Rational Arguments

Rep. Ryan is disappointing me.  He has a defense of his “Roadmap” up.  Specifically, he wants to talk about how his plan will affect Medicare.  In his own words:

We do not have a choice as to whether Medicare will change from its current structure. It is being driven to insolvency. An honest debate requires a serious discussion of how Medicare will avert its collapse and be made sustainable. Unfortunately, but not surprisingly, the Democrats’ political machine has attacked my contribution to this debate, making the false claim that the only solution put forward to save Medicare would “end Medicare as we know it.”

The CBO has said that my reform plan, “A Roadmap for America’s Future,” would put Medicare on a sustainable path. The plan protects and preserves Medicare for those enrolled now and for those who will become eligible in the next 10 years, while reforming the program to ensure it will be there for younger generations. Future seniors would have access to the same coverage I enjoy as a congressman.

OK.  First of all, no one is arguing against the fact that Medicare has to change from its current path to be sustainable.  But part of the reason that path was made worse was because of the huge unpaid for addition of Medicare Part D, which was not passed by the Democratic machine.  ARGH.  Look, he’s made me make a partisan argument.  Unforgivable.  Deep breath.

Rep. Ryan, your plan for Medicare is not crazy.  It’s not corrupt.  It’s not morally wrong.  But I’m sorry, it absolutely would end Medicare as we know it.

Medicare right now is a defined benefit plan.  Everyone knows exactly what they are going to get from the government and that’s what happens.  Every year, the government (CMS) figures out how much it will cost to give those defined benefits, and it pays the bills.  There are pros and cons to such a plan, but that’s Medicare as we know it.

You would like to change Medicare to a defined contribution plan.  In that plan, everyone knows how much money (in a voucher) they are going to get every year, and then they go out and buy insurance.  Every year, the government sets how much it is willing to pay, and gives out the vouchers.

A defined contribution plan is NOTHING like a defined benefit plan.  Going to a voucher system, is a total change from Medicare.  It’s the “end of Medicare as we know it”.

Medicare right now is the equivalent of Canada’s single payer health care system.  You want to end that; you want to privatize it.  It’s a radical change.  Own it.  Deal with it.

Your proposal would be a much greater disruption of Medicare than anything in passed in health care reform recently.  Yet many of your colleagues have said that any cuts to Medicare would be horrible.  Did you share this view with them earlier this year?  I ask, because I’ve always felt that the demagoguery about cuts to Medicare was foolish.  I’m not sure you’ve always been consistent.  A wonk would clarify that.

The irony is that you keep talking about the CBO as if they were the gold standard of knowledge in terms of how reform will affect the budget in the future.  Did you share this feeling with your colleagues when they were debating health care reform earlier this year?  I ask, because I’ve always felt the CBO was credible.  I’m not sure you’ve always been consistent.  A wonk would clarify that.

Another irony is that what you are proposing, giving the elderly money or vouchers to buy private insurance, sounds much like the exchanges recently passed in the PPACA.  Right?  How is it different?  Did you share your feelings on the value of this type of setup with your colleagues when they were debating health care reform earlier this year?  I ask, because I’ve always felt the exchanges seemed like something conservatives would always support.  I’m not sure you’ve always been consistent.

A wonk would clarify that.

I’ve been following Bruce Bartlett for the last year or so with increasing interest.  I am too young to remember him from his work in the Reagan and Bush I administrations, but I have to tell you, the man makes as much sense as anyone I’ve been reading with respect to the economy and the budget.  Maybe he speaks to my conservative side.

A few weeks ago, he wrote about a poll that I’ve been meaning to get back to.  I’m late, but it’s still relevant:

Today, Harris released an extraordinarily interesting poll on attitudes toward taxes, spending and deficits in several European countries and the US…The principal lesson of the US responses appears to be that support for spending cuts and government downsizing is broad and deep. But at the same time, there is strong support for soaking the rich through the tax system. Also, Americans continue to have unrealistic expectations about how easy it will be to balance the budget without cuts in programs that affect them. This suggests that if forced to choose between spending cuts that affect them and higher taxes that don’t affect them, the latter could quickly become the dominant position…

Question 5: “Which of the following policy areas do you think should bear the biggest part of the spending cuts burden?”

