Saving Medicare With Free Market Reforms
CARPE DIEM
Professor Mark J. Perry's Blog for Economics and Finance
Monday, May 23, 2011
About Me
- Name: Mark J. Perry
- Location: Washington, D.C., United States
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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38 Comments:
The high costs of health care caused by government is a great disservice for both the insured and uninsured.
Paul Ryan, and the Cato guys can yak until they're blue in the face; the voters aren't going to let them mess with grandma's medicare.
The Dems have won NY-26 exactly 3 times since 1857. The Dem is running, almost entirely, against the Ryan Medicare Plan. It looks like she's going to make it 4.
This is an "unforced error" of monumental proportions. The Pubs really are "the pary of stupid."
I have friends, married couple, early 50s. They pay $1,200 monthly now for private insurance. They say they think they will have to "go bare" from 60 to 65, as they won;t be able to afford insurance.
Kill Medicare? Vouchers?
I wonder how the voters will respond to that.
How about vouchers for the VA first, as a test to whether they work?
the video is long on rhetoric and short on important specifics.
He continues the disinformation campaign by conflating FICA and Income Taxes sources and not making clear that there are two parts to Medicare - Part A and Part B.
Part A is funded from 2.9% FICA taxes while Part B is funded from the Income Tax and premiums.
check here to see how the revenues and expenditures break down:
http://www.socialsecurity.gov/OACT/TRSUM/tr11summary.pdf
Look under "What were the sources of Income.
Medicare Part A = 104 billion solely from FICA Taxes
Medicare Part B = 204.6 billion from income taxes and 58 billion from premiums.
Think about this - we have a 1.5 trillion deficit and of that only 204.6 billion is due to Medicare (Part B).
So you could ZERO OUT Medicare part B and the current deficit would "shrink" to "only" 1.3 Trillion.
Without question - as health care costs increase including Medicare it's going to FURTHER exasperate THE problem.
But right now you have a 1.3 trillion deficit that is NOT GETTING ADDRESSED at all while the medicare bomb-throwers would have everyone believe that Medicare is the cause of the CURRENT DEFICIT
which it is not.. but the narrative swings the focus away from the 1.3 structural deficit that none of these guys have provided a plan to fix ..
to their FAVORITE topic... big bad entitlements that are going to "bankrupt" the country.
The narrative is just plain corrupt and does a disservice to the country because it basically ignores the real 600-lb CURRENT BUDGET Gorilla - the 1.3 Trillion Deficit that is NOT DUE to Medicare.
" Paul Ryan, and the Cato guys can yak until they're blue in the face; the voters aren't going to let them mess with grandma's medicare."
I think we MUST TELL Grandma the TRUTH about Medicare Part B and the fact that Grandma is paying $100 a month for premiums and using $400 a month in benefits and that is not sustainable and Grandma is going to have to pay more in premiums and co-pays and have less covered.
But when someone tries to tell the truth to Grandma - the guys in the video start shouting "death panels" - at the same time trying to get enough other people to sign up to get rid of Grandma's Medicare all together.
The reason all of this holds together is that these issues are not well understood by Grandma (even though she depends on it) and Grandma like many others in "informed" on the issues these days in sound-bites - like this video.
There are a bunch of people who, if they knew the real truth about Medicare and not the distorted fairy tales who would AGREE to make the necessary reforms to put the program on a sustainable path.
but we have a whole segment of the political spectrum to basically DISAGREE with the CONCEPT of Medicare and want to kill it - hook or crook.
In other words - they are not really interested in the merits of the issue - just kill it.
So that's why we see videos like this that do not tell the real truth about the issue but rather want to blow-up Medicare on false fiscal issues.
If someone just stood up, and said, "we have to raise Medicare Premiums a bit. In fact, a pretty good bit," everyone would just shrug their shoulders, and say, "what's new?"
If they said, "we're going to start prescribing Omeprazole, and Simvastatin for Grandpa, instead of Nexxium, and Zocor; it's just as good, and a heck of a lot cheaper" the drug companies wouldn't like it, but the voters would say, "well, duh."
If the politicians said, "Drug companies will sell to Medicare at the same price that they sell to Canada, and France, everyone would say, "Right On."
There's a Lot that can be done. Dropping Grannie's health coverage ain't one of them.
Yes, there are enormous problems with the U.S. health care system.
