“The Medicare Miracle”: Everything The Usual Suspects Have Been Saying About Fiscal Responsibility Is Wrong
So, what do you think about those Medicare numbers? What, you haven’t heard about them? Well, they haven’t been front-page news. But something remarkable has been happening on the health-spending front, and it should (but probably won’t) transform a lot of our political debate.
The story so far: We’ve all seen projections of giant federal deficits over the next few decades, and there’s a whole industry devoted to issuing dire warnings about the budget and demanding cuts in Socialsecuritymedicareandmedicaid. Policy wonks have long known, however, that there’s no such program, and that health care, rather than retirement, was driving those scary projections. Why? Because, historically, health spending has grown much faster than G.D.P., and it was assumed that this trend would continue.
But a funny thing has happened: Health spending has slowed sharply, and it’s already well below projections made just a few years ago. The falloff has been especially pronounced in Medicare, which is spending $1,000 less per beneficiary than the Congressional Budget Office projected just four years ago.
This is a really big deal, in at least three ways.
First, our supposed fiscal crisis has been postponed, perhaps indefinitely. The federal government is still running deficits, but they’re way down. True, the red ink is still likely to swell again in a few years, if only because more baby boomers will retire and start collecting benefits; but, these days, projections of federal debt as a percentage of G.D.P. show it creeping up rather than soaring. We’ll probably have to raise more revenue eventually, but the long-term fiscal gap now looks much more manageable than the deficit scolds would have you believe.
Second, the slowdown in Medicare helps refute one common explanation of the health-cost slowdown: that it’s mainly the product of a depressed economy, and that spending will surge again once the economy recovers. That could explain low private spending, but Medicare is a government program, and shouldn’t be affected by the recession. In other words, the good news on health costs is for real.
But what accounts for this good news? The third big implication of the Medicare cost miracle is that everything the usual suspects have been saying about fiscal responsibility is wrong.
For years, pundits have accused President Obama of failing to take on entitlement spending. These accusations always involved magical thinking on the politics, assuming that Mr. Obama could somehow get Republicans to negotiate in good faith if only he really wanted to. But they also implicitly dismissed as worthless all the cost-control measures included in the Affordable Care Act. Inside the Beltway, cost control apparently isn’t considered real unless it involves slashing benefits. One pundit went so far as to say, after the Obama administration rejected proposals to raise the eligibility age for Medicare, “America gets the shaft.”
It turns out, however, that raising the Medicare age would hardly save any money. Meanwhile, Medicare is spending much less than expected, and those Obamacare cost-saving measures are at least part of the story. The conventional wisdom on what is and isn’t serious is completely wrong.
While we’re on the subject of health costs, there are two other stories you should know about.
One involves the supposed savings from running Medicare through for-profit insurance companies. That’s the way the drug benefit works, and conservatives love to point out that this benefit has ended up costing much less than projected, which they claim proves that privatization is the way to go. But the budget office has a new report on this issue, and it finds that privatization had nothing to do with it. Instead, Medicare Part D is costing less than expected partly because enrollment has been low and partly because an absence of new blockbuster drugs has led to an overall slowdown in pharmaceutical spending.
The other involves the “sticker shock” that opponents of health reform have been predicting for years. Bulletin: It’s still not happening. Over all, health insurance premiums seem likely to rise only modestly next year, and they are on track to be flat or even falling in several states, including Connecticut and Arkansas.
What’s the moral here? For years, pundits and politicians have insisted that guaranteed health care is an impossible dream, even though every other advanced country has it. Covering the uninsured was supposed to be unaffordable; Medicare as we know it was supposed to be unsustainable. But it turns out that incremental steps to improve incentives and reduce costs can achieve a lot, and covering the uninsured isn’t hard at all.
When it comes to ensuring that Americans have access to health care, the message of the data is simple: Yes, we can.
By: Paul Krugman, Op-Ed Columnist, The New York Times, August 31, 2014
“The Entitlement Of The Very Rich”: Gutting Social Security And Medicare Far More Unthinkable Than Not Reauthorizing Ex-Im Bank
The very rich don’t think very highly of the rest of us. This fact is driven home to us through fluke events, like the taping of Mitt Romney’s famous 47 percent comment, in which he trashed the people who rely on Social Security, Medicare, and other forms of government benefits.
Last week we got another opportunity to see the thinking of the very rich when Jeffrey Immelt, the CEO of General Electric, complained at a summit with African heads of state and business leaders that there is even an argument over the reauthorization of Export-Import Bank. According to the Washington Post, Immelt said in reference to the Ex-Im Bank reauthorization, “the fact that we have to sit here and argue for it I think is just wrong.”