The new Medicare Trustees Report was released, and for once, I’m not going to tell you to go read it.  It’s 229 pages, and it’s too dry even for me.  But Paul Krugman made a graph that’s worth looking at:

What you see in blue is the projection for Medicare spending in the future from the 2009 report (before health care reform was passed).  What you see in red is the projection for Medicare spending in the future from the 2010 report (after health care reform was passed.  As you can see, starting in 2020 and projecting into the future, spending slows greatly.

Can you totally predict the future?  No.  Do we need to make even more cuts?  Yes.  But it’s hard to look at this and not think that at least it’s a start.  I complain a lot that the PPACA doesn’t do enough to control costs, but this is more than I expected.

People can hate the PPACA, but it says – right up front – that it’s going to cut Medicare spending.  And it does.  You may remember that many politicians who opposed it liked to scream about how the cuts to Medicare were terrible.  You can’t oppose any cuts to Medicare and then claim to care about the deficit.  If we don’t find a way to slow Medicare spending, the deficit will continue to rise.

I’m curious if anyone who opposes the PPACA will at least admit that it’s doing this.

Pivoting off the Politico story on how Republicans plan to “choke” health care reform to death, Autsin Frakt has a post up which reiterates his concern that politicians opposed to the ACA could, in effect, starve it:

Make no mistake, repeal by purse strings could create a mess. The law has many moving parts that act together to create a sensible, complete whole. And implementing a piece of legislation as complex as the ACA requires fully funding the agencies that oversee it. So, this strikes me as the most politically viable, serious attack on health reform.

I’ve thought as much for a while. Back in December 2009 I wrote,

To the extent we hear more about health reform it will be for one reason: the money. While the legislation may be internally balanced so it scores as deficit reducing, it will not be viewed as monolithic once it passes. It has both spending and savings. Could we keep the savings and gut the spending? Sure.

Who would do that, and why? Answers: Republicans, for tax cuts. While the former are out of power, that won’t last forever. And the latter are always popular. This reform will be attacked. Things may quiet down, but this is not the end of it. Money has a way of drawing attention and a crowd.

The combination of “savings” created by failing to fund implementation and tax cuts is likely to appeal to the Republican base. Keep in mind that the ACA does very little for the broad middle-class of voters who are covered in the large-group market. In these hard economic times, such voters may prefer some money in their pockets than additional spending on a program for which they expect little benefit. (Of course losing one’s job jeopardizes one’s insurance so the ACA really does add a meaningful layer of protection for all Americans.)

As I said before, I don’t think this is very likely.  It”s the popular things that cost money. Closing the donut hole. Subsidies. Decreased Medicare copays. The “bad” stuff like the mandate can’t be easily defunded. So when they actually go to starve things, it won’t be nearly as popular as they think.

Moreover, I think that think this is exactly the fight the White House wants. Up until now, Republicans could only make threats. To actually defund it, they would have to put something down on paper. They will be attacked ruthlessly for it. And it still likely won’t pass.

I bet they don’t do it.

An eagle-eyed reader let me know that the Kaiser Family Foundation has a nice subsidy calculator up that you can play with.  You enter information about your income and situation, and you get to see how much health insurance and care will cost you in 2014.

It’s not all good news.

Let’s say you are a 60 year old divorcee in 2014.  You make $46,136, which is 401% of the poverty line.  You are therefore eligible for NO subsidy from the government.  Your premium will be $10,162.  Should you actually need care, your out of-pocket costs will be capped at $6250.

So in a best case scenario, your health insurance/care will cost you 22% of your income.  In a bad year (or a regular year if you have a chronic illness) your health insurance/care will cost you 36% of your income.  Um… that’s not affordable.

Granted, the cost is so high that you would likely not be subject to the mandate.  Great.  So you continue to have the option to be uninsured.

The people who are going to be hit hardest by this are those making just over 400% of the poverty line.  Because, ironically, if you make just a little bit less – say $45,906 (399% of the poverty line), then – due to subsidies – your premium will cost you $4361.  That’s less than 10% of your income.  And your out-of-pocket costs are capped at $4167.  So the most you could pay in a year would be 19% of income.

That’s still a lot.  But it’s WAY less than if you make just over the 400% line.

I have yet to see a good answer for what the government is going to do when people start asking for pay cuts to get under the 400% line.  I don’t see why it won’t happen.