That's why we need to scale back government intervention substantially.
Unfortunately, with "Obamacare," we continue to go the other way, which adds even more inefficiency.
what really strikes me is that RIGHT NOW - Medicare is being subsidized by taxes to the tune of about $230 billion dollars annually while SS and Medicare Part A are, at this moment in rough balance and contribute little to the deficit.
So, RIGHT NOW, the total Medicare "hit" on the budget is 1/5 of the 1.5 trillion deficit.
That's leaves 1.3 trillion that has nothing to do with Medicare.
And there are a wide range of things that could cut this number substantially and while a bitter pill to swallow for seniors - the truth is that there are a lot of seniors who are well off financially and getting a 3-1 benefit payback from subsidy.
Clearly people who are of decent financial means should not be subsidized with taxes.
The entire deficit crisis narrative is royally screwed up - ON PURPOSE.
There is absolutely no question that both Medicare A and B as well as SS need to be fixed soon so as to not ADD even more debt to the CURRENT budget shortfalls.
But RIGHT NOW - almost the entire focus of the anti-Medicare folks is NOT FOCUSED on the 1.3 trillion part of our deficit and 14 trillion in debt that have absolutely nothing to do with the CURRENT status of SS and Medicare.
Because of this - the entire issue has degraded into a blood sport wedge issue that is being waged on ideological grounds and not responsible fiscal grounds.
Grandma may not understand the intricacies of the inside-baseball budget kerfuffle but Grandma has good instincts about the politics which are suspect.
"The Dems have won NY-26 exactly 3 times since 1857. The Dem is running, almost entirely, against the Ryan Medicare Plan. It looks like she's going to make it 4."
Actually, if NY-26 goes to the Dems it will be because they have put up a fraud to run as a "Tea Party" candidate when, in fact, he's just a leftist shill. If enough voters are suckered in, the Dems may eeck out a win. The election has almost nothing to do with Paul Ryan or Medicare.
" Yes, there are enormous problems with the U.S. health care system."
but we are holding govt healthcare to a different fiscal standard.
Govt healthcare is said to have "unfunded liabilities" if we judge the CURRENT funding with the 75-year horizon costs - which are horrible by any measure.
But private healthcare - measured the same way..
with today's premiums and the 75-year pay out would be just as horrible.
We say that the govt unfunded liabilities "prove" that govt health care is not sustainable.
but if you judged private health using the same standard... i.e. they cannot increase premiums or cut benefits to address their long-term "unfunded liabilities" - then are they not - ALSO unsustainable?
Larry, government needs to scale back its enormous influence over private health care insurance.
So, Americans can have more health care at lower premiums.
"RIGHT NOW, the total Medicare "hit" on the budget is 1/5 of the 1.5 trillion deficit ... RIGHT NOW - almost the entire focus of the anti-Medicare folks is NOT FOCUSED on the 1.3 trillion part of our deficit and 14 trillion in debt that have absolutely nothing to do with the CURRENT status of SS and Medicare."
Unfortunately, there are no anti-Medicare folks in Washington. If people were allowed to save the money that they are currently required to pay toward Medicare and SS over their lifetimes in personal tax deferred or tax free accounts they would be much better off when it came time for them to retire.
That said, what people like Paul Ryan are focused on is the unfunded liabilities of these to Ponzi schemes. According to the Medicare and Social Security Trustees Report the unfunded liability of these two programs is just over $59 trillion and that, at least with regard to Medicare, is understated according to Medicare's chief actuary, Richard Foster:
"The annual report to Congress on the financial status of Medicare must be based on current law. In this report, the various cost-reduction measures—most importantly the reductions in the payment rate updates for most categories of Medicare providers by the growth in economy-wide multifactor productivity—are assumed to occur in all future years, as required by the Affordable Care Act. In addition, an almost 30 percent reduction in Medicare payment rates for physician services is assumed to be implemented in 2012 as required under current law, despite the virtual certainty that Congress will override this reduction."
Reason
The Medicare Ponzi scheme is failing, and it is set to take a lot of people's savings and medical security with it. The left is hoping that by demagoguing this issue they can ride a wave of fear into a political majority allowing them to "restructure" this failure on their terms. Don't bet on it.
We're on a unsustainable path without efficiencies and trade-offs.
