An Argument Against Expanding Entitlements
July 17, 2008
1. It’s wrong to make promises you know will not be able to keep.
1a. This is particularly wrong when you know people will rely on such promises to their detriment.
2. Medicare currently has unfunded liabilities of $65.4 trillion dollars.
3. The Federal government is not going to be able to raise enough revenues to cover this $65.4 trillion shortfall, let alone any expanded health care entitlements.
4. If people are promised expanded health care services from their government, they will be less likely to save sufficient money to provide such services for themselves should the government fail to deliver.
5. Thus, it is wrong (given current conditions) to advocate expanding government health care entitlements.
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I think this a powerful argument in many ways. I am very very very frustrated at how Americans reacted as a whole when Bush was trying to talk about Social Security and the huge ole Crisis we are about to be in. It seemed most people yawned, the political folks used it in the typical way and then we moved on.
Demographics is just ignored!!!
In many ways I am agains the Govt helping as to Help Care. I was a big supporter of the Prescription drug benefit. I do not want people dying because they cannot have basi chealth care which is one reason I look to models like in my state the Charity Hospital system that provides often good services.
Mostly though I am concerned that in this culture of Death unless something is done and lookng at the demographics that the old will be pressured to take an early exit as it were by their children
I think many in the Conservative movement backed Romney because they thought he could make a deal.
However none of this makes any sense till we get this other stuff under control
In one Democratic debate there was a moment of truth when that rather eccentric guy from Alaska pointed out that no one was telling the truth on the stage. No one was talking about how both parties, and we as a people going along with it, are robbing the Social Security Trust Fund to pay for Govt.
All these is creating a public storm and twenty years from now the children of the babyboomers might revolt and perhaps not in good ways
1. Why can they not be kept? Social security is broadlyu sustainable, medicare less so. What you seem to be getting at is that debt-financed “entitlements” burden the future generation. But until the US government becomes insolvent, it’s silly to say promises cannot be kept.
1a. huh?
2. Yes. But it always strikes me as economically silly, when looking at health care, to freak out about the imbalances on the government accounts, but not on the household side. Health care costs are rising all over the world, largely through non-demographic factors. That is true of private and single payers systems (like medicare) alike. There are two questions. One, who do we control costs? Hard question. Two, which system is relatively more efficient at controling costs while maintaining quality. This is a no-brainer: single payer systems. They don’t waste money on marketing, profits, and incessant to enrol only healthy (cheap to insure) people.
3. Wait a minute. First, how much if this is Bush’s prescription drug subsidy to the drug and insurance companies? How much is the inefficient medicare advantage? Even stripping out these effects, one should not misuderstand this number. This is a present value stock number. It tells us nothing flows over the next, say, hundred years if we introduced some health care reforms. It does not say what would happen over time with some decent tax hikes on the wealthy and a huge cut in military spending, for example.
4. Evidence, please. This is an old, and much debated question, in the retirement literature. But I’m more interested in your underlying philosophy: you seem to assume that people are responsible for paying for their own health insurance. That I reject. A basic right like health care should not be subject to market forces.
5. No.
Morning’s Minion,
The argument is simple. The government has made lots of promises regarding health care and pensions. It isn’t going to keep all of them. For people to advocate promising even more benefits when we know that the government isn’t going to deliver on the one’s it has already made is irresponsible. And if you’re asking whether the argument applies to the prescription drug entitlement, the answer is yes.
you seem to assume that people are responsible for paying for their own health insurance.
The argument I’ve presented doesn’t assume this, I don’t think.
A basic right like health care should not be subject to market forces.
I assume you think food is also a basic right. Do you think food should not be subject to market forces?
There is nothing in the natiure of “entitlements” that suggests policy can not be changed in the future. The very term “entitlement” is a bad one. Much better to use the accounting category “social transfers” or “social benefits”, a category of spending alongside wage government consumption and non-wage government consumption. Nothing magical about it.
MM,
I’m rather confused as to the notion that one should never have to pay for a “right”, when the “right” is taken to be the reception of a specific good or service. (Perhaps that fits well with my desire that we abolish the terminology of “rights” almost entirely.)
When we say that people have a “right” to housing, basic health care, food, clothing etc., we mean that in a society awash with such commodities, we should not actively deny such things to those not otherwise able to attain them.
Clearly, if we were all sitting around in an undeveloped society, no amount of demanding our “rights” would make food, shelter and clothing (much less medical care) appear without someone working to provide it. Paying for care is simply a way of working to provide it. (Unless we assume that those who provide medical care are not entitled to a just or any other wage.)
So yet of course we have a duty to pay for medical care. Nor do you seek to take that duty away from people — you just want to do it through taxes rather than insurance payments or direct payments to the people providing care.
I openly question the discount function used. Even if we play along, we would have to work under the assumption that when we are say running a $200B deficit, we will not making changes. As you are probably aware, relatively minor adjustments like reducing the increase in benefits, increasing the taxes on benefits, or increasing the age of eligibility can radically change these projections. To come up with the trillion dollar mark, the aggregated the deficit indefinately. It is very difficult for us to produce an accurate biennial budget. Projecting expenditures 100 years out is a fools game. Even at the household level, projecting them beyond 10 or 15 years is more for entertainment’s sake than providing information.
