In “Getting Better Value From Medicare” I have written about how Medicare reform could pave the way for health care reform.
The current House Bill would do just that. It includes many excellent suggestions for containing Medicare spending in ways that would lift the quality of care.
If health care reform includes a public sector insurance plan, that public sector insurer would incorporate many of Medicare's reforms, offering Americans better care at a lower price. We cannot count on for-profit insurers to do this. We need a strong public sector insurer. In light of the current debate, HealthBeat readers might want to take a look at my report.
Blue Dog Democrats object to a public sector option because they do not want to ask for-profit insurers to compete with a less expensive, less wasteful plan. Yet they say they worry that legislation put forward by progressive Democrats will cost too much!
They can’t have it both ways. If they want to rein in health care spending, the best way to do that is to eliminate wasteful spending on unnecessary and ineffective treatments—something that both Medicare and a public sector plan would do.
How would Medicare decide where to trim? White House Budget Director Peter Orszag suggests creating an independent panel of physicians and health care experts who would use medical evidence to set Medicare fees—hiking fees for care that we know is effective–including primary care—while trimming fees for some over-priced procedures and tests that provide little or no benefit.
Instead, the Blue Dogs want to raise Medicare fees for all rural providers—without looking at the benefit of the treatments they are providing to patients. By weakening or eliminating a public sector insurer, while raising Medicare fees across the board, the Blue Dogs would make health care more expensive.
Where would they save money? By reducing the subsidies that the House Bill would give to lower-income and middle-income Americans to help them pay them pay for health care premiums. Meanwhile, the Blue Dogs reject a mandate that employers over a certain size must contribute, either by covering their own employees or by paying into a pool that would provide subsidies.
The Blue Dogs are confused. They seem to think that the goal of health care reform is to protect for-profit insurers and businesses. They have forgotten the true goal: to provide affordable, sustainable, high quality care for all Americans. We should put the interests of the patient at the center of health care reform.
Maggie:
If we do have a public sector plan with Medicare-type reforms, the bill should also include directly transferring the FICA taxes to the trust funds.
Presently, the FICA taxes go to the Treasury’s general fund, like all other internal revenue collections.
They are used to pay general government expenses, like all other internal revenue collections.
Private insurers are mandated to collect premiums, and to spend those premiums on medical and administrative costs.
Why shouldn’t the public option have similar mandates?
Don Levit
The opponents of a public health care plan see it as a back door plan that will evolve to single payer status; that is, a goverment take over of health care. Their concern is that this will lead to a Medicare like fee schedule for providers that, if fashioned like the current Medicare program, would represent massive cuts in reimbursement. Cut too far, and you will not attract the caliber of people to go into health care you want, and quality will suffer.
A goverment plan should be sold as a plan that will compete on an even playing field with private insurers, requiring reserves be held and that the plan cannot run a deficit by the goverment printing more money, if costs exceed revenues. If such a goverment plan can provide us with a more benevolent insurer, less concerned abut fulfilling the wishes of stoackholders and the CEO, then all the better. Stripping away excessive CEO compensation and dividend payouts will likely be more than enough for a goverment run plan to flourish, but don’t be so obvious as to the end goal by making a goverment plan that has the rules bent in its favor.
Keith,
Private insurers don’t want to get rid of excessive CEO payouts and dividend payments. It’s their bread and butter.
Just what would a government plan have to do to compete on a level playing field with private insurers? It really sounds to me like you are asking a public option to make a profit, which is counter to the point of reforming health care.
Having a national insurance exchange is not a single payer system because private companies can still compete. They will have to adapt their model, just as fire insurance did when it switched from providing fire fighters to reimbursing for lost property.
These are savvy business people. If they can’t figure out a way to make a profit from competing with a public option, then they don’t deserve to exist in the first place.
As for the Blue Dogs, I am more convince they are Republicans Light: all the corporate lap dog, sans the moral majority guilt trip.
Panacea,
I don’t think you read my whole post.
The impediment to you or I starting up an insurance company is that they require large reserves of cash on hand to handle potential losses. A goverment health plan might not be required to have such reserves on hand since the goverment has the ability to simply print money. A goverment run plan should have to fulfill the same requirements of adequate cash reserves. It also cannot run a deficit, with the goverment propping it up with funds in the event its claims exceed its reserves. That would ensure a more even playing field on the same terms for private insurers and a goverment entity alike.
Indeed the goverment plan would not be required to make a profit per se, but must generate those cash reserves to offset potential future losses just like the private insurers are currently required to do. What a goverment plan does not have to do (but may if it sees advantage) is pay its CEO and administrators exorbitant salaries and will not have to answer to stockholders and pay dividends. This alone might be the big advantage of a goverment plan, but I do not consider this an unfair advantage.
Keith,
I think I misunderstood your post.
If the public option is set up as a trust like Social Security is, then the question of reserves wouldn’t be an issue. But the reason Social Security is going “bankrupt” is because Congress can’t keep its hands out of the piggy bank.
The government simply printing more money is a potential issue with everything the government does, including the recent financial bailout. That’s why Russia and China were talking about getting out of the dollar and US Treasuries–because they feared the US Treasury would simply print more dollars to pay off bonds, thus increasing inflation.
