Posts tagged with: medicare

Blog author: jmeszaros
Wednesday, July 20, 2011
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John Boehner recently stated, in the debt-ceiling talks, that “We’re going to continue and renew our efforts for a smaller, less costly and more accountable government,” which most Americans agree with in principle.  However, citizens say that keeping benefits the same for the three big programs, Social Security, Medicare, and Medicaid, is more important than taking steps to reduce the budget deficit by a margin of 60 percent compared to 32 percent for Social Security, 61 compared to 31 percent for Medicare, and 58 compared to 37 percent for Medicaid.

So Americans purportedly want thriftier government, but still want benefits? What gives?  Part of the problem, according to James Kwak, is “the idea that there is one thing called ‘government’–and that you can measure it by looking at total spending–makes no sense.”

What Kwak means is that total expenditure is a misleading measure of the “size” of government. He presents this example:

The number of dollars collected and spent by the government doesn’t tell you how big the government is in any meaningful sense. Most government policies can be accomplished at least three different ways: spending, tax credits, and regulation. For example, let’s say we want to help low-income people afford rental housing. We can pay for housing vouchers; we can provide tax credits to developers to build affordable housing; or we can have a regulation saying that some percentage of new units must be affordably priced. The first increases the amount of cash flowing in and out of the government; the second decreases it; and the third leaves it the same. Yet all increase government’s impact on society.”

So increased spending (or decreasing it) does not necessarily mean the “size” of government has grown (or shrunk). Think how regulation is synonymous with big government, but it does not involve a tax or direct spending of any kind.

In fact, “big” government is often viewed through the lens of regulation, rather than cost. For instance, Kwak explains:

When people say government is too big, they often have in mind something like the Consumer Financial Protection Bureau–a regulatory agency that tells businesses what they can and can’t do…the CFPA’s budget is about $300 million, or less than one-hundredth of one percent of federal government spending.”

Again the divergence between cost and “bigness” is seen.  The CFPA may be viewed as “big,” intrusive, and unnecessary but it is not large in terms of cost like Social Security and Defense spending.

Kwak states, “popular antipathy toward the regulatory state has been translated into an attack on popular entitlement programs.”  Many people dislike certain government regulations and, due to the budget debate, dislike of regulation, the amount of government spending, and specific government programs may have become accidentally intertwined.

As mentioned before, Americans view Social Security, Medicare, and Medicaid as important and worth preserving.  Kwak elaborates: “Rationally speaking, your opinion about Social Security or about Medicare should be based on how much you put in and how much you get out–not on the gross size of the program, and not on how big the rest of the federal budget is. Yet instead the total size of the budget has become the driving force behind potential structural changes in Social Security and Medicare.”

Kwak suggests that “we should make decisions on a program-by-program basis, just like a business is supposed to do.”  His advice is: “If there’s a program that the American people, through our democratic system, agree will provide benefits greater than its costs, we should do it, independently of the existing spending level. And if there’s a program that isn’t covering its costs, we should kill it.”

Instead of focusing on a generality, “government size”, our elected officials should evaluate programs on a cost-benefit level.  Then government agencies that are viewed as too costly or intrusive (the CFPA) could be eliminated and government programs that are viewed as beneficial (SS, Medicare), but need reform, can be focused on in an unbiased way and not be harmed by the “too big” generality.

Jordan Ballor, in a blog post for Acton, wrote: “All government spending, including entitlements, defense, and other programs, must be subjected to rigorous and principled analysis.”  Indeed, although the American people think Social Security, Medicare, and Medicaid are beneficial, 52 percent think Social Security needs significant reform, 54 percent think Medicare needs reform, and 54 percent, likewise, for Medicaid.  However, without having a clear definition of what “too big” means, successful retooling will be difficult to achieve.

Ballor added: “This means that the fundamental role of government in the provision of various services must likewise be explored. This requires a return to basics, the first principles of good governance, that does justice to the varieties of governmental entities (local, regional, state, federal) and institutions of civil society (including families, churches, charities, and businesses).”  True reform requires not simply legal and budgetary change, but a reevaluation of what entities perform certain services, as Ballor suggested.