A reader sent me the following tweet from a prominent conservative ex-politician:

Press Corps-pls do your job as Obama sneaks in Berwick appt;pls cover his mission:socialized healthcare&rationing based on”quality of life”

This kind of thing makes my head explode.  Look, I’m not going to get into the politics of the Berwick appointment.  But who oppose him see his “mission” to be twofold:

1. He’s for increasing government paid/run health care
2. He’s for decreasing spending on government paid/run health care

Ok.  You can’t be angry at him for both of these.  You can be angry at him because you believe he will increase the amount of money that government spends on health care or you can be angry at him because he will limit the amount of money that government spends on health care, but you can’t be angry at him for both.  For that matter, he really can’t do both.

Moreover, you, yourself, can hate one of these things, but you can’t hate both.

So, please, rail against increases in health care spending or against them.  Choose.  This is sort of silly.

I can’t believe how many email I get about this.

Look, there’s a problem with Medicare funding.  I’ve already talked about this:

Basically, back in the 90’s, Congress tried to slow the rising costs of Medicare by pegging how much they pay doctors to a formula.  Yes, the formula underestimated how quickly medical costs would rise, such that every year, Congress “fixes” the problem by ignoring it and pushing it to next year.  They’ve been doing it so long that if they let the SGR kick in, reimbursement rates to physicians would drop overnight by more than 20%.

That’s me.  Quoting myself.  That’s how bad it’s gotten.

They let the SGR kick in.  Reimbursement rates dropped a ton.  The usual stories appeared about the sky falling.  Docs will rush to leave Medicare.  The system will collapse.  This is why the ACA sucks.  Blah blah blah.

Look.  First of all, the ACA has nothing to do with the SGR.  Actually, it has little to do with Medicare.  Not one more person got Medicare because of the ACA.  So if you think Medicare reimbursement rates are too low, so be it.  It has nothing to do with health care reform.

Further, this is all theater.  There’s no way they will let the SGR kick in permanently.  This is politics.  They will increase the rates.  They always do.  They always will. The politicians don’t have the stomach to actually lower costs.  So everyone can chill.  They will do what you want and spend, spend, spend.  They will even pass it so that docs who were reimbursed at rates lower than they expected can get the money back later.  Sure, it will cost more to file that extra paperwork.  But that’s what you want, right?  More spending!

I’m exasperated because it seems to be the same crowd screaming about the deficit and high spending that’s screaming about the lower reimbursement rates.  You can have lower spending or you can have lower deficits, but you can’t have both.  Pick.  Stop wasting my time.

Check out this graph from the IMF:

Let’s break it down.  On the x-axis, you have a measure of how much a country would have to change its spending in order to bring down the debt to a reasonable amount.  I believe for the purposes of their calculations, for a developed country it’s about 60% of GDP.  Countries further to the right have the most cuts to make to spending in order to get the debt under control.

On the y-axis, you have a measure of how much a country can expect its spending to increase because of health and pension increases (think Medicare and Social Security).  Countries closer to the top of the graph will have higher increases in spending because of their projected costs in these areas.

Do you know where you absolutely do not want to be?  The upper right corner.  That’s where a country would be if it both had the most cuts needed and the most anticipated spending in health and an aging population.  It’s a perfect storm.

Can you guess where the US is?

I hear more and more people talking about the size of the debt and the increases in spending.  None of them are talking seriously about Medicare or SSI spending, or how we might cover them.  Wake me when they do.

(h/t The Economist)

A number of you are emailing me about the Politico article on low-cost health care plans:

Part of the health care overhaul due to kick in this September could strip more than 1 million people of their insurance coverage, violating a key goal of President Barack Obama’s reforms.

Under the provision, insurance companies will no longer be able to apply broad annual caps on the amount of money they pay out on health policies. Employer groups say the ban could essentially wipe out a niche insurance market that many part-time workers and retail and restaurant employees have come to rely on.

I’ve never been an ACA apologist.  This is entirely true.  But the why is just as important as the what here:

This market’s limited-benefit plans, also called mini-med plans, are priced low because they can, among other things, restrict the number of covered doctor visits or impose a maximum on insurance payouts in a year. The plans are commonly offered by retail or restaurant companies to low-wage workers who cannot afford more expensive, comprehensive coverage.

Depending on how strictly the administration implements the provision, the ban could in effect outlaw the plans or make them so restrictive that insurance companies would raise rates to the point they become unaffordable.

Look, the ACA doesn’t ban low-cost plans.  It sets no minimums on what a plan can cost.  It does, however, set minimums on what a plan can cover.  It does ban low-benefit plans.  It just so happens that low-benefit plans are also usually low-cost.