However, the Fed is on top of that issue. Now that many corporations are paying back their TARP funds, the fears of inflation and weakening of the dollar are easing.
If health care reform is successful at creating a commission that sets reimbursement and pays based on best practices rather than the number of procedures, then costs can be contained the the public option will have the reserves you speak of.
That’s why private insurers fear the public option. They like things they way they are. Escalating costs allow them to drive up premiums even as they deny care. They are making money hand over fist and don’t want things to change.
Keith–
The House plan makes it clear that the public sector plan must be able to finance itself from premiums alone.
Under the House legilsation, the government cannot prop it up, and the govt cannot print money to support the public plan wtih deficit financing.
I agree with you –the other advantages (no need to pay execs exorbitant salarie or provide profits for shareholders )are Not unfair advantages.
Panacea– yes, I agree.
The Blue Dogs are “Republicans Light:– corporate lap dogs,” and if for-profit insures cannot figure out how to compete with a public insurer that is financed soley by its premiums, those for-profit insurers do not deserve to exist.
Taxpayers cannot afford to bail out another industry isn’t able to compete with intelligent rivals. .
Keith–
The House plan makes it clear that the public sector plan must be able to finance itself from premiums alone.
Under the House legilsation, the government cannot prop it up, and the govt cannot print money to support the public plan wtih deficit financing.
I agree with you –the other advantages (no need to pay execs exorbitant salarie or provide profits for shareholders )are Not unfair advantages.
Panacea– yes, I agree.
The Blue Dogs are “Republicans Light:– corporate lap dogs,” and if for-profit insures cannot figure out how to compete with a public insurer that is financed soley by its premiums, those for-profit insurers do not deserve to exist.
Taxpayers cannot afford to bail out another industry isn’t able to compete with intelligent rivals. .
“…the Blue Dogs want to raise Medicare fees for all rural providers.”
Wait. Don’t tell me. Let me guess….
Would those be places monopolized by one or two insurance companies?
Nah. Surely not.
I predict that the Blue Dogs will destroy their political coaltion if they persist on obstructing this essential inevitable moment in history.
Dr. Rick Lippin
Southampton,Pa
Hi,
I really like your blog. It has some great tips on health. I also have a good health blog that ranks for Health Blogs in Google and has a lot of links with other high rankings for health related terms. Would you be interested in exchanging links in each others sidebars?
Thanks,
Eli
responding to Keith, there’s no danger of social security bankruptcy for another three decades. there’s a danger of medicare bankruptcy in the next few years. in both cases, the threat is simple — programs pay out more than they take in. this has nothing to do with government invading the funds, changing rules or other such things. harry and louise would have the same problem if they consistently spent more than they earned.
Jim:
Why do you belive that government invading the funds of Social Security and Medicare has nothing to do with its solvency?
If a private insurer didn’t collect the premiums, how would it stay in business?
Don Levit
Hi Maggie,
Its Ed again, the writer of the cheerleader comment. I have read your book and I bought more copies and passed it out even. This is what got me reading your blog.
There isn’t much I disagree with you about. In fact I think I have seen worse abuses than you. Frankly, I kind of like Irving Relman’s description in Second Opinion and his solution wasn’t bad either.
I was surprised to see two resonses to my coment from you. My point on the cheerleader comment was to alert you to a perception on my part that your message is starting to sound like propaganda.
In my world, being effective trumps being right, meaning, if I have to give credit elsewhere or acceed (even in words only) to an alternate view point, or find something bad about one viewpoint I support and one good thing about a viewpoint I oppose, I do this. This is not compromise, its being effective to get to a goal.
Feel free to email me offline if you want more info.
Sincerely,
Ed
Now on to the comment on this post —
I agree that a public insurance option is required, if only to shake things up. I firmly believe that it will end up in 10 years in a state that needs change, but what doesn’t??
Programs, of all sorts, tend to end up being abused. This will likely be no different, but it will do much good in the near term. One thing I don’t like about the solutions being proffered is their seeming finality — a desire to say “We fixed the problem for good!!”
Problems are not often fixed for good, that is the way of things. Providers and users through self interest will find ways to exploit the system for gain.
I’d like to see a single payor system, that seems the best alternative. If the public insurance option gets us closer to that, well good.
Maybe there is a cycle of sorts that will work long term. Private->Mixed->Public->Mixed->Private->Mixed->Public. But the challenge is to push the system to move more frequently, lets say every decade rather than every 30 years, where the last 20 of the 30 years are counter-productive.
OK, well that’s a mouthful.
Sincerely,
Ed
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Ed–
Thanks for your comments.
Unfortunately, sometimes there just isn’t anything good to say about an opponent’s proposals.
Let me ask you– what do you find to like in the
Baucus/Blue Dog compromise?
I’m afraid that Ed Shultz summed it up pretty well in his op-ed on his MSNBC show last night. (In the next half hour or so you’ll see a link to his show on HealthBeat– He did a brief interview with me, but what he himself had to say was very interesting.)
As he pointed out, this compromise is all about money–money funnelled from the lobbyists to the Blue Dogs, Baucus and others.
