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“The Austerity Trap”: What Raising The Medicare Eligibility Age Really Means

After a campaign in which Republicans attempted to pillory Barack Obama for finding $716 billion in savings from Medicare (via cuts in payments to insurance companies and providers but not cuts to benefits), those same Republicans now seem to be demanding that Obama agree to cuts in Medicare benefits as the price of saving the country from the Austerity Trap, a.k.a. fiscal cliff. Oh, the irony! You’d almost think that they weren’t really the stalwart defenders of Medicare they pretended to be.

And there are some hints that the Obama administration is seriously considering agreeing to raise the Medicare eligibility age from 65 to 67 as part of this deal. It’s a dreadful idea, and as we discuss this possibility, there’s one really important thing to keep in mind: Medicare is the least expensive way to insure these people. Or anybody, for that matter. In all this talk of the bloated entitlement system, you’d be forgiven for thinking Medicare was some kind of inefficient, overpriced big government program. But the opposite is true, and that’s why raising the eligibility age is such a dreadful idea.

Raising the eligibility age saves very little money, on the order of a few billion dollars a year. That’s because the 65 and 66-year-olds will have to get insurance somewhere, and many of them are going to get it with the help of the federal government, either through Medicaid or through the insurance exchanges, where they’ll be eligible for subsidies. However, since many Republican-run states are refusing to expand Medicaid in accordance with the Affordable Care Act, lots of seniors who live in those states will just end up uninsured, which will end up leading to plenty of financial misery and more than a few premature deaths. Put this all together, and the Center on Budget and Policy Priorities estimates that while the federal government would save $5.7 billion a year from raising the eligibility age, costs would increase by more than twice in other parts of the system—for the seniors themselves, employers, other enrollees in exchanges who would pay higher premiums, and state governments.

What we’d be doing is taking people off Medicare, the most efficient and inexpensive option for them to have insurance, and putting them into the individual market, which works less well and costs more. When we start talking about this in more detail, that’s what Republicans should really be forced to address.

If you want more details on the implications of raising the eligibility age, you should be reading Jonathan Cohn and Sarah Kliff. But it’s important that we keep the big picture in view as the Austerity Trap deal takes shape. If anything, we should be putting more people on Medicare—that would save money and improve health in the system overall (you may recall that when the ACA was being debated one of the proposals was to allow people over 50 to buy in to Medicare, an idea we should bring back). There’s an argument being made that raising the eligibility age may not be a good idea, but the administration has to give Republicans something, and it’s not that big a deal. If that’s the case that wins the day, we should be clear about exactly what it means: a more expensive health care system, exactly the opposite of what everybody says they want.

 

By: Paul Waldman, Contributing Editor, The American Prospect, December 10, 2012

December 11, 2012 Posted by | Health Care | , , , , , , , , | 1 Comment

“Focusing On The Wrong Things”: Why We Should Stop Obsessing About The Federal Budget Deficit

I wish President Obama and the Democrats would explain to the nation that the federal budget deficit isn’t the nation’s major economic problem and deficit reduction shouldn’t be our major goal. Our problem is lack of good jobs and sufficient growth, and our goal must be to revive both.

Deficit reduction leads us in the opposite direction—away from jobs and growth. The reason the “fiscal cliff” is dangerous (and, yes, I know—it’s not really a “cliff” but more like a hill) is because it’s too much deficit reduction, too quickly. It would suck too much demand out of the economy.

But more jobs and growth will help reduce the deficit. With more jobs and faster growth, the deficit will shrink as a proportion of the overall economy. Recall the 1990s when the Clinton administration balanced the budget ahead of the schedule it had set with Congress because of faster job growth than anyone expected—bringing in more tax revenues than anyone had forecast. Europe offers the same lesson in reverse: Their deficits are ballooning because their austerity policies have caused their economies to sink.

The best way to generate jobs and growth is for the government to spend more, not less. And for taxes to stay low—or become even lower—on the middle class.

(Higher taxes on the rich won’t slow the economy because the rich will keep spending anyway. After all, being rich means spending whatever you want to spend. By the same token, higher taxes won’t reduce their incentive to save and invest because they’re already doing as much saving and investing as they want. Remember: they’re taking home a near record share of the nation’s total income and have a record share of total wealth.)

Why don’t our politicians and media get this? Because an entire deficit-cutting political industry has grown up in recent years—starting with Ross Perot’s third party in the 1992 election, extending through Peter Petersen’s Institute and other think-tanks funded by Wall Street and big business, embracing the eat-your-spinach deficit hawk crowd in the Democratic Party, and culminating in the Simpson-Bowles Commission that President Obama created in order to appease the hawks but which only legitimized them further.

