Social Secuirty and Medicare -- The Sky is Still Falling

Frank Bruni has penned an entirely banal editorial, echoing those of years and decades past, about how unfair it is that Americans are "saddling" the next generation with the cost of Social Security and Medicare. Bruni pitches people over the age of forty against the "Millennials", but it seems like only yesterday that poor Gen. X was going to be forced to support the Baby Boomers.

For Bruni, Bob Kerrey proves to be a veritable fount of platitudes,

This subject haunts him more and more. “If we’re trying to figure out how to advance the next generation’s future, we need to be spending more on the next generation, and we’re spending it on yesterday’s generation,” said Kerrey, 70. “I am not the future. My 12-year-old son is. But if you look at the spending, you’d think I’m the future.”

So the argument is that we need to spend more supporting children? No, of course not.

Kerrey is referring mostly to Social Security and Medicare, which, along with Medicaid, are the so-called entitlements that claim a larger and larger share of the federal budget.

He’s fixated on those sorts of numbers: According to the Congressional Budget Office, Social Security, Medicare and Medicaid totaled 6.7 percent of the country’s gross domestic product in 1990. By 2010, they were 10 percent. And by 2038, such spending may represent 14.3 percent. It’s hard to see how that leaves much money for discretionary spending on infrastructure, on education, on research, on a range of investments that safeguard or improve the America that today’s young people will inherit.

Of course, by 2020 such spending may not represent 14.3 percent, but that's always beside the point in this type of editorial

If the problem is that we need to shift those numbers, let's consider what has happened when the President has proposed Reagan-style adjustments to FICA taxes and benefits. The Republicans have obstructed those efforts, and have even demagogued against the President as trying to cut Medicare benefits for seniors. The politics seem to be irrelevant for Bruni, but it's reasonable to infer both that one of the two political parties has no interest in reforms that will help to preserve Social Security and Medicare over the long-term, and that very same party is too craven to be honest with its supporters about its goals. And that's why haven't we moved forward on the obvious solution, which Obama has at times attempted to pursue despite strong opposition to benefits reductions from within his party. How does Bruni see it?

That unwillingness [to look at budgetary math] includes the predictable pushback from many members of Congress, from voters and from various advocacy groups when proposals are made to limit the growth of Social Security by, say, fiddling with cost-of-living adjustments.

Well, yeah, but it does bear mentioning that when one party was ready to forge ahead with reforms, the other party refused to cooperate.

Bruni continues with a complaint that we're already making cuts,

Talk to physicians and other scientists who have long depended on research grants from the National Institutes of Health to keep the United States at the forefront of invention and innovation and they’ll tell you how thoroughly that spigot has closed over the last 10 years. They’re defeated, despondent.

Would Bruni have us believe that those doctors were focusing their full effort on childhood illnesses? Of course not. But if not, how does he reconcile his complaints about spending cuts with his complaint that we're spending too much money on the medical needs of older Americans?

Bruni offers another tired complaint,

The Urban Institute released a report in 2012 that looked at figures from 2008 for the combined local, state and federal spending that directly benefited Americans 65 and older versus spending that went to Americans under 19; the per capita discrepancy was $26,355 versus $11,822. Julia Isaacs, a senior fellow at the institute, told me that while data for subsequent years hadn’t been analyzed yet, it wouldn’t show a significant change in that gap.

Sure, if you include Social Security and Medicare, we spend a lot more money on older Americans than we do on kids. But Social Security is a program that you pay for over your working years, and for the average participant the return on the investment is not particularly impressive. Similarly, Medicare is supported by people over their working lives and it's reasonable for people who have spent their lifetimes paying into the system to receive its benefits when they retire.

Would Bruni complain that the money in his 401K plan is not clawed back for the benefit of younger workers? That the long-term care insurance he paid for ends up paying for his long-term care? One would expect not. While an argument can be made about whether workers should pay more or whether the payout is too high (or too low), there's no equivalence between Medicare and Social Security payments, which workers have paid for, and government funding for kids.

As for Bruni's general complaints about how his peers talk about millennials,

Sure, some people make a habit of complaining about "kids these days", but such has it always been. Bye Bye Birdie came to stage in 1960. here's a memory from 1967:

Senator Jim Inhofe, Dishonest, Irresponsible Demagogue

I see that Jim Inhofe is lying about ObamaCare.

Sen. Jim Inhofe (R-OK) told the radio station WABC on Sunday he may not have been granted his recent emergency quadruple bypass heart surgery if he was insured under Obamacare, BuzzFeed reported.

"You are talking to someone right now who probably wouldn’t be here if we had socialized medicine in America," he said on host Aaron Klein's radio show, referring to Obamacare.

Inhofe, 79, told Klein he discovered he needed immediate heart surgery for clogged arteries after going in for a routine colonoscopy, and that had he been in a country with “socialized medicine like Obama is trying to impose upon America,” the operation might have been unavailable.

As even a half-informed half-wit would know, coronary bypass surgery is performed as a matter of routine in nations with socialized medicine. But more than that... And such a person would likely also realize that, despite irresponsible demagoguery from people like Inhofe, Obamacare involves the purchase of insurance from private insurance companies. Surely Inhofe can still generate enough sparks between his neurons to understand the difference between buying insurance from a private company, even if pursuant to a mandate, and "socialized medicine."

Inhofe has two taxpayer-funded insurance policies. The first is the insurance the taxpayers provide to him through his employment as a U.S. Senator. Second, he is the beneficiary of a truly socialized health insurance plan, the extremely popular program called Medicare. Nothing about his coverage is going to materially change on January 1. He would still have his two taxpayer-funded policies, and with coordination of coverage it was likely the socialized Medicare program that paid for his recent surgery and that would pay for it had his need arisen next year.

You know what? Let's toss ObamaCare out the window, and give everybody exactly what Jim Inhofe enjoys - government paid health insurance on top of government-paid Medicare coverage. Deal?

With Bipartisanship Like This, Health Care Doesn't Need Enemies

When you hear about an organization that calls itself the "Bipartisan Policy Center", what's the first question that comes to mind? If I spot you this essay, might it be, "I wonder how they bankroll themselves, whose policy positions they're pushing under the guise of 'bipartisanship'"? No real surprise - when you are willing to offer a big enough paycheck, you can get people from both sides of the aisle to sign on to your clients' positions.

So, then, what's the basic premise of this special interest front group?

What we learned is that, until better care is prioritized over more care, our nation will continue to face a problem with health-care costs. The good news is that, through thoughtful policy, health-care practitioners can be encouraged through rewards to focus far more on what is best for their patients and less on the number of tests and procedures they can order. The even better news is that such a health-care vision can not only produce better care but also cost less.

So... Bill Frist has given up his habit of diagnosing medical conditions from the Senate floor, then insisting that their lives be prolonged indefinitely no matter what the financial cost to the country or emotional cost to their family? Was it the "bipartisanship" that brought him around, or the paycheck, because... You'll please excuse my skepticism that Tom Daschle and Bill Frist couldn't see eye-to-eye on what was good for the nation when they were being paid by the taxpayer to do so, but fell into a warm mutual embrace of their employer's policy position the second they entered the private sector.

Well, they claim that we can pay less and get better healthcare. So how do they, the admitted beneficiaries of the best health care our nation has to offer, far better than the average American can presently hope to obtain, propose to give us this "higher quality and greater efficiency" at a lower cost?

To address these, we seek to promote coordinated and accountable systems of health-care delivery and payment, building on what has proved successful in the private and public sectors. Organized systems of care emphasize the value of care delivered over the volume of care. These systems are often better able to meet patients’ needs and desires and are able to effectively reimburse providers and practitioners for delivering high-quality care.

That sounds like... obfuscation. It would be helpful if they would start by identifying the systems that have "proved successful in the private and public sectors", but... I know, far too much to ask. Besides, if they were to approach that issue honestly they would have to praise the efficiency and popularity of Medicare and the single-payer V.A. system, as well as the fact that every other industrialized nation has managed to offer an overall quality of care comparable to that of the U.S. at a considerably lower cost.

So, if they cannot identify even one of the "coordinated and accountable systems of health-care delivery and payment" they used as their model, perhaps they can help us by giving us examples of that coordination and accountability. You know, of the sort of measures that will result in better care for less money.

• They propose to "Preserve the promise of traditional Medicare while adding more choices and protections for beneficiaries, including accountable systems of care and a stronger, more competitive Medicare Advantage program." So "keep Medicare but with added buzzwords" - and then magically create a "stronger, more competitive Medicare Advantage program"... does that mean, one that won't require massive subsidies to attract even a single consumer to migrate from standard Medicare? Just asking.

• They propose to "Strengthen and modernize the traditional Medicare benefit, including adding a catastrophic cap, rationalizing cost-sharing and premiums and expanding access to assistance programs for those with low incomes" - in case you're not paying attention, what they're saying here is that they want to cost-shift from the Medicare program to its beneficiaries. So... their two leading ideas have nothing to do with improved systems or providing better care. Should we hold our breath and expect things to get better?