The Acton Institute is committed to real budget reform, and, to make sure that programs, like Social Security, are evaluated fairly and reformed properly, the United States should make sure it clearly defines the costs and benefits of individual programs before taking drastic action.

Blog author: jmeszaros
Wednesday, July 6, 2011
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Many politicians have talked of repealing the Patient Protection and Affordable Care Act (“Obamacare”).  Mitt Romney has said nullifying the healthcare law would be one of his first actions if he was elected president.  However, rather than just repealing the law and going back to the status-quo, with minor changes, the American people should demand true reform.

In 2001, Milton Friedman, the famed, Nobel-prize winning economist, published an article titled “How to Cure Health Care.” (Although worthy of serious consideration, Friedman’s analysis does not contain any explicit moral message, and is simply a policy analysis on healthcare.  For a more in-depth look at the moral dimension of healthcare reform, visit Acton’s special section on healthcare)

In his essay, Friedman stated that, “The United States spends a mind-boggling percentage of its GDP on a health care system that virtually everyone agrees is a disaster,” and that was in 2001.  Spending has only increased over the past decade.  In fact, according to the Department of Health and Human Services Center for Medicare and Medicaid Services, the United States spent 17.6 percent of its GDP on healthcare in 2009, and this figure is expected to grow over time.

In addition to out of control spending, studies in the United States and Europe at the time were showing “…public dissatisfaction with the increasingly impersonal character of medical care.”  Recently, a 2010 Gallup poll showed a majority of Americans are satisfied with the quality of healthcare they receive (62 percent rated quality as excellent or good), but only 39 percent rated the availability of coverage as excellent or good.

How did this happen? How has massively increased spending led to unsatisfactory coverage?

In four words: the government got over-involved.

Friedman explained, “In other technological revolutions, the initiative, financing, production, and distribution were primarily private, though government sometimes played a supporting or regulatory role.”  However, in healthcare, the government decided to intervene and regulate extensively.

It all started at the onset of World War II when, due to wage and price controls enacted during the war, “firms competing to acquire labor at government-controlled wages started to offer medical care as a fringe benefit,” which was not recorded as part of their salary due to the wage-controls.  As a result, employees came to expect healthcare from employers as part of their compensation.

The IRS eventually wised up to this and, wanting more revenue, started to tax the contribution.  Workers raised an uproar so Congress passed a law, The Revenue Act of 1942 (Section 127 specifically), allowing, in Friedman’s words, “… medical care expenditures to be exempt from the income tax, if, and only if, medical care is provided by the employer.”  This system, according to Dr. Donald P. Condit in his Acton Institute commentary “Should Business Be Responsible for Employee Health Care?”, “effectively punishes taxpaying citizens who are paying for health care benefits with after-tax dollars.”

Thus, if an employee paid directly for healthcare, this was added to their taxable income, but, if they went through their employer, it was not, setting up a large incentive to get insurance coverage from one’s employer.  Condit states “medical spending has increased with this ‘tragedy of the commons’ scenario, wherein resources [health care dollars] are overconsumed with the perception that someone else [the company, the government] is paying.”

Friedman similarly demonstrated the result of this and other policies dealing with healthcare with a simple example: “In 1946, seven times as much was spent on food, beverages, and tobacco as on medical care; in 1996, more was spent on medical care than on food, beverages, and tobacco.”  In 50 years, healthcare went from a minor expenditure to the major expenditure of most people, and, during this period, spending by individuals and government on healthcare approximately quadrupled.

Friedman explained, “On the evidence to date, it is hard to see that we have gotten much for quadrupling the share of the nation’s income spent on medical care other than bureaucratization and widespread dissatisfaction with the economic organization of medical care.”

What can be done?

For starters, Friedman said: “If the tax exemption were removed, employees could bargain with their employers for higher take-home pay in lieu of medical care and provide for their own medical care either by dealing directly with medical care providers or by purchasing medical insurance.”  This would make families more responsible for their own healthcare and they could adjust accordingly, either spending less/more on healthcare or taking more/less in wages.  (It seems that most would probably spend less on healthcare and take more income in light of this National Journal article).