Most of the media have bought into the narrative that our economic problems stem from an out-of-control budget deficit. They’re repeating this hokum even now, when we’re staring at a fiscal cliff that illustrates just how dangerous deficit reduction can be.

Deficit hawks routinely warn unless the deficit is trimmed we’ll fall prey to inflation and rising interest rates. But there’s no sign of inflation anywhere. The world is awash in underutilized capacity As for interest rates, the yield on the ten-year Treasury bill is now around 1.26 percent—lower than it’s been in living memory.

In fact, if there was ever a time for America to borrow more in order to put our people back to work repairing our crumbling infrastructure and rebuilding our schools, it’s now.

Public investments that spur future job-growth and productivity shouldn’t even be included in measures of government spending to begin with. They’re justifiable as long as the return on those investments – a more educated and productive workforce, and a more efficient infrastructure, both generating more and better goods and services with fewer scarce resources – is higher than the cost of those investments.

In fact, we’d be nuts not to make these investments under these circumstances. No sane family equates spending on vacations with investing in their kids’ education. Yet that’s what we do in our federal budget.

Finally, the biggest driver of future deficits is overstated—rising health-care costs that underlie projections for Medicare and Medicaid spending. The rate of growth of health-care costs is slowing because of the Affordable Care Act and increasing pressures on health providers to hold down costs. Yet projections of future budget deficits haven’t yet factored in this slowdown.

So can we please stop obsessing about future budget deficits? They’re distracting our attention from what we should be obsessing about—jobs and growth.

 

BY: Robert Reich, The American Prospect, November 21, 2012

November 23, 2012 Posted by | Budget | , , , , , , , , | 1 Comment

“Life, Death And Deficits”: There Is No Good Case For Denying Older Americans Access To Medicare And Social Security

America’s political landscape is infested with many zombie ideas — beliefs about policy that have been repeatedly refuted with evidence and analysis but refuse to die. The most prominent zombie is the insistence that low taxes on rich people are the key to prosperity. But there are others.

And right now the most dangerous zombie is probably the claim that rising life expectancy justifies a rise in both the Social Security retirement age and the age of eligibility for Medicare. Even some Democrats — including, according to reports, the president — have seemed susceptible to this argument. But it’s a cruel, foolish idea — cruel in the case of Social Security, foolish in the case of Medicare — and we shouldn’t let it eat our brains.

First of all, you need to understand that while life expectancy at birth has gone up a lot, that’s not relevant to this issue; what matters is life expectancy for those at or near retirement age. When, to take one example, Alan Simpson — the co-chairman of President Obama’s deficit commission — declared that Social Security was “never intended as a retirement program” because life expectancy when it was founded was only 63, he was displaying his ignorance. Even in 1940, Americans who made it to age 65 generally had many years left.

Now, life expectancy at age 65 has risen, too. But the rise has been very uneven since the 1970s, with only the relatively affluent and well-educated seeing large gains. Bear in mind, too, that the full retirement age has already gone up to 66 and is scheduled to rise to 67 under current law.

This means that any further rise in the retirement age would be a harsh blow to Americans in the bottom half of the income distribution, who aren’t living much longer, and who, in many cases, have jobs requiring physical effort that’s difficult even for healthy seniors. And these are precisely the people who depend most on Social Security.

So any rise in the Social Security retirement age would, as I said, be cruel, hurting the most vulnerable Americans. And this cruelty would be gratuitous: While the United States does have a long-run budget problem, Social Security is not a major factor in that problem.

Medicare, on the other hand, is a big budget problem. But raising the eligibility age, which means forcing seniors to seek private insurance, is no way to deal with that problem.

It’s true that thanks to Obamacare, seniors should actually be able to get insurance even without Medicare. (Although, what happens if a number of states block the expansion of Medicaid that’s a crucial piece of the program?) But let’s be clear: Government insurance via Medicare is better and more cost-effective than private insurance.

You might ask why, in that case, health reform didn’t just extend Medicare to everyone, as opposed to setting up a system that continues to rely on private insurers. The answer, of course, is political realism. Given the power of the insurance industry, the Obama administration had to keep that industry in the loop. But the fact that Medicare for all may have been politically out of reach is no reason to push millions of Americans out of a good system into a worse one.

What would happen if we raised the Medicare eligibility age? The federal government would save only a small amount of money, because younger seniors are relatively healthy and hence low-cost. Meanwhile, however, those seniors would face sharply higher out-of-pocket costs. How could this trade-off be considered good policy?