• They want to "Reform the tax treatment of health insurance to limit the taxfavored [sic] treatment of overly expensive insurance products" - In other words, if you have really great coverage (like the kind they, personally enjoy) they want to increase the tax burden on your employer so that your employer will offer you lesser coverage. Once again the entire focus is on shifting the cost of care from insurance to the consumer, and has absolutely nothing to do with improving care or efficiency.

• They propose to "Empower patients by promoting transparency that is meaningful to consumers, families and businesses, and streamline quality reporting" - which, if they have actually studied the issue, they know translates into meaningless twaddle. But heck, it sounds like it came right out of a mission statement generator, so odds are you never thought it was anything but meaningless twaddle. The most charitable reading is that they propose to give consumers more information so that they can make their own decisions about their healthcare instead of deferring to their doctors. Oh, you thought you were going to hear about things that work, things that improve care and lower costs, rather than the usual tired nonsense about how consumers can learn to manage the intricacies of their own medical care? Well, guess again!

• They're going to "Advance the nation’s understanding of potential cost savings from prevention programs, through support for research and innovation on effective strategies to address costly chronic conditions" - because, you know, telling people, "If you don't smoke, lose weight, eat better, and exercise more, you'll be healthier", has been such a successful strategy to date. Because so many people have yet to hear that sort of hectoring.

• Back to twaddle, "Offer incentives to states to promote policies that will support a more organized, value-driven health-care delivery and payment system, such as supporting medical liability reform and strengthening their primary-care workforce." In the real world, "medical liability reform" - that is to say, denying victims of malpractice effective redress through the courts" - has not resulted in cost savings. But clearly it's something that their employer's clients want, so there it is! And what does "strengthening the[] primary-care workforce" mean? Clearly it doesn't mean "hiring more primary care physicians", as so far this proposal is about anything but encouraging people to see their doctors when they're sick.

They pat themselves on the back,

All of these policies are designed to improve the quality and value of our nation’s health care. That is where every health-reform effort should start.

Sure, if we pretend that "improve the quality and value of our nation’s health care" is synonymous with "improve the bottom line of the industry groups that fund our organization". Given that none of the proposals as stated has any realistic chance of either improving the quality of care or improving the efficiency of the provision of care, but can be guaranteed to raise both cost and risk for the consumer, it's difficult for me to believe that they're fooling anybody with this other than the guy on the Washington Post's editorial board who approved the essay. I joke - the editorial board and its members push this sort of editorial with some regularity, knowing full well that they're at best pushing a half-truth and at worst pushing something that's good for the bottom line of the insurance, pharmaceutical or hospital industry even if harmful to consumers.

By presenting this report to federal, state and private-sector leaders, we hope to promote a collaborative dialogue and a shared understanding of strategies to put our nation’s health system, as well as its economic outlook, on a sounder, healthier and more sustainable path.

No, really, they don't. All four of the authors had the opportunity to do what was right for the nation when they held elected office, or when they worked in the public sector. Their unified front comes not from a realization of how obtuse and destructive they were when they couldn't agree, but from the fact that they won't keep their jobs if they don't push their employer's agenda. How about a little bit of honesty?

If A Case Can Be Made for Ryan's Medicare Vouchers, How About Making It

Sometimes I get a bit tired of how bad analysis can be in a "leading" newspaper. Here's what passes for the work of a "health care correspondent" in the National Journal, on Paul Ryan's latest budget stunt:

The plan would not eliminate traditional Medicare. Democrats have gotten political mileage from accusing Ryan of wanting to “end Medicare as we know it.” That is not the same thing as ending Medicare. Ryan’s plan would give seniors a fixed amount of money that they could use to buy traditional Medicare coverage or a private plan with similar benefits. It would convert the program from a single-payer monolith into a marketplace of competing plans. But unlike his budget of two years ago, it would not remove traditional Medicare from the menu of options. Here’s where the “as we know it” part comes in: Because traditional Medicare would have to compete on price with the private plans, there’s a chance it could become too expensive for every senior who wants it to buy it. The plan, which limits how much the payment can increase each year, could also shift costs to even those seniors who buy the cheapest option in the marketplace.

I think it would be more accurate to say that mediocre reporters have gotten mileage out of snarking at an accurate description of Ryan's Medicare plan which, as any healthcare correspondent should know, has been repeatedly revised due to a recognition that current Medicare recipients would go ballistic if it had been implemented as originally proposed. Seriously, if you buy the conceit that Ryan's privatization plan doesn't change Medicare, but merely gives you ample money to buy full Medicare coverage along with any number of additional private plans, why do you think Ryan continues to be such a coward about the implementation of his plan - pushing off full implementation for a decade? Why wouldn't seniors rejoice at the new choices, rather than being anticipated to recoil with such horror that implementation must be put off into the distant future? If the Ryan plan breaches the promise of Medicare to current recipients, how clueless do you have to be to believe it won't change anything for future recipients? How clueless do you have to be to go along with the pretense that Medicare as we know it could be sustained under his voucher plan?

The author, Margot Sanger-Katz, suggests that under Ryan's voucher plan "there’s a chance [traditional Medicare] could become too expensive for every senior who wants it to buy it". A chance? Could? Is she completely ignorant of the genesis of this plan?

If you believe that the purpose of the Ryan plan is to save money - that Medicare costs too much, and that the voucher plan will significantly curtail spending - how difficult is it to figure out that the savings have to come from somewhere. Ryan and his party engaged in some pretty egregious demagoguery against Obama's cuts to Medicare providers - cuts designed to ensure a consistent level of care for seniors. Those cuts... remain part of Ryan's proposed budget. But that's not enough cutting. From where does Ms. Sanger-Katz believe additional savings will be derived? As should be obvious, Ryan's plan is to ensure that the "fixed amount of money" grows at an artificially capped rate well below the rate of medical inflation.

It's also pretty astonishing that Ms. Sanger-Katz is unaware that the Ryan voucher plan is designed to shift healthier seniors out of Medicare - that is, now that he's willing to allow some form of Medicare to continue to exist. Returning to an earlier point, Ms. Sanger-Katz bashed Democrats for supposedly getting "political mileage from accusing Ryan of wanting to 'end Medicare as we know it.'" If the original plan did not end Medicare as we know it, because his vouchers would happen to be called "Medicare", why is Ms. Sanger-Katz claiming that its the continued ability to buy "traditional Medicare coverage" that keeps Ryan's plan from ending Medicare as we know it? If she believes that to be the case, as is implicit in her argument, then it's time for her to respect the facts and admit that the Democrats were correct

As for the goals of the voucher plan, as should be obvious, healthy seniors with lower healthcare costs are more profitable for private insurers. The sickly, money-losing senior citizens are a population that insurers don't want to serve and have never wanted to serve. Ms. Sanger-Katz would apparently have us believe that she has no comprehension of why Medicare exists in the first place. Seniors who need a lot of medical care will end up on "traditional Medicare" (if they can afford the premium), with the result being that Medicare's per patient costs will rise at a much higher rate than the private plans that are able to cherry-pick from a healthier population. While Ms. Sanger-Katz does not hold herself out as an insurance correspondent, she should still be able to figure out that the operative words are not "chance" an "could".

If Ms. Sanger-Katz knows the basic facts, she should admit them. From there, she could describe the probable impact of Ryan's proposed cuts and voucher plan and, if she nonetheless believes the cuts to be appropriate and a voucher plan to be a reasonable alternative to single payer, lay out the policy case for the Ryan plan. If I give her the benefit of the doubt based upon what she instead wrote, I have to regard her as credulous and lazy - as willing to take at face value representations from hyper-partisan politicians that, if made to a better reporter, would instead inspire a series of probing follow-up questions, or at least the performance of basic research to determine if she's being sold a bill of goods.

Saving Money by Ending Medigap Coverage?

Among the various proposals offered by Ruth Marcus, ostensibly to help balance the budget, is this:

Another idea, from MIT’s Jonathan Gruber, would attack Medicare costs from the consumer side. It would deal with the current risk of catastrophic costs by adding an out-of-pocket maximum tied to beneficiaries’ incomes so that poorer seniors would face less risk.

But it would also heavily tax seniors’ supplemental insurance plans that fail to impose adequate cost-sharing on beneficiaries. Again, this proposal could appeal to both sides: The Obama administration has suggested limiting Medigap policies, and the Ryan approach is all about giving consumers incentive to control costs. Estimated savings: $125 billion over 10 years.

But wait - I thought the magic of markets and private insurance would "fix everything", so how is it that the healthcare market will become more rational and efficient if we all-but-eliminate Medigap coverage? Well, Ruth Marcus isn't a "free markets" fundamentalist, so I can't hang that one on her, but the underlying concept seems questionable. If Marcus is speaking of savings to Medicare, then she presupposes that without Medigap coverage a huge number of seniors will seek less care. The nominal assumption is that if you shift more cost to the patient, the patient will be more reflective about seeking care, and will be less likely to see a doctor unless it's absolutely necessary. The reality is that this type of cost-shift has a very poor record of reducing the cost of care to the consumer. The nature of Medicare makes it less likely that the consumer is going to be convinced to choose costly options, when an insurance company might require significantly less costly options to be tried first, so real savings could only be achieved if the patient foregoes medical care. From what I've seen in the private health insurance market, that's not likely to happen unless copayments become uncomfortable to afford - in which case you're going to end up denying necessary care.