"Unfortunately, there are no anti-Medicare folks in Washington. If people were allowed to save the money that they are currently required to pay toward Medicare and SS over their lifetimes in personal tax deferred or tax free accounts they would be much better off when it came time for them to retire."
We already have MSAs including Medicare MSAs.
The problem with the MSA idea is what happens if you have expenses greater than your account?
Some say that you have to BUY Catastrophic Insurance but the question is who do you buy it from?
If you have existing health care problems.. you're going to be charged much more for catastrophic insurance.. may not even be able to buy it.
Singapore deals with this problem by offering Govt-subsidized Catastrophic insurance at a fixed subscriber price - but if too many folks run out of their MSAs - the cost of the govt-subsidized catastrophic insurance will increase.
"That said, what people like Paul Ryan are focused on is the unfunded liabilities of these to Ponzi schemes."
but he's not focused on the unfunded liabilities of TRICARE and private insurance which is also going up at the same rate as Medicare.
What happens when you kill Medicare but private healthcare continues to go up?
"According to the Medicare and Social Security Trustees Report the unfunded liability of these two programs is just over $59 trillion and that, at least with regard to Medicare, is understated according to Medicare's chief actuary, Richard Foster:
"The annual report to Congress on the financial status of Medicare must be based on current law. In this report, the various cost-reduction measures—most importantly the reductions in the payment rate updates for most categories of Medicare providers by the growth in economy-wide multifactor productivity—are assumed to occur in all future years, as required by the Affordable Care Act. In addition, an almost 30 percent reduction in Medicare payment rates for physician services is assumed to be implemented in 2012 as required under current law, despite the virtual certainty that Congress will override this reduction."
you need to supply the links to this... but remember he said CURRENT LAW while we do not hold private insurance to the same standard - CURRENT PREMIUMS.
BOTH Medicare AND private insurance if held to no increases in premiums would show unfunded liabilities.
Ryan wants to kill Medicare because of the "unfunded liabilities" but he has no answer to the same problem with private healthcare.
"Reason
The Medicare Ponzi scheme is failing, and it is set to take a lot of people's savings and medical security with it. The left is hoping that by demagoguing this issue they can ride a wave of fear into a political majority allowing them to "restructure" this failure on their terms. Don't bet on it."
Medicare is no more a Ponzi scheme than ANY "pay as you go insurance" which includes ALL private health care insurance also.
We don't say that private health care must raise it's premiums NOW to deal with future health care increases.
They are allowed to incrementally raise the premiums and adjust benefits and dump people if it helps their bottom line - to deal with their future "unfunded" liabilities.
It's the same issue govt or private but we use a double standard to judge them.
An "unfunded liability" for Medicare is not an unfunded liability for private insurance even though both of them have exactly the same issue.
re "unfunded liabilities"
with a time horizon - this concept makes no sense.
SS and Medicare use a 75-year horizon.
this is an actuarial calculation that provides "look ahead" projections so that changes can be made now or in the near future.
Private health insurance if it did the same process and used a 75-year horizon and held their current premiums fixed.. would ALSO show god-awful unfunded liabilities.
There are no restrictions on pvt healthcare in raising it's premiums to keep from having unfunded liabilities but we say that if we judge Medicare to allow no increases that it is a "ponzi scheme" with unfunded liabilities.
Medicare has changed several times over the years to adjust FICA and other changes to benefits to keep it solvent.
The PROCESS is what keeps it solvent.
It's a very similar process to private healthcare which ALSO adjust it's premiums and benefit to maintain fiscal integrity.
It's the SAME PROCESS for the SAME REASONS.
Govt healthcare, when judged with the same criteria is no more or less sustainable than private insurance.
it's a myth, promoted by those who disagree with the CONCEPT of SS and Medicare but know they cannot win the issue on that basis so they attack it fiscally which is simply dishonest.
" with a time horizon - this concept makes no sense."
meant to say:
WITHOUT a time horizon - the concept of unfunded liabilities makes no sense.
In short, the Republicans have always hated SS, and Medicare, and in their determination not to let this crisis go to waste, they are on the attack, once more.
And, just like the other times, they'll pay at the ballot box.
I must have missed something, but I fail to understand where the free market comes in when we will still have the FDA, occupational licensing laws, certificates of need and corporate practice of medicine laws even with vouchers.