The bottom line is that raising the age of eligibility for either Social Security benefits or Medicare would be destructive, making Americans’ lives worse without contributing in any significant way to deficit reduction. Democrats, in particular, who even consider either alternative need to ask themselves what on earth they think they’re doing.

But what, ask the deficit scolds, do people like me propose doing about rising spending? The answer is to do what every other advanced country does, and make a serious effort to rein in health care costs. Give Medicare the ability to bargain over drug prices. Let the Independent Payment Advisory Board, created as part of Obamacare to help Medicare control costs, do its job instead of crying “death panels.” (And isn’t it odd that the same people who demagogue attempts to help Medicare save money are eager to throw millions of people out of the program altogether?) We know that we have a health care system with skewed incentives and bloated costs, so why don’t we try to fix it?

What we know for sure is that there is no good case for denying older Americans access to the programs they count on. This should be a red line in any budget negotiations, and we can only hope that Mr. Obama doesn’t betray his supporters by crossing it.

By: Paul Krugman, Op-Ed Columnist, The New York Times, November 15, 2012

November 19, 2012 Posted by | Politics | , , , , , , , , | 2 Comments

“Promoting Untrue Choice”: Paul Ryan’s Health Care Proposal Would Shrink The Medicare Doctor Pool

The federal budget proposed by Representative Paul Ryan, the Republican vice-presidential nominee, extols the benefits of “promoting true choice” for Medicare beneficiaries.

In truth, though, the Ryan plan would substantially reduce choice for many people on Medicare — by cutting them off from their current doctors.

Doctors see Medicare patients, despite the relatively low payments they receive for doing so, partly because Medicare represents such a large share of the health-care market.

If a substantial number of beneficiaries moved out of Medicare and into private plans, as Ryan proposes, doctors would have much less incentive to see Medicare patients. And the elderly who want to remain in traditional Medicare would risk being stranded.

The evidence suggests that, in time, this problem could well affect a large share of Medicare beneficiaries. To put that evidence in context, though, it helps to first review the history of the Ryan plan.

The proposal has changed since it was presented in 2011. In the original version, traditional Medicare was eventually to be replaced in its entirety by private plans. The Congressional Budget Office found that this shift would raise health-care costs drastically because the private plans wouldn’t be large enough to enjoy Medicare’s leverage in negotiating prices with hospitals and other large providers. The savings that private plans could achieve because beneficiaries would share more of the costs, and therefore economize more, would be more than offset by that loss of leverage — and by the private plans’ higher overhead and need to turn a profit.

Ryan Revision

In response to the devastating CBO report, Ryan revised his proposal. Under Ryan 2.0, private plans would co-exist with traditional Medicare. (The CBO hasn’t fully evaluated the revised plan yet.)

Many supporters argue that the new plan can’t be as big a problem as the old one, since beneficiaries could always choose to remain in traditional Medicare. In health care, however, choice isn’t always innocuous — and can sometimes be harmful.

I have previously described two downsides to expanding private plans in Medicare. First, it would undercut Medicare’s ability to help move the payment system away from fee-for- service reimbursement and toward payments based on value, because no private plan is large enough to accomplish that shift by itself. Second, the mechanism for adjusting premiums to even out the health risks of individual beneficiaries is far from perfect, so plans can easily game the system, raising total costs. In effect, the plans would end up being overpaid.

The reduced choice of doctors for those who remain in traditional Medicare is a third adverse consequence of moving beneficiaries out of the program.

Currently, Medicare beneficiaries almost universally enjoy excellent access to doctors. And the great majority of beneficiaries never have to wait long for a routine appointment, the Medicare Payment Advisory Commission has found. Roughly 90 percent of doctors accept new Medicare patients.

Doctors provide this access even though they are reimbursed by Medicare at rates that are only about 80 percent of commercial rates — partly because Medicare is such a large share of the market. Which brings us to the concern about the Ryan plan.

Medicare Doctors

How important is Medicare’s market share in influencing physician participation? The evidence is limited, but the best study to date suggests it is significant. In the 1990s, Peter Damiano, Elizabeth Momany, Jean Willard and Gerald Jogerst, all associated with the University of Iowa, surveyed Iowa physicians and examined variation among counties. They found that for each percentage-point increase in the share of Medicare beneficiaries in a county’s population, doctors were 16 percent more likely to accept patients on Medicare. The only other study I know of on this topic, an unpublished analysis by Matthew Eisenberg of Carnegie Mellon University, also found an effect from Medicare’s market share, albeit one that was substantially smaller than the one Damiano and his colleagues found.