There is really nothing in their compromise for patients–at least nothing that I can find, and I have been reading everything that I can about it.
On the “Ed Show” you’ll also see Senator Jay Rockefeller –looking very angry and very tired and saying “no comment.”
As Ed explains, Rockefeller, like Kennedy, has spent much of his career working on healthcare reform.
He appears to be at once furious and broken-hearted.
Today, in a newspaper story, Rockefeller replied to a reporter who asked what he thought about the so-called bi-partisan compromise: “Look at my face. Do I seem happy?” the reporter described his voice as “stoney.”
That’s not typical of Rockefeller.
There is, as you know from my book, much corruption in the health-care business–and we all know there is much corruptioon in Congress.
Rockefeller, and others, realize that the forces of corrupton are trying to destroy the health care reform bill–they also want to destroy Obama.
(The amount of racism in recent attacks on Obama is beyond the pale. They’ve been circulating a photo of a half-naked Obama, wearing a loin-cloth and what appears to be the full head-dress of an African Medicine Man –looking dejected because “Obama Care” is failing.)
This photo is ciruclating in the group called “Concerned Citizens”–the group run by Rick Scott, the unconvicted felon responsible for the HCA/Columbia debacle.
(I have now written and spoken about Rick Scott many times–and have never heard from his lawyers. This suggests that I’m not defaming his characer; what I am saying is the simple truth.)
Those who oppose health care reform have also been among those questioning where Obama was born and whether he is “one of us.”
Even after REpublicans “voted” on this question, the media continued to give it much play on television and elsewhere.
And then there is Gates-Gate. A Washington Post columnist suggested that in commenting on Gates’ arrest Obama showed a lack of “discipline.”
This man has more impulse control than any president I have seen in many years.
I also know Skip Gates–taught with him many years ago. As a young man he didn’t have a hair-trigger temper, was never rude and wasn’t a wise-guy. I doubt he has undergone a complete personality change. Obama also knows Gates, making his reaction perfectly understandable.
Things have gotten very ugly.
Bottom line: The Baucus plan is designed to serve the monied intersts–and to gut real reform.
On single-payer; There’s nothign wrong with single-payer per se, and utlimately we might wind up with something close to that. (Though I still wouldd like non-profit alternatives so that when we wind up with another administration like the GWB administration, and a Congress that won’t stand up to him, there is an escape hatch. )
But what single-payers can’t seem to accept is the fact that healthcare reform is a process that will take time. We can’t
just suddenly declare an end to employer-based insurance and tell everyone to sign up for single-payer tomorrow.
It would be, as Atul Gawande points out,
“chaos. People would die.”
Moreover we can’t afford the subsidies that would be required if everyone gave up employer-based insurance all at once.
Finally, the House bill–it is not presented as a Final Solution. It is very open-ended and makes it clear that we are talking about ongoing pilot programs, over many, many years –mostly within Medicare–which then can be incorporated in a public sector plan.
The subsidies, the Exchange and the public sector optoin don’t kick in until 2013. People who work at large companies and have employer-based insurance cannot go to the Exhcange and pick something else until 2019. (Because we can’t afford having too many people give up their employer-based insurance at the same time. We wouldn’t be able to cover the subsidies. )
Both Orszag and his health care adviser Zeke Emanuel have talked about how this will be a process–that we will make mistakes, not everthing will work, we will have to be constantly re-calibrating.
If MedPac or another independent panel of physicians and healthcare experts is in charge of Medicare and the public option, it will be much easier to make these changes withotu having to go through Congress (which will have just 30 days to come out with a joint resolution opposing the panels plan.)
One of the things that distinguishes the progressive plan from what what Blue Dogs want–and what the single-payers want–is that progressives understand that we need evidence-based medicine.
Our care needs to be “managed”–but not by for-profit insurers.
Blue Dogs, Single Payer Advocates, Republicans etc. don’t like the idea that every patient might not get everything that he or she thinks he or she wants (based on TV ads for drugs, or anecdotes from friends and neighbors).
They don’t like the idea that our doctors need guidelines –no one doctor can know everything he needs to know even in his own specailty.
Good doctors recognize this.
But too many Americans are still wedded to the idea of “My Doctor”–one person who knows me, is all-knowing, and knows what is best for me.
Over many years, the House Bill will offer financial incetives to doctors who begin to work in accountable teams, collaborating with each other and with hospitals.
Over many years, Americans wiill come to accept the fact that in the 21st century, medicine must be a team sport.
But none of this is going to happen if people like me sit here and write “On the one hand . . . ” “On the other hand . . .” trying to find something good in everything anyone proposes (ignoring his motives.)
As it is, there’s too much waffling going on in Congress– and in the media.
We need passion and courage. We need leadership in Congress. I very much wish Ted Kennedy were in better health. I can only imagine what he would be saying. (Don’t know if you’re old enough to remember his speech at the Democratic convention when the Democrats were running against Reagan.)
But I’m hopeful that Jay Rockefeller, Chris Dodd, Pelosi,Rangel, DeLaruo and other honest progressives–people who do not willing to compromise principles in order to sell their vote– will rally, and with help from the White House, will manage to pull this out of the fire.
