Category Archives: social insurance

No compromise

In his blog Paul Krugman makes the point that the stimulus bill before Congress isn’t going to end up with bipartisan support.  The GOP wants tax cuts and the Democrats want spending.  The difference of opinion isn’t so much a debate over the proper course of action, it’s a “collision of fundamentally incompatible world views”.  Says Krugman:

If one thing is clear from the stimulus debate, it’s that the two parties have utterly different economic doctrines. Democrats believe in something more or less like standard textbook macroeconomics; Republicans believe in a doctrine under which tax cuts are the universal elixir, and government spending is almost always bad.

Republicans certainly like tax cuts, but I think it’s important to be clear why. It’s not because they think tax cuts will pay for themselves (even though they say so); it’s not because they don’t like the government to spend money (see Iraq War, et al); it’s not because they are particularly greedy (well, maybe it is, but let’s just stipulate that one).  It’s because the massive borrowing required by tax cuts will eventually accomplish what they can’t accomplish through more straightforward means:  destroy broad based social insurance programs like Social Security and Medicare.  This is the “fundamentally incompatible world view”.  For the modern conservative Social Security and Medicare are “European-style socialism”.  And if Obama tries to pass anything approaching national healthcare, he’s going to have a major collision with that world view.

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Filed under economics, healthcare finance, social insurance

Back to the future with Newt

I heard Newt Gingrich on NPR this morning talking about how the GOP can make a comeback.  After saying that small government and tax cuts are the primary feature of the GOP, he went on to say that we shouldn’t get the wrong idea.  The GOP isn’t anti-government.  In fact the smallest government he and most Republicans can imagine would be $1.5 trillion.

What they object to is “dumb government”.  They are in favor of “smart government”.   As examples of smart government, he noted that Lincoln built the transcontinental railroad, Teddy Roosevelt built the Panama canal, and Eisenhower built the interstate highway system.

Ummm…point of order.

When was the last time the GOP championed a national anything, outside of weapons and war?  I’m thinking Eisenhower’s interstate 50 years ago.  And where, exactly, is Eisenhower in the pantheon of GOP heroes these days?  I’d say he’s about where that modern-day GOP hero Barry Goldwater put him—in the dumpster with other loathed liberals.

But I don’t want to dump on Newt too much.  If the GOP is going to start moving their party in the direction of Lincoln, TR, and Eisenhower I say three cheers.  But they’ve got a long way to go, and I think we need to see some action–not just words.

Incidentally, Newt didn’t specify what his $1.5 trillion government would look like, but since federal spending was $3 trillion in 2008 and $1.4 trillion of that was Social Security, Medicare, and Medicaid—I think you can kind of see what his “smart” government would look like.

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Filed under economics, radical right, social insurance

Health care stimulus

One of the strange things about our current economic situation is that, over the long run we need to save MORE, but over the short-term we are saving TOO MUCH.  Over the past ten years or so we have been saving almost nothing and consuming with borrowed money.  And the borrowing was against an illusory asset—housing prices in a bubble. Not good.

But now, fear has caused people to spend too little.  People are even afraid to save money in traditional ways; its all going to the safety of US Treasury securities.  So we need the federal government to step in and fill the gaps.  First we need massive spending to stabilize the economy; then we need a prudent level of savings to provide for investment over the long term.

Over at TNR Jacob Hacker makes the case for healthcare reform as the perfect stimulus:

During the campaign, skeptics complained that a health care overhaul would involve a lot of upfront costs and that the saving would only come later. But that’s exactly what we need right now. Health care involves major spending in the near future, but, more than other initiatives, it will put a brake on federal outlays in the far future.

Exactly.  Hacker has some of the detail of how this will work in the short-term, but in the long-term it could be a huge savings, plugging a large portion of the $53 trillion hole in the federal budget that our accountant in chief, David Walker, likes to talk about.

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Filed under economics, healthcare finance, social insurance

Tax whiplash

Remember a few years ago when the GOP was leading the charge to dimantle save Social Security?  Some of us observed that excess Social Security taxes collected over the past 25 years had intentionally created a $2 trillion trust fund, enough to pay 100% of benefits until 2042 according to the CBO.

No, no, no, said the GOP.  It’s unbelievably naive to think of Social Security as a stand alone insurance plan with a “trust fund”.   You need to think of all taxes and expenditures together.  And taken together, the federal government’s in a bad hole.  Social Security will have to be cut back.

One reason that argument is outrageous is because the $2 trillion was accumulated by taxing ONLY income below $102,000 (current cap).  Income above that level is tax free—always has been.

Fast forward three years and Obama is considering imposing a Social Security tax on income above $250,000—from its current 0% to maybe 4%.  The GOP response to this?  A whiplash inducing reversal of opinion.  (from the Wall Street Journal):

…lifting the cap would change the nature of Social Security from an insurance program — which pays out based on how much you paid in — into a wealth-transfer program that is far more progressive.

