Sens. Tom Coburn (R., Okla.) and Joe Lieberman (I., Ct.) have produced a Medicare-reform proposal. The bill would save Medicare $600 billion over ten years and extend the program’s solvency by 30 years. It would save money by raising the eligibility age to 67 by 2025, increasing premiums and co-pays, and means-testing benefits so that wealthier beneficiaries paid more. It would also curtail “Medigap” plans — which cover the difference between what Medicare pays and the total cost of a procedure, reducing the program’s already-modest incentives for seniors to economize on care.
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The proposal is a good one, and it would be even better if its means-testing provisions were modified so as not to reduce incentives to work, save, and invest. Coburn-Lieberman could gain some Democratic support, and it makes a good bargaining chip for fiscal reformers in the debt-limit debate. But nobody should be under any illusion that this legislation makes the Ryan plan’s Medicare reforms unnecessary. It is a complement rather than an alternative to the Ryan plan. It would achieve short-term cost savings while leaving the fundamental problems of Medicare untouched. Ryan’s plan has the opposite virtue and vice: It would take years to go into effect, but would truly fix the system.
The reason this bill would make Medicare solvent for 30 years, rather than for the foreseeable future, is that even deep cuts won’t change the incentives the program creates. Medicare would still operate on a “fee for service” model — which pays doctors more whenever they perform additional procedures, regardless of the expected health benefit, and also makes the program a target for fraud. The best way to fix this problem is to give seniors money to put toward premiums, and allow private insurance companies to compete for the money. This approach would reward insurance companies for designing plans that both cover important procedures and give doctors an incentive to control costs. That’s what the Ryan plan would do, albeit years down the road.
Coburn-Lieberman also eliminates one of the few remaining arguments for IPAB, Obamacare’s Medicare-rationing board. The board’s defenders point out that it would yield savings in the short term, unlike Ryan’s plan. But Coburn-Lieberman would do the same thing, only without setting up an unelected board whose only power is to cut payments to doctors and pharmacies — that is, to ration — and that can in some cases enact policies without input from elected officials.
The question we should be asking is not which of these proposals to support, the Coburn-Lieberman cuts or the Ryan reform. It is: How can we enact both?
The trustees for Medicare and Social Security (the people who run the system and know the situation best) report the combined unfunded liabilities of just these two programs at $107 Trillion (yes, trillion with a T.) Medicare's unfunded liabilities are over twice those of SS.
Let us further assume that we would like to discharge this responsibility over the next 40 years. I am ignoring all the basics like inflation, new people entering the system, cost of living adjustments, et. al. I am just saying let us decide, today, to begin paying off this obligation over the next 40 years.
Assuming 40 years and $107 Trillion we would need to extract (on average, some years more some less) $2.675 Trillion (yes, trillion with a T) from the economy every year for those 40 years. Social Security and DI revenue (2008) was $0.805 trillion.
The federal budget for FY 2011 is $3.78 trillion with $1.48 trillion as deficit. Personal income taxes currently yield $1.08 Trillion in revenue.
Defense spending alone is $0.7 trillion. Current Medicaid spending is $0.338 trillion (expected to nearly double to $0.674 trillion by 2017) which is, effectively, everything not spent on the SS and Medicare and assuming we continue to run a level of deficit that everyone agrees is unsustainable.
The entire GNP of the USA is $13.8 trillion.
The proposal outlined in this editorial is slated to save $0.600 Trillion over 10 years on Medicare. Given the magnitude of the numbers admitted to by the trustees of Medicare itself this plan is a band-aid on a severed artery.
I fully recognize that I am making a very simplistic analysis of the problem. It would be tedious to go into a broad economic analysis and besides there are many who post to this site who simply say if we tax people enough we can get these programs solvent.
I frankly doubt that a more sophisticated economic analysis would help them to understand this problem. Perhaps simple numbers presented in a simple way can succeed where cogent and more elegant financial arguments such as those made by Sowell, Kudlow, et al. have failed.
From the Merriam-Webster Law Dictionary:
Pon·zi scheme
Pronunciation: 'pän-zE-"skEm
Function: noun
Etymology: Charles A. Ponzi (ca. 1882–1949), Italian-born American swindler
: an investment swindle in which early investors are paid with sums obtained from later ones in order to create the illusion of profitability.
To those of you who expect to render SS and Medicare solvent, and given these indisputable numbers from the government itself, how will you pay for this?
I was surprised to read that you are in favor of the Lieberman-Coburn plan for Medicare.
This plan actually takes away the positive face of the Ryan plan – not hurting current and coming soon to be seniors, and puts an ugly face on the Republican agenda, this is political suicide, and objectively an unfair treatment of seniors.
The attempt to cut Medicare costs on the back of unorganized not too well to do seniors, is an unnecessary provocation against a constituency who is mostly loyal to conservative principles, no wonder that it is coming out of a “so called Conservative” who is willing to raise taxes and go against the majority of his party in more than one occasion, and a “so called Independent” who votes 90% of the time with Democrats, and his constituency is made mainly of Union members and retirees who will not have to pay the additional costs which he is proposing.