(4) is a reasonable enough premise, but it doesn’t strike me as irrational. If I have a job where I’m provided a vehicle, am I acting rationally if I put aside money in the event that my vehicle is taken away? While hedging for non-performance is done in certain activities, our economy is more dependent that legal recourse will be available in the event of failure to perform rather than the entity hedging. For if the entity had to hedge before entering any business transaction, the added cost would most likely exceed the saving derived from having it done under contract.
As to (5), mm rightly asks whether we are expanding or transferring. There is an underlying assumption that the public sector should not perform what the private sector can perform. While I’m a supporter of private enterprise, at least putatively, I do not believe the maze of corporate relationships in health care provides greater good than one admistered by the government.
Do you think food should not be subject to market forces?
Under certain circumstances yes. No one objects to the Red Cross offering meals to people after a natural disaster. This is because the ordinary provision of service is not able to be done. Not intervening would involve starvation. One of the principle issues with health care is that the market, at least presently configured, doesn’t provide the goods in an equitable fashion. We are not having this same argument with food distribution in this country.
Good points MZ.
I think the rights talk, when stripped of the false notions and implicit underlying assumption of “rights” based logic ultimately means that a society called to uphold the dignity of all its members without discrimination. What that means for contemporary America is different than what it meant for 3rd Century Rome. But food and health care should not be withheld because someone is poor.
M.Z.,
I’m not sure how the Red Cross offering meals to people after a natural disaster counts as not subjecting food to market forces. The Red Cross is a private organization and, to the best of my ability, does not have the authority to ban people from selling food after a natural disaster. The food it gives out, it has to buy (or the food is donated by someone who either buys it or forgoes income via the donation). And so on.
What I meant to say is that I have difficulty seeing how a service like health care provision can be ethicially subjected to the profit motive.
Blackadder,
The Red Cross is not offering food at the price the market will bear. The provision of food is socialized through the generosity of the Red Cross donors. That the social welfare is provided under private auspices is something I don’t consider significant. Government officials specifically contact the Red Cross and coordinate their activities. If we are going to strictly limit it to government actors, one can think of places where our military has set up mess halls after disasters.
While there certainly aren’t laws against selling food after disasters, many states do have laws against gouging.
“I do not believe the maze of corporate relationships in health care provides greater good than one administered by the government.”
I second that statement. Our current health care system is not market driven because most of the time, the people who use the health insurance are not the ones who actually choose the health insurance. In fact, the consumer of the health insurance and health care has very little decision making ability. We do not choose when we get sick, or in an accident, and only rarely are we in a position to question the treatment we are given or offered.
We are qualified to do our general checkups and routine visits, which generally run about $40-$60 dollars a visit (without insurance), but once the real money starts getting spent, we are usually hurting and not able to make rational decisions anyway – no a good place for market forces to be at work.
There have been lots of problems with socialized medicine, but many have been tried and I am sure that we can gleen the good from the bad with sufficient effort.
Two, which system is relatively more efficient at controling costs while maintaining quality. This is a no-brainer: single payer systems. They don’t waste money on marketing, profits, and incessant to enrol only healthy (cheap to insure) people.
As you have said, evidence please. Yes, a single-payer system wouldn’t waste money on marketing or profits for private insurance companies, but that is counterbalanced by the fact that more people are being given the ability and incentive to use more medical care more often. (Indeed, the whole freakin point of arguing for a single-payer system in America is that there are 47 million people who don’t have insurance and who therefore may delay or be unable to get enough medical care.)
So what’s your evidence that eliminating “marketing” and “profits” would outweigh the 47 million people who would be using more medical services more often?
Again, you’re a smart economist guy, so please remember that 1) correlation isn’t causation, and 2) it’s a good idea to control for at least some independent variables. Thus, it doesn’t count for you to point to the raw amount spent on health care in France or other European countries; as all of those countries have many differences from America (including diet, demographics, doctors’ salaries, and many other things that you wouldn’t be controlling for).
“A basic right like health care should not be subject to market forces.”
Right, nationalize grocers!
“What I meant to say is that I have difficulty seeing how a service like health care provision can be ethicially subjected to the profit motive.”
But still not concerned about the profit motive of grocers?
RR –
There is a difference between what condition we are in when shopping for our groceries, and the condition we are in when we are shopping for medical care. I would guess that MM is not talking about the yearly check-ups, or the ‘hey doc, I stubbed my toe’ situations. When we consume medical services on a large scale, our capacity to act in a rational manner is severely impeded. As I stated before, this is not a situation in which Market Forces such as profit motives, should prevail.
“No one objects to the Red Cross offering meals to people after a natural disaster. This is because the ordinary provision of service is not able to be done. Not intervening would involve starvation. One of the principle issues with health care is that the market, at least presently configured, doesn’t provide the goods in an equitable fashion.”
I don’t think anyone would object to providing subsidized health care for the needy. But the Red Cross doesn’t hand out food to those who can get it on their own nor does it ban people from buying food from someone else.
