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Medicare and Medicaid
Don't Be Fooled By Obama's New Debt Deal
Who knew “The Who” would be such prescient political philosophers? As the media swoons over Obama’s offer to cut Medicare spending and reign in the cost of Social Security (he’s soooo bipartisan!), I can’t help but be reminded of The Who’s “Won’t Get Fooled Again.”
“Change it had to come
We knew it all along
We were liberated from the fall, that’s all
But the world looks just the same
And history ain’t changed
‘Cause the banners, they all flown in the last war
…We don’t get fooled again!”
You’ll have to pardon their syntax, I think rock legends are allowed a little leeway when it comes to grammar, but those lyrics pretty much sum up exactly how I’m feeling about Obama’s newfound willingness to address entitlements: I won't get fooled again!
According to the Washington Post,
“Obama plans to argue that a rare consensus has emerged about the size and scope of the nation’s budget problems and that policymakers should seize the moment to take dramatic action.
As part of his pitch, Obama is proposing significant reductions in Medicare spending and for the first time is offering to tackle the rising cost of Social Security. The move marks a major shift for the White House and could present a direct challenge to Democratic lawmakers who have vowed to protect health and retirement benefits from the assault on government spending.”
First, let’s understand this “dramatic action” is probably more accurately described as “teensy weensy action.” According to the Washington Post story, the White House is now “seeking a plan that would slash more than $4 trillion in annual budget deficits over the next decade.” That sounds big, but not compared to the $46 trillion the Congressional Budget Office expects the federal government to spend over the next ten years.
Second, when it comes to Washington, never take the future for granted. As Senator DeMint told the Washington Times, “We agree we need immediate spending cuts, caps and entitlement reform, but that’s exactly what Washington did in the 90s when we were $5 trillion in debt. Now Gramm-Rudman is ignored, the entitlement reforms never materialized, and debt has exploded to over $14 trillion. Americans won’t be fooled again; they know none of these grand promises will ever happen unless we force Washington to do it with a balanced-budget amendment.”
In fact, recent history is littered with the carcasses of failed budget deals, in which spending reductions, and even entitlement reforms, are offered up in return for higher taxes. Inevitably, the result has been the same – the spending cuts never materialize, Congress loses its stomach for politically difficult reform, and the taxes stay the same.
Given that it is apparently big news that Obama has shown a willingness to cut Medicare, let’s take a glance back into history to search for parallels. Fortunately, it is not very difficult. Nearly every budget deal for the last 30 years has involved some tweaks to Medicare and Medicaid as a way to score big, but illusory, savings.
One of the most (in)famous was a 1990s deal between President Bill Clinton and Republican Congress called the Balanced Budget Act. Part of the compromise is the now infamous “doc fix” - an attempt to control the growth in Medicare spending. Except it never materialized. The law tied physician pay to increases in the economy, but since health care spending grew twice as fast as gross domestic product, the provision meant doctors faced huge pay cuts. This led to an annual ritual of complaining by the American Medical Association, Congress voiding the mandated cuts, and enormous growth in the size of the annual “doc fix” that must be dealt with.
The Obama cuts will be no different. He’s reportedly considering further reduction in payments to providers, cuts to support physician-training programs, and changes to Medicare’s prescription drug benefit. But when the politics become tough and when the lobbyists get cranking you can bet Washington will fold like a cheap suit.
The fact is, none of his proposed reforms can be guaranteed to take place beyond 2012 because there is no way to bind future Congresses; unless that is we pass a balanced budget amendment.
Until I see that, I, Like The Who, won’t be fooled again.1 Comments | Post a Comment | Sign up for NTU Action Alerts
Congress's Motto-Fix It in Post
If that isn't already Congress's motto, it should be. An AP story out today reports that due to a little-known provision in the health care bill that a "married couple could have an annual income of about $64,000 and still get Medicaid." An additional 3 million people could qualify for Medicare in 2014, and that worries Medicare's chief actuary. Others don't seem quiet so worried. According to the story:
A spokeswoman for the Senate Finance Committee, which wrote much of the health care law, said if the situation does become a problem there's plenty of time to fix it later.
"These changes don't take effect until 2014, so we have time to review all possible cases to ensure Medicaid meets its mission of serving only the neediest Americans," said Erin Shields.
It's one thing to digitally edit out a movie gaffe or rerecord a bit on inaudible dialogue, but wouldn't it make sense to know what the legislation that you're passing does before you pass it? It sounds a bit naive I know, but isn't that better than having to keep correcting the goofs in post?
HT: Demian Brady
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Ryan's Adult Conversation a Sharp Contrast to Dem's Mediscare Tactics
Recently, former President Bill Clinton warned Democrats that they were “going to have to be willing to give up, maybe, some short-term political gain by whipping up fears” about Medicare.