And yes, according to the Medicare Payment Advisory Commission (MedPAC), if implemenented this proposal would result in seniors going more heavily out of pocket:

Congress should add a new charge for Medicare beneficiaries who buy supplemental insurance, according to a recommendation from its advisory panel.

The size of the fee for Medigap plans was not specified but left up to the secretary of HHS, according to a unanimous recommendation by the panel (PDF). Medicare Payment Advisory Commission members and other health policy experts have frequently criticized such plans as cost drivers for Medicare because they often cover all out-of-pocket costs for beneficiaries, which critics contend leads to overutilization of healthcare services.... Marcus also suggests eliminating fee-for-service and instead "giving Medicare providers a set amount to cover beneficiaries" - an idea that is difficult to reconcile with her Medigap proposal, which appears to be predicated upon the continuation of fee-for-service with copayments for those individual services.

“This whole effort is not motivated by a desire to achieve savings, but it's really motivated by a desire to have a benefit package that works for beneficiaries,” Michael Chernew, a panel member and professor in the Department of Health Care Policy at Harvard Medical School, said before the vote.

The person Marcus references, Jonathan Gruber, appears to believe that the impact of this change can be mitigated for less affluent seniors by offering them a greater subsidy in lieu of Medigap - that is to say, they would get what amounts to Medigap as part of their basic Medicare benefit. If the goal is to prevent "overutilization of healthcare services", does that make sense? Are we to believe that only more affluent seniors overutilize medical services, and they'll suddenly stop if they don't have Medigap coverage? For that matter, what evidence is there other than assumption that this overutilization exists, or that it can be affected by imposing a massive tax on Medigap policies?

So seriously, rather than pulling numbers out of... who even knows where, let's have an explanation of why we should believe that this proposal is sound public policy, why should believe it will result in cost savings to Medicare and the degree to which it will increase cost to seniors. Let's compare healthcare utilization rates of seniors to other nations, to see if in fact the level of care our nation's seniors receive is unusually high or is pretty typical. Let's perform a sufficient analysis that we can be reasonably sure we're not going to increase costs, by having a senior neglect a medical condition such as a diabetic abscess, odd symptoms that turn out to be a first heart attack or the onset of kidney failure, or a TIA, until they have a much more costly medical crisis.

Too much to ask? It's easier to simply roll out a massive reinvention of Medicare as a giant, nationwide experiment, but I believe it's appropriate to do some bona fide analysis and testing before engaging in a large-scale experiment that will materially affect the lives of real people, based upon little more than untested theory and assumption.

Achieving Medicare Savings for Durable Medical Equipment

Charles Lane has discovered the problem that Medicare often pays an inflated price for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS). My reaction is two-fold: First, although Lane has identified an area of Medicare spending in which savings could be obtained, he's focusing on a tree. Second, Lane only hints at the resistance that is likely to be encountered should Medicare attempt to minimize DMEPOS expenditures.

Lane tells us that "between 2000 and 2010, Medicare spent $69.4 billion on DMEPOS, almost all of it based on the old, inflated reimbursement rates." So, roughly $7 billion per year. In 2010, the Medicare budget was $560 billion. Even if we assume that there was significant growth in the cost of DMEPOS over that decade, such that by 2010 we were spending $12 billion per year, we would still be talking about just over 2% of spending. If we assume reforms not yet implemented could save 1/3 of that amount, we would be looking at saving $4 billion per year. That type of reform is significant - but only makes a material difference to the cost of Medicare in the aggregate.

One of the arguments often made in response to President Obama's proposed tax increases is that they're too small to make a difference.

The proposed tax increase would fail to address the deficit seriously. According to the Joint Committee on Taxation, the proposed tax increase would raise only $68 billion by shifting the top tax bracket from the Bush era rate of 35 percent up to 39.6 percent (plus a few from the health care law). The government expects to spend $9.9 billion per day, or a projected $3.627 trillion for this year. Based on these numbers, the addition $68 billion from a tax increase would pay for 6.8 days of government operation.

It's a fundamentally dishonest argument, and it's absurd to pretend that we could identify a single tax increase that could bring the budget into balance - at least without tanking the economy. The modest savings that can be achieved by cutting waste in DMEPOS spending should not be overlooked, as small steps are worth taking, but Lane seems to overstate the importance of that one aspect of Medicare spending to its overall budget picture, using ten year figures to exponentially increase the size of an average year's expenditure, and omitting any mention of the size of the Medicare budget.

Lane argues that the "obvious solution" is "competitive bidding". Certainly, one way to avoid excessive cost would be to allow Medicaid to use its market power to negotiate with manufacturers, perhaps leaving Medicare recipients free to choose other equipment but making them responsible for any cost in excess of the negotiated price for equipment on its approved list. Distributors could be paid a percentage of the approved cost as their fee for handling the equipment and training recipients in its use. Manufacturers and distributors, I expect, would go ballistic, and would attempt to scare Medicare recipients by talking about "government bureaucrats deciding what equipment you get", and the like. It would be interesting to see Lane flesh out his "obvious" solution in a future column - and if he has the space, he can also address how we can convince the Republicans in Congress that Medicare should be allowed to use its market muscle to achieve savings not just here, but also (and more importantly) for pharmaceuticals.

It's worth noting that a great deal of DMEPOS, despite its substantial cost, is effectively abandoned when the patient no longer needs the equipment. It would be nice if it were possible to recover, refurbish and reuse some of that equipment. Unfortunately, even before considering patient resistance to being given refurbished, older equipment, the cost of recovering, refurbishing and redistributing medical equipment would likely exceed the potential savings.

David Brooks and the Progressive Regressive Tax

Lost among the commentary on David Brooks' (lack of) grasp of budgetary details and proposals, is this:

My fantasy package, and I’m not running for office, would include a progressive consumption tax, and it would have chained CPI, and it would have a pretty big means-test of Medicare.

Many have pointed out that means-testing Medicare won't have a significant impact on expenditures, as the wealthy consume health care at roughly the same rate as everybody else. The "chained CPI" idea is meant to reduce Social Security benefits over the long term which, needless to say, will have the most pronounced impact on the poor. But seriously, a progressive consumption tax? The whole reason that factions of the political right are in love with a "consumption tax" is that it's inherently regressive. Take that away, and what's the point?

Brooks' reminds me of the people who want to impose a mileage tax on automobiles. You could simply increase gas taxes - which would also have the impact of placing a higher tax burden on larger, heavier vehicles and thus encourage people to shift to smaller, lighter, more efficient vehicles. But why not create an entirely new tax to accomplish part of what could be better achieved by adjusting the rate of an existing tax? If you want to raise additional tax revenue in a progressive manner without hammering the population of citizens that lives paycheck to paycheck, why impose a "consumption tax", imposing upon business an additional system of collection and remittance, with associated complicates system of exemptions or rebates to make it "progressive", when you can simply raise the already-progressive income tax rate and better accomplish your goal?

Unless, of course, the "progressive" part of your plan is a deceit - something to fool the masses before you hit them with a new, regressive tax. (Just as means testing Medicare and diminishing the return on Social Security might be seen as less about balancing the budget and more about undermining the present broad support those programs have as a result of their universality?)

Collective Action - Aspiration vs. Reality

Charles Lane wrote a column recently in which he complained that "collective action" is overrated:

[T]he gist [of Mancur Olson's argument] is that large numbers of people do not naturally band together to secure common interests. In fact, the larger the group, the less likely it is to act in a truly collective manner.

As Olson explained, the interests that unite large groups are necessarily of the lowest-common-denominator variety. Therefore the concrete benefits of collective action to any individual are usually small compared with the costs — in time, effort and money — of participation. “Free-riding” is a constant threat — as the difficulties of collecting union dues illustrates.

By contrast, small groups are good at collective action. It costs less to organize a few people around a narrow, but intensely felt, shared concern.

Lane suggests that Olson's thesis is supported by the existence of lobbyists and "special-interest groups that swarm Congress", seeking favorable legislation. He also speaks as if this is a new thing, or that the recognition of diverse interests and competing factions didn't arise until Olson published his 1965 book.

I agree with the general thesis that, the larger the group, the more difficult it is to achieve consensus, and that the difficulty compounds as you try to achieve consensus on a greater number of issues or across a broad range of subjects. Lane is also correct that factions tend to look out for their own self-interest, "whether or not success comes at the larger society’s expense". Lane is correct that groups that self-select for a specific purpose (e.g., to lobby Congress for a favorable tax law, or a protectionist regulation that protects them from competition) can be effective at advancing their agenda. They tend to be even more successful when they are well-funded.