Until he can suppositions correct RR, there is no point in discussing anything with you. I don’t enjoy playing Libertarian games. The nice thing is that there are only two or three serious libertarians out there, so it is of no consequence if I ignore them.
Jeremy,
Even most advocates of a free market system, acknowledge the prudence of having catastrophic insurance to cover extraordinary costs.
SB,
MM will provide as evidence, Taiwan’s single-payer system. To which I always counter with Singapore’s superior free market system.
The Red Cross is not offering food at the price the market will bear.
True. Parents also generally don’t charge their kids for the food they eat. Does the fact that people sometimes give something away mean that it isn’t subject to market forces? That certainly wasn’t how Morning’s Minion was using the term. If I had responded to him by saying that health care would not be subject to market forces even in a libertarian paradise, as even in such a utopia doctors would sometimes provide free care to people after natural disasters, he would have rightly dismissed my answer as unserious.
There may be good reasons for the government to play a more prominent role in providing health care than it does in other sectors of the economy, but among the reasons for this greater role will not be the fact that basic health care is a right, since there are other things (e.g. food) that are also rights, but with regard to which the government does not play as prominent a role.
Since it has been established that one needn’t oppose government intervention in principle in food distribution or health care, can we move on to discuss the actual prudential issues?
Since it has been established that one needn’t oppose government intervention in principle in food distribution or health care, can we move on to discuss the actual prudential issues?
I’m happy to discuss prudential issues. It was Morning’s Minion that brought up the question (or at least seemed to) of whether subjecting the provision of health care to market forces and the profit motive was in principle wrong.
blackadderiv -
If we should not expand government based healthcare programs, do you then think that the current programs provide the care that is needed? Optimal?
If we should not expand government based healthcare programs, do you then think that the current programs provide the care that is needed? Optimal?
Certainly not.
Any thoughts on the best way to provide those services? Our current system seems to really fall on it’s face when providing care to the underemployed, and mentally disabled. I’ve also known of cases with a ‘fully’ covered person required to file bankruptcy because of costs incurred treating a dread disease. If we should not be expanding government programs because of fiscal reasons, how should we address these issues?
Jeremy,
The first post I ever did for Vox Nova was on this very subject, and can be found here.
The proposals I offer in my post are piecemeal rather than systematic (I tend to be skeptical about whether any sort of systematic overhaul would end up doing more good than harm). If you were looking for a systematic proposal, I would recommend looking to Singapore as a possibility. Brad Delong’s ideal health plan also has some features that I like (though I’m not endorsing it).
Ok, after having some time to think about it, I have the following observations.
1) The dollar figure of a government program, or the deficit of that program is a relative to the benefit. Governments are not individuals or families, and what are hard and fast economics for individuals are more ‘guidelines and suggestions’ for governments, especially for large ones like the US. Therfore, the cost of a program should be considered, but it’s not a hard and fast ‘no’
2) The american system of health care serves the relatively healthy and the middle class really well. I think there is very little that can be done to improve access, availability and satisfaction for routine items and basic emergency care for those who make a reasonable wage, or have a stash of money saved up.
3) The american system serves some really well on the fringes as well, although I have known several who have gone bankrupt treating dread diseases, I have also known some whose insurance seem to carry the whole load. The difference seems to be government job vs. private sector job. In addition, I have not heard of someone lacking for *required* care. Despite a lack of a formal guarantee, our system does provide emergency and needed care for all who require it.
4) Those I have known with mental diseases, and those who are underemployed do not fair well at all under our system. Every doctors visit produces as much anxiety as relief, and in general, they [the 'disadvantaged'] do not feel respected by their health care professionals. However, they still get the treatment they absolutely NEED, but they don’t get the treatment they WANT, and in some cases, they don’t get the treatment that *could* break them of the chains of mental illness.
They competent but underemployed are just screwed untill they can land a decent job. And that is not always a bad thing, but is not optimal.
So I see two glaring problems – 1) The mentally ill; The biggest problem with the current system that I haveseen is that government entilement programs require fraud safe gaurds. Most people I know with mental illness have a great deal of trouble navigating the ‘safegaurds’. Between missed appointments and missed meds, only the sane and the borderline get through the ‘safegaurds’. The truely mentally ill are stuck untill they get a volunteer advocate to help them navigate the system.
2) High cost medical procedures: I think that at some point, the government needs to step in and cover the costs. Insurance alone cannot cope with high risk disabled, or 20 something punks who think they are immortal. Sometimes life throws medical problems at individuals and families that are so big, they cannot act in a rational and self deterministic fashion for some time. These incidents must be cushioned by the community so mitigate the impact as much as possible. There is only so much the government can do, but far too many families go through bankrupcy after a heartbreaking medical situation.
So in conclusion, although perhaps we do not need an entitlement program to pay for the medical costs of the majority of our citizens, we should consider expanding the current progam and/or adding entitlements for true ‘high-cost’ required medical treatment.
I don’t have any good ideas for helping the mentally ill, except for those who know them to advocate and help them through the system. I don’t think the government can come up with a system that will deter fraud, and yet let those who need the help through the door.