Got it?  A tax structure that transfers wealth TO the wealthy is just plain ol’ taxes.  A tax structure that transfers wealth FROM the wealthy is a contemptible “wealth-transfer program”—aka Socialism.

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Filed under economics, social insurance

War on Healthcare

Today’s word: medical underwriting. “the use of medical or health status information in the evaluation of an applicant for coverage”

As I’ve pointed out before McCain’s healthcare plan relies heavily on state-run high-risk pools; it would essentially eliminate employer-sponsored group insurance by making group premiums non-deductible for employers. Everyone would be given a tax credit for $2500-$5000 and pushed into the individual market. It would likely be a nightmare for many people. It also bears a striking similarity to the plan offered by the health insurance lobbying group, AHIP. Shocking, I know.

I have suffered through publicly financed healthcare my entire life.  I will waiver in my efforts to save the American people from that fate.  --John McCain

"I have suffered through publicly financed healthcare my entire life. I will not waiver in my efforts to save the American people from a similar fate." --John McCain

If McCain and AHIP are successful in implementing their plan they will have delivered a gold mine to private insurers and a minefield to state governments. Private insurers will be working in the most profitable demographic imaginable: healthy people with money. Everyone else–literally those most likely to need healthcare–will be looking to government at all levels to help them out: the old (Medicare), the poor (Medicaid), and the sick (state high risk pools). As a taxpayer my question would be this: if we taxpayers are going to provide health insurance to all the high risk folks, why not the low risk too? At this point what exactly is the point of having private insurers around?

Moreover, let’s take a look at the process by which insurers would identify these potentially costly customers, medical underwriting. Insurers say they need to screen out high risk people, like people with pre-existing conditions, people with a family history of certain diseases, age, gender, and so forth—so that they can keep premiums affordable for everyone else. This might make some sense if they were planning to actually exclude someone from the healthcare system. But no one, to my knowledge. actually proposes to do that.

That’s not to say it doesn’t happen all the time (for more on that subject, I highly recommend Jonathan Cohn’s book, Sick). No, insurance companies don’t explicitly say they want to exclude people from the healthcare system, they just want to exclude certain people from their healthcare system.

What private insurers propose to do is to use medical underwriting to shift costs from private insurers to the government. In other words, if the health insurance system worked exactly as the insurance industry says they want it to, medical underwriting would be merely an expensive, useless process that shifts costs to the public. However, since our healthcare system doesn’t work as advertised, medical underwriting is an evil process, tossing random people into the giant cracks and crevices of our patchwork healthcare system–in addition to being expensive and useless.

It’s for this reason that our healthcare system cannot work without mandatory participation. Everyone gets coverage; everyone pays something. That requires an end to the vast majority of medical underwriting. if McCain and the health insurance companies had one ounce of dignity they would be begging the government to stop them from medical underwriting. Like slavery and child labor it’s a morally bankrupt practice that has been outlawed in other countries for decades. But, instead of ending it, they want to expand it. They want to refine it, fine tune it, devote vast resources to it, so that they can more efficiently identify those who are at risk of costing them money.  So that they can more efficiently dump them on the taxpayers.  So that they can more efficiently mine their particular niche of the healthcare system for gold.

They call this proposal—I’m not making this up—“a plan for guaranteed access” and “covering the uninsured“. Although the medical underwriting they propose to use has precisely the opposite effect—it excludes people from the system—they call their proposal “guaranteed access” because… ummm…they’re going to ask taxpayers to guarantee it. As AHIP puts it on their website, they will “encourage states to develop and implement access proposals”. McCain’s website assures us that “as President, John McCain will work with governors to develop a best practice model that states can follow – a Guaranteed Access Plan or GAP”.

Right. Is there one person in America who believes the GOP has any intention of raising $1 of tax money to pay for this? As I write they are working as hard as they can to defund social insurance and social programs all across the country. Even children cannot escape the GOP attack on government financed healthcare. Now they are proposing that state governments (with their vast resources!) start covering millions of people who would be uninsurable under McCain’s plan? Please.

Its hard to avoid seeing this as a cynical ploy to protect the private insurance industry’s turf. I imagine McCain and his AHIP buddies sitting around the planning table trying to figure out what to do about financing their “Guaranteed Access Plan”.

McCain: OK, we’ve done what we need to do, consulted industry, packaged our plan with the right buzz words—how can we best insure that in never actually happens?

Adviser: John, let’s get the states involved. Obviously a weaker taxing authority than the federal government; divided into 50 separate jurisdictions; they have constant budget problems, 17 states don’t even have high risk pools, and as a rule, our party operatives have been very successful at demagoguing the tax issues for years.

McCain: OK, excellent. Our plan will be to “work with the states”.

In my humble opinion its a total outrage that McCain and the health insurance industry are taken seriously. Especially McCain, having spent his entire life covered by publicly financed health insurance; where does he get off recommending this type of program for the rest of us?

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Filed under economics, healthcare finance, junglenomics, social insurance

Social Security “a disgrace”—John McCain

Via TPM, John McCain has apparently taken to calling Social Security an “an absolute disgrace” because

“…we are paying present-day retirees with the taxes paid by young workers in America today. And that’s a disgrace. It’s an absolute disgrace and it’s got to be fixed.”