However, he runs into trouble when he attempts to turn his critique of collective action into a critique of stable democracies and, more specifically, the Obama Administration. Turning to a later book by Olson, Lane argues,

His paradoxical, and deeply depressing, conclusion: Political stability is a curse of sorts, because, over time, stable societies accumulate interest groups, with all the distortion and complexity that breeds. “On balance,” he wrote, “special-interest organizations and collusions reduce efficiency and aggregate income . . . and make political life more divisive.”

Lane diagnoses the United States with that "British disease", with too many factions looking out for their own self-interest, with the result that the bargaining table is "too crowded to agree on the problem, much less a solution."

But if we step back for a moment, the foundation of the Lane/Olson "British disease" thesis is weak. First, Britain's fall from its status as a dominant world power followed the collapse of colonialism and its involvement in two world wars. Over that same period the U.K. underwent a massive social transformation. Its likely that the social transformation did lead to a greater number of voices vying for the attention of Parliament, but Britain's decline began long before, under a class-based power structure that was far less responsive to many of those voices, so it's difficult to even find a meaningful correlation, let alone causation. To focus on an increased number of "special interests" while ignoring the economic drivers of Britain's shrinking influence is to miss the forest for the trees.

Further, if it is in fact true that older democracies become ineffecient due to their being overwhelmed by a proliferation of special interests, where can we find the modern, nimble democracies not yet weighted down by faction? France's Fifth Republic? Greece passed its most recent Constitution in 1975 - what should we make of that? Which of the democracies borne of the fall of the Iron Curtain are exemplars of the efficiency and lack of faction that Lane attributes to long-term stability?

In criticizing the President, Lane also misses the entire point of appeals to unity and collective action. It's not that the President is lacks "realism". It's that he, like every President who came before him, recognizes that you don't unify the people or inspire the type of solutions Lane claims he favors by telling the people, "We're hopelessly divided by faction, we have no chance of solving tough issues, so 'every man for himself,' 'good luck and thanks for all the fish.'" The notion of the people as a collective, pulling together, is part of the preamble to the Constitution:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence,[note 1] promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

Divisions among the citizenry, and the need to nonetheless pull together, have been part of presidential rhetoric from the time of George Washington:

Citizens, by birth or choice, of a common country, that country has a right to concentrate your affections. The name of American, which belongs to you in your national capacity, must always exalt the just pride of patriotism more than any appellation derived from local discriminations. With slight shades of difference, you have the same religion, manners, habits, and political principles. You have in a common cause fought and triumphed together; the independence and liberty you possess are the work of joint counsels, and joint efforts of common dangers, sufferings, and successes.

But these considerations, however powerfully they address themselves to your sensibility, are greatly outweighed by those which apply more immediately to your interest. Here every portion of our country finds the most commanding motives for carefully guarding and preserving the union of the whole.

Lyndon Johnson:

This is one nation. What happens in Selma and Cincinnati is a matter of legitimate concern to every American. But let each of us look within our own hearts and our own communities and let each of us put our shoulder to the wheel to root out injustice wherever it exists. As we meet here in this peaceful historic chamber tonight, men from the South, some of whom were at Iwo Jima, men from the North who have carried Old Glory to the far corners of the world and who brought it back without a stain on it, men from the east and from the west are all fighting together without regard to religion or color or region in Vietnam.

Jimmy Carter:

With God’s help and for the sake of our nation, it is time for us to join hands in America. Let us commit ourselves together to a rebirth of the American spirit. Working together with our common faith we cannot fail.

I suspect that Lane has been thinking about the issue of faction and how it impedes government action, and has a better column hidden somewhere inside his head, but made the poor choice of trying to build his case based upon a flawed thesis about the "British disease", presidential rhetoric that is consistent with that of every other president, and the conceit that the concept of faction and competing interests is relatively new to politics. Lane also overlooks the dark side of faction, with its "us versus them" thinking, and although he acknowledges "", he elides from his column any mention of wedge issues and the manner in which political factions and parties attempt to create and exaggerate differences between groups in order to prevent political change or progress. Sometimes it's the rhetoric Lane criticizes, that of unity and common interest, that allows for the type of change he claims to endorse.

Lane betrays his actual complaint when he engages in the language of his own faction, that of the Very Serious Person:

But the president’s paean to collective action lacked Olson’s realism. The question is not just how much more government we need or want, if any. It’s also how much more government we can afford, in light of its purposes and given the risks Olson identified — which have already materialized in the form of unsustainable but politically untouchable entitlement programs.

The question for Lane, though, is not how much government we can afford, because his faction is unconcerned with how government could provide the same level of service at a substantially lower cost. Were Lane to break out of the groupthink of his faction he would acknowledge (as has his paper) that the only government "entitlement" that is projected to be unsustainable is Medicare, while Social Security can be made sustainable for the indefinite future with relatively modest changes. Fixing Medicare? Lane's own newspaper doesn't think the problems are all that difficult to fix, but it's also telling that Lane isn't advocating the immediate, significant cost savings that could come from emulating the better national health insurance plans of other western democracies.

At the end of it all, Lane does a pretty good job of evidencing his larger point, that it's difficult to find solutions when people won't look past their self-interest. He grouses that the President isn't sufficiently serious about entitlement reform while failing to admit that President Obama keeps offering Reagan-style Social Security reforms that will keep its books in balance, despite the howls of factions on the left. He similarly ignores the fact that the Patient Protection and Affordable Care Act (Obamacare) attempts to improve the quality of Medicare while reducing costs, and that its cost-saving measures would be stronger but for the obstructionism and demagoguery of the Republican Party. And of course, he fails to note that Obama was ready to enter into a "grand bargain" with the Republicans on taxes, spending and entitlements but... the Republicans walked away from negotiations.

I can't argue with Lane's feelings - we would all feel better if the government stopped listening to anybody else, and honed in on what we, individually, believed to be in the best interest of the nation. I guess it needs to be said: that's not realistic.

As Long as the Health Insurance Industry Stands to Profit....

George Will has passed along the notion that, as the penalty for not buying insurance under the PPACA has been declared a tax, it will inevitably fail to inspire people to buy insurance. I'm not sure if he's still up to doing cartwheels down the halls of the Washington Post building, but you can sense a certain smugness, pleasure at the idea that legislation intended to help uninsured, underinsured and sick people obtain health insurance - and thus health care - at an affordable cost might fail. Will's argument appears to be the latest iteration of the position Michael Gerson was pushing some months back, that if the mandate is called a "penalty" people will pay it but if it's called a "tax" they will not. Gerson's idea was that if you call something a tax, people will apply a cost-benefit analysis and decide "I'm better off paying the tax as compared to buying insurance". Will proposes,

The point of the penalty to enforce the mandate was to prevent healthy people — particularly healthy young people — from declining to purchase insurance, or dropping their insurance, which would leave an insured pool of mostly old and infirm people. This would cause the cost of insurance premiums to soar, making it more and more sensible for the healthy to pay the ACA tax, which is much less than the price of insurance.

[Chief Justice] Roberts noted that a person earning $35,000 a year would pay a $60 monthly tax and someone earning $100,000 would pay $200. But the cost of a qualifying insurance policy is projected to be $400 a month. Clearly, it would be sensible to pay $60 or $200 rather than $400, because if one becomes ill, “guaranteed issue” assures coverage and “community rating” means that one’s illness will not result in higher insurance rates.

Dean Baker responds,

There are two problems with Will's logic. First, the insurance will likely pay for many non-serious illnesses that even healthy people would otherwise have to cover out of pocket. in other words, it is not a question of paying $400 for nothing as opposed to paying $200 for nothing. It is a question of paying $400 for insurance or $200 for nothing. It is not clear that many people will make the choice that Will wants them to make.

Baker also suggests that an economic consequence could be imposed upon people who don't buy insurance:

The more important problem with Will's thinking is that there are an endless number of ways to slice and dice the restrictions so that the option of not buying insurance is less attractive. For example, the cost of buying insurance can be made higher for those who had previously opted not to buy into the system. Suppose the cost of later buying into the system rose 25 percent for each year that a person opted not to buy in. (Medicare Part B works this way and the vast majority of beneficiaries do chose to buy in when they first become eligible.) This would make the arithmetic of opting out much less favorable.

The rules can also be changed to make pre-existing conditions uncovered for the first 2 years after buying insurance for those who opted to pay the penalty rather than buy into the system. Neither of these measures would in any obvious way run afoul of Justice Roberts' argument for the constitutionality of the ACA.

I agree that such consequences could be created, but I'm not sure that they would work or that they wouldn't be self-defeating - at least the ones proposed by Baker. When applying for Medicare, most people recognize that they will eventually need Medicare Part D, and the penalties are such that it makes little to no sense to put off enrollment. I'm not sure that the populations who are being targeted by the penalty view significant health costs as that inevitable.

Similarly, one of the goals of universal health insurance is to help society avoid the increased cost of care for a manageable or preventable medical condition. If you deny somebody care for a chronic condition for a couple of years, most likely the period of years after it becomes sufficiently severe that the person wants insurance, you create the risk that excluding the condition from insurance will increase the applicant's long-term healthcare costs, and you risk their condition worsening to the point of disability, perhaps taking them out of the workforce or shortening their careers.