Hootsbuddy and Dr. Rick–
Hootsbuddy– you are absolutely right.
Dr. Rick- I hope you are right. I’m hoping Obama can ignite grass roots support.
His group is now askign citizens to contribute $1 a day to fight–until we get a real reform bill.
(You give them your credit care number, and they charge your credit card $30 every month.)
A clever idea which should both raise money and rally people to think and talk about Obama’s plans for reform.
Hootsbuddy and Dr. Rick–
Hootsbuddy– you are absolutely right.
Dr. Rick- I hope you are right. I’m hoping Obama can ignite grass roots support.
His group is now askign citizens to contribute $1 a day to fight–until we get a real reform bill.
(You give them your credit care number, and they charge your credit card $30 every month.)
A clever idea which should both raise money and rally people to think and talk about Obama’s plans for reform.
P.S. Ed–
I misquoted Rockefeller.
Here is the quote, form the Times which points out that the Baucus compromise would
“Mr. Rockefeller said he was unhappy that the legislation would end the Children’s Health Insurance Program and could reduce the scope of benefits for 11 million children in the program.
Asked if he would support the bill, Mr. Rockefeller shot back a somber, stony look. ‘Can’t you see the joy on my face?’ he asked.”
How am I supposed to find something good to say about a plan that takes healthcare away from poor children?
This is morally bankrupt.
The Times does suggest that the compromise calls for a panel to oversee Medicare fees, but I very much doubt it would resemble the panel Orszag proposes.
It would probably be a panel like the one that sets fees today– composed almost entirely of specialistis who virtually never recommend reducing specialists’ fees for any service.
Dear Maggie,
In general I, again, agree with you. I do not want to wait until 2013 or 2019 to get the money out of medicine. Money driven medicine IS the problem so it’s not part of the real solution.
I also agree that this “meet in the middle” hoax is just that, a hoax designed to make it look like the push back is well intentioned and not “money driven govenment.”
We could use the old tried and true trick, move further towards the edge to balance the middle more towards reasonability. So if we all push for single payor, perhaps we can get a public insurance option at least.
It seems still a big problem I see unaddressed in healthcare reform is the lack of enforcement teeth when doctors/insurance/volume-driven hospitals are caught doing wrong.
Some convictions with jail time would certainly send a message as would prosecutions for misleading advertising/monopolists/dualopolists (i.e. hospital/insurer collusion).
I think unless there is a feeling that bad actions have potential reprecussions that the bad actors have no dissuasion.
Indeed we do not need new healthcare reform laws to throw the book at existing criminals, so why isn’t that already happening?
If the administration wants to show it is serious, then let’s see them take down a Partners or UPMC or Cigna or Aetna or Mylan or Medtronic or Highmark. I believe that all of those organizations are already being investigated by Federal or State law enforcement.
What’s with that do you think? Is the problem really with the regulators and law enforcement?
Sincerely,
Ed
Not wanting to side-track your topic, but since you mentioned it, Maggie, I don’t know where to ask this question.
I support Obama and voted for him, as does almost every patient safety advocate that I know of. I donated money to his healthcare fundraising…but why is he asking his supporters to donate money so he can reform healthcare? He’s the *&^! president and that’s why we elected him!? It left a bad taste in my mouth and a lot of other patient safety crusaders bad-mouthed the Obama pleas for cash as well…most of us have made sacrifices for years to improve healthcare, financial and otherwise. We voted for him. Why is he asking us for money!?!?!
Lots of important info here that’s essential to sorting out the policy issues from the politics of it all. Thanks.
One point I want to make gently is to rebut the cautionary quote that Maggie relies on from Atul Gawande in reference to needing to move slowly toward improved Medicare-for-All aka single payer:
“chaos, People would die.”
Per the highly respected IOM report “Consequences of Uninsurance” we already have a system that is chaotic, fragmented, and severely dysfunctional causing many people to needlessly die.
Per IOM 20,000 people are already dying prematurely every year-after suffering more and living sicker lives stripped of their dignity-simply due to being uninsured. Many of these people are the patients I cared for in my decade as a home care nurse in Boston and working with a program that serves people who are homeless and ill. So please, don’t unintentionally add to the scare tactics already aimed at an improved Medicare-for-All approach to reform.
Moving on to the point of BlueDog Dems obstructionist role in reform, readers might want to see this just in from The Hill:
Blue Dogs strike deal: No health vote before recess
07/29/09 12:08 PM
It’s particulary disgusting to read (if it’s true) about the news that Waxman caved on these two elements of reform, especially the public plan payment structure:
“To win the support of the four Blue Dogs, Waxman agreed to loosen the employer mandate so that it covers businesses with payrolls of $500,000 or more, instead of $400,000. Rates on the “public option” will not be tied to Medicare, but negotiated separately, as private insurers do.”
http://thehill.com/leading-the-news/blue-dogs-strike-deal-no-health-vote-before-recess-2009-07-29.html
Maggie, I am just joining in the discussion and may have “missed” some critical information related to my comments to follow.
I have not heard anyone discuss Tort reform anywhere during the healthcare debate, however I truly believe that until and unless we address this issue healthcare reform as a stand alone will not succeed.