“Whipping up fears” is the nice way to say it. Given that Democrats recently came out with a political ad depicting a Paul Ryan-esque figure literally throwing an elderly woman off of a cliff, scaring the ever-living-bejesus is probably a more apt way to describe it.
Such partisan demagoguery makes a mockery of the very real problem we face. It’s based on a calculation that emphasizes the short-term political success of their party over the long term financial well being of our program.
Fortunately, Republicans are taking a different tack. In a new video: Saving Medicare: Visualized, Ryan ignores the impulse to treat voters as children, opting instead to have an adult conversation about the unsustainable trajectory of Medicare spending and its impact on our debt. Unlike the cheap gimmick of throwing grannie off a cliff, Ryan’s video evokes fear based in reality – that without reform Medicare will bankrupt our country.
In an op-ed in today’s Wall Street Journal, Thomas Saving and John Goodman, a former Medicare trustee and the President of the National Center for Policy Analysis respectively, unveil just how unsustainable the Democrats’ vision for Medicare is. Recently, House Minority Leader Nancy Pelosi said Democrats have already “[given] the blueprint for how we strengthen Medicare in the Affordable Care Act.” But Saving and Goodman argue that any “strengthening” was nothing more than a parlor trick.
“In terms of the sheer dollars involved,” they argue, “the law’s reduction in future Medicare payments is the equivalent of raising the eligibility age for Medicare to age 68 for today's 65-year-olds, to age 71 for 55-year-olds and to age 74 for 45-year-olds. But rather than keep the system as is and raise the age of eligibility, the reform law instead tries to achieve equivalent savings by paying less to the providers of care.”
Once you leave the fantasyland of the written page, paying less to providers will have enormous real world consequences. Reduced payment rates will reduce the amount of doctors who will accept Medicare patients, making it harder for seniors to find a doctor. Once admitted, they will likely face reduced amenities, a lower level of care, and reduced treatment options.
The fact is, there is just no getting around the absolute need to reform Medicare. Democrats can continue to ignore the problem and choose to maximize their political gain by preying on the fears of older voters. But with America teetering on the edge of financial ruin, how much longer can they afford to play these games? After all, what good is winning an election, if you have to force the nation into default to do it?0 Comments | Post a Comment | Sign up for NTU Action Alerts
Despite Clinton's Warnings, Democrats Demagogue Medicare Reform
Many Democrats are wrongfully hailing the New York special election as a critical victory over Rep. Paul Ryan’s Medicare reform plan. They’re beginning to see how Medicare demagoguery and scare tactics could be a potent recipe for winning big in the 2012 elections. But at what cost?
That’s the question that former President and respected thinker Bill Clinton has apparently been asking himself. Speaking yesterday at a fiscal summit hosted by the Peter Peterson Foundation, Clinton said, “I think the Democrats are going to have to be willing to give up, maybe, some short-term political gain by whipping up fears on some of these things – if it’s a reasonable Social Security proposal, a reasonable Medicare proposal. We’ve got to deal with these things. You cannot have health care devour our economy.”
Sadly, thus far Democrats have appeared either unwilling or unable to look past the 2012 elections, regardless of the disastrous long-term consequences that might entail. Take Senate Majority Leader Harry Reid who used his time on the Senate floor to say, “The Republican plan to kill Medicare is a plan to make the rich richer and the sick sicker.”
Quotes like that seem to confirm President Clinton’s fears about his party’s misreading the New York tea leaves. In a candid conversation caught by ABC News, Clinton was overheard telling Ryan “I’m glad we won this race in New York, [but] I hope Democrats don’t use this as an excuse to do nothing.”
Nothing appears to be exactly what Democrats plan to do. When asked what her plan was for Medicare, House Minority Leader Nancy Pelosi responded, “It is a flag we’ve planted that we will protect and defend. We have a plan. It’s called Medicare.” In other words, their plan to reform Medicare, is, well, to leave it alone.
Although that may be good politics in the short-term, it would represent a financial disaster in the long-term, threatening the existence, much less the benefit levels, of the Medicare program liberals are claiming to be such stalwart advocates of. According to the 2011 Medicare Trustees’ report, the Hospital Insurance trust fund will run out in 2024, five years earlier than last projected. In addition the report argues that the Democrats’ Patient Protection and Affordable Care Act has done little to improve Medicare’s actuarial future. The report states,
“By the end of thelong-range projection period, Medicare prices . . . would be less than half of their level under the prior law. Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees. . . Well beforethat point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result.”
Is that really the future that Democrats want to fight for tooth and nail?