It may be possible to work out penalty provisions that could work, and I don't want to treat a couple of "off the top of my head" ideas as the end of the discussion, but we would have to take care not to create a penalty that would undermine the goals of universality and perhaps even increase the overall cost of care.

Baker correctly points out that if a problem develops and the Republicans in Congress refuse to address it, "that route would have nothing to do with the constitutional restrictions put in place by Roberts". History tells us that Will's belief that "Republicans will ferociously resist exacerbating the nation’s financial crisis in order to rescue the ACA" is nothing more than a fantasy - when it comes to budgeting, Republicans are good at three things: Spending money, cutting taxes and thereby reducing revenues, and then whining about the fact that due to their policies we "can't afford" to pay the bills they ran up. Will confuses their "talking the talk", insisting that we must cut Social Security and Medicare in order to balance the budget, with "walking the walk", proposing actual, concrete cuts. When you look at their actions, you have... Medicare Part D, the unfunded prescription drug benefits that the Republican's leading fiscal scolds endorsed.

I continue to believe what I said in response to Gerson's column: That if the insurance industry finds that not enough people are responding to the penalty, such that their profits are at risk, the Republicans will adjust the mandate to increase participation. I find it exceptionally unlikely that they will tell insurers, "Be patient and take the losses, because in a few years we may be able to repeal the entire law." Let's not forget, there's a reason the Republicans favored this approach back in the 1980's, and why the insurance company agreed to get out of the way of the PPACA when it was proceeding through Congress: They believe that they will profit from the reform. Going back to the status quo ante may sound good to Will, but it takes away the anticipated profit. Losing money for years, in the hope of getting back to the status quo ante? Get real. Insurance companies didn't go to Congress and say, "We can't make money with Medicare Advantage", they said, "Give us a subsidy!" And they got it.

Will argues that by virtue of the penalty's having been declared a tax, "the penalty for refusing to purchase insurance counts as a tax only if it remains so small as to be largely ineffective". That's the argument that Baker was addressing when pointing out that Congress has more options than simply making the penalty larger. But I disagree with Will's conceit that the penalty tax can't be onerous - if it's reasonably related to the actual cost of providing care to the uninsured. Also, it's not a binary issue - if the tax is increased, it will not go from "too low" to "onerous", but will be ratcheted up until it becomes sufficiently effective.

The Roberts Court pointed out that by statute the penalty can never be more than the cost of insurance - but at that point, surely even Will can understand that most people will opt to acquire the insurance they're effectively already paying for, and the tax revenues from those who do not will be more than sufficient to ensure the continuation of the program. If everybody pays a premium sufficient to pay for health insurance, but some aren't receiving benefits, the result is that there's some extra money in the system. Also, as Baker points out, the threshold at which it makes more sense to buy insurance, as opposed to paying a penalty and paying for your own care, comes well before the amount of the penalty matches the cost of insurance.

The fact remains, if the penalty proves ineffective the insurance industry will come to Congress not to argue, "Repeal this program," but to say, "Fix things so that we're profitable." And just as the Republicans were happy to subsidize private competitors in the Medicare Advantage program, they will oblige the insurance industry by increasing the penalty - whether directly or through other measures along the lines of what Baker described - or by providing a subsidy.

Jennifer Rubin's 'Best' Isn't Good Enough

In what some might see as an attempt to defy a popular definition of insanity, I saw a link to Jennifer Rubin's comment, "How to Win the Debt Ceiling Fight" and decided to see if she actually had something useful to say.

Republicans are struggling to devise a formula that simultaneously holds the president’s feet to the fire and yet escapes the charge that the GOP is playing Russian roulette with the country’s credit rating. As a practical matter I simply don’t think Republicans have the fortitude to hit the debt ceiling. To avoid the inevitable march-up-the-hill-down-the-hill routine there are two strategies (probably more) readily available.

That is to say, without actually explaining what a victory would look like, Rubin perceives two potential "winning strategies" for the Republicans. The first?

First, following the lead of Sen. Pat Toomey (R-Pa.) in 2011, Republicans could pass legislation explicitly prohibiting default on our obligations and spelling out a sequence for paying our bills so that we don’t default on bond holders, stop Social Security checks or stiff the troops. However, this still might require shutting down other parts of the government, which the GOP has shown no stomach to do.

Should somebody point out to Ms. Rubin that if she admits, at the outset, that the Republicans have "no stomach" to implement her first idea, there's no point in pretending it's serious? Note, Rubin's objection is that the Republicans have no follow-through. She ignores the logistical issues: if she knows of a way the House of Representatives can "pass legislation" that becomes law despite being rejected by the Senate and President, I would love to hear about it....

At the heart of Leahy's proposal is, I suspect, a recognition of how much power Congress delegates to the President when it forces a government shut-down. The idea would presumably be to structure the shut-down to damage Democratic interests while protecting Republican interests over a period of months while the government is unable to pay its bills. The problem thus goes well beyond "stomach", and into the territory of naked partisanship. The Republican Party would have to show its hand - to let the public know exactly what the price would be for its brinksmanship, and how much worse things would get over the ensuing weeks and months until default became inevitable. And... then what?

When the blackmail is explicit, the President will be able to point directly at the blackmail - "They say that if I don't agree to budget cuts that they won't identify, they're going to keep me from paying your Social Security retirement benefits>". What would be the Republican response to that? Would they develop the "stomach" to identify the cuts that they want? Rubin doesn't think so. So the President's response can be, "You control the purse strings - pass a bill enumerating the cuts you want in order to get us out of this catastrophe you've created," and the Republicans have to choose between looking like (malicious) fools, identifying the cuts, or folding. Even Rubin can see the folly of that approach.

What's Rubin's other idea?

The other approach, the smartest I have seen so far, comes from Keith Hennessey, who explains that Republican leaders begin by “assuring [the president] that we will not allow the government to default on its obligations. The debt limit will be increased. The questions we must resolve are first, whether we will simultaneously cut government spending and second, who will cast the votes for the debt increase.” The Democrats then have a choice: either agree to significant entitlement reform in conjunction with a debt increase to get Obama through at least 2014 or the House Republicans will ”deliver 50 Republican votes for a three-month clean extension.

Basically, the Republicans will say, "We're up against the debt ceiling and we want you to make cuts." The President will reply, "What cuts would you like to make?" The Republicans will once again come up with nothing (as Rubin says, "no stomach"). The President will reply, "If you don't want to cut the budget, then you are going to need to approve the spending you've already authorized." The Republicans will then pass a debt ceiling increase approving that spending.

That is the smartest Republican strategy Rubin has seen? She provide's Hennessey's rationale,

[T]his strategy would tell the President, “Hey, if you want your terrible policy, you’re going to have to deliver House Democratic votes for it. Good luck with that.” Either the President accepts and Republicans pound on the “Democratic debt limit increase” message every three months, or he agrees to cut spending. Either way, default risk is eliminated. Republicans will look responsible because they will be acting responsibly, and the markets couldn’t care less about which Members take political heat for casting these unpopular votes.

So every three months the Republicans will say, "Cut spending or we'll raise the debt ceiling," the President will reply, "If you're going to raise the debt ceiling anyway... but, okay, I'll humor you, what cuts do you want me to consider?" The Republicans will reply, as usual, with "We got nothing." Then the public will get mad at the Democrats because the debt ceiling goes up? And it's "lather, rinse, repeat every three months for the next four years"?

Wow.

Not content to simply look foolish, Rubin has to embellish Hennessey's proposal with some terrible advice for her party:

I would add that under no circumstances should the negotiations (if the president chooses to entertain real entitlement reform) be in secret and/or between Republican leaders and the president. It’s time for regular business, with all lawmakers forced to cast votes. Shifting the focus away from the White House is hugely important in avoiding a (losing ) PR battle with the president and might actually deliver results.

Except this Republican grandstanding only works when they pretend it's the Republican Congress against an all-powerful President. If you reduce the role of the President, you make it obvious that Congress controls the proverbial purse strings - that the debt ceiling sideshow is irrelevant, and that the fundamental problem is that the Republicans in Congress keep authorizing the spending that necessitates government debt. You allow the President to point to the public, bipartisan negotiations and say, "When they come up with solutions, I'll be happy to review their budget reform bill, but for now they are running up the bills and it's my job to pay them." And then, per Rubin's proposal, the Republicans will raise the debt ceiling without condition. It's as if she wants her party to appear toothless.

A final word of advice: The Republicans should turn the president’s favorite class warfare game against him. He is the one defending Warren Buffett’s right to receive Social Security and free ride on Medicare; Republicans want to force rich people to pay more and get less so middle- and lower-income people have their benefits. Republicans may shy away from such arguments but unless the GOP captures the “fairness” argument and becomes the champion of the little guy, it will keep losing support and forever be outfoxed by the White House.