Last year I had the health insurance provided by the employer, which in recent years turned to be a high deductible plan. Unfortunately I was not in good health and I ended up paying around $6,000 out of pocket for medical expenses. This year I enlisted on Medicare, and obviously chose a plan that will eliminate such expenses if God forbid they have to occur. had the Lieberman-Coburn plan been enacted, I would have been denied the option of paying a higher premium each month to a private insurer so that I will not have endured the kind of expenses I experienced last year which I no longer can afford. I was never in a Union, so I don’t have a backup plan.
The idea of having people to pay so they can affect the cost, is no doubt a novel idea in theory, as long as it takes into account the ability of individuals to make those payments, but forcing people who are limited in resources to choose between buying a gift for their grandchildren, and using an experimental treatment which might help them, is cruel and stupid.
This is another well intentioned plan, which did not consider the unintended consequences.
Since the private insurer determined that for $160 per month it can provide me with the safety net I require, why not let them fight the costs, since they mainly will have to pay for them?
The editorial states that doctors have no incentive to cut costs.
Unfortunately, given the litigious nature of our society cutting costs could very well mean a lawsuit that doesn't consider cost savings as a quality approach to treatment.
Give us malpractice protection for cost savings and the incentive will be there.
I think we need to look at reducing the unnecessary expenses for physicians, health care professionals, and hospitals. Medical malpractice tort reform seems to me a necessary component to any solution.I think this should also include pharmaceutical companies. There are too many parasites in the system. They drive everyone's cost up needlessly.
The arguments that many of us have been making are 1) that patients should have a substantial financial stake in their care so they will use it efficiently and work to eliminate watse and fraud and 2) that people who do not have such an interest make no effort to help the system to function or to protect the financial welfare of the rest of us.
Do you realize that in your post, though I am sure you did not intend to, you specifically demonstrated our points and acted according to the very arguments we have been making?
"The idea of having people to pay so they can affect the cost, is no doubt a novel idea in theory, ..."
It is not a theory it is a fact and your own behavior demonstrates it clearly, to wit:
1) Our first argument:
"... and I ended up paying around $6,000 out of pocket for medical expenses. This year I enlisted on Medicare, and obviously chose a plan that will eliminate such expenses ..."
In other words, when you were involved in paying substantially for your medical care you took great effort to minimize the cost to yourself.
So you acted exactly according to what we predicted would happen in our first argument. In your case, you sought to transfer the costs to someone else rather than, say, trying to negotiate lower rates or detect and eliminate waste or fraud. A sound strategy on your part as a transfer of cost is often much easier than attempting to mitigate it any other way.
2) Our second argument:
"Since the private insurer determined that for $160 per month it can provide me with the safety net I require, why not let them fight the costs, since they mainly will have to pay for them?"
In other words, now that you have managed to get your share of the cost to an amount small enough not to motivate you, you no longer care if the system is abused, defrauded, robbed, etc. You have succeeded in transfering enough of the cost to others so you no longer care about how well the system runs or whether people are cheating it.
Apparently when you have no significant share in the cost of your care you no longer concern yourself with whether your insurance provider is damaged. Which is exactly what we argued would happen in our second point.
Good post, eristic. As someone who is eight years from being eligible for Medicare, I think we are at the fork in the road, and other seniors are going to have to realize that something will need to be done that affects everyone immediately, not 20 years down the road. For the sake of their, and my, grandchildren.
If this means raising the eligibility age, then by all means do so. If this means increasing premiums and co-pays, by all means do so. If this means changing the Ryan plan to make it effective immediately for all both over and under 67 (I don't agree with Ryan's setting the age at 55 in regard to what applies to whom), then I am willing to agree to do so.
I know how costly health care is. I have a retiree health care plan that pays very little until something catastrophic happens, and I pay $314/month for the privilege of having such rotten coverage. But I also know there are far more costly plans, some of which are no better than mine, some of which are much better than mine. I just want some certainty that Medicare will be there for me and the rest of the country without bankrupting us all. Perhaps it is time to dump Medicare like Andy McCarthy proposed. But I'm not ready to go there - yet. We have to do something, before Medicare collapses and collapses the Federal treasury in the process.
Your whole posting is pure theory, no practical evidence whatsoever. I wish that you will never have to deal with health problems yourself or for people who are dear to you.
Since I generally believe in the same theories as you do, I can understand where you are coming from, but like I said, theory not always matches reality.
Now to your points:
I sure took great efforts, but what were the results? Negligible! Unless you want me to give up on my health concerns and go to a less qualified physician or hospital? I tried to save, out of necessity. I managed to change some minor non-essential providers, like the lab, the MRI provider, etc, which saved me very little. I even avoided a few unnecessary blood tests. The saving I could manage were negligible, because on the main issues which really bare the bulk of the costs I was not ready to compromise, would you?