This kind of reform would help by “reprivatizing medical care by eliminating most third-party payment, and restoring the role of insurance to providing protection against major medical catastrophes,” rather than using insurance to pay “for regular medical examinations and prescriptions.”

This sounds great, in theory, but how would such a drastic change actually be accomplished?

Friedman advocated for medical savings accounts. He stated: “A medical savings account enables individuals to deposit tax-free funds in an account usable only for medical expense, provided they have a high-deductible insurance policy that limits the maximum out-of-pocket expense.”  This way, employees, not employers, would be responsible for their own healthcare spending, hopefully eliminating the third-party problem, while allowing the wages contributed to still be tax free.

Several companies, including Forbes, Quaker Oats, and the Golden Rule Insurance Company, tried out medical savings accounts instead of employer provided insurance and found that healthcare costs were lower and both management and employees were more satisfied than under the old employer provided system.

Friedman stated, “Families would once again have an incentive to monitor the providers of medical care and to establish the kind of personal relations with them that were once customary.”

This puts responsibility back on the individual to care for his or her family and brings to mind the words of 2 Thessalonians 3:10: “If a man will not work, he shall not eat.”  Modern healthcare is obviously not comparable to biblical food, but the concept of individual responsibility has largely been lost with employer provided healthcare. This reminds all that a family is better served caring for itself rather than relying on someone else to make choices, including healthcare, for them.  Condit, in his essay, says as much: “Employer, or any third party, involvement in providing health care can interfere with an employee’s ability to make his or her own decisions and distort individual responsibility.”

Also, allowing families to manage their own healthcare costs would allow for greater efficiency by means of more efficient spending.  For instance, instead of using insurance to pay for a doctor visit due to a cold or a small prescription, one could pay out of pocket.  If most people paid out-of-pocket, the cost would likely go down because what individual would pay $80 (like my insurance company does) for a 20 minute doctor visit?  By putting people in control and not insurance or government bureaucracies, one could expect people to “shop around” for quality doctors.  Then, doctors’ offices would likely offer better care to compete for patients, instead of expecting an $80 to $100 payout from the insurance company or the government.

In addition, Friedman advocated for the abolishment of Medicare and Medicaid, which sounds rather radical.  However, he said the government should “…replace them by providing every family in the United States with catastrophic insurance (i.e. a major medical policy with a high deductible).”

That way “the family would be relieved of one of its major concerns – the possibility of being impoverished by a major medical catastrophe – and most could readily finance the remaining medical costs.”

This should satisfy the concern that impoverished citizens would not get adequate coverage.  Even if a small portion of the population is chronically ill or unable to pay their medical bills, these people would be covered by a government catastrophic care policy.

It is a citizen’s duty to care for those individuals in their communities who simply cannot help themselves.  Condit states, “Christians, and others, are expected to fulfill a service obligation, with a preferential consideration for the poor and underserved.”  This corresponds to the principles of subsidiarity and sacrifice seen throughout Catholic and Christian teaching.

In Luke 3:11, John the Baptist states: “The man with two tunics should share with him who has none, and the one who has food should do the same.”  Jesus himself said, in Luke 14:13, “when you give a banquet, invite the poor, the crippled, the lame, and the blind.”  Again, in Jesus’ and John’s teaching, the focus is on “you”, the individual, caring for ones neighbor, rather than an entity such as the government (or a corporation).  The government, naturally being more impersonal and disconnected, could provide support in the severest cases, when communities and individuals could not support their own.

Rather than harming the less-fortunate and marginalized, this kind of health reform could free up time and hospital beds (many families would spend much less time and money on care) to help those chronically ill individuals who truly need the best care and doctors available. Friedman’s approach does not solve all the problems of healthcare (how do I know this doctor/hospital is reputable or provides good care since there is no rating service, what about those that refuse to or cannot pay out of pocket, etc.) and this is only a basic analysis, but it does offer a seldom discussed approach to improve care, allow for greater individual independence, and decrease costs.

 

The Detroit News published Dr. Don Condit’s Acton commentary on Accountable Care Organizations (ACOs) in today’s paper. The ACOs are designed to manage costs under the Patient Protection and Affordable Care Act, better known as Obamacare.