I am not sure that Rubin is going to convince more than a tiny handful of dimwitted people that somebody who pays FICA at the maximum rate for most of his career, and continues to do so well past retirement age, is getting a "free ride". If it needs to be explained, if you pay for insurance you are entitled to receive the coverage that you have paid for, even if you're rich - and Buffett, at age 82, is still paying into the system. Further, despite Rubin's eagerness to engage in what her party decries as "class warfare", even if you disqualify the top 1% from eligibility for Social Security and Medicare you will not materially affect the balance sheet.

Rubin apparently hopes that this form of Republican class warfare will confuse people. "We could cut Medicare spending by 1% if the richest 1% of the population were declared ineligible for Medicare. We, the Republican Party, don't think that's fair and to show that we stand for 'the little guy' we propose cutting everybody's Social Security and Medicare benefits."

Rubin's good at pouring out the snake oil, but if she wants people to actually buy it the trick is to confuse people into thinking they're getting something other than snake oil.

David Brooks and the Missing Link

A few days ago, I suggested that when David Brooks fails to link to something that he is referencing and is easily available online, he's probably hiding something. Here we go again:

Spending on domestic programs — for education, science, infrastructure and poverty relief — has already faced the squeeze and will take a huge hit in the years ahead. President Obama excoriated Paul Ryan for offering a budget that would cut spending on domestic programs from its historical norm of 3 or 4 percent of G.D.P. all the way back to 1.8 percent. But the Obama budget is the Ryan budget. According to the Office of Management and Budget, Obama will cut domestic discretionary spending back to 1.8 percent of G.D.P. in six years.

No link to that 1.8 percent figure? You'll find it here, on page 30, with the explanation,

Discretionary spending levels other than overseas contingency operations reflect the budget authority caps under the Budget Control Act of 2011. The split of discretionary spending between security and nonsecurity after 2013 is based on increasing budget authority in each category by the growth rate in the aggregate discretionary cap.

Perhaps Brooks somehow missed it, but right now neither party is keen on implementing the automatic tax cuts that are scheduled to occur under the deficit reduction sequestration provisions of that Act.

Brooks also describes CBO projections,

The current budget calls for a steep but possibly appropriate decline in defense spending, from 4.3 percent of G.D.P. to 3 percent, according to the Congressional Budget Office.

The 3% number apparently comes from here, page 74, for the year 2022:

Most discretionary appropriations for 2013 through 2021 are constrained by the caps and automatic enforcement procedures put in place by the Budget Control Act; for 2022, CBO assumed that such appropriations would equal the 2021 amount grown at the rate of inflation. Given those appropriations, discretionary spending would decline from 8.4 percent of GDP in 2012—which is already below the 2011 level of 9.0 percent—to 5.6 percent in 2022 (see Table 5-1).

In reciting the 3% figure as "possibly appropriate", Brooks is expressing some level of indifference to a cut to that level. His professed fear is that "defense planners are notoriously bad at estimating how fast postwar military cuts actually come", whereas his ability to project future Medicare cost increases verges on perfection (never mind that he appears to be unaware that Medicare spending growth has been lower than projected for the past three years) - and thus at some point in the future the military budget might be cut below the 3% (that results from the sequester, and that both parties appear intent on raising) in the CBO projection. Also, there's an inherent tension between arguing that the 3% figure is "possibly appropriate" and Brooks' overall thesis that the President's purpose in appointing Chuck Hagel is to have him "supervise the beginning of America’s military decline".

First it's the OMB, then the CBO, and then over to the GAO. David Brooks writes,

Keep in mind how brutal the budget pressure is going to be. According to the Government Accountability Office, if we act on entitlements today, we will still have to cut federal spending by 32 percent and raise taxes by 46 percent over the next 75 years to meet current obligations. If we postpone action for another decade, then we have to cut all non-interest federal spending by 37 percent and raise all taxes by 54 percent.

The GAO writes,

One measure of the challenge over the long term is the “fiscal gap.” The fiscal gap represents the difference, or gap, between revenue and noninterest spending over a certain period, such as 75 years, that would need to be closed in order to achieve a specified debt level at the end of the period. From the fiscal gap, one can calculate the size of action needed—in terms of tax increases, spending reductions, or, more likely, some combination of the two—to close the gap.

For example, to keep debt held by the public as a share of GDP in 2086 from exceeding its level at the beginning of 2012 (roughly 68 percent of GDP) in our Alternative simulation, the fiscal gap is 8.3 percent of GDP (see table 1). This means that revenue would have to increase by 46 percent or noninterest spending would have to be reduced by about 32 percent (or some combination of the two) on average over the 75-year period. Even more significant changes would be needed to reduce debt to lower levels.

Brooks says "and", the GAO says "or"... which means Brooks is doubling the size of the problem. Were Brooks to resort to the obscure news source known as the "New York Times", he would find an explanation by Bruce Bartlett of the GAO's projection:

As the table shows, spending is not out of control. Entitlement programs like Social Security and Medicare are rising gently as the baby-boom generation retires. All other spending, including that for the military and domestic discretionary programs, falls – with the notable exception of interest on the debt. Interest rises sharply as the deficit rises, principally because the G.A.O. assumes that revenue will not be permitted to rise above its historical average – as Republicans continually insist....

That leaves interest on the debt as the principal driver of long-term spending and deficits. As the G.A.O. projections show, net interest rises from 1.4 percent of gross domestic product this year to 3 percent in 2020, 4.9 percent in 2030 and continues rising astronomically thereafter as interest accrues on the bonds previously sold to pay interest on the debt.

Interest rises from 6.1 percent of the federal budget in 2012 to 12.9 percent in 2020, 21 percent in 2030 and eventually reaches 59 percent if current projections are maintained through 2082, the last year in the G.A.O. analysis. As a share of the deficit, interest would rise from 19.2 percent this year to 62 percent in 2020. In the long run, virtually all of the deficit is accounted for by interest on the debt.

Bartlett asserts that the way to avoid that enormous increase in the cost of interest is for the present generation of Republicans to stop preventing government from paying for itself. Simply put, the GAO report does not support Brooks' "out of control Medicare" position, but is the result of out-of-control borrowing forced by Republican insistence that government not be adequately funded. If you don't want the national debt to grow and you're not willing to make the cuts to government expenditure necessary to avoid growing the debt, you have to increase revenues.

On the positive side, Brooks seems to have given up on his peer group's historic insistence that the problem is a single program called "medicareandsocialsecurity", and is now focused on Medicare. On the negative side, he's not being honest about what his sources actually say, and he's making what is fundamentally an appeal to fear. The OMB and CBO reports are only relevant if the Republicans refuse to work out a different deal, such that the automatic cuts are not changed. The GAO projection, which is half as dire as Brooks purports, indicates that the growth of Medicare costs remains a significant concern but that the larger concern is that continued, long-term deficit spending will cause the amount the U.S. has to pay to service the debt to snowball. This?

Chuck Hagel has been nominated to supervise the beginning of this generation-long process of defense cutbacks. If a Democratic president is going to slash defense, he probably wants a Republican at the Pentagon to give him political cover, and he probably wants a decorated war hero to boot.

All the charges about Hagel’s views on Israel or Iran are secondary. The real question is, how will he begin this long cutting process? How will he balance modernizing the military and paying current personnel? How will he recalibrate American defense strategy with, say, 455,000 fewer service members?

Fear-based nonsense. First (granting that he's younger than he looks), if Brooks recalls his history, back in 2000 candidate Al Gore was proposing greater military spending than candidate George W. Bush, and Donald Rumsfeld was predicted to have been chosen to oversee a reinvention of the military into a smaller, more nimble force. How did that turn out, again? Second, even Brooks knows that Hagel will not be overseeing a reduction in the active duty armed forces from 1.4 million down to @1 million. Brooks doesn't explain his number, but I expect he's extrapolating from the financial figures from the CBO - a reduction "from 4.3 percent of G.D.P. to 3 percent" over eight years, or 30% over eight years, with 30% of 1.4 million being 4.2 million... that's in the same ballpark.

Never mind that Hagel is unlikley to be Defense Secretary in eight years, that the scheduled defense cuts underlying that projection are not going to happen, that a 30% cut does not prevent prioritization (it would not be 30% of each line item, across the board), that Congress controls the purse strings, that neither this Congress or the President can bind the hands of their successors, or that Brooks himself has suggested that the net result (of the cuts that won't actually occur) may be an appropriate level of defense spending. "The sky is falling - we're turning into Europe and it's going to happen this month."

A still theoretical 30% cut in military spending is not going to "turn us into Europe."

What's missing from Brooks' column? A solution. Brooks implicitly rules out means testing when he argues that a tax increase on the wealthy is "barely a wiggle on the revenue line and does nothing to change the overall fiscal picture". Does he endorse the Democratic initiative to attempt to identify the most effective treatments for medical conditions, why trying also to identify and eliminate costly treatments that are either no more effective than less costly counterparts or that don't work at all? If so, he should write a column criticizing his own political party for its demagoguery about "rationing" and "death panels". Does he want to arbitrarily cap Medicare expenditures and replace the program with vouchers? If so, he's afraid to say so. Does he simply want to reduce compensation levels for doctors, hospitals, and medical equipment suppliers? What's left?