About 10 percent of the U.S. population is now enrolled in traditional Medicare, and an additional 5 percent has private Medicare plans. Let’s assume, for the sake of argument, that the Ryan plan would cause another 5 percent of the population to shift, and to be conservative let’s cut in half the Damiano estimate of the impact from that reduction in Medicare’s market share. Then the chance that a doctor is willing to see traditional Medicare patients would be expected to decline by a whopping 40 percent. The share of doctors accepting Medicare would fall from about 90 percent to 54 percent.

To be even more conservative, let’s average the reduced Damiano estimate (already been cut in half and applied only to today’s market share rather than the higher one that will exist in the future when more people are on Medicare) with the Eisenberg estimate. Still, about 20 percent of doctors would be expected to stop accepting Medicare patients.

Supporters of the Ryan approach might argue that fewer people would shift into the private plans, so the impact would not be that great. After all, the existing Medicare program already offers Medicare Advantage plans, so perhaps anyone who wants private insurance already has it. But then, what is the point of Ryan’s Medicare reform?

Another defense might be that the government could simply raise doctor-reimbursement rates to encourage providers to continue treating a shrinking population of traditional Medicare patients. And that’s true. However, Ryan has not included the extra cost in his budget.

So, which is it, Mr. Ryan? Will your plan cause Medicare beneficiaries to lose access to their doctors, or are your budget numbers too rosy because you haven’t counted the extra payments needed to keep doctors in the program?

 

By: Peter Orszag, Council on Foreign Policy, Business Insider, September 24, 2012

September 25, 2012 Posted by | Health Reform | , , , , , , , , | Leave a comment

Blame Greed, Not Obama For Rise In Health Insurance Premiums

It’s Obama’s fault

Isn’t everything? I can’t believe what I am hearing and reading. Insurance companies are raising their premiums and, of course, that is President Obama’s  fault. It’s that damn “Obamacare.” Ah, no, it isn’t.

Insurance companies have been raising their subscriber’s premiums  for  years before Mr. Obama was president; actually, even before he was “Senator Obama.”

I have a family plan to cover my husband and our two children; but I also own two small businesses and cover my employees’ healthcare at both companies. The large private PPO provider who I won’t name, but has  the color of the sky in their title (ahem), has increased my premiums for both group plans and my individual family plan at least once a year  for the past five  years. And when I phone them and ask why, they don’t have an answer. They certainly don’t say: It’s President Obama’s fault and the passage of the Affordable Care Act.

As a matter of fact, the president of Kaiser also stated that healthcare reform is not the reason for the increased premiums; at best,  it might contribute to 1 percent; so what is the other 99 percent?  What is the reason these insurance companies keep increasing our premiums?

How can healthcare reform increase our premiums? Due to the increased number of people being covered by the reform act (mostly children and  students who may remain on their parent’s plan), there are more people  purchasing plans, whether employers or employees, which actually brings more  money to those insurance companies. So why the increase?

Every time my plan has been increased, I have phoned to ask what additional benefits I am receiving for that cost increase; and every  time the answer is the same: none. When I ask why, no one knows. But I  know, it’s greed.

All, not some, all of the heads of these insurance companies earn millions of dollars a year in their paychecks. The insurance companies  are one  of the few in America not being negatively affected by our  economy. Don’t believe me? Check their stock prices, or  the stock  prices of most medical related companies for that matter.

Actually, the increase in premiums, whether a person has an HMO or a PPO, just helps to support the need not only for healthcare reform, but for further reform, specifically a public option.

These increases are proof that the public needs another option, an affordable option. And the mandate? That drives business to the  insurance companies, so they should be reducing the premiums. Insurance companies will say that many people are requesting a higher  deductible; of course we are, it’s a bad economy and most of us want to  pay less per month, taking the risk that we won’t end up in the E.R.  or need surgery, etc.

And according to my doctor-husband, that’s a big risk. He’s an orthopedic surgeon. Patients used to  come see him when they were in  pain—let’s say their knee hurt. Now they come when their bones are  sticking  out—when they’re chronic.

So the increased prices by the insurance companies should be blamed on the insurance companies. They  are hurting our healthcare system, doctors’ ability to provide proper care, and the economy as  well; especially when so many Americans head to the E.R. once they’re  chronic, which further bankrupts the system.

Bottom line—don’t  blame Obama. Blame the insurance companies. They’re the bad guys this time  around.

By: Leslie Marshall, U. S. News and World Report, September 29, 2011

September 30, 2011 Posted by | Affordable Care Act, Class Warfare, Congress, Conservatives, Consumers, Economic Recovery, GOP, Health Care Costs, Middle Class, Republicans, Right Wing, Teaparty | , , , , , , , | 1 Comment

   

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