How Do You Solve A Problem Like Medicare?
Call it a crisis or not, as you please, but the fact is that Medicare is facing a huge longterm shortfall. As they say in Al Anon, the first step to recovery is admitting you have a problem. But, assuming politicians are willing to do this, what should be step two? Writing in last week’s Wall Street Journal, congressman Paul Ryan offers one proposal:
According to the Congressional Budget Office, Social Security, Medicare, Medicaid and the rest of government will consume nearly 40% of the economy by the time my three young children reach my age (38). This will require more than doubling the average tax burden of the past 40 years just to keep the government afloat. Continuing down this path will eventually strangle our economy.
To meet this challenge and secure our fiscal future, I’m introducing a comprehensive legislative plan called “A Roadmap for America’s Future.”
The bill secures the existing Medicare program for those over 55 – so Americans can receive the benefits they planned for throughout most of their working lives. Those 55 and younger will, when they retire, receive an annual payment of up to $9,500 to purchase health coverage – either from a list of Medicare-certified plans, or any plan in the individual market, in any state.
The payment is adjusted for inflation and based on income, with low-income individuals receiving greater support and a funded medical savings account.
Over at Econlog, Arnold Kling thinks he has a better idea:
I would immediately raise the Medicare eligibility age to 75 for everyone aged 50 and younger. Then, I would index the eligibility age to average longevity, so that the eligibility age continues to rise as longevity increases. If longevity continues to increase at the rate of about 1/4 year per year, then the eligibility age would rise at that rate.
Once you reach 50, your eligibility age would be locked in. For example, someone who is 46 today would be given an initial eligibility age of 75. However, by the time they reach 50, the eligibility age might have increased to 76. At that point, that person’s Medicare eligibility would be locked in to age 76.
I would propose eliminating the Medicare tax, which would lop about 1.5 percentage points off of the odious payroll tax. In the short run, I would recommend not cutting spending elsewhere, and instead letting this serve as an economic stimulus. Once the unemployment rate falls to a more reasonable level, we could try to find spending cuts elsewhere in the government Budget to offset the shortfall in payroll tax revenues.
The second sugar-coating proposal would be a new government-matching IRA account for people born in 1953 or later (i.e., those affected by the increase in the Medicare eligibility age). The idea would be to encourage people under the age of 50 to save money for their old age by providing both tax advantages and government matching funds. These savings accounts would help people to support themselves until they reach the age when they are eligible to receive Medicare.
Both proposals are worth thinking about, but given the fate of President Bush’s attempts at Social Security reform (back when the Republicans controlled both houses of congress), such proposals strike me as being more than a little quixotic. To quote High Fidelity, it’s like trying to borrow a dollar, getting turned down, and asking for 50 grand instead.
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The fact that Americans pay twice as much for health care, and for worse outcomes that in comparator countries while leaving millions lacking has nothing to do with the costs of Medicare. We need to look at total health care costs, not just the part that gets included in the government budget– that is an ideological fallacy.
Here’s the deal: let’s get universal health care, preferably based on a single payer system. You would almost certainly save money, and cover more people at the same time (see Taiwan). Then let’s look at the rising cost of health care, which is a worldwide phenomenon, and driven by distinctly non-demographic factors. Let’s not put the cart before the horse here.
Both proposals seem absurd to me. I don’t think $9,500 would cover healthcare premiums for most seniors (who typically have limited resources and more frequently won’t have pensions), and raising Medicare eligibility to 75, when most people will have been retired for 10 years (even without healthcare, many people will retire) is cruel. Unemployment isn’t that high where a 1.5% decrease in the payroll tax would have a major effect and bosst economic growth substantially. I’m amazed someone would propose that argument at a site with “econ” in its name. I’m with MM – heathcare needs to be fixed for everyone under 65, and then you might have better (and cheaper) healthcare outcomes for those over 65.
Although, in the end, healthcare is so expensive for people over 65 because it costs a lot for the procedures necessary to keep them alive. So unless people are going to decide they don’t want their cancer treated, or they’re willing to forego the valve replacement, then I don’t see an outcome that can be cheap and can respect human dignity.