Also, probably very unpopular point of view, but I also believe that those of us that make unhealthy life-style choices resulting in Obesity, Hypertension, Diabetes etc should pay more in premiums as they are in the end greater users of the health-care delivery system. I am not sure how one would go about developing a multi-tier payment system but it is apparent that the education that we all receive regarding these life-style choices does not work. Hitting the pocket-book would I believe have a far greater impact on choices.
Medicare premiums are way too low especially considering that at the end of life many of us need and use a greater portion of the healthcare.
As a prior employee of one of the larger Managed Care companies, who payed far more in premiums than the 65+ age group, I feel I am not biased in that comment.
Another issue that is of concern to me and others is the fact that our Congressman and Senators have a stand-alone plan that is paid for by the tax-payer so how can they possibly understand this issue, they are far too removed from it.
The food industry is also an area that needs greater oversight.
It is a complex issue and one that cannot be sorted out in 2-3 months, but rather with a measured thoughtful process.
To Jan – In some respects, yes, “It is a complex issue and one that cannot be sorted out in 2-3 months, but rather with a measured thoughtful process.”
But I – and many others – would argue quite strenuously that the answer is not to increase the costs for all Medicare recipients nor to punish people for being diabetic or obese by charging them higher premiums.
The preferred and civilized, and smart approach, would be to identify some important principles for a high performance health system and then to use these principles to assist us as a nation in guiding and shaping national health system reform. And guess what? It’s been done! btw President Obama’s principles for health reform align closely with these:
National Institute of Medicine’s 5 guiding principles to judge health system reforms:
1. Health care coverage should be universal.
2. Health care coverage should be continuous.
3. Health care coverage should be affordable to individuals and families.
4. The health insurance strategy should be affordable and sustainable to society.
5. Health care coverage should enhance health and well-being by promoting access to high-quality care that is effective, efficient, safe, timely, patient-centered, and equitable.
Click this link for the Press Release and link to full IOM Report http://www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=10874
If I recall correctly, it was Atul Gawande in a recent interview with Ezra Klein who said that it doesn’t matter whether it is a private plan or a public plan that pays, it is the physician who writes the order. I don’t know if it is original to him, but he went on to note that the most expensive piece of medical equipment is a pen in the hands of a physician.
Until such time as we bring the provider element of the equation under control, we will see neither cost containment nor quality improvement.
It is not as though we do not know what works. Large, integrated health care delivery systems, in a competitive environment, that assume a financial risk for the well being of their clients and the care that they deliver have a proven track record. We don’t need to study the problem, we need to work on the implementation of a migration plan.
Institutionally, I don’t see Medicare as the engine driving system wide reform. It is too identified with the current system to be sufficiently ruthless in driving change. I may be wrong here, but knowing how entrenched government institutions work, I have yet to be convinced otherwise.
The most important part of health care reform is winning – without giving away the store, the farm, the house, and three of the four kids. OR a public plan.
We just did it in Connecticut. With tremendous grass-roots support, we took on the insurance industry and the Republican Party and our own governor and we won. So it can be done.
On July 20th, our state House and Senate successfully overrode Republican Governor Rell’s veto of the SustiNet health care reform plan – one of the most ambitious plans for universal health care anywhere. The SustiNet law mandates the creation of a nine member committee to be known as the SustiNet Board. The board, co-chaired by State comptroller Nancy Wyman and State Healthcare Advocate Kevin Lembo, will lay out the steps for implementing a plan to provide health insurance to the state’s 325,000 uninsured and to broaden the range of insurance options available to employers.
The centerpiece of SustiNet involves making the state employees plan self-insured, then opening it up (with quality care and sliding-scale affordable rates) to: the uninsured; Medicaid recipients; small business employees; nonprofit employees; municipalities; and individuals who have unaffordable or inadequate employee –sponsored plans.
According to health economists Jonathan Gruber of MIT and Stan Dorn of the Urban Institute, SustiNet will return $2.80 to employers and employees for every dollar invested by the state.
In the insurance capital of the country, with a Republican Governor, a broad-based coalition of small business owners, providers, faith leaders, union leaders, health care advocates and other stake holders beat the odds.
If we can do it here, you can do it there.
More about SustiNet is at: http://www.healthcare4every1.org.
In the long run, many reformers believe that getting various principles in place – the public plan, IMAC, universal coverage, employer mandates – are more important than the details of how they are put in place, since history shows that all social insurance systems, both here and abroad, are subject to extensive revision over time before they reach equilibrium. In fact, an argument can be made that there is no social insurance system in the world that has actually reached equilibrium yet.
I fear we’re being distracted here by some confusion about medicare
part a (hospital insurance) and social security financing. As a
former congressional staffer who used to work on these issues, I’d
like to try and set things straight.
Both programs pay benefits to today’s beneficiaries using income paid
in by today’s workers. Both programs have accumulated money that is
lent –at interest — to the world’s most reliable borrower, the U.S.
Treasury. So each dollar we pay in social security or medicare taxes
actually yields more than a dollar in benefits because of the interest
that’s subsequently earned.