To get some orientation, the Ex-IM Bank makes around $35 billion a year in loans or loan guarantees each year. The overwhelming majority of these loans go to huge multi-nationals like Boeing or Mr. Immelt’s company, General Electric. The loans and guarantees are a subsidy that facilitates exports by allowing these companies and/or their customers to borrow at below market interest rates.
As a practical matter, whether the bank is reauthorized or not will have no noticeable impact on the economy. If the government took away the subsidy on this $35 billion in exports, it would probably lead to a decline of between 10 and 30 percent in these exports ($3.5 billion to $10.5 billion), while costing Boeing, GE, and the rest some of their profit margin on the portion they continued to export.
The loss of exports would be in the range of 0.2 percent to 0.5 percent of total exports or 0.02 percent to 0.06 percent of GDP. (This assumes that none of the exports include imported parts, which is obviously not the case.) In short the impact on the economy of ending the subsidies from the Ex-Im Bank would be almost invisible.
If the folks pushing for the Ex-Im Bank reauthorization were really concerned about jobs created through trade, we could generate far more jobs with even a modest decline (e.g. 1 percent) of the dollar against other currencies. This would make our exports cheaper to people in other countries and would reduce the price of domestically produced goods relative to imports, thereby leading consumers to purchase more U.S. made goods.
While ending the Ex-Im Bank would have little impact on trade and jobs it would be a big deal to Mr. Immelt’s company and presumably to Mr. Immelt’s compensation. Therefore it is not surprising that he might find it “just wrong” that we should even have to argue about it.
For some additional context, it is worth noting that Mr. Immelt is one of the members of the Peter Peterson initiated group, Fix the Debt. In that capacity he has gone around the country arguing for the need to cut Social Security and Medicare benefits. So we have someone who makes $25 million a year, at least in part from taxpayer handouts, who runs around the country complaining about retired workers getting $1,300 a month from Social Security, whining because he has to argue to continue the handouts he receives.
It would be nice if Immelt were just another crazed one percenter who had no credibility outside of his country club, however this is not the case. It was not an accident that Mr. Immelt was at this summit. He is a highly respected business leader and apparently is close enough to president Obama to have been made head of his Council on Jobs and Competitiveness.
The reality is that the Immelts of the world are able to put muscle behind their sense of entitlement because politicians need their campaign contributions to be credible candidates. For this reason, they are almost certain to secure the reauthorization of the Ex-Im Bank, which has the support of most of the leadership of both parties.
The rest of us just have our votes. But if the public has a clear understanding of the agenda of the Immelts of the world, and their political allies, it will be better positioned to protect the entitlements that workers depend on and have paid for. Gutting Social Security and Medicare should be far more unthinkable than not reauthorizing the Ex-Im Bank.
By: Dean Baker, Co-Director, CEPR; The Hufington Posst Blog, August 12, 2014
“Laying It All Out On Medicare”: No Mistaking Paul Ryan’s Policy
The release of a new Paul Ryan budget plan is always the occasion for a lot of ridicule from liberals, for a whole bunch of reasons, and this year’s will be no different. Ryan’s budgets always manage to combine a remarkable cruelty toward poor people with a sunny optimism that draconian cuts to social services will result in a veritable explosion of economic growth, allowing us to balance the budget without taking anything away from the truly important priorities (like military spending) or, heaven forbid, forcing wealthy people to pay more in taxes.
I’m sure there are other people preparing detailed critiques of the Ryan budget, but I want to focus on one thing this brings up: the question of how we talk about Medicare. As he has before in his budgets, Ryan proposes to repeal the benefits of the Affordable Care Act, like subsidies for middle-class people to buy insurance and the expansion of Medicaid, but he’d keep the tax increases and Medicare cuts that the bill included in order to pay for it all, which helps him achieve his “balanced” budget.
Yes, it’s true that when Ryan was running for vice president, he joined Mitt Romney in condemning those very Medicare savings. But nobody really believed he was doing anything at the time but being a team player. So we can give him credit for taking at least a step toward putting his money where his mouth is on Medicare. Sure, it may be couched in some misleading words (the document refers to “strengthening Medicare” no fewer than ten times), but there’s no mistaking the policy.
Because the rest of his party is, to put it kindly, of two minds when it comes to the program. On one hand, they will tell you, Medicare is unsustainable, a ravenous beast that will devour the entire nation’s financial well-being if we don’t find a way to suppress its appetite. In Washington-speak, this is translated as “doing something about entitlements.” We have to Do Something About Entitlements! If you don’t want to Do Something About Entitlements, you’re just not serious about our nation’s fiscal challenges.