Medicare beneficiaries will be “assigned” to 5,000 patient-minimum organizations to coordinate their care. While HHS Secretary Kathleen Sebelius talks about improvement in care, the politically poisonous truth is that Medicare is going broke and ACOs are designed to save money.

The words “rationing” or “treatment denial” or “withholding care” are not part of her press release, but reading the regulations reveals intentions to “share savings” with those who fulfill, or “penalize” others who fall short of, the administration’s objectives. The administration’s talking points include politically palatable words that emphasize quality improvement and care enhancement when the real objective is cost control by a utilitarian calculus.

Physicians and other health care providers will find themselves in conflict with the traditional ethos of duty to patient within ACOs. Doctors will face agency conflicts between the time honored primary duty to patient. Medical care providers will receive incentives for controlling spending, and penalties if they do not. “No one can serve two masters” (Matthew 6:24); not even physicians.

Read “Obamacare rules belie compassion, care” on the Detroit News website.

A commentary by Acton Research Director Samuel Gregg titled “Deficit Denial, American Style” which was published in Acton News & Commentary on March 9th appeared today in the Detroit News as “It’s time to curb welfare growth” and was also picked up by RealClearPolitics. Gregg provides an enlightening examination on the growth of the welfare system, and with our current budget problems, the need to also reform it:

If, however, the results of a much-discussed Wall St Journal-NBC News poll released on March 2 indicate what Americans really think about fiscal issues, then much of the country is clearly in denial – i.e., refusing to acknowledge truth – about what America needs to do if it doesn’t want to go the way of many Western European nations.

While the poll reveals considerable concern about government debt, it also underscores how unwilling many Americans are to reduce those welfare programs that, in the long-term, are central to the deficit-problem.

Here are the raw facts. America’s federal social security program has become the largest government pension scheme in the world in terms of sheer dollars. It is also by far the federal budget’s single greatest expenditure item.

According to the Office of Management and Budget, “human services” ― Social Security; Medicare; Health-expenditures; Education, Training, Employment, and Social Services; Veterans benefits; and the euphemistically-named “Income Security” (i.e., unemployment-benefits) ― were consuming 4 percent of America’s GDP in 1949. By 1976, this figure had increased to 11.7 percent. In 2009, it was consuming 15.3 percent of GDP.

During the same period, human services began consuming a steadily-increasing size of federal government expenditures. In 1967, human services spending was 32.6 percent of the federal budget. By 2009, this figure had increased to 61.3 percent. It is predicted to rise to 67 percent by 2016. In 2010, 75 percent of human services spending was on Social Security, Medicare, and Income Security ― in short, the core welfare state.

These disturbing numbers make it clear any serious federal deficit reduction must involve spending-cuts to federal welfare programs. That doesn’t mean other areas of government-spending should be immune from cuts. But the deficit simply can’t be properly addressed without a serious willingness to reduce welfare-expenditures.

The original Acton commentary by Samuel Gregg can be read in full here.

Blog author: jcouretas
Thursday, March 10, 2011
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A new commentary from Acton Research Director Samuel Gregg. Sign up here to get the latest opinion pieces delivered to your email inbox on Wednesday with the free weekly Acton News & Commentary.

Deficit Denial, American-Style

By Samuel Gregg

Until recently it was thought the primary message of the 2010 Congressional election was that Americans were fed up with successive governments’ willingness to run up deficit-after-deficit and their associated refusal to seriously restrain public spending.

If, however, the results of a much-discussed Wall St Journal-NBC News poll released on March 2 indicate what Americans really think about fiscal issues, then much of the country is clearly in denial – i.e., refusing to acknowledge truth – about what America needs to do if it doesn’t want to go the way of many Western European nations.

While the poll reveals considerable concern about government debt, it also underscores how unwilling many Americans are to reduce those welfare programs that, in the long-term, are central to the deficit-problem.

Here are the raw facts. America’s federal social security program has become the largest government pension scheme in the world in terms of sheer dollars. It is also by far the federal budget’s single greatest expenditure item.