After Rep. Ryan expressed how disheartened he was that the New York race would likely lead to paralysis for his plan, President Clinton said that Ryan should “give me a call.” I don’t think it’s Ryan who needs the talking to. Unfortunately, it’s the Democrats who need a talkin-to.1 Comments | Post a Comment | Sign up for NTU Action Alerts
Liberal Plan for Deficit? How About a 40% Tax Hike
Unsurprisingly, it was that last line that caused the uproar. In response, Douthat did some math and found that if the CBO’s projections come true (revenues jump from 18 to 23 percent of GDP) an average family of four’s payroll and income tax burden would jump from 15 to 25 percent. The marginal tax rate on labor income would rise from 29 percent to 38 percent. “Such unprecedented levels of taxation,” Douthat argues, “would throw up hurdles to entrepreneurship, family formation and upward mobility.”
Drum didn’t wait long before punching back. In a post from yesterday, he pointed to the fact that “The federal tax take was around 20% of GDP during the Clinton era.” Using this as a reference point he argues that letting the Bush tax cuts expire and then raising tax rates by an additional four or five GDP points wouldn’t “be wildly oppressive.”
There are numerous problems with Drum’s latest attempt to pull himself out of the intellectual hole he has dug. Most prominent among them is his odd choice of reference point. Although it is true that tax revenue did rise to 20 percent of GDP under Clinton, it is not, as Drum would have us believe, a case where policymakers can snap their fingers and have revenues soar. Tax revenues are much more closely tied to the performance of the economy than with tax rates. As Megan McArdle pithily notes, “saying ‘all we have to do is go back to the tax rates under Clinton’ is effectively saying ‘all we need is another asset price bubble that funnels a huge amount of money into the pockets of the rich.’” McArdle points out that if we exclude the height of the stock market (or, if you prefer, the dot-com) bubble, the average tax revenue take under Clinton was around 18.5 percent.
We also have to dispute Drum’s notion that a tax hike of 5-6% of GDP isn’t “wildly oppressive,” an argument much akin to the initial flash-point of this debate, his assertion that tax levels of 25 percent “just isn’t that much.” While such throw-away editorializing may work on a blog, in reality, such tax hikes would dramatically increase tax burdens for the average American.
Since World War II, the traditional demarcation line given the emergence of the modern welfare state, government revenues have hovered just around 18 percent of GDP. Much to liberal’s chagrin, even with the continuation of the Bush-era tax cuts, the United States will collect about 18 percent of GDP as the economy recovers.
So the problem is not revenues have suddenly plummeted, it’s that government spending will dramatically spike. While NTU firmly believes that we mustn’t the burden of Washington’s largesse on the backs of taxpayers and should instead find ways to curb the growth in government spending, liberals like Drum believe we should raise taxes to 25 percent of GDP. They phrase their planned tax hike smartly, saying revenues need to go up by 7 percent of GDP. But this obfuscates the reality for the average taxpayer. Using an 18 percent baseline, a 7 percent GDP increase, would mean that everyone’s taxes would have to go up by around 40 percent. And that huge revenue grab doesn’t buy us anything new, it’s solely to maintain entitlements as they are presently structured!
This online debate may go on forever. Drum even admits that “a lot of our disagreement is simply irreconcilable.” But let’s hope our representatives in Washington are not so ideologically stubborn. Let’s hope they don’t believe a 40 percent across the board tax hike “just isn’t that much.” Because it is that much. It would mean a fundamentally different life for the average American.1 Comments | Post a Comment | Sign up for NTU Action Alerts
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You can learn more about possible entitlement reform options by watching videos from NTUF's reform panel on our YouTube channel.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Comments on Alice Rivlin’s Entitlement Reform Testimony
The Brookings Institution’s Senior Fellow Alice Rivlin prepared testimony for the House Committee on the Budget -- one of the centers for entitlement reform and debate. She presented ways to reform Social Security, Medicare, and Medicaid while reducing the federal deficit. The views and options she expressed were the recommendations of the Bipartisan Policy Center’s Task Force on Debt Reduction (Domenici-Rivlin). Below, I highlight a few points that particularly struck me.
Medicare: As a member of the President’s Debt Commission, she worked with Congressman Paul Ryan (WI-1) to produce the Rivlin-Ryan Plan. Touted by panelists at NTUF’s Moving Forward on Entitlements event, Medicare would be remade into a voucher program. After 2020, new enrollees would receive fixed health care-related contributions at a growth rate of GDP plus one percent. Much like Congressman Ryan’s Roadmap, the plan would greatly increase Medicare’s longevity.