The fact that Americans pay twice as much for health care, and for worse outcomes that in comparator countries while leaving millions lacking has nothing to do with the costs of Medicare.
We already know for sure that THAT can’t possibly be true. Get this straight: The American government right now spends more money per-capita on health care than the entire health care system does in France. And the American government obviously does so while covering a far lower percentage of the population.
Here’s the deal: let’s get universal health care, preferably based on a single payer system. You would almost certainly save money, and cover more people at the same time (see Taiwan).
Do you really expect anyone to believe this fairy tale? Universal health care is probably the best of a set of bad options, but at least admit that it would cost more.
The assumption here is that Medicare is a major problem? But where does the thinking go if Medicare is judged to be the core of the only viable solution — a single payer system?
SB:
From the OECD:
Total health care spending per capita:
US: $4.497
G-7 average: $2,524.
Total public health care spending per capita:
US: $1,989
G-7 average: $1,723.
The US health care system is so much more expensive (and for far worse outcomes) than elsewhere, and that is because of its largely private-insurance driven model (middle men are expensive). Single payer would not only bring insurance to the millions currently lacking, but would clearly do so at lower cost than today.
MM:
I was wrong about France, but not by very much. Full and recent statistics are available here; http://assets.opencrs.com/rpts/RL34175_20070917.pdf
Do the math from Table 1: The United States spends $6,102 per capita, and 44.7% is publicly financed, for a total of $2,727.24 in the United States that is publicly financed. That figure is within a few hundred dollars of the TOTAL per capita spending in countries like Germany, France, Denmark, and Sweden, and MORE than the total spending in Ireland, United Kingdom, Italy, Japan, Finland, Greece, and many others.
Moral: If the United States government already spends that much on healthcare, there’s absolutely no reason to think that US total spending is going to be reduced to the levels in the United Kingdom, for example. That would require completely eliminating all private spending in the United States without replacing it with ANYTHING, not to mention covering many millions more people at the same time. That’s simply impossible.
Indeed, it’s very tiresome that you consistently reduce any complicated policy question to a simplistic analysis that (miracle of miracles) perfectly coincides with your own policy agenda (i.e., getting rid of private health insurance). It’s simply ignorant to say that everything is due to the cost of middlemen. In fact, Table 20 in that document shows that health administration and insurance costs in America are only $465 per person per year. That’s a lot, but even if you reduced administration costs to zero, the United States would STILL be spending about $5,637 per capita on health care, close to DOUBLE the amount spent in most OECD countries.
*****
Moreover, there are many reasons that America spends much more on health care and that various health measures here are worse, and NONE of these reasons would change if we moved to a single-payer model.
Even under a single-payer model, American doctors would still demand higher salaries than European doctors. Result: Higher spending.
Even under a single-payer model, American doctors would still use more expensive technologies and more invasive surgeries much more often. Result: Higher spending.
Even under a single-payer model, America would still have greater rates of crime, obesity, drug usage, and other things that most certainly affect how healthy the population is. Result: Worse outcomes.
SB,
You raise very important questions at the end of your remarks. They have to do with prevention, the relationship between prevention and care, the purpose of the medical practice (should it be a profession?), the impact of dysfunctional behavior on society, prevention as it applies to such behavior, and so forth.
But, in terms of the question: “How do we pay for what we get?” the answer hands down is a single payer system. Medicare is core of the solution to THAT problem. It is not the single bullet solution to the total array of challenges that are intertwined in making improvements to the health status of Americans.
To discuss health care apart from prevention makes no sense. To discuss the economics of health care as THE determining factor in determining the nature of health care makes no sense.
The vast majority of threats to health status come NOT from illness and disease. They come from behavior, especially for the younger population. To address substance abuse and youth violence only within the context of the criminal justice system makes no sense.
We spend 99% of our nation’s health dollars addressing illness and disease. Yet illness and disease constitutes only 10% of the threats to health status. The majority of threats come from the lack of quality relations of one person to another (50%), to the social and physical environment (20%), and to genetic factors (20%). We are spending 99% or our health dollars on that which constitutes only 10% of the problem.
What is missing in the health care debate is an answer to two questions:1) what constitutes good health? and 2) what contributes to good health?