According to the Office of Management and Budget, “human services” ― Social Security; Medicare; Health-expenditures; Education, Training, Employment, and Social Services; Veterans benefits; and the euphemistically-named “Income Security” (i.e., unemployment-benefits) ― were consuming 4 percent of America’s GDP in 1949. By 1976, this figure had increased to 11.7 percent. In 2009, it was consuming 15.3 percent of GDP.

During the same period, human services began consuming a steadily-increasing size of federal government expenditures. In 1967, human services spending was 32.6 percent of the federal budget. By 2009, this figure had increased to 61.3 percent. It is predicted to rise to 67 percent by 2016. In 2010, 75 percent of human services spending was on Social Security, Medicare, and Income Security ― in short, the core welfare state.

These disturbing numbers make it clear any serious federal deficit reduction must involve spending-cuts to federal welfare programs. That doesn’t mean other areas of government-spending should be immune from cuts. But the deficit simply can’t be properly addressed without a serious willingness to reduce welfare-expenditures.

And yet despite all the passionate rhetoric from Americans about the need to diminish government-spending, the Wall St Journal-NBC News poll suggests that fewer than 25 percent of Americans favor cutbacks to Social Security or Medicare as deficit-reduction measures. As the Wall St Journal’s own commentators noted: “Even tea party supporters, by a nearly 2-to-1 margin, declared significant cuts to Social Security ‘unacceptable.’

Unacceptable? Think about that word. Do large numbers of Americans really believe there is something morally evil about significant reductions to welfare-spending under any circumstances? Since when – apart from Greece and other models of fiscal rectitude – have welfare payments assumed the status of an absolute right subject to no qualification? Have we really gone so far down the path of economic-Europeanization?

Granted, the same poll suggests much larger numbers of Americans are willing to raise the retirement age to 69 and means-test social security. But is that the best Americans are willing to do?

Spain’s unreconstructed-1960s-lefty Socialist government has just lifted Spain’s retirement-age to 67. Unsurprisingly, that won’t fully kick-in until 2027, long after Spain’s political class and their tame voting constituencies have met their Maker and no longer need to live off their children’s futures. But can Americans who proclaim their attachment to free enterprise and personal responsibility really do no better than left-wing Western Europeans?

Back in 2007, the journalist Robert J. Samuelson summarized the situation perfectly. “Most Americans,” he wrote, “don’t want to admit that they are current or prospective welfare recipients. They prefer to think that they automatically deserve whatever they’ve been promised simply because the promises were made. Americans do not want to pose the basic questions, and their political leaders mirror that reluctance. This makes the welfare state immovable and the budget situation intractable.”

Presidential campaigns are invariably accompanied by a great deal of posturing. It would be helpful, however, if some serious candidates for the nation’s highest office in 2012 – Republican or Democrat – would use their moment in the spotlight to educate Americans about what’s at stake.

One former American vice-president once reportedly insisted, “Deficits don’t matter.” Unfortunately, there is mounting proof he was wrong. After examining data on 44 countries over approximately 200 years, two economists recently found evidence suggesting that developed nations with gross public debt levels exceeding 90 percent of GDP (i.e., America) find that their medium-growth rates fall by one percent, while average growth declines by an even greater proportion.

That’s worrying because while deficit-cutting matters, wealth-creation matters even more if we are to dig ourselves out of our fiscal hole. America now seriously risks seeing its burgeoning welfare costs suffocating the productive sector of the economy that makes social welfare possible in the first place.

Incidentally, it won’t be the rich who suffer. It will be the poor. In their laudable concern for the weakest among us, Americans ought to remember that and start matching political rhetoric with consistent fiscal action.

Dr. Samuel Gregg is Research Director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, and Wilhelm Röpke’s Political Economy.

In yesterday’s edition of the Grand Rapids Press, editorial page editor Ed Golder reflects on the implications of the historically-high levels of government spending, the deficit, and debt.

Most impressively, Golder notes where the government is actually spending money, and it is largely not in the areas of discretionary spending that so many politicians like to talk about. Golder writes,

Neither party is forthrightly honest about what needs to be done. Making the necessary cuts touches on very large and politically sacrosanct programs. About one fifth of federal spending, for instance, is defense. Can we seriously tackle the budget without looking at some prized weapons programs?