On the other hand, Republicans believe that Medicare is utterly sacrosanct, a jewel whose every facet is so perfect that even the most modest attempt to curtail its costs should be met with howls of anguish and outrage. Or at least that’s what they believe at election time, when they’ll air one ad after another condemning Democrats for cutting the Medicare seniors so desperately need. Democrats all over the country have been subjected to ads saying, “Congressman Fnurbler voted to cut $716 billion from Medicare!” over a picture of an elderly couple sitting at the kitchen table, looking over their bills with an engulfing despair, then meeting each other’s eyes in a tragic look that says, “Thanks to Congressman Fnurbler, all is lost. If only we had been able to pay our gas bill so we could stick our heads in the oven and end it all right now.”
Republicans are so deeply opposed to the idea of cutting Medicare that they can’t even stomach anyone trying to see if Medicare is spending its money wisely. Mention the Independent Payment Advisory Board, a component of the ACA that was designed to restrain Medicare costs if they rose too fast, and steam will come out of their ears. (The IPAB would make recommendations to Congress on ways to save money, and Congress would have to act on them. But since Medicare spending has slowed dramatically in the last couple of years, the requirement has yet to kick in, and President Obama hasn’t bothered to appoint anyone to what is still a theoretical board.) They waged a virtual war on comparative effectiveness research, effectively saying that it was dangerous to even ask which competing treatments work well and which don’t.
In other words, most Republicans believe we must, must, must reduce the cost of Medicare—excuse me, Do Something About Entitlements—but are adamantly opposed to every step that has been taken to reduce the cost of Medicare. I’m sure that lots of them are sympathetic to Ryan’s vision, which is to essentially turn the program into a voucher system, in which the government helps you buy private insurance, and over time costs magically go down (and if you’re thinking that sounds a lot like what people are getting on the Obamacare exchanges, any Republican will tell you that it’s totally different because freedom).
So let’s give Paul Ryan some credit. Sure, his numbers might not add up. But when he puts out a budget, there’s no mystery about where he’s coming from and what he wants to do.
By: Paul Waldman, Contributing Editor, The American Prospect, April 1, 2014
“The Insurance Company Bailout That Republicans Love”: The GOP Has Found A Way To Be Even More Hypocritical Than Before
Remember when Republicans found insurance company bailouts outrageous? Good, because the Republicans don’t.
On Friday, the Obama Administration announced proposed payment rates for Medicare Advantage plans, the private insurance option within Medicare. The federal government pays insurers a fixed fee for each senior they enroll. The program’s goal is to provide seniors with more options and, ideally, foster competition that will lead to better management of care both within the traditional program and for those who get private insruance instead. But, for a long time, experts have said the federal government is actually paying the insurers too much—in other words, more than it costs to provide the same coverage through traditional Medicare.
In the late 1990s, when the program was known as “Medicare+Choice,” the Clinton Administration attempted to rectify this by reducing insurer fees. But experts subsequently found the government was still paying the plans too much, so the Obama Administration and its allies included additional Medicare Advantage cuts in the Affordable Care Act—leaving discretion over the exact rates to the Department of Health and Human Services and its actuaries. On Friday, HHS revealed its calculations for next year’s rates, based in part on projections for how health care spending for the country as a whole is changing.
The payment formula is complicated and even now, with a weekend to digest the announcement, analysts aren’t entirely sure how insurers would react and what that would mean for seniors in the plans. (As Phil Galewitz of Kaiser Health News reports, many independent experts seem to think the effects would be pretty minimal.) But insurers, who say better benefits account for whatever extra funds they get, have warned that cuts of virtually any magnitude will force insurers to offer less generous benefits, charge higher premiums, or withdraw from the program altogether—as some of them did in the late 1990s, following those cuts the Clinton Administration implemented. The insurers are lobbying the administration to use its discretion to reduce the cuts or, ideally, eliminate them altogether. If you live in Washington and have seen those ubiquitous “Seniors are Watching” advertisements on billboards and buses, you have some idea of how strongly the insurers feel about this.
But insurers aren’t the only ones making a fuss. Republicans are too—and they have been for a while. As you may recall, Republicans pounced on the new Medicare Advantage cuts as proof that Obamacare was bad for seniors—in the 2010 midterms and then, again, in the 2012 presidential election. It was pure political gold, since seniors (particularly white seniors) were among those most skeptical of Obama and his health care law in the first place. Of course, House Republicans voted for the very same cuts when Paul Ryan’s budgets had them. But that didn’t stop Republicans from attacking the cuts then—and it’s not stopping them now. “ObamaCare has already caused millions to lose the healthcare plans they liked, and now it is directly harming seniors who rely on the care they have through Medicare Advantage,” Eric Cantor, the House Majority Leader, said on Friday. “Our nation’s grandparents should not have to wake up tomorrow worried they no longer can access the care they want because of Obamacare.”