There are a host of health insurance plans out there that are cheap.  It’s just that the majority of those also are crappy.  Sure, they’re great if you’re healthy.  They only stink when you get sick; but that’s when you need them.

One of the things the ACA does is try and eliminate under-insurance.  It tries to regulate the insurance companies so that you can’t get sold a plan that provides too little coverage when you need that.  That costs money.

The companies that are complaining about this were giving their employees skimpy insurance.  They are upset that they won’t be able to do so in the future.  They’re also upset that real insurance will cost more.

This is America; they’re allowed to be upset, and they’re allowed to complain.  I just don’t have a lot of sympathy for them.

P.S. More robust reform would have eliminated issues like this, but you didn’t want that, America.  Deal with it.

Every once in a while, someone has to wheel out the usual story on how Canada’s health care system is about to collapse.  Today, it was Reuter’s turn:

Pressured by an aging population and the need to rein in budget deficits, Canada’s provinces are taking tough measures to curb healthcare costs, a trend that could erode the principles of the popular state-funded system.

Before I even get into this, can we acknowledge that rising health care costs in not a Canadian problem, but a worldwide problem?  Please remember as we go through the rest of it that – today – we spend about twice per person what Canada does on health care.  If they are complaining that it costs too much, what are we doing?  And while they spend about 10% of GDP on health care, we spend 16%.  So anyone who points to their model as “unable to contain costs” should just shut up.

Anyway, here is my favorite line:

In some ways the Canadian debate is the mirror image of discussions going on in the United States.

Canada, fretting over budget strains, wants to prune its system, while the United States, worrying about an army of uninsured, aims to create a state-backed safety net.

Huh?  We already have a safety net. It’s called Medicaid.  It’s not as good as I like but it exists.  This reporter, however, seems to think that the ACA is about the safety net.  It’s not.  It’s mainly a huge plan to give taxpayer money to people to buy private insurance.  It’s an expansion of the private system, albeit with government money.  It’s not some new government plan.

Moreover, Canada wants to contain rising costs.  Like we should.  But as they take steps to be fiscally prudent, we deride them as failures.  Here’s a United States Senator:

What will happen in the U.S.? | Reuters: Soaring costs force Canada to reassess health model

Soaring health costs?  As opposed to here?  Am I losing my mind?

They quote four people in the article.  One is the Ontario Finance minister.  He says:

“Our objective is to preserve the quality healthcare system we have and indeed to enhance it. But there are difficult decisions ahead and we will continue to make them”

Seems reasonable enough.  I don’t disagree.  You would think, that if this was an article describing the upcoming demise of the single payer system, that there would be other politicians calling for, say, the demise of the single payer system.  But no.  Instead, we get the following three players:

1) A senior economist at Toronto-Dominion Bank.  You read that right.

2) A professor at University of Toronto’s Rotman School of Business.

3) A senior economist at Scotia Capital.  What is Scotia Capital?  This is Scotia Capital:

Scotia Capital is the marketing name covering the Scotiabank Group’s integrated global corporate and investment banking and capital markets functions. Scotia Capital’s global operations are divided into two primary business units:

Global Corporate and Investment Banking

Global Capital Markets

In Canada, Scotia Capital offers a full range of corporate and investment banking and capital markets products and services.

Really?  This is who they went to for health policy expertise?  Can you possibly predict what she will advise?

Scotia Capital’s Webb said one cost-saving idea may be to make patients aware of how much it costs each time they visit a healthcare professional. “(The public) will use the services more wisely if they know how much it’s costing,” she said.

“If it’s absolutely free with no information on the cost and the information of an alternative that would be have been more practical, then how can we expect the public to wisely use the service?”

Ah….  the moral hazard.  Like music to my ears.

No health policy experts.  No politicians advocating for change.  A bank economist, a business professor, and an economist for Scotia Capital.  The article never mentions that the single payer system in Canada is wildly popular.  The article never mentions that no serious politician is running on a platform of repealing it.

But most importantly, the article never mentions that the Canadian health care system is not like ours in any way.  No matter what headline you read, the ACA is not a single payer system.  The ACA changed very little structurally.

Our system is still mostly private.  Ours costs way more.  Ours covers far fewer people.  And ours has similar, if not worse, outcomes.

Our system is nothing like Canada’s.  We should be so lucky.