Problems arise if benefit payments exceed income (and earned
interest), something that may happen in social security in 30 years,
largely because of the declining ratio of workers to retirees and in
medicare within the next decade, both because of the changing ratio
and, more importantly, the fact that health care costs increase much
faster than wages do. Let me emphasize that funding for these
programs has absolutely nothing to do with the Federal debt or deficit
and that the problem would be the same even if the budget was in
balance rather than facing record deficits.
Medicare parts B and D, the voluntary outpatient and drug insurance
programs, are funded separately through a combination of beneficiary
premiums and general revenues.
Hope this clarifies things (ask if not) and gets us back on track.
Jan, people who think like you are dangerous:
“I also believe that those of us that make unhealthy life-style choices resulting in Obesity, Hypertension, Diabetes etc should pay more in premiums as they are in the end greater users of the health-care delivery system.”
First of all this is not true as all regular health beat readers know by now. It’s you healthy people that “use more healthcare dollars in the end” Smokers are already taxed to death.
Let me ask you something, Jan, do you enjoy, say, boating with your family or skiing in the winter? Gee, I think you should pay more for healthcare because you could be seriously injured participating in those types of activities. Do you drink coffee in the morning? Oh, Jan, you should pay through the nose for health “insurance” because you could get high blood pressure from all that caffeine. How many miles do you drive to work each day, Jan? And in what type of traffic? I think you should pay more for health insurance on the rainy days you drive to work.
Shall I continue?
Jim:
I agree with part of what you say about Social Security and Medicare.
Both programs are paying today’s beneficiaries by today’s workers, in theory.
The theory is that the payroll taxes are paid directly into the trust funds.
In practice, the payroll taxes go into the Treasury’s general fund.
Only the EQUIVALENT of those taxes is CREDITED to the trust funds to pay current beneficiaries. The trust funds hold no cash, only accounting entries in the form of government debt.
The reason that a dollar in taxes yields more than a dollar in benefits is due to interest, as you stated.
But the interest is not like what one may earn on an investment.
The interest is paid, because the principal (the interest in the trust funds) have been loaned to the Treasury to pay for battleships and other governmental expenses.
The interest is loan interest, not investment interest.
You wrote that funding for these programs has nothing to do with the federal debt.
That is incorrect.
All the borrowing done from the trust funds to the Treasury’s general fund shows up as intragovernmental debt, which is almost half of the total federal debt of around $11trillion.
You are right that the interest paid on intragovernmental loans does not show up in the federal deficit.
That will occur when expenses exceed income in the various trust funds, such as happened recently with Medicare.
But, that accounting of interest simply delays the paying of it, and compounds the total principal and interest that eventually must be paid.
I can provide links from the Treasury Department and Social Security to support my observations.
Maybe we should correspond offline, if this is boring for others.
Don Levit
Lisa & Everyone–
Everyone–I’ll be back later to reply to more comments.
Lisa–
Sorry, I worded that in a confusing way.
President Obama is Not soliciting funds.
A group that grew out of his campaign is doing a grass-roots drive to solicit funds for TV ads that would counter the many conservative anti-reform ads out there.
Jim, Ed, Ann, Jan, Ann (second comment), Bill, Lisa, Pat S., iblogWest Hartford,
jim– you are right. SS is not in trouble– long term, it will need some adjustments, but the fixes are relatively easy and doable.
Medicare, on the other hand is spending more than it is taking in. Reimbursements are climbing by about 5.5% a year. Wages and GDP are not rising that fast. This is the problem– healthcare inflation. And we are not getting good value for the dollars. Too much waste in the system.
Ed–We very rarely punish corporate crime with jail time– in the health care industry or anywhere else.
Instead, we just fine corporations, they pay the fines and move on.
The individuals responsible are not punished. Sometimes they are fired, but move on to other jobs.
In our justice system, the wealthy are protected by highly-paid very skilled attornies.
So our prisons are filled with poor men and boys. many of whom ccmmitted relatively minor crimes whiel the Rick Scotts of the world go free–and are to spend millions influencing our political process . ..
Ann–
I’m particularly disappointed by the compromise regarding the public plan not being able to use Medicare rates.
The Hill legilsation callls for reforms in Medicare rates– raising fees 5% to 10% for primary care and geriatrics –plus bonuses and loan forgiveness–while leaving Medicare free to lower rates for other services. Here, the Medicare Payment Advisory Commission has recommended that Medicare take a look at particuarly lucrative services where volume has been rising–in part because they are so lucrative.
The Hill legislation also urges Medicare to use financial carrots and sticks in payments to hospitals. Hospitals complain that Medicare rates are too low–but the fact is that most hospitals turn a profit on Medicare’s reimbursements for most patients.
Some hospitals- that treat a great many uninsured patients and patients on Medicaid–are in financial trouble.
But many are simply inefficient– errors are made, so patients get sicker and stay longer; patients pick up infections, so they stay longer; “diagnosis” consists of ordering 10 tetss (rather than diagnosing “hands on” while talking to and listening ot the patient)–again longer stays, higher costs.
On Gawande’s warnign that we need to phase this in: while lack of insurance contributes to premature death, the big factor leading to premature death is poverty.
And insurance is not going to cure that.
