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Winehole23
05-13-2009, 12:37 PM
Health Care, a Lesson in Pain (http://www.nytimes.com/2009/05/13/business/economy/13leonhardt.html?_r=1&ref=politics)



By DAVID LEONHARDT (http://topics.nytimes.com/top/reference/timestopics/people/l/david_leonhardt/index.html?inline=nyt-per)

Published: May 12, 2009


The events of the last few weeks have raised the odds that a health care overhaul will really happen this year.


Democrats have suggested (http://www.nytimes.com/2009/04/25/us/politics/25budget.html) that they are willing to play hardball and pass a bill without Republican support. Arlen Specter (http://topics.nytimes.com/top/reference/timestopics/people/s/arlen_specter/index.html?inline=nyt-per), the senior Pennsylvania senator, became a Democrat, potentially adding one more vote. At the White House on Monday, lobbyists for doctors, insurers and other industry groups pledged (http://www.nytimes.com/2009/05/12/us/politics/12health.html) to reduce the growth of medical spending.


Yet none of these developments has removed the main hurdle to health care reform (http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/health_insurance_and_managed_care/health_care_reform/index.html?inline=nyt-classifier): the matter of the missing $90 billion.


Providing health insurance to the roughly 50 million people without it will cost something like $120 billion a year. President Obama (http://topics.nytimes.com/top/reference/timestopics/people/o/barack_obama/index.html?inline=nyt-per) has proposed $60 billion or so in new revenue for this purpose — a “down payment,” his advisers say. But Congress seems set to reject about half of the down payment (a plan to limit high-income families’ tax deductions for charitable giving and other such things). That makes for the $90 billion health care hole.


And no one is quite sure how to fill it.


Because Mr. Obama has made it clear (http://www.nytimes.com/2009/05/03/magazine/03Obama-t.html?pagewanted=4) that health care is his top legislative priority, the $90 billion hole has become one of the biggest political issues of 2009. The Obama administration’s health care team is now preoccupied by it. On Tuesday, the Senate began to consider it, at a packed round-table discussion (http://finance.senate.gov/sitepages/hearing051209.html) among 13 prominent health experts and members of the finance committee.


“Now it’s time to think about money,” said Max Baucus, the Montana Democrat who heads the committee.



The experts at the round table — liberal and conservative — actually agreed to an impressive degree about the best way to fill the hole. They urged the senators to limit the tax deduction for employer-provided health insurance (http://content.healthaffairs.org/cgi/content/abstract/27/3/622).


The deduction may seem a wonderful thing, but it isn’t. It benefits the wealthy more than anyone else. It encourages employers to overspend on health insurance, because $100 in untaxed medical benefits is more valuable to workers than $100 in taxed income. And, as Mr. Baucus said, the deduction has a certain Willie Sutton appeal for Congress: it’s where the money is.



The government forgoes $250 billion a year in taxes because of the deduction (http://www.nytimes.com/2009/05/08/health/policy/08healthtax.html). Capping it, to apply only to reasonably priced health plans, would bring in enough money to fill most of the $90 billion hole.
The idea seems to be classic Obama: empirical, pragmatic, bipartisan. Unfortunately, it happens to be an idea that John McCain (http://topics.nytimes.com/top/reference/timestopics/people/m/john_mccain/index.html?inline=nyt-per) campaigned on last year and that Mr. Obama, sensing a political opening, blasted as a tax increase. “Taxing health care instead of fixing it,” intoned the narrator in an Obama campaign advertisement (http://www.youtube.com/watch?v=H6vnHmAfJCY&feature=channel_page), with ominous music playing in the background. “We can’t afford John McCain.”


Mr. Obama’s economic advisers would be happy to see him reverse his position. But his political advisers remember that ad and know it could be used against him. Further complicating matters, labor unions and Charles Rangel, the influential Democratic House member, say they remain firmly opposed (http://www.nytimes.com/2009/05/07/health/policy/07health.html) to capping the deduction.


All of which means that filling the $90 billion hole is going to be very tricky.


If the tax deduction can’t be touched, the first alternative is simply to add the $90 billion a year to the deficit, to cover the uninsured now and pay for it later, as President George W. Bush did (http://www.pbs.org/wgbh/pages/frontline/tentrillion/themes/bush.html) with his tax cuts, the Iraq war and the Medicare (http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicare/index.html?inline=nyt-classifier) prescription drug benefit. In another time, this might have been politically palatable. But it isn’t now, not when this year’s deficit is projected to be larger than any since the end of World War II.