With this latest salvo, however, Republicans have actually found a way to be more hypocritical than before. For the last few weeks, Republicans and their allies have been in high dudgeon about Obamacare’s so-called risk corridor program, in which the federal government will subsidize insurers that take heavy losses for the next three years. Republicans and their allies have decried risk corridors as a “taxpayer bailout” of the insurers. But the policy justification for risk corridors is straightforward and, even to some conservatives, incontrovertible: They will ease the transition to a newly regulated insurance market, so that it’s possible to provide universal coverage through a system of private plans. And unlike the additional Medicare Advantage payments, the risk corridor program might actually end up being a net boon to the taxpayers, since the government also shares in unexpected insurer gains. (The Congressional Budget Office has actually predicted as much, though, as with many such projections, there’s a lot of uncertainty there.)
Maybe Republicans think that’s insufficient reason to pay the Obamacare insurers money—fine. But then how can they simultaneously insist government keep paying higher fees to Medicare insurers, given the case for them is a lot more dubious?
Congressional Democrats haven’t exactly covered themselves in glory over this issue. New York Senator Charles Schumer was among the Democrats who signed a bipartisan letter to HHS, urging the administration not to harm beneficiaries with payment reductions, though the senators stopped short of calling for outright reversal of the cuts. But the current Republican position makes no sense whatsoever, unless the GOP’s real priorities are (a) opposing anything the Obama Administration supports (b) sucking money away from the traditional, government-run Medicare program (c) stopping programs and spending that benefits the non-elderly uninsured. Readers can decide for themselves which of those explanations make the most sense—or whether, perhaps, it’s all of the above.
By: Jonathan Cohn, The New Republic, Fenbruary 24, 2014
“Didn’t See That One Coming”: How Paul Ryan Helped Save Medicare And Social Security By Trying To Gut Them
President Obama’s new budget will not include a proposal to implement “chained CPI” to slow the growth of Social Security benefits, according to White House officials.
And there’s one man who deserves most of the credit for making sure there will be no cuts to benefits to seniors until at least 2017 — ironically the politician who has worked the hardest to reduce the promises made to America’s retirees — Rep. Paul Ryan (R-WI).
The president had included the reform measure in his 2013 budget as an attempt to provoke a so-called Grand Bargain with House Republican leaders. Such a deal would have required them to end some tax breaks for the rich. That was never going to happen and the White House’s acceptance of this fact helps focus the 2014 elections on votes most Republicans in Congress have taken in the past to cut both Social Security and Medicare, thanks to Paul Ryan.
The chairman of the House Budget Committee’s first budget plan in 2011 not only privatized Social Security — a proposal that President George W. Bush could not even get a vote on when the GOP controlled both houses of Congress — it remade Medicare into a voucher program that radically shifted the financial burden to seniors without doing much to reduce the overall cost of health care. The plan was so popular — at least with Republican donors — that it instantly made Ryan a national hero and possible presidential candidate.
The chances of enacting the plan with President Obama in office were zero, but Ryan, buoyed by his new stardom, helped guide House Speaker John Boehner (R-OH) into a debt-limit crisis that shook global markets still dizzy from the financial crisis. House Republicans demanded a dollar in cuts for every dollar the debt ceiling was raised and President Obama obliged with a plan that not only included chained CPI, but also raised the Medicare eligibility age. To sell this plan to Democrats, the president demanded a small percentage of new revenues by ending tax breaks on upper-income Americans.
Boehner was about to make the deal, when Ryan “dropped a bomb” on it, fearing it would guarantee Obama’s re-election. Instead both sides settled on the sequester.
Ryan released another budget in 2012 that dropped Social Security privatization and added a public option to his Medicare plan. Desperate for Tea Party credibility, Mitt Romney selected Ryan to be his running mate after being forced to embrace the congressman’s budget during the primary. Together, the two men re-elected the president.
After Obama’s re-election, Speaker Boehner reportedly tried to take the offer Ryan had rejected in 2011. The president told him it was off the table, and likely will be for the rest of his term unless Republicans consider higher taxes on the rich, which they won’t.
In the past two years, the deficit has been cut in half and is projected to be even lower within 10 years as a share of GDP than if the Simpson-Bowles debt plan or Paul Ryan’s first budget had become law. If the reforms to Medicare implemented in the Affordable Care Act continue to slow the growth of costs as they have since 2010, our long-term debt crisis may be solved, despite Paul Ryan’s best efforts.
By: Jason Sattler, The National Memo, February 20, 2014
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