The US spends 16.5% of GDP for health care. Can anyone really say we are getting out money’s worth? Hardly. Frankly, the entire system is embarrassing. It has been defined in large measure by ideological struggles.
Well, I personally think that if what you care about is people’s actual health, rather than the structure of the insurance industry, you’d get more bang for the buck to change 1) the federal farm bill and food stamps (stop subsidizing high-fructose corn syrup and subsidize vegetables/fruits instead); 2) transportation and zoning policies (encourage more walkable living arrangements). There’s not any way for me to prove that, of course, any more than there’s any way for someone to prove that I’m wrong. Just a hunch.
I did NOT say it would be reduced to the levels of the UK (which anyway, is more single provider than single payer and tries to do health care on the cheap). My point is that moving to a single payer system will be cheaper, relative to where it is today.
Some additional points you fail to mention: the price price of drugs, testimony to the fact that the government does not take advantage of its status as a large buyer to get a better bargain.
The salaries issue is partly due to the relative lack of primary care in the US- this is where I personally notice the big difference between here and Europe– people rely on the ER for short-term care instead of a GP walk-in. This is a horrendous waste of resources as a well as a contributor to worse outcomes. Plus, as personal relationship with a family doctor is very attractive from a the point of view of Catholic social teaching.
SB: on your points (1) and (2), you’ll get no argument from me. I would fully support both.
I know you didn’t specifically say that US spending could be reduced to UK levels, but your first comment suggested that the whole reason the US spends more than other countries is because of our insurance system. Clearly, though, even if one strips out the entire cost of the insurance system in the US, we’re still spending twice as much as some other Western countries, so that cannot possibly be the whole reason. That’s the only point.
Read the rest of the report — spending on drugs does not explain very much of why US spending is higher than other countries. You could reduce that spending by a little bit if the government “took advantage of its status as a large buyer,” but again, we’d still be spending way more than other Western countries.
Per capita the U.S. government spends more on health care than many countries do one their entire system. On the other hand, private spending on health care per capita also exceeds total per capita spending in a lot of countries. So I don’t think either the profit motive or government waste can be blamed for our high health care costs.
It wasn’t ever thus, of course. Back in the early 1970s spending on health care in the U.S. as a percentage of GDP was half what it is now and was comparable to spending in other Western nations. The change seems to be due largely to the fact that we make more widespread use of new medical technologies and treatments in the U.S. than do other countries. The implications of this for health care policy, however, are not entirely clear.
MM: [i]let’s get universal health care, preferably based on a single payer system. You would almost certainly save money, and cover more people at the same time (see Taiwan).[/i]
Let’s get universal health care, preferably based on private accounts. You would almost certainly save money, and cover more people at the same time (see Singapore).
Anyway, I like Paul Ryan’s general ideas and Arnold Kling’s too except for the bit about raising the eligibility age. I’d tweak them just a little and combine them. Promise benefits only to those who are 60+. For everyone else who has paid in, convert the Medicare payroll tax into an individual HSA contribution that is government-matched (amount of matching depends on your age so that the older you are the more will be matched).
Scrap the nuclear arsenal (as part. of course, of serious multilateral negotiations), begin the closure of the US bases that litter nearly every country on Earth. That’d give you a few trillion dollars to spare.
I just found this site and web page and made my first quick pass through it.
I see some pretty strong cries for single-payer.
That’s pleasing to see.
We want single-payer …
http://www.ninenineohnine.org/pages/Monitor_Popular_Support
Single-payer makes economic sense …
http://www.ninenineohnine.org/pages/Costs_and_Savings
Too many people are dying unnecessarily with the current system
http://www.ninenineohnine.org/pages/Real_People
Single-payer has so many benefits its amazing. Study this …
http://www.ninenineohnine.org/pages/Single-Payer_Education
We will finally get what millions of people in other countries already have … peace of mind regarding health care instead of fears and worries, bankruptcies, loss of homes, calls from creditors, divorces
http://www.ninenineohnine.org/pages/Peace_of_Mind
We just need to get on the Schedule of action to get it …
http://www.ninenineohnine.org/pages/Schedule
Bob the Health and Health Care Advocate