That leaves two ways to pay for an expansion of health insurance: raise taxes or cut health spending.



Economically, spending cuts have a lot to recommend them. The United States spends vastly more per person (http://www.commonwealthfund.org/Content/Charts/Chartbook/Multinational-Comparisons-of-Health-Systems-Data--2008/I/International-Comparison-of-Spending-on-Health--1980-2006.aspx) on medical care than any other country. Much of that spending does nothing to improve health, as chronicled in this newspaper’s recent “Evidence Gap” series (http://topics.nytimes.com/top/news/health/series/the_evidence_gap/index.html). Getting rid of such waste could pay for universal health insurance, several times over, and prevent Medicare from going bankrupt (http://www.nytimes.com/2009/05/13/us/politics/13health.html).



The $30 billion that remains of Mr. Obama’s down payment plucks the low-hanging fruit of cost reduction, like the subsidies for private insurers to provide the same coverage as Medicare at a higher cost. But the precise strategy for finding a lot more savings is still murky. “Reducing spending without also affecting services that do improve health,” says Douglas Elmendorf (http://cboblog.cbo.gov/), director of the Congressional Budget Office (http://topics.nytimes.com/top/reference/timestopics/organizations/c/congressional_budget_office/index.html?inline=nyt-org), “is challenging.”
The Obama administration is laying the groundwork for a more efficient system by pushing for more research into medical effectiveness (http://www.nytimes.com/2009/05/07/business/07compare.html). But we’re not there yet, and getting there won’t be easy. Consider that some of the same industry groups that pledged to reduce medical spending this week are also trying to block effectiveness research — the very thing that would tell us how to reduce spending without damaging people’s health.


So over the short term, tax increases are probably necessary, though they have their own problems. Will the 85 percent (http://www.census.gov/prod/2008pubs/p60-235.pdf) of people with health insurance be willing to pay higher taxes for something approaching universal coverage?



Congress has already rejected several of Mr. Obama’s proposals to reduce the budget deficit, including the plan to limit charitable deductions for the affluent. The other ideas that have been floated, like taxing high-calorie sodas (http://www.yaleruddcenter.org/resources/upload/docs/what/industry/SodaTaxNEJMApr09.pdf), wouldn’t raise anywhere near $90 billion a year.



You can imagine a bill that mixes together lots of different revenue sources, in typical sausage-making style. But it’s hard to get to $90 billion without changing the deduction for employer-provided health insurance. “I just don’t know where else you get enough money,” says Jonathan Gruber (http://econ-www.mit.edu/faculty/gruberj/), an M.I.T. (http://topics.nytimes.com/top/reference/timestopics/organizations/m/massachusetts_institute_of_technology/index.html?inline=nyt-org) economist and one of the round-table panelists.


One possibility is that Congress will pass a bill capping the deduction, and Mr. Obama will be able to claim that he is signing it reluctantly. Another possibility, however, is that we need to begin thinking about whether health care reform is possible even if some significant number of people remain uninsured.


What might that look like?


The subsidies for insurance, which make up most of the $120 billion price tag, would have to be reduced, leaving some people unable to afford coverage but also cutting the bill’s cost. That would be the painful compromise.



The second, crucial step would be doing everything possible to get rid of wasteful medical spending: using the force of law to hold medical providers to their cost-reduction pledges; moving Medicare away from a fee-for-service model that pays for quantity, not quality; encouraging low-cost hospitals to grow and high-cost hospitals to change — or shrink.


During the campaign, Mr. Obama emphasized universal insurance more than costs. Since taking office, he has shifted his focus somewhat. “What we have done,” Rahm Emanuel (http://topics.nytimes.com/top/reference/timestopics/people/e/rahm_emanuel/index.html?inline=nyt-per), the White House chief of staff, told me this week, “is raise cost control to the same level as expanded coverage.”
Cost control has the political benefit of appealing to the 85 percent of people with insurance. And it has enormous economic benefits, too. If costs can be reduced, the price of covering the uninsured will come way down. Put differently, the only way to have a sustainable universal health care system is to control costs.



In an ideal world, Congress and Mr. Obama would find the $90 billion to cover all the uninsured now. But if they don’t, health care reform is not an all-or-nothing proposition.

JoeChalupa
05-13-2009, 12:39 PM
Interesting.