"In short, the Republicans have always hated SS, and Medicare, and in their determination not to let this crisis go to waste, they are on the attack, once more.
And, just like the other times, they'll pay at the ballot box"...
Thanks rufus for reaffirming that societal parasites are the ones that appreciate spending other peoples' money...
From Thomas Sowell in today's Washington Examiner: Dependency and votes
Those who regard government "entitlement" programs as sacrosanct, and regard those who want to cut them back as callous or cruel, picture a world very different from the world of reality.
To listen to some of the defenders of entitlement programs, which are at the heart of the present financial crisis, you might think that anything the government fails to provide is something that people will be deprived of.
In other words, if you cut spending on school lunches, children will go hungry. If you fail to subsidize housing, people will be homeless. If you fail to subsidize prescription drugs, old people will have to eat dog food in order to be able to afford their meds.
This is the vision promoted by many politicians and much of the media. But, in the world of reality, it is not even true for most people who are living below the official poverty line...
(there's a bit more)
Juandos, we know what the Democrats are trying to do.
They want to continue driving-up the cost of health care (which is a great disservice in itself), until it's so high, a complete government takeover will be an improvement.
It will be an improvement initially.
However, over time, hospitals will deteriorate, the quantity and quality of medical equipment will fall, there will be less specialized care (and more generalized care initially), etc..
When trade-offs are exhausted and inefficiencies continue, we'll receive less and less health care for the prices or taxes we pay.
I do believe PT it the nail on the head: "When trade-offs are exhausted and inefficiencies continue, we'll receive less and less health care for the prices or taxes we pay"...
How many of the best & brightest will want to go into health care (regardless of which field of health care) when they see such a lame pay off for their excessive time and efforts to be qualified to work in the health care field?
If the U.S. government nationalizes the health care industry, new drug development will likely slow substantially:
Pharmaceutical industry-Wikipedia
"The United States accounts for almost half of the global pharmaceutical market, with $289 billion in annual sales followed by the EU and Japan."
Check out this April 15 Bloomberg news story: Drugmakers Poised to Report Biggest Drop Since 2006 on Record Patent Loss
Professor Mark, a Bloomberg news story link should've shown up and comment #23 but didn't...
"Clearly people who are of decent financial means should not be subsidized with taxes."
Davy Crockett (D) believed people who are not of decent finacial means should not be subsidized by taxes either. Crockett didn't believe in taking other's money.
How many of the best & brightest will want to go into health care (regardless of which field of health care) when they see such a lame pay off for their excessive time and efforts to be qualified to work in the health care field?
I predict a lot of American doctors opening private clinics in the Caribbean.
Clearly people who are of decent financial means should not be subsidized with taxes.
I predict a surge of people hiding their financial means to receive subsidy. Terrible incentives.
" I predict a surge of people hiding their financial means to receive subsidy. Terrible incentives. "
umm......you may have noticed...
that your income taxes ....
require your social security number.... as well as your Medicare paperwork.
they know your income....and they already means test the premiums for Medicare Part B but the premiums are ridiculous for most and need to be raised - which coincidentally would be the same way that private insurance would deal with shortfalls .....
FYI - Social Security benefits themselves are also means tested and....taxed per your income level.
This comment has been removed by the author.
The U.S. dominates the world in the Biotech Revolution.