“The Affordable Care Act includes important provisions aimed at improving health outcomes and reducing cost growth: authorizing Medicare to contract with accountable care organizations on the basis of shared savings and value-based payments to providers; pilot projects to try out other payment reforms; ... . However, the impact and timing of these efforts is still uncertain.”
The Patient Protection and Affordable Care Act (PPACA), otherwise known as Obamacare, greatly increased the bureaucratic weight on the health care system. To help offset some of the pressure, accountable care organizations -- “a provider organization that takes on responsibility for meeting the health needs of a defined population” a.k.a. HMOs under government control -- are said to save money while increasing health care efficiency. However, this is a very optimistic outlook. To assume a new level of control of care, charged with ensuring quality and lower cost curves, is to institutionalize quality. Ask Medicaid how that turned out.
Pilot programs under PPACA may not have the results many proponents of Obamacare would hope. In improving quality and prices through such programs, many of the factors leading to success are oft times difficult, if not impossible, to replicate in other cities, states, or regions. NCPA’s John Goodman has explored pilot programs and their seemingly random success rates. I am not branding pilot programs as useless but they ought to be used in targeted instances with realistic measures of success. The general provisions used in PPACA open a door for pilot programs to become legacy government efforts, not to improve health care.
I agree with many of the reforms Rivlin proposed for Medicaid. Many of the problems occur because the give and take of “dual eligibilities” -- low-income earners receiving both Medicare and Medicaid -- and the shared financing system between state and federal governments. Many states are given larger shares per capita than others because they have learned to game the system. Rivlin goes on to say, “states could be given more leeway to design their own programs, either through block grants… or through waivers under the existing program.” By cutting out the federal bureaucracy, states would get medical care funds to those who need it more quickly.
Rivlin’s stance on Social Security reform is a mixed bag. She calls for a “change in the calculation of annual cost-of-living adjustments for benefits to more accurately reflect inflation” and to “slightly reduce the growth in benefits… for approximately the top 25 percent of beneficiaries” (otherwise known as means testing). Both measures would bring more accurate cost controls, while maintaining benefits for which the program was originally intended.
However, her last point concerned me the most: “The Task Force plan would cover newly hired state and local government workers under the Social Security system, beginning in 2020, to increase the universality of the program.” Certain government employees can opt out of the system in favor of their own group pension plans, which often are more successful than Social Security. By bringing more people into the system, a short-term cash infusion would result but, if no systemic reform occurs, they would end up in precarious situations similar to current beneficiaries.1 Comments | Post a Comment | Sign up for NTU Action Alerts
Harvard economist Jeff Miron presented his realistic goals for truly fixing what Obamacare has failed to do: reducing health care costs while providing more Americans with quality health insurance. In the video below, presented by the Institute for Humane Studies Learn Liberty initiative, Miron delves into the complex issues facing taxpayers across the country, using commonsense solutions we can all understand.
Throw away the notion that health care is a right: By branding health care as a right, we are led to believe in giving any health care to anyone who wants it without the need to pay for it. Much like our entitlement system today, everyone on the system would demand all they health care they can get because there is no accountability of personal cost. More demand leads to evermore spending and still more taxing of American workers.
Repeal Obamacare: Many of the proposed initial savings of the Patient Protection and Affordable Care Act are largely derived from cuts in current government medical programs, like Medicare. This kind of budget fixing was reported by the Congressional Budget Office as a net decrease in spending outlays but does not take into account the increased demand resulting from the free-ridership in point one (not to mention the decreased tax revenue, as CBO assumes it will increase over time). Miron says it perfectly, “thinking that expanding coverage reduces the deficit is just completely insane.”
Phase out Medicare: As one form of entitlement reform (see NTU Foundation’s panel discussion on fixing Social Security, Medicare, Medicaid, and pensions), people on Medicare don’t have an incentive to be selective with the care they receive because they pay so little for the care. The program creates price and resource distortions in the market, making costs higher for those on regular plans and ratcheting up the mandatory spending of the government. Miron says taking care of the people most in need (people in poverty with no employment and no medical coverage at all) is not out of the question. It is taking care of people who can afford health plans that doesn’t make sense. Getting rid of the Medicare system would help the quality and cost of health care, the tax burden of American taxpayers, and the recovering economy.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Virginia Beach Taxpayers to Discuss "Boomergeddon"
Have an interest in fiscal issues and need something to do this Saturday? The Virginia Beach Taxpayer Alliance is hosting James Bacon, author of Boomergeddon. The meeting is at the Marian Manor Retirement Center's Terrace Room. Breakfast begins at 8:30 a.m. and is $3 per person. A meeting follows at 9:00 a.m. For additional details, contact Robert Dean (robertkdean @ cox.net).0 Comments | Post a Comment | Sign up for NTU Action Alerts