Blake
05-13-2009, 03:22 PM
“I just don’t know where else you get enough money,” says Jonathan Gruber (http://econ-www.mit.edu/faculty/gruberj/), an M.I.T. (http://topics.nytimes.com/top/reference/timestopics/organizations/m/massachusetts_institute_of_technology/index.html?inline=nyt-org) economist and one of the round-table panelists.

soda, candy and high fructose corn syrup tax.

problem solved.

boutons_deux
05-13-2009, 03:55 PM
http://www.alternet.org/images/site/logo.gif
The Truth Behind the Social Security and Medicare Alarm Bells

By Robert B. Reich, Robert Reich's Blog
Posted on May 13, 2009, Printed on May 13, 2009
http://www.alternet.org/story/140003/


What are we to make of yesterday's report from the trustees of the Social Security and Medicare trust funds that Social Security will run out of assets in 2037, four years sooner than previously forecast, and Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago?

Reports of these two funds' demise are not new. Fifteen years ago, when I was a trustee of the Social Security and the Medicare trust funds (which meant, essentially, that I and a few others met periodically with the official actuary of the funds, received his report, asked a few questions, and signed some papers) both funds were supposedly in trouble. But as I learned, the timing and magnitude of the trouble depended a great deal on what assumptions the actuary used in his models. As I recall, he then assumed that the economy would grow by about 2.6 percent a year over the next seventy-five years. But go back into American history all the way to the Civil War -- including the Great Depression and the severe depressions of the late 19th century -- and the economy's average annual growth is closer to 3 percent. Use a 3 percent assumption and Social Security is flush for the next seventy-five years.

Yes, I know, the post-war Baby Boom is moving through the population like a pig through a python. The number of retirees eligible for benefits will almost double to 79.5 million in 2045 from 40.5 million this year. But we knew that the Boomers were coming then, too. What we didn't know then was the surge in immigration. Yet immigrants are mostly young. Rather than being a drain on Social Security when the Boomers need it, most immigrants will be contributing to the system during these years, which should take more of the pressure off.

Even if you assume Social Security is a problem, it's not a big problem.

Raise the ceiling slightly on yearly wages subject to Social Security payroll taxes (now a bit over $100,000), and the problem vanishes under harsher assumptions than I'd use about the future. President Obama suggested this in the campaign and stirred up a hornet's nest because this solution apparently dips too deeply into the middle class, which made him backtrack and begin talking about raising additional Social Security payroll taxes on people earning over $250,000. Social Security would also be in safe shape if it were slightly more means tested, or if the retirement age were raised just a bit. The main point is that Social Security is a tiny problem, as these things go.

Medicare is entirely different. It's a monster. But fixing it has everything to do with slowing the rate of growth of medical costs -- including, let's not forget, having a public option when it comes to choosing insurance plans under the emerging universal health insurance bill. With a public option, the government can use its bargaining power with drug companies and suppliers of medical services to reduce prices. And, as I've noted, keep pressure on private insurers to trim costs yet provide effective medical outcomes.

Don't be confused by these alarms from the Social Security and Medicare trustees. Social Security is a tiny problem. Medicare is a terrible one, but the problem is not really Medicare; it's quickly rising health-care costs. Look more closely and the real problem isn't even health-care costs; it's a system that pushes up costs by rewarding inefficiency, causing unbelievable waste, pushing over-medication, providing inadequate prevention, over-using emergency rooms because many uninsured people can't afford regular doctor checkups, and spending billions on advertising and marketing seeking to enroll healthy people and avoid sick ones.

Robert Reich is professor of public policy at the Richard and Rhoda Goldman School of Public Policy at the University of California, Berkeley. He was secretary of labor in the Clinton administration.
© 2009 Robert Reich's Blog All rights reserved.
View this story online at: http://www.alternet.org/story/140003/

boutons_deux
05-13-2009, 04:23 PM
Opinion

(http://www.facebook.com/sharer.php?u=http://www.truthout.org/051309L?print&t=Social%20Security:%20Downturn%20Does%20NOT%20Aff ect%20Long-Run%20Picture) (http://digg.com/submit?url=http://www.truthout.org/051309L?print&title=Social%20Security:%20Downturn%20Does%20NOT%2 0Affect%20Long-Run%20Picture&bodytext=&media=&topic=)[/URL] [URL="http://www.truthout.org/051309L"]Social Security: Downturn Does NOT Affect Long-Run Picture (http://buzz.yahoo.com/article/pub/http%253A%252F%252Fwww.truthout.org%252F051309L%25 3Fprint)