List of the top 100 biotechs in the world (by revenue 2006):
"List of Biotechnology Companies"-Wikipedia
1 Amgen USA
2 Genentech USA
3 Genzyme USA
4 UCB Belgium
5 Gilead Sciences USA
6 Serono Switzerland
7 Biogen Idec USA
8 CSL Australia
9 Cephalon USA
10 MedImmune USA
11 Celgene USA
12 Abraxis BioScience USA
13 Actelion Switzerland
14 ImClone Systems USA
15 Amylin Pharmaceuticals USA
16 Millennium Pharmaceuticals USA
17 PDL BioPharma USA
18 OSI Pharmaceuticals USA
19 MGI Pharma USA
20 Pharmion USA
21 Nektar Therapeutics USA
22 Vertex Pharmaceuticals USA
23 Biocon India
24 Cubist Pharmaceuticals USA
25 Enzon Pharmaceuticals USA
26 QLT Canada
27 ViroPharma USA
28 Alkermes USA
29 Crucell Netherlands
30 United Therapeutics USA
31 LifeCell USA
32 Ligand Pharmaceuticals USA
33 Myriad Genetics USA
34 Exelixis USA
35 Cangene Canada
36 InterMune USA
37 Nabi Biopharmaceuticals USA
38 BioMarin Pharmaceutical USA
39 Lexicon Pharmaceuticals USA
40 Progenics Pharmaceuticals USA
41 Innogenetics Belgium
42 Idenix Pharmaceuticals USA
43 MorphoSys Germany
44 Omrix Biopharmaceuticals USA
45 Regeneron Pharmaceuticals USA
46 Acambis UK
47 Tanox USA
48 ViaCell USA
49 Indevus Pharmaceuticals USA
50 Medarex USA
51 NPS Pharmaceuticals USA
52 Monogram Biosciences USA
53 Oscient Pharmaceuticals USA
54 Array BioPharma USA
55 AEterna Zentaris Canada
56 IsoTis Switzerland
57 Enzo Biochem USA
58 CuraGen USA
59 Neurocrine Biosciences USA
60 MediGene Germany
61 Life Therapeutics Australia
62 Inspire Pharmaceuticals USA
63 CV Therapeutics USA
64 Cerus USA
65 SciClone Pharmaceuticals USA
66 ImmunoGen USA
67 Protherics UK
68 Arena Pharmaceuticals USA
69 Vernalis UK
70 Bavarian Nordic Denmark
71 Xoma USA
72 GPC Biotech Germany
73 Micromet USA
74 Targacept USA
75 Carrington Laboratories USA
76 Acorda Therapeutics USA
77 Anika Therapeutics USA
78 Human Genome Sciences USA
79 Dusa Pharmaceuticals USA
80 ZymoGenetics USA
81 Maxygen USA
82 Isis Pharmaceuticals USA
83 Genmab Denmark
84 BioSciMed USA
85 Bioniche Life Sciences Canada
86 Vitrolife Sweden
87 Coley Pharmaceutical Group USA
88 Palatin Technologies USA
89 Encysive Pharmaceuticals USA
90 GenVec USA
91 Medivir Group Sweden
92 Peptech Australia
93 Ambrilia Biopharma Canada
94 Cytogen USA
95 Replidyne USA
96 Sinovac Biotech China
97 Trimeris USA
98 Avanir Pharmaceuticals USA
99 Adolor USA
" I predict a surge of people hiding their financial means to receive subsidy. Terrible incentives. "
umm......you may have noticed...
that your income taxes ....
require your social security number.... as well as your Medicare paperwork."
You really DON'T understand this, do you...
Larry G-
Before I watched the video, I thought it plausible that you made some worthwhile points with your comments. After watching it, I realized that you were only blowing hysterical smoke. You go on about the current deficit as if the Ryan plan were deficient because Medicare is only a part of the deficit, while ignoring the fact that the Ryan plan is designed to bring us into long-term balance.
I have seen your type of comments in other places, which leads me to believe that this is one of the current lefty arguments making the rounds. BTW, I believe you meant "exacerbate", not exasperate.
Larry G
"FYI - Social Security benefits themselves are also means tested and....taxed per your income level."
Wrong - means testing has been continually resisted for fear that SS would be seen as a welfare program. This is a rookie error. You are not very sophisticated.
Ryan's Plan does not "fix" the current deficit until 2040,
right?
Right not Medicare "owns" 220 billion dollars of a 3.1 trillion spending budget which is 1.5 trillion more than we take in.
How does wiping out Medicare take care of the "entitlement" problem and the 1.5 trillion deficit?
" Wrong - means testing has been continually resisted for fear that SS would be seen as a welfare program. This is a rookie error. You are not very sophisticated."
you guys are a RIOT.
you seems to get all of your facts NOT from authoritative sources and you seem to not even be able to key in simple phrases to get the truth:
try this:
" are social security benefits taxed?"
and Voila! you'll get this:
" Taxes and your Social Security benefits
Some people have to pay federal income taxes on their Social Security benefits. This usually happens only if you have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return) in addition to your benefits."
http://www.ssa.gov/planners/taxes.htm
youse guys keep to your little narrative about "rookie" and over and over you prove that you don't know the simple facts and are relying on right-wing propaganda for your info rather than credible organizations.
Larry-
Now I remember - you're that Larry. The one with the logic deficiency. I won't make that mistake again.
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