The High Personal Cost of End of Life Care

According to Ezekiel J. Emanuel,

IT is conventional wisdom that end-of-life care is an increasingly huge proportion of health care spending. I’ve often heard it said that people spend more on health care in the year before they die than they do in the entire rest of their lives. If we don’t address these costs, the story goes, we can never control health care inflation.

Wrong. Here are the real numbers. The roughly 6 percent of Medicare patients who die each year do make up a large proportion of Medicare costs: 27 to 30 percent. But this figure has not changed significantly in decades.

It seems reasonable to infer that by "figure" Emanual means "percentage", as it is implausible that the dollar figure expended on care during the last year of life has not changed significantly "in decades". So what does that percentage figure mean in terms of dollars?

The Medicare program provides subsidized medical insurance for the elderly and for some disabled people. Spending for Medicare totaled about $555 billion in 2012, providing coverage for about 50 million people.

Let's use the low-end figure, 27%. Emanuel is instructing us that 6% of Medicare recipients consumed 27% of $555 billion - let's round that off to $150 billion for 3 million Medicare recipients, an average of $50,000 per person. That, in contrast to $8,617 on average for everybody else. Let's not forget, also, that many of those patients will be in long-term care facilities for much of the year, subsidized by their savings and, once those are depleted, by Medicaid. While the proportion may not be rising, the dollar amount is rising - faster than inflation - and while the numbers bear out the position that people don't, on average, spend "spend more on health care in the year before they die than they do in the entire rest of their lives" the numbers do suggest an enormous expenditure on medical care for patients who receive little benefit from that care - and perhaps pay an enormous personal price on top of the financial cost.

And the total number of Americans, not just older people, who die every year — less than 1 percent of the population — account for much less of total health care spending, just 10 to 12 percent.

Given that younger Americans are much more likely to die from traumatic injury, it's not really a surprise that when they're included in the picture the percentage declines. But as Emanuel surely knows, although care for traumatic injury can be phenomenally expensive, people are not actually talking about car crashes when they are talking about the high cost of end-of-life care.

Emanuel makes a better point about cost reduction,

The more important issue is that just because we spend a lot on end-of-life care does not mean we can save a lot. We do know that costs for dying patients vary widely among hospitals, which suggests that we can do better. And yet no one can reliably say what specific changes would significantly lower costs. There is no body of well-conducted research studies that has proved how to save 5, 10, much less 20 percent.

That's true in part. There are patients who are clearly terminal, but whose families insist upon additional treatment (sometimes overruling the wishes of their loved one) at significant cost. Also, if you think through the logical implications of a typical voucher plan, there appears to be a significant population of people who would "save" money simply by cutting off payment for treatment. While it remains correct that there's no good way to define, in advance, when the last year of life begins and what approaches to treating a specific medical condition will save money without compromising care, if you're willing to be sufficiently mercenary to ration care and make that $50K figure impossible for the average elderly person to reach, you'll "save" money.

If you want to try to identify means of saving money - approaches to end-of-life care that avoid the cost of hospitals, skilled nursing facilities, and the like - it's necessary to engage in the analysis of available data on approaches to patient care, costs and outcomes. If you want patients to be informed of their options, including the fact that by foregoing the aggressive treatment of what is likely to be a fatal disease they may both live longer and have a better quality of life, you have to actually educate the patient - and as Emanuel notes the last effort to introduce that sort of education on a widespread basis collapsed under Republican hysterics about "death panels".

Emanuel is correct that doing nothing to improve the quality of care for the dying is not an acceptable approach to end-of-lie care, but at the same time he suggests that we're doing very little. Emanuel supports end-of-life counseling for patients (the so-called "death panels"), increased availability and use of palliative care, and revised criteria for admission to hospice care. But we can also do some comparative outcome research, which might help us create better criteria for who truly is approaching the end of life, and what treatments that might represent top notch quality of care for a younger patient may undermine quality of life and perhaps even shorten the remaining lifespan of an elderly patient.

The Elderly Cannot Be Informed Consumers of their Most Expensive Care

I am not sure how I came to the page, but in going through the proliferation of articles I had opened in my browser with the intention of "getting to this later", I found "Saving Medicare from Itself" written in mid-2011 by Avik Roy of the Manhattan Institute. For the most part the article simply rehashes the conventional wisdom about Medicare - if costs continue to significantly outstrip inflation, the program cannot be sustained.

Given that Roy started out by, in effect, preaching to the choir, he had what should have been a relatively simple task. Use the available facts and data to point to possible solutions to the problem of healthcare inflation. I know that some argue that the problem of healthcare inflation is going to cure itself - that the changes that led to the rise in costs reflect the significant evolution of the industry and, as we exit the era of new blockbuster drugs and improvements in medical technology become more incremental, inflation will tame itself. But history is a better teacher than wishful thinking - or as Burgess Meredith put it... - we have to plan as if healthcare inflation will continue to rise. And you know what? If we find ways to make healthcare significantly more affordable without compromising quality, even if the cost curve cures itself we'll be much better off as a society.

If Roy believes his own thesis, then one of his arguments should be, "We should look at how other industrialized nations are able to offer a comparable quality of care, with comparable outcomes, at a much lower cost, and at least think about doing what they're doing." Alas, Roy is not so much interested in advancing good policy as he is in advancing the agenda of reducing the scope of Medicare.

Roy argues,

The largest driver of Medicare cost inflation is the fact that retirees bear little of the expense for their own care. As a result, seniors have no incentive to avoid unnecessary or overpriced treatments. Rettenmaier and Saving have shown that, between 1960 and 1985, growth in health expenditures was highest in those categories of spending in which consumer cost-sharing was lowest (such as hospital care), and lowest where consumers were most responsible for their own expenses (like prescription drugs, which were not covered by Medicare during that period).

If that actually were the cost, you should see a different rate of medical inflation for non-elderly populations. You should see yet another, much lower rate of medical inflation for procedures that normally fall outside of insurance coverage. And you should see a much higher rate of inflation in industrialized nations that offer universal or near-universal healthcare coverage. But... you don't.

Roy overlooks the fact that people are inevitably going to be poor consumers of healthcare services. They like their doctor, so they keep going back to their doctor - and while the relationship will benefit many patients, others will keep going back to a doctor who is providing substandard care or who is opportunistically ordering unnecessary tests and procedures, perhaps through self-referral, in order to maximize his revenues. How does Roy suggest that the average elderly person determine whether the doctor she trusts is providing sufficient care, or if a different doctor might offer equivalent care at a lower price or better care at a higher price that nonetheless results in a net savings?

But more than that, where does Roy imagine that the savings will come from? If we're talking about seniors with chronic health conditions, they are going to need diabetes supplies, oxygen, catheters and the like. No way around it. Does Roy believe that individuals can get better pricing on care, supplies and services than an insurance company or government agency that can negotiate a discount? If so, I would like to see him connect that theory to the reality in this country, where the uninsured pay the highest prices for their medical care. If I were to be less charitable, I might ask whether Roy's intention is that the elderly have to choose the care, medication and equipment they need, versus paying their bills, buying food....

One has to ask if Roy's goal is to bend the cost curve, or if it's simply to shift medical costs from Medicare onto elderly individuals. If we presuppose that the elderly can afford the care that they require, it remains fair to observe that a cost shift does not actually address either the cost of the healthcare system or healthcare inflation. It simply means that instead of the money coming from Medicare, it will come from a senior's savings. Or their children's savings. Because unless the goal is deprivation, the money has to come from somewhere.

The problem with Roy's argument actually goes much deeper, when you consider the times when the elderly can easily run up five and six figure medical bills. A senior falls and fractures her hip. A senior has a heart attack or stroke. A senior collapses and is diagnosed with acute kidney failure. They can be in a hospital with a five figure medical bill before they're even able to consider whether they're in the most appropriate care center with the most appropriate doctor and most appropriate treatment plan. When you suffer a catastrophic health issue, odds are you are going to have to rely upon some combination of serendipity and the good intentions of others to get you to a point of medical stability - Roy's conceit that it is possible to address this type of issue by giving seniors an incentive to shop around for the best deal isn't realistic.

Roy complains that the same general problem holds true across the board:

The same holds true for all consumers of health care — not just the elderly. Medicaid and the system of employer-based health insurance both provide a great deal of first-dollar insurance coverage, meaning that consumers do not pay directly for services they receive and therefore have no clear sense of relative costs and values. In 1960, individuals paid directly for 52% of national health expenditures, but by 2008 that share had declined to just 12%. Americans are shielded from the real costs of their health care; as a result, it costs too much.

Except here's the thing: Insurance companies have been experimenting with copayments and deductibles to try to save money. And that cost-shifting has been relatively successful. However, on the whole, the net cost to the consumer has gone up. Why? Because when you have comprehensive insurance and your doctor says, "You need a CT scan", somebody from the medical center calls up your insurance company to see if it's covered. If the answer is "No," the patient is likely to receive a less expensive test that is covered by insurance. On the other hand, if the patient does not have that invisible intermediary, there's nobody to come back with, "Why not start with an ultrasound (or other test that might either confirm or refute a potential diagnosis) and we can see if the CT remains necessary once we have the results." They simply hear their doctor saying, "You need this," and so they pay for it.

