Free Markets, Free People

Medicare

Your Sunday Morning Wakeup

Bruce Bartlett gives you a different way of looking at the mess your political leaders, over a number of generations, have gotten us into and what it will cost, at a minimum, to fulfill the promises they’ve made over the decades.

To summarize, we see that taxpayers are on the hook for Social Security and Medicare by these amounts: Social Security, 1.3% of GDP; Medicare part A, 2.8% of GDP; Medicare part B, 2.8% of GDP; and Medicare part D, 1.2% of GDP. This adds up to 8.1% of GDP. Thus federal income taxes for every taxpayer would have to rise by roughly 81% to pay all of the benefits promised by these programs under current law over and above the payroll tax.

Since many taxpayers have just paid their income taxes for 2008 they may have their federal returns close at hand. They all should look up the total amount they paid and multiply that figure by 1.81 to find out what they should be paying right now to finance Social Security and Medicare.

To put it another way, the total unfunded indebtedness of Social Security and Medicare comes to $106.4 trillion. That is how much larger the nation’s capital stock would have to be today, all of it owned by the Social Security and Medicare trust funds, to generate enough income to pay all the benefits that have been promised over and above future payroll taxes. But the nation’s total private net worth is only $51.5 trillion, according to the Federal Reserve. In effect, we have promised the elderly benefits equal to more than twice the nation’s total wealth on top of the payroll tax.

We again have a new crop of political leaders making similar promises about a range of things, from energy to the environment to health care. Look at what they’ve done with the portion of health care they were given previously?

Someone – anyone – tell me how, given the performance of government to this point with Medicare and Medicaid, it is going to provide lower cost health care when it is obvious that it has been instrumental in doing just the opposite?

For some reason, I just can’t get past that negative and inconvenient truth enough to suspend disbelief and decide that once government is running the whole show, everything will fall in line and we’ll have world-class health care at a much lower price – all managed by government.

And one other point Bartlett makes – this mess was made by politicians and, as our laws are written, can only be fixed by politicians. But politicians rarely, if ever like to make decisions which will be unpopular and cause them to have to find new employment. No one likes to be the bad guy. So don’t expect much in the way of “fixing” this mess. You’re more likely to see the whole house of cards collapse because it is unsustainable and the administration in charge at the time blame the previous one (kind of like what you’re seeing now on just about everything else) than to see any political leader actually make the hard decisions necessary (and then win over the Congress) to actually take care of these looming problems.

Enjoy your Sunday.

~McQ

Government and Markets

This story typifies, at least to me, the problem we can expect in the health care field if government becomes even more involved than it is now:

Obama administration officials, alarmed at doctor shortages, are looking for ways to increase the supply of physicians to meet the needs of an aging population and millions of uninsured people who would gain coverage under legislation championed by the president.

The officials said they were particularly concerned about shortages of primary care providers who are the main source of health care for most Americans.

One proposal — to increase Medicare payments to general practitioners, at the expense of high-paid specialists — has touched off a lobbying fight.

Family doctors and internists are pressing Congress for an increase in their Medicare payments. But medical specialists are lobbying against any change that would cut their reimbursements. Congress, the specialists say, should find additional money to pay for primary care and should not redistribute dollars among doctors — a difficult argument at a time of huge budget deficits.

The trend for years has been away from general practice and toward specialties. Part of that stems from the fact that specialists are paid more than generalists.

Most of us understand that most of our medical care will take place in our latter years with the obvious exception of certain genetic and chronic diseases which afflict a portion of the younger population. So Medicare, which kicks in at 65 whether you want it or not, is a major payer (and player) to family practice doctors who care for older Americans that make up the bulk of their practice.

With that being the case, we’re seeing fewer and fewer medical students option to become family practitioners, preferring the more lucrative pay specialists earn. The consequent result of low pay, huge patient loads and little recourse for changing that has seen family practice numbers in medical universities drop alarmingly. Why spend all that time and money learning a particular craft when the rewards aren’t as great as you want?

So here we have the market for family practitioners reacting to a distortion in the market created by the government refusing to pay at what the doctors feel is an adequate rate for the treatment of the majority of their patients. The market’s feedback mechanism sends the signal to the potential doctor to look at areas which would be more lucrative than family practice to receive adequate compensation. That area is specialization.

The reason I bring this particular example up is the competing proposals. One say, “hey, if you want more family practitioners, pay them more – that provide the incentive to become a generalist”. On the other hand, there’s a proposal to do that, but to accomplish that increase at the expense of specialists who take medicare.

How do you suppose specialists will react? Well if they do as two of mine have, they’ll simply say, “sorry, we don’t treat Medicare patients”.

And how do you suppose such a decision would effect the number of family practitioners. Well, that would depend on how much they’re willing to increase payments to them.

In the era of massive budget cuts and the promise by government to “decrease” the costs of health care, any increase in my estimation, would by minimal and not enough to change the tide concerning family practice. But taking that increase out of what is paid specialists certainly might be the tipping point for many of them to declare they’ll no longer treat Medicare patients.

Certainly our old friend the Law of Unintended Consequences again at work.

~McQ

Suddenly We Have Problems (Update)

Funny how this works, eh?  