And the biggest category of spending, the one growing at the fastest rate, is entitlements – Medicare, Medicaid, Social Security and health insurance for children.

We may have to accept the idea that rich people will pay more than poorer people for medical coverage. We will almost certainly, given life expectancies, have to work longer before receiving Social Security benefits.

Reform of defense spending is important. But the real key is entitlement reform. I’ve often thought that one lasting legacy of the Bush era (beyond the wars and the Great Recession) is found in his insistence on bringing to the national discussion the issue of entitlement reform, particularly Social Security. He wasn’t successful, but it did show some principled political courage to make Social Security reform a major policy goal of his administration.

Golder also relates this entertaining little anecdote:

Speaking to the Economic Club of Grand Rapids Monday, financial forecaster Jason Trennert, was asked by an audience member to handicap Washington’s ability to make meaningful headway in tackling the debt. He wryly quoted theologian Augustine of Hippo, who famously quipped, “Lord make me chaste, but not yet.”

In other words: Sure, we’ll reform. Tomorrow.

Tomorrow’s here. Heck, tomorrow may be yesterday at this point.

That’s one other legacy of the Bush era that we are living with, the legacy of the mantra, “Lord, make me thrifty, but not yet.” That goes for the politician as well as for the citizen.

Golder rightly concludes by pointing to the need for leadership on these pressing fiscal issues. We’ve gotten to this place largely because of a lack of political leadership. “Our leaders have to talk frankly about what needs to be done – programs that will be cut, individual sacrifices that will have to be made,” writes Golder.

Instead of statesmen we’ve been electing those who could bring home the most pork for their districts and constituencies, damn the consequences. That needs to change, and it begins in the renewal of leadership in other spheres of social life, including the family, business, charity, education, and so on.

From the Jan. 5 Acton News & Commentary. This is an edited excerpt of “Health-Care Counter-Reform,” a longer piece Dr. Condit wrote for the November 2010 issue of the Linacre Quarterly, published by the Catholic Medical Association. For more on this important issue, see the Acton special report on Christians and Health Care. Dr. Condit is also the author of the 2009 Acton monograph, A Prescription for Health Care Reform, available in the Book Shoppe.

Obamacare and the Threat to Human Dignity

By Dr. Donald P. Condit

Since President Obama signed the Patient Protection Act into law in March 2010, the acrimonious debate on this far-reaching legislation has persisted. For many, the concerns over the Obama administration’s health care reform effort are based on both moral and fiscal grounds. Now, with House Republicans scheduling a vote to repeal “Obamacare” in the days ahead, the debate is once again ratcheting up.

Perceived threats to the sanctity of life have been at the heart of moral objections to the new law. Despite a March 2010 executive order elaborating the Patient Protection Act’s “Consistency with Longstanding Restrictions on the Use of Federal Funds for Abortion,” many pro-life advocates fear a judicial order could reverse long-standing Hyde amendment restrictions on the use of federal tax dollars for abortion. Impending Medicare insolvency and the Patient Protection Act’s establishment of an “independent payment advisory board” to address treatment effectiveness and cost suggest bureaucratic restrictions on the horizon for medical care of the elderly and disabled.

The objections made on fiscal grounds are serious. Prior to the 2008 presidential election, Barack Obama voiced concern for 47 million Americans without health insurance. More recently, supporters of this legislation focused on 32 million Americans, with 15 million immigrants and others left out of the equation, yet still requiring care in United States emergency rooms. The Patient Protection Act increases eligibility for Medicaid recipients, yet state budgets are severely strained with their current underfunded medical obligations. Moreover, doctors struggle to provide health-care access to Medicaid patients when reimbursed below the overhead costs of delivering care.

Who Should Pay?

The perception among consumers of third-party responsibility for health, including payment for health-care resource consumption, is the major factor for unsustainable escalation of medical spending in the United States. Yet the Patient Protection Act augments third-party authority and threatens doctor-patient relationship autonomy, by increasing responsibility of government and employers for health care. Patients and physicians will face increasing involvement of third parties in decision making in exam rooms and at the bedside. (more…)