Also, when he says “people will die” if we try to move too fast, he is referring to how chaotic the system is now. As he points out, more people die of complications following surgery than die in car accidents.
Many of those deaths were preventable. And many of those surgeries were unncessary.
He is concerned that if we simply pour more patients into a dysfunctional, broken system, more people will be hurt– by heatlhcare itself. . .
And right now, we don’t have enough primary care doctors and nurses to care for everyone. If we phase this in, we stand a better chance of being prepared–and being able to sort out the sickest patients and make sure they are cared for first.
Typically, the sickest patients are also the poorest, which is why the administation and the House bill focus on expanding Medicaid and Schip fist–and hiking fees for Medicaid providers to the same level as Medicare fees–which is a very important fix.
I’m very sympathetic to the many poor and uninsured who are at risk today–and think we should focus first on that group.
But there are also many middle-class uninsured who are in relatively good health -as well as many relatively healthy upper-middle-class self-employed Americans who are underinsured –and have a high deductible– because insurance is so expensive in the individual market.
When we roll out universal coverage, they will flood the Insurance exchange, wanting care–and we need to be prepared.
So while I certainly think everyone should be covered, I think Gawande is right, if we try to put everyone into the system at once, hospitals, clinics and doctor’s offices will be overflowing with people who would like an MRI for their back pain (because their brother-in-law, who has good group insurance had an MRI);
people who want someone to prescribe a drug they saw on TV; people who want an anti-biotic for a child with an earache (the child needs an over-the-counter painkiller, not an antibioitc) and people who are truly seriously ill.
If there were a way to sort out the sickest among the uninsured and underinsured and put them in the system Now, I would want to do that. But as it stands, the best way to do that is to focus on the poor first– and progressive reformers are trying to do that.
There is also the problem of financing reform. The subsidies are likely to cost much more than we expect (as they did in Massachusetts). If we can begin to bring down the cost of care now (with Medicare lowering fees for certain over-priced marginally effective services, refusing to pay for preventable readmissions, unncesssary tests and overpriced drugs and devices that are no better than older products) universal coverage will be more affordable in 2013.
And if Medicare begins doing this now (as provided for in the House bill) private insurers will follow suit.
There is an argument to be made that part of the problem in Massachusetts is that they moved too quickly–and now they are trying to deny care to legal immigrants who pay taxes! (See Naomi’s post–and thanks for sending me that Boston Globe article that she quotes.)
Jan–
The truth is that obese people, smokers, and others who follow “unhealthy life styles” cost the health care system less than the rest of us.
They die earlier–often of a stroke, heart attack, or fast-moving cancer–and dont’ live long enough to
develop some of the most expensive diseases like Alzheimer’s.
Also,reserach shows that obesity, smoking etc. are much more prevalent among poor people. We now know that poverty causes these problems. Being poor is very stressful–and depressing–so the poor self-medicate.
We now know that obesity is not a “choice”–in our society, few would choose to be obese. It is a diseae that causes great pain and suffering for the obese person.
Obesity cannot be “cured” with will power. We now have many medical studies showing that even when obese people diet and exercise under a doctor’s supervision, are completelly compliant –and lose some weight–almost all of them put the weight back on.
This is connected to body chemistry that tells the body it is starving–and so in an effort to save itself, it manages to store fat, even when the patient is eating only 900 calories a day.
This is, of course, heart-breaking for the patient.]
Right now, doctors don’t have any way to help obese adults except bariatric surgery–which is dangerous, and a last resort for those who are morbidly obese.
We have more hope of helping obsese children–many of whom are poor–by changing their enviromenet. (Rates of obesity among children are highest in the poorest states.)
Obesity is tied to poverty because the poor lack access to places where they can exercise safely and they lack access to nutritious foods. (Even when there are fresh vegetlables fruit and fish available in ghetto grocery stores they are very expensive because they are perishable.)
In poor public schools,
school lunches consist of inexpensive, filling but not very nutrious high-carb foods.
Poor schools often don’t have gyms and gym teachers.
On tort reform–
In states that have tried tort reform (like Texas) where they have capped awared, the cost of health care has not gone down. Doctors continue to overtreat.
Even if the potential award is capped, they say they still fear being sued.
Perhaps we could wipe out defensive medicien if we made it illegal to ever sue a doctor or a hospital. But clearly that would be unfair to patients.
Unfortunately, many mistakes are made in our healthcare system–often because the right hand doesn’t know what the left hand is doing, or because people are too rushed, or because the system is designed for the convenience of the hospital rather than the safety of the patient.
But I agree we need to find a better way to deal with malpractice. Some hospitals have found that admitting to the mistake, explaining exactly what happened –saying “we’re very, very sorry”–and then agreeing to go to abritration to figure out how much the patient or family should be compensated brings down costs and avoids lawsuits.
You don’t need to go to court–or go through the expensive, lenghty process of “discovery” as the plaintiff’s lawyer tries to find out what actually happened.
Hospitals have found that patients and famillies are much more likely to want to sue if they are stonewalled. If the hospital, doctors and nurses are open about what happened, this defuses the anger and frustration.