February, 2005:

Your lack of details is no surprise–an essential component of the government’s PR blitz is the obscuring of details because, in fact, Social Security faces no immediate crisis. President Bush is lying to us, again.Despite the president’s sky-is-falling forecasts, the system’s trustees give Social Security another four decades of soundness; the nonpartisan Congressional Budget Office gives it five. Many independent economists believe the program will stay healthy closer to six or seven more decades.

January of the same year:

It all sounds awful, but is it really so bad? Is there a Social Security crisis?

Most Democrats say no. They contend the president is trying to scare people into supporting his plan for drastically changing the program.

“The future is not as bleak as some people would have the public believe,” says Peter Diamond, an economics professor at the Massachusetts Institute of Technology. “Social security is not bankrupt in the usual sense of the term — not going broke, not going ‘flat bust.’”

[…]

But professor Diamond says, yes, in 2042, benefits will have to be cut, but retirees then would still get more money than today’s retirees.

“We’ve got 35 or more years to phase in very slow changes that people can certainly adapt to and live with,” he says.

And Medicare?

From the majority Democratic Congress of last August:

“The Medicare trigger was cooked up by Republicans behind closed doors as a political ploy to foster an unfounded panic about the strength of Medicare’s finances,” said Rep. Pete Stark (D, Calif.), chair of the House Ways and Means Subcommittee on Health. “We must turn off the trigger and reject Republican attempts to arbitrarily limit Medicare financing.”

Stark and other Democrats argue that Medicare’s trend to require an increasingly larger portion of its funding to be in the form of general tax revenues has no bearing on the program’s long-term solvency. Although Democratic lawmakers support some of the Bush bill’s provisions, they take issue with his proposal to ease the drain on tax dollars in part by charging wealthier seniors more for their Medicare drug benefit premiums.

Yet what is going to happen today?

On Monday, Obama will bring together more than 130 lawmakers, heads of advocacy groups and economists in the White House State Dining Room to lay out the bad news – a federal deficit of at least $1.3 trillion, the largest as a share of the nation’s economy since World War II. The fiscal summit is meant as a first volley in the battle to address runaway costs for Medicare, Medicaid and Social Security.

Runaway costs? But, but … I thought Republicans were trying to scare everyone? I thought Bush had lied? You mean they were right?  My goodness, you mean that it may have been the Democrats who were being disingenuous.

Heh … that can’t be so, can it?

Hope and change.

UPDATE:  Apparently Democrats are still pushing the “there’s nothing wrong with Social Security” meme.  From the Joe Scarborough show, and interview with budget director Peter Orszag, who will be chairing today’s “Fiscal Responsiblity Summit” (yes, it’s okay to laugh):

JOHN HEILEMANN: Peter, it’s John Heilemann from “”New York”” magazine. there’s a report in “”the New York Times”” today, this goes back to a question that Joe kind of hinted at a minute ago, which is that Barack Obama considers doing a White House task force on Social Security reform to announce today and he got pushed back from Democratic leaders in the House and Senate. is that report true? Is the question of Social Security reform still on the table for you guys, how important is it?

PETER ORSZAG: Well, I want to come back to the point that was raised earlier, which is that Medicare and Medicaid are the primary drivers of our long-term fiscal problem. We want to address that first. we want to get health care done this year. Social Security is also an issue and after we’ve dealt with health care I think it probably does make sense to try to get Social Security on sounder ground also, but let’s get the big problem fix first.

HEILEMANN: Peter, did you guys back down or not?

ORSZAG: I don’t think it’s constructive to get into the back and forth of discussions in, you know, in internal discussions. i think the important point is, the president is committed to addressing the largest problem that we face which is Medicare and Medicaid.

JOE SCARBOROUGH: Peter, please understand, it may not be constructive, but it’s an awful lot of fun. Did Nancy Pelosi tell you to back off of Social Security and Medicare and Medicaid reform?

ORSZAG: You guys are wild having fun like that. We want to get — I really want to focus on — SCARBOROUGH: Peter, it’s all we got.

MIKA BREZEZINSKI: He fits the show. Answer the question, Peter. You got an answer for us?

ORSZAG: Again, Social Security is, you know, does face a long-term deficit, it does need to be addressed, but it’s much smaller than the problems than Medicare and Medicaid and the health system. i think it makes sense to focus there first.

It doesn’t take a rocket scientist to see through Orszag’s rather poor attempt to obfuscate the issue. Apparently they did back down. Medicare and Medicaid only remain on the table because they are a means to an end – what the Democrats like to euphemistically refer to as “health care reform”. That, by the way, does not refer to making either Medicare or Medicaid more efficient, less costly or less wasteful, it instead refers to expanding both programs. That, in the era of Democratic rule is considered to be “fiscally responsible”.

~McQ

This Has To Give You A “Warm Fuzzy”

Not content with busting the bank with the Pork bill and TARP II, now, finally, the 50+ trillion in unfunded mandates are apparently next:

The following week, the president will host what the White House is billing as a “fiscal responsibility” summit on February 23. The goal of the summit is to begin weighing the impact of massive federal programs like Social Security and Medicare just days before the president plans to unveil his first annual budget to Congressional leaders.

Budget? There’s nothing left to spend. Frankly I think Michael Ramirez has the best take on it.

flock

My guess is this can will get kicked down the road, left for 45 or 46 to deal with.

~McQ