Which brings to mind another contributing factor: the doctor may not have any idea what the tests, procedures, and medications he orders cost. In fact, there's a large, lucrative industry built around trying to convince doctors to prescribe expensive, patented medications, or to use new medical technologies, implants and devices. Perhaps that would be mitigated in part if more patients were overtly cost conscious, but I doubt it - it's not realistic for doctors to keep track of the relative cost of myriad treatment options, and to try to guide patients through their choices - particularly at those times when the most expensive care decisions are being made. Even if we assume that the information is available, accurate and that the patient is capable of understanding the financial information. It's simply not realistic.

Note that Roy also assumes that the fact that "In 1960, individuals paid directly for 52% of national health expenditures" while now "but by 2008 that share had declined to just 12%" means that people are choosing to obtain care that the don't actually require. A big part of the difference comes directly from Medicare - a program that was created in no small part because the elderly were being underserved by the health insurance market. We also now diagnose and treat a wide range of chronic health issues that were barely on the radar screen, or even unknown to medicine, back in 1960. We also offer a wide range of medical treatments that significantly improve the quality of life that were in their infancy or largely unavailable in 1960. A big part of the difference comes from the fact that, as a society, we have decided that certain medical care should be provided to people even when they cannot afford to pay a cent toward that care - hence programs like Medicaid and laws like EMTALA.

Roy makes little effort to advance his position that healthcare costs would decline if consumers were required to pay for a greater percentage of their care, and as I noted the data suggests that costs could actually increase. Roy does not attempt to document that the care is unnecessary, or the mercenary argument that if we apply a cost-benefit analysis we as a society will be better off even if we deny people access to necessary medical care.

At the end of his article, Roy reveals himself to be little but a foot soldier for the Romney/Ryan "reform" plan - not a policy analyst, but a political advocate. His first recommendation is right out of the political coward's playbook - "Don't change anything for anybody aged 55 or older." That's not about making good policy or protecting people - it's about votes. If in fact his second proposal, cost sharing (i.e., increasing what people have to pay for the care they receive) leads people to "make sensible decisions about whether to pursue treatment", it will do so for somebody who is presently 55 or older. If in fact his third proposal, means testing, is a reasonable measure, there's no reason to exempt the present generation of wealthy Medicare recipients from that standard. Worse, cost-sharing is unlikely to work, and means testing is not likely to produce appreciable savings.

Roy's next proposal is to "index the Medicare retirement age to life expectancy", that is, to make people wait longer to qualify for Medicare. Never mind that a significant population of seniors already postpone medical treatment until they qualify for Medicare. Never mind that the cost of postponed treatment can mean that the overall cost of Medicare goes up, or that more people will end up either on Medicaid, or become eligible for Medicare through SSDI instead of through reaching the retirement age. If there is a valid argument that actual savings could be realized, Roy hasn't tried to make it, relying instead upon supposition.

Roy's first meaningful proposal is to work harder to eliminate fraud from Medicare. Except everybody wants to eliminate fraud. Doctors and clinics get sued and prosecuted for Medicare fraud. Roy's solution? To privatize administration of Medicare. He may as well argue that we should wave a magic wand. There is no reason to believe that privatized administration will reduce fraud, and every reason to anticipate that it will increase costs.

Roy's ultimate proposal is that we implement a Ryan-style voucher plan for Medicare, while allowing seniors to buy insurance through a health insurance exchange. You know, the sort of exchange that's "the end of the world" as part of the PPACA, but for some reason is the height of market efficiency for a post-Medicare voucher program for the elderly.

Roy closes by attempting to put Medicare "in context":

Addressing this problem would require reforming and integrating Medicare, Medicaid, the employer-sponsored system, and the individual market (and would therefore require replacing Obamacare with a very different set of health-care reforms well beyond Medicare). It would involve addressing the runaway costs of defensive medicine and medical-malpractice litigation. Such changes would of course be extremely difficult to undertake, as the heated ongoing health-care debate amply demonstrates.

Roy wants to "integrat[e] Medicare, Medicaid, the employer-sponsored system, and the individual market"? That sounds a lot like what would be accomplished through "single payer". So no, that's actually not what Roy wants. Were Roy and his brand of analyst serious about reform they would be looking around the world at how other industrialized nations have responded to the same issues and proposing that we emulate their success. Instead they urge us to ignore our lying eyes, drink the Kool-Aid, and double down on our history of failed market-based (non-)solutions.

Note also Roy's introduction of the canards that "defensive medicine" and medical malpractice play a significant role in the current problem, and his prevarication that they are "runaway costs". They weren't important enough to address in his plan to save Medicare, but how can you close out a political argument like this without dropping them in for good measure? A serious analyst would put the prevention of malpractice and maloccurrence on the agenda, while recognizing that any effort to push the "runaway malpractice costs" like would reveal him as a dilettante. The current system compensated a very small percentage of malpractice victims, and is very accurate at weeding out unsupported claims. There's no indication that so-called "defensive medicine" could be eliminated even if doctors enjoyed absolute immunity - and if you look at the facts even the most sweeping "tort reform" measures, such as the laws in Texas that come close to giving doctors immunity, do not affect the manner in which doctors order tests and procedures. What changes things? The sort of salaried arrangement used by facilities like the Mayo Clinic and the Cleveland Clinic. Go figure.

Strip away the window dressing and the argument boils down to, "Medical care costs too much and costs are rising too quickly. I have no solutions, so I propose eliminating any form of group health insurance, giving poor people vouchers that they can use to pay for individual insurance policies, and calling it a day."

As Usual, Michael Gerson Overplays His Hand

It's not that he gets off to a good start - he's eager to jump sharks from the word "go" - but how can the man look himself in the mirror after serving up a whopper like this one:

There is a political problem at the heart of the budget debate. If Democrats get what they want — tax-rate increases on the wealthy — they can crow about it in public. If Republicans get what they want — structural reductions in entitlement spending — they are unable to crow. Their motivation is fiscal and ideological, not political.

Gerson's memory is perhaps too short to recall, but when his former boss, George W. Bush, was elected to office our nation had a budget surplus. A few years later we has massive tax cuts, two unfunded wars, the unfunded Medicare Part D benefit, and a massive budget deficit. And then, for Act 2, we got the collapse of the economy. Their motivation is fiscal? If you believe that the Republican Party cares about balancing the budget, you're a fool.

Remind me again, where was Michael Gerson when the Bush Administration was taking the explicit, public position that deficits don't matter? Oh yeah... he was writing Bush's speeches.

Is Republican opposition to Social Security and Medicare ideological, at least within the party itself? Certainly, but not an ideology born in a vacuum. The ideology that drives the Republican Party to attempt to undermine Social Security and Medicare is very much about politics - it's about pleasing powerful and monied interests that bankroll the party, and is about gaining and holding power over the long term.

If Gerson means to suggest that it's a double-edged sword - that the Republicans accept a certain amount of political risk when they make massive cuts to Medicare and Social Security a central part of their party's ideology, and that they thus misrepresent their motivations and goals so as not to alienate the beneficiaries of those programs - he has a point. But to make that point he has to actually admit that the leaders of his party cannot be trusted to tell the truth. That is to say, opposition may be driven by ideology at the top, but the rank and file Republican voters like Social Security and Medicare. They don't share the ideology of the party's elite, and the Republicans therefore obfuscate lest they find themselves unable to win an election.

The heart of the present conflict is that the Republicans have been lying to the public for years, a lie exemplified by the Romney/Ryan budget proposal. Romney promised that he was going to cut taxes, significantly increase military spending and, although he proposed an idea to transform Medicare into a voucher program starting a decade in the future, that he would maintain Medicare benefits for those 55 and older and would not cut Medicare spending. When he was asked for specifics we got "I'll fire Big Bird".

The truth is, if you want to balance the budget it's going to be painful. If you want to balance the budget without increasing tax revenue, it's going to be extremely painful to the middle class. Gerson had no problem with the Bush-era lie that "deficits don't matter", and he has no problem with the present Republican lie that the budget can be balanced - with trillions freed up for tax cuts and increased military spending - by closing loopholes in a revenue-neutral fashion and eliminating waste. His problem is that the Democrats refuse to take ownership of the Medicare and Social Security cuts his party desires.

In focusing on the specifics of Gerson's mendacity, let's not lose track of the big picture. This Congress cannot bind future sessions of Congress to its spending plan. What Gerson and the Republicans want is not an actual, workable plan to balance the budget over a period of years. They want the President to agree to structural changes to Social Security and Medicare that would be difficult for future sessions of Congress to undo, while offering no assurance that they won't be every bit as profligate and irresponsible as Bush with the "savings" that result.

The President is resisting that "deal", and Gerson's unwilling to articulate the stakes in an honest manner, so instead we get this noisome whinging about how the President is a meany-pants who isn't offering enough concessions to the poor, downtrodden Republicans.