Tuesday 12 May 2009


by: Dean Baker | Visit article original @ The Center for Economic and Policy Research (http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/cepr-statement-on-social-security-trustees-report/)



The 2009 Social Security Trustees Report (http://salsa.democracyinaction.org/dia/track.jsp?v=2&c=%2BBRCkEquVAb3OMxVM5Vv%2FMqkuie1PAC2) shows a considerably worse short-run picture and slightly worse long-run picture than the 2008 report. In the short-run, the annual surplus of taxes over benefits is projected to be just $18.8 billion in 2009 and $18.3 billion in 2010. This compares with projected surpluses of taxes over benefits from the 2008 report of $87.1 billion for 2009 and $82.7 billion for 2010. (It is important to note that the Trust Fund is projected to collect $238 billion in interest on government bonds in these years, in addition to its tax revenue.)


It is not surprising that Social Security's annual financial picture deteriorates in a downturn. This is entirely predictable and in fact desirable. Social Security's tax revenues fall as workers lose their jobs.


Almost two-thirds of the reduced surplus this year is due to an unusually large cost-of-living increase for 2009. The latest adjustment accounts for last year's rise, but not the fall in oil prices. Though continuing benefits are automatically adjusted for inflation, this year Social Security will be paying a 6.9 percent larger real benefit to retirees, disabled workers and their families.


In this way the program provides income security to households and acts as an important stabilizing force in the economy. Social Security would be a much less effective program if its annual finances did not deteriorate when the economy went into a slump.


This short-term falloff in revenue has a relatively limited effect on the program's finances as indicated by the limited movement in the projected date of the Trust Fund's depletion (from 2041 to 2037) and the modest increase in the projected size of the 75-year shortfall (from 1.70 percent of payroll to 2.00 percent of payroll). The longer-term financial health of the program will be dependent on a series of factors about which we can only guess at this point.


First, we do not know whether the economy will sustain the accelerated rate of productivity growth from 1995-2005 period. The average annual rate of economy-wide productivity growth averaged 2.3 percent over this decade, far above the 1.7 percent growth rate assumed in the 2009 trustees report. If the economy can sustain this rate of productivity growth in the years following the recovery, then more than 30 percent of the projected shortfall would be eliminated.


The second key factor about which we have little knowledge at this point is the wage distribution. The upward redistribution of wage income in the years following the 1983 reforms substantially worsened the projected shortfall. In 1983, 90 percent of wage income fell under the Social Security cap. However, this had fallen to just 83 percent by the beginning of this decade.


It is possible that the events of the last two years will at least partially reverse this upward redistribution of income, most obviously by cutting salaries for the most highly paid workers in the financial industry. If the upward redistribution of the last quarter century were fully reversed, it would eliminate approximately one-third of the projected shortfall.


A third key factor will be the trend in health care costs. The trustees assume that there will be a growth in the gap between hourly compensation and wages of 0.2 percentage points a year. This is due to the projection that health care cost growth will continue to outstrip the rate of economic growth by a large margin. However, if health care reform succeeds in constraining costs to grow at the same rate as the economy (except for aging), then the gap between the rate of compensation growth and the rate of wage growth can be largely eliminated. This would reduce the size of the projected shortfall by approximately 10 percent.


In short, as a result of the economic collapse there is even more uncertainty than usual around the long-term projections. This is a good reason to put off for the moment any plans to substantially alter the program. Of course, it would be incredibly mean-spirited to propose cuts to those who are either retired or nearing retirement, since they have been the primary victims of the economic collapse.


Retirees and near retirees have lost more than $10 trillion in housing and stock wealth in the last two years. It would be incredibly malicious policy to amplify the impact of these losses by cutting Social Security benefits, especially since people in these age cohorts already paid for these benefits through their Social Security taxes.
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Dean Baker (http://www.cepr.net/content/view/80/80/) is the Co-director of the Center for Economic and Policy Research (http://www.cepr.net/). CEPR's Jobs Byte (http://www.cepr.net/index.php/data-bytes/jobs-bytes/unemployment-jumps-to-8.1-percent-as-job-loss-accelerates) is published each month upon release of the Bureau of Labor Statistics' employment report.


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Why cap SocSec at all?