Keep your government hands on my Medicare!
Celebrating Medicare and Medicaid’s 47th birthday this week, here are some quick thoughts on government’s role in ensuring access to affordable health care:
- The United States spends nearly double what other countries spend. Americans spent a total of around $7,600 per person on health care in 2010, compared with around $3,900 on average for countries with similar standards of living, according to the Kaiser Family Foundation. Despite this higher spending, health outcomes are no better than in other developed countries.
- Government picks up nearly half the tab. As fewer Americans are covered by employer-sponsored insurance, government has taken up the slack. State and federal programs now directly or indirectly cover 45 percent of health care costs in the United States.
- High and rising health care costs are the biggest fiscal challenge our country faces. The Congressional Budget Office (CBO) projects that federal spending on major health programs will increase from 7.4 percent of GDP in 2022 to 10.4 percent in 2037 if current policies remain in place. Nearly two-thirds of this increase is due to the assumption that per capita health care expenditures will grow faster than per capita GDP. In the absence of this excess cost inflation, spending on these programs would increase to a more manageable 8.6 percent of GDP in 2037, largely reflecting the long-anticipated baby boomer retirement.
- Government isn’t the problem. The private sector plays a larger role in the United States, where health care costs have risen much faster, than in other countries. Government programs aren’t immune to cost inflation, however, since most government beneficiaries see the same providers as patients with private insurance. Nevertheless, government insurance is more efficient. As the National Academy of Social Insurance has found, Medicare costs have generally grown more slowly than costs in the private sector (see also Diane Archer’s discussion here).
- Shifting responsibility to individuals would increase overall costs. The House budget resolutions developed by Budget Committee Chairman Paul Ryan (R-Wis.) would shift costs to vulnerable seniors while weakening Medicare’s ability to control these costs. According to the Center for Economic and Policy Research, Ryan’s fiscal year 2012 budget resolution would increase economy-wide health care spending by as much as $34 trillion over 75 years—six times the size of the projected Social Security shortfall—if seniors purchased Medicare-equivalent plans. More likely, national health costs would skyrocket and seniors would receive less adequate insurance and care.
- I’ve never met a Canadian who thinks our system is better than theirs. My Canadian relatives don’t agree on much politically, but like Michael Moore’s relatives in Sicko, they’re afraid they’ll be bankrupted if they wind up in a hospital across the border. Despite what you may have heard on U.S. news programs, Canadians grumble about their system, but they’re terrified of ours.
- Try it, you’ll like it. My Canadian relatives can’t fathom why many Americans don’t like “Obamacare.” Though the law may not be perfect, it expands coverage to the uninsured while making great strides in protecting insured people from the vagaries of the private marketplace, as the AFL-CIO outlined in a strong statement of support yesterday. Distrust of the plan has more to do with people’s feelings about the general direction the country is moving in than the actual provisions in the Affordable Care Act (ACA). Hostility is especially pronounced among Republicans, even though the ACA is based on a Republican template and largely preserves the (less efficient) structure of private insurance provision rather than expanding direct government provision of care. But once ACA is fully implemented, its popularity will likely jump, as happened with Medicare.
- We need a public option. Where ACA is weakest is cost containment, though part of the problem is that the bean counters at CBO are dismissive of provisions of the law designed to restrain costs in the future, creating a bias in favor of plans like the Ryan plan that focus on cutting and capping benefits rather than slowing costs (see p. 8 and p. 57 of CBO’s Long-Term Budget Outlook for a description of how CBO’s “Alternative Fiscal Scenario” assumes away cost containment). The best way to reduce costs would be a Canadian-style single-payer system. If this isn’t politically feasible, let’s at least have a public option modeled on Medicare, as EPI board member Jacob Hacker proposed back in 2007. Then we’ll have to watch carefully to make sure the government plan competes on a level playing field with private plans.
- Programs for the poor become poor programs. Medicare is a better insurance model than Medicaid, which is a life saver, but in most states is grossly inadequate for protecting even very poor people, as Jeff Madrick explains in a New York Review blog post. In the typical state, a working parent loses eligibility for Medicaid when his or her income reaches only 63 percent of the poverty line, and an unemployed parent must have income below 37 percent of the poverty line to qualify for the program, according to the Center on Budget and Policy Priorities. Meanwhile, poor working-age adults without dependent children are completely out of luck in most states. The ACA was intended to rectify Medicaid’s state-level deficiencies as an anti-poverty program, but as Timothy Noah points out in The New Republic, the Supreme Court’s ruling undermined the Medicaid expansion, thus strengthening the case for federalizing the program to ensure adequacy
- It’s not a zero-sum game. In a sensible world, what matters is the total amount and ultimate distribution of health costs, not the federal government’s share. But as Eric Laursen describes in his new book on the struggle to defend Social Security since Reagan, elite opinion frames the issue of social insurance in such a way that benefits going to any one group (usually seniors, or in Bill Keller’s version, baby boomers) appear to come at the expense of another group (usually young people). This allows people like Rep. Ryan and Fiscal Commission co-chairs Alan Simpson and Erskine Bowles to promote plans that hurt the young people they purport to help while ignoring the real problem—that it’s hard to compete globally and raise living standards when you’re spending twice as much as you need to on health care. Sadly, our ability to pursue expansionary fiscal policies and address other national priorities appears hamstrung by projections showing federal spending going through the roof—and revenues held hostage at low levels—whether these projections are realistic or not.
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