in fiscal responsibility. We do and I do.”

I’ll be waiting for the details, specifically, what he plans to do with Medicare.


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Filed under Election 2012

Paul Ryan Leads With His Chin

The FT reports:

Paul Ryan, the Republican’s fiscal front man who created a political storm with a budget proposal to upended popular government programmes, has promised a repeat performance in the 2012 election year.
Mr Ryan said he was undeterred by attacks from the White House and Democrats, and even some Republicans, on his plan to cut taxes and dramatically change Medicare, a sacred cow of US politics that provides healthcare for the elderly.
“We lead with our chin on the issue,” said Mr Ryan, a 41-year-old Wisconsin congressman who chairs the budget committee in the House of Representatives. “I am looking forward to doing it next year, actually. In a weird way I really am,” he said in an interview with the Financial Times.
Mr Ryan’s determination to press ahead with another aggressive budget could fuel Republican concerns that the proposal will become a lightning rod in next year’s election and damage their chances to win back the White House and take full control of Congress.
But Mr Ryan said it was worth the risk. “I just want to know. To the country: do you want to fix it or not?” he said. “If we win, we’re going to fix this thing.

Paul Ryan should be applauded, even by those on the Left, for his willingness to touch the third rail. Others talk serious while on Sunday talk shows without ever putting forward serious proposals. Ryan has shown courage in this regard. You may dislike his plan – some on the Right do as well – but he should receive appropriate recognition as being one of the very few adults on Capitol Hill. Many Republicans will surely be unhappy with him for pushing his budget again, but they will not do so out of principle. Rather, they will do so out of their own desires to be re-elected. No one will write a profile of their courage.
If the Tea Party wants another litmus test: Do you support Paul Ryan? If not, do you have a serious plan, or just words

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Filed under Domestic Politics

“I’m not a number. I’m not a line item on a budget…

and I’m definitely not a push-over. But I am a voter.”

What exactly does the word “earn” mean? Dictionary.com offers the following:

Did these 50 million seniors from this AARP advertisement “earn” their Medicare and Social Security?

First, Medicare. Andrew Biggs crunched the numbers.

Let’s start with a typical person who was born in 1944, began work at age 21 in 1965, and in 2009 retired at age 65 and enrolled in Medicare. Over the course of his life he paid the Medicare tax out of his wages.

After adjusting for changes in tax rates, cost of living adjustments, interest rates, etc.:

This typical person paid around $64,971 in Medicare payroll taxes over his lifetime. Likewise, after netting out Medicare premiums, he’ll receive around $173,886 in lifetime Medicare benefits. The net? He can expect to receive around $108,915 more in benefits than he paid in taxes over his lifetime. (Emphasis mine.)

Second, Social Security. In 2001, the Cato Institute called social security the “boomers’ bargain” due to the low tax rates they paid during most of their working years.

Ever since we Gen-X/Yers began working, we’ve paid 12.4 percent of our earnings to Social Security — half taken through the “FICA” tax on our paycheck and half through the payroll tax. In the coming years, Congress likely will increase that rate to more than 17 percent to delay the 2038 catastrophe. [Bankruptcy of the Social Security trust fund.] What is more, the Medicare tax (which is now a mere 2.9 percent) will increase because that program faces an even worse crisis than Social Security.

In contrast, the Boomers will get a bargain. When they entered the workforce in the late 1960s, they paid only 6.5 percent of their earnings to Social Security and nothing to Medicare. For about half of their working years, the Boomers paid 10 percent or less to Social Security and less than 1.25 percent to Medicare. Only from 1990 on, when the Boomers had earned paychecks for a quarter-century, did they start paying 12.4 percent to Social Security and 2.9 percent to Medicare — the same percentage we Gen-X/Yers have paid our whole lives.

It’s worth noting that in 2001 the social security trust fun was expected to start running deficits in 2016. It ran its first deficit last year. In their 2011 Summary Reports, the Social Security and Medicare Boards of Trustees concluded:

Projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will require legislative corrections if disruptive consequences for beneficiaries and taxpayers are to be avoided.

The financial challenges facing Social Security and Medicare should be addressed soon. If action is taken sooner rather than later, more options and more time will be available to phase in changes so that those affected can adequately prepare.

The problem is that seniors – most perfectly capable of working more and consuming less – vote. Thus, they’ve earned the benefits. The rest of us will have to pay.

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Filed under Domestic Politics