Josh Marshall asks where’s the disgrace? “That’s how the system was designed to operate”.

True enough. But here’s the deal. It really does look like young people are supporting old people—and many of the old folks like McCain and the vast punditocracy that continually trash the program are wealthy and don’t need the money. So they feel guilty receiving Social Security. It kind of looks like welfare payments, a big redistribution scheme hatched by liberals. As McCain says, “it’s a disgrace.”

Let’s think that through. Imagine that Social Security didn’t exist but we still wanted people to prepare financially for retirement. So we require that everyone purchase an annuity at retirement that will guarantee some minimum standard of living. Further we mandate that everyone start saving from day one of employment so that they can buy the annuity. But that’s the end of the government involvement. These will be private annuities, say from Aetna. So all workers send a bit of their paycheck to Aetna each month, buying their annuity on the installment plan. Aetna turns around and sends annuity payments to people who have retired. From the perspective of the individuals involved this system would operate exactly the same as Social Security except the intermediary is a private insurance company instead of the government.

Would McCain call this arrangement a disgrace? Or think that its old, rich people receiving welfare payments? I doubt it. This is just how insurance works.

Social Security operates the same way. There are two differences, however. One, Social Security is distributing far more of the money it takes in to retirees than private insurers would because it has lower administrative costs, no commissions or billionaire CEO to pay, etc.

Second—and this is something that could be called welfare—Social Security started making annuity payments to retirees from the start. Old folks in the early years of the programs got a pretty good deal. They received benefits without paying in or without paying in much. Personally I don’t think that was bad idea. The generations that had lived through depression and world war deserved it if anyone did. No, there’s really nothing about the program I would call a disgrace.

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Filed under brain dead media, economics, social insurance

Medicare Smackdown

As we progressives dream of universal health coverage, one overriding fear clouds the horizon. Who can take on the health insurance lobby? Based on a vote in the House of Representatives last week, one worthy opponent appears to be American Medical Association. The House voted Tuesday on a plan to restrain Medicare spending. One option was to cut reimbursements to the insurance industry’s favorite program, Medicare Advantage; the other option was to cut reimbursements to physicians by 10%. The vote result: AMA lobby-355; insurance lobby-59.

Take that, Humana!

Even more astonishing, Bush has threatened to veto the law should it get to his desk, but Senate Republicans so far have successfully filibustered it.

My question: how in the world did the GOP end up going to the mat to defend the health insurance industry against the docs? In an election year, no less. Bush and the GOP of course will say they are desperately, desperately, concerned about budget deficits and tough choices have to be made.

Right. This, from the $5 trillion man.

The answer is that the modern GOP hates and fears social insurance programs like Social Security and Medicare. Remember that Bush’s first priority when it came to using his political capital from the 2004 election was an attempt to privatize Social Security. Now he’s now willing to alienate a powerful constituency, the docs, to force fellow Republicans to defend Medicare Advantage, the GOPs attempt to privatize Medicare.

How does Medicare Advantage privatize Medicare? Here’s a brief history:

  • 1997- Congress enacts “Medicare Choice (Part C) allowing private insurers to offer a competing product to traditional Medicare. Medicare had always offered a fixed benefit package; private insurers could offer different types of policies as long as they were at least a good as traditional Medicare.
  • 1997-2003 – few people enroll in Medicare Choice
  • 2003 – Congress overhauls Medicare Choice and renames it Medicare Advantage. New rules permit increased payments to private insurers and richer benefit packages to enrollees (dental, vision, lower co-pays) in effect paying insurers to market Medicare Advantage and rewarding seniors who enroll in private Medicare.
  • 2008 – It works. Humana reports that 66% of its profits come from Medicare Advantage policies. Seniors like it too; enrollment hits 25% of all Medicare beneficiaries.

One problem. Medicare Advantage costs taxpayers 13-17% more per enrollee than traditional Medicare. Thus, the budget problem.

I just have to laugh at this. Let’s take a step back and ask “why were private insurers brought into Medicare to begin with?” To lower costs, of course! But it turns out that, given a level playing field, insurers weren’t very interested. So Congress sweetened the pot. Paid them to write Medicare policies and paid beneficiaries to enroll in private Medicare. The fact that the entire enterprise accomplishes exactly the opposite of it’s stated intention is apparently irrelevant to Bush and the GOP. They are so delighted with the program, they are willing to cut physician’s reimbursements by 10% to defend the program.

So what will happen? I don’t think there is any chance physician fees will be cut and the GOP doesn’t want to cut them. They just got maneuvered into a bad political situation. Likely Congress will gets some cut in privatized Medicare and will punt on everything else. But I’d like to hope that this entire episode highlights that the problem of healthcare cost isn’t going to be solved by private insurers.

One other thing: the GOP is far more interested in delivering loot to the insurance industry than it is in solving actual problems.

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Filed under corporate welfare, healthcare finance, social insurance