Ann– I would add only this: the nation needs to begin invest in public health. Too many of our resources are devoted to acute care–after a patient becomes sick. Investing in public health means launching a new war on poverty by investing in poor communities and the schools and daycare centers in those communities, by creating jobs for the poor, by improving housing and the environment in poor communities, by subsidizing greenmarkets urban farming and free smoking cessatoin clinics that offer free nicotine patches.
Bill–
I agree completelly that we need to change provider behavior. We know accountable care organizations work.
But no for-profit insurer has ever created (or helped create) an accountable care organization. Instead, for the past 10 years, they have simply paid for every new procedure and drug that comes down the pike–without worrying about whether it is effective or dangerous (Vioxx) and passed the cost laong in the form of skyrocketing premiums.
Only non-profit insuers (Geisinger, etc.) and the government (the VA) have put together organizations where doctors and hospitals collaborate–and are not paid more for “doing more”.
I recently attended an IHI conference about ten communities that have succeeded in bringing healthcare costs way down while lifting qualtiy signfiicantly. Almost all of them did it by moving away from the “competitive” model, and instead, collaborating–sharing resources, sharing information, pooling fees, etc.
Competition does not worko to improve healthcare or lower costs. Competition leads to medical “arms races” where every hospital in town because the same very expensive cutting-edge equipment–and then to pay for it, has to overuse it. Competition leads to docs opening their owon surgical centers–and sending the least difficutl, most lucrative cases there “skimming” from the local hospital that is strugglign to provide services that are never lucrative–like burn units.
Medicare has wanted to begin encourage integrated, efficient health care systems where doctors are paid for quality, not quantity, for years.
Lobbyists have blocked its efforts and for 8 years the Bush administration absolutely refused to let Mark McClellan do anything except try to privatize Medicare through Medicare Advantage.
Meanwhile the Medicare Payment Advisory Committee–and independent, non-partisan committee made up some brilliant physicians and health care experts wrote hunderds of pages of excellent reports outlining what needs to be done to reform Medicare.
The Bush administration probably never read them.
But people within Medicare did–and many agreed.
Peter Orszag, who was then the CBO director (and is now the White House budget director) read them, tesitifed before Congress about them, and wrote about them,
Orsazag and his healthcare adviser in the White House, Zeke Emanuel, understands what needs to be down–as does President Obama.
The House bill that was approved by 3 committees contains many of MedPac’s recommendatoins for Medicare reform.
Orszag has figured out a way to shield that refrom from lobbyists and Congress–and many progressive reformers in Congress agree.
Regarding Gawande’s comment–I responded to it directly in this post https://healthbeatblog.com/2009/06/does-it-matter-who-pays-for-care-who-has-the-standing-to-set-limits.html
There, I explain why for-profit insurers will never use financial carrots and sticks to encourage the highest qualtiy care.
They didn’t when they tried to “manage care” in the 1990s–and they won’t now.
Moreover, neither patients nor physicains trust for-profit insurers. They don’t have the moral or political standing to change the way providers provide care.
A MedPac-like committee of physicians and health experts who are protected from Congress and lobbyists– would have the standing to do this.
Pat S.– You write: “In the long run, many reformers believe that getting various principles in place – the public plan, IMAC, universal coverage, employer mandates – are more important than the details of how they are put in place, since history shows that all social insurance systems, both here and abroad, are subject to extensive revision over time before they reach equilibrium. In fact, an argument can be made that there is no social insurance system in the world that has actually reached equilibrium yet.”
Yes, exactly. This is what I mean when I say that healthcare reform will be a process, not an event.
And the White House understands this.
Lisa–
I agree. People who engage in Xtreme sports put their health at risk. I don’t have anything against Xtreme sports–but the truth is they may wind up needing expensive care.
Still, I wouldnt’ charge them higher premiums.
I suspect that all of us do something that puts our health in danger—even if only by worrying too much.
iblog WestHartford–
Sounds like a good plan–I’ll have to read more about it.
Maggie:
When you say that Social Security is not in trouble, you are correct – for today.
It really depends on what context you view Social Security and Medicare, to assess their fiscal sustainability.
The Treasury has 2 perspectives – the trust fund perspective and the budget perspective.
The trust fund perspective, basically, uses the math to assess when benefits will have to be curtailed, when the trust fund figures become zero.
This is the perspective you are using, when you say that in 20xx, the trust fund will still be solvent.
The budget perspective takes a more holistic view, for the ability for Social Security and Medicare to be maintained is dependent on the government’s ability to meet its obligations, now and in the future.
That is known as the second perspective, the budget perspective.
In Issue Brief No. 4, issued by the Treasury Department, it provides a few more details on the budget perspective.
“The present Social Security system has its surpluses accumulate in the trust fund. These surpluses increase the government’s capacity to pay future benefits, only if they result in smaller amount of oublic debt issuance that would occur if there were no surpluses. This is because reducing near-term debt increases the government’s capacity to issue future debt to pay benefits when the trust fund bonds are redeemed.”
Do you think the total debt is lower, due to the Treasury borrowing from the trust funds?
From the budget perspective, the answer is no, for the total debt simply increases by the amount of the borrowing.
Don Levit
Good post, I’d like to see a single payor system, that seems the best alternative. If the public insurance option gets us closer to that, well good.