Health care is unique because it is our life and souls which are on a thread, and a normal human being will not try to save on those. I consider myself way above average regarding life experience, business experience etc. so I cannot see how the average senior who will be asked to pay large amounts of money he or she usually cannot afford will do a better negotiation than I did and get better results. In other words, all the Lieberman-Coburn plan does is deny the most vulnerable among us the opportunity every consumer has – to buy insurance to protect them from unexpected and unmanageable costs, in the name of a theory which does not work.
It is not my job to ensure that the system is not abused defrauded robbed etc. I’m the consumer, and my interest is to take care of my health at the best quality and cost I can get. You are trying here unsuccessfully to make me fill guilty for something I’m not responsible for, and which is beyond my ability to change.
If you want me to help fix the system, please arrange for positive incentives which will reward me if I avoid an X-ray, or an unnecessary lab test, don’t punish me and force me to avoid necessary treatments.
Unfortunately, you didn’t show how this plan works; it doesn’t - based on my personal experience. All it does is prevent legitimate private insurance companies from offering a much needed service to customers who are interested in buying it. In my book, this is meddling with the free market for no good reason.
Stop talking about saving the government money or saving a particular program money. They're trying to avoid future tax hikes so they're saving me money as a future taxpayer, money I don't even have yet though it is already devoted to spending in the present because of short-term thinking and self-interested politicians.
How about, "they're saving the next generation money." In this case, Coburn-Lieberman saves $600 million for the next generation of taxpayers.
"...means-testing benefits so that wealthier beneficiaries paid more."
That's fine--as long as "wealthier beneficiaries" are required to "contribute" a proportionally equal amount less. Anything else makes Medicare just another income redistribution, soak-the-rich, scheme.
"I sure took great efforts, but what were the results? Negligible!"
Negligable? Really? Your previous monthly cost was $500 ($6K per year, you said) reduced now to $160. You reduced your monthly expense by %68. You do not consider this significant? If it was not significant then why did you bother? Do you have any other expenses such that if you were offered a %68 reduction you would decline the offer?
"... I tried to save, out of necessity. I managed to change some minor non-essential providers, like the lab, the MRI provider, etc, which saved me very little. I even avoided a few unnecessary blood tests."
In other words when the costs to you were substantial you made an effort to get them under control. That is what I said and you seem not to realize that you keep supporting my argument.
"The saving I could manage were negligible, because on the main issues which really bare the bulk of the costs I was not ready to compromise, would you?"
Economics is the study of the allocation of scarce resources among competing users? ALL of us compromise, all the time. And you are no exception. What you are arguing is that you should be exempted from the costs of those compromises. When you demand the very best, at someone else's expense, you have transferred from them to yourself the resources you desired. It is a cold truth whether you chose to admit it or not. Everything has costs, multiple uses, multiple people competing for those things and nothing is in unlimited supply.
And you managed a huge savings, %68. I am arguing that your participation in the cost of your healthcare should be sufficient to motivate you to want to see it handled properly, to see that system is preserved and not abused. You need this medical system. Why are you so adamant that you have no responsibility in protecting it when you yourself depend upon it?
"Health care is unique because it is our life and souls which are on a thread, and a normal human being will not try to save on those."
Are you not a normal human being? You specifically stated that you changed your insurance to save on YOUR costs. What you actually saying is that there is no amount of other people's money you are prepared to spend on your care. Hardly the same thing.
"so I cannot see how the average senior who will be asked to pay large amounts of money he or she usually cannot afford will do a better negotiation than I did and get better results."
There are all kinds of ways to reduce the costs of things. Having a Co-Pay is one of them. The insurance provider will do the heavy lifting but you have to have some substantial interest in helping them succeed. This is what Adam Smith would call "Elightened Self-Interest.' I will address this point further below.
" In other words, all the Lieberman-Coburn plan does ..."
I do not support this plan; I never said I did. I am opposed to this plan for reasons stated in my first post. These reasons are based on the economics (mathematics) of the situation. Reread that post and consider the numbers which are from the US government itself.
"It is not my job to ensure that the system is not abused defrauded robbed etc."
So as a citizen crime is not your problem? As a member of society, society's problems are not your problem? So if a gang-banger is running around robbing shops that is none of your concern? Robbing a business with a gun and robbing a business with a pen are both robbery.
It is precisely this attitude that has so damaged our republic. Ostensibly sensible people seem to feel they are no longer are part of the society in which they live. Your attitude seems to be 'society can go to blazes so as long as I get mine.' I am not impressed.
" I’m the consumer, and my interest is to take care of my health at the best quality and cost I can get."
Do you not see the complete disconnect between this statement and your previous one!? If Peter (the customer) robs Paul (the merchant) you can rest assured that Gadl (the disinterested) will pay a higher price for what he buys from Paul.
Despite your fervent wishes that it be otherwise the damage done to others by crime is something for which you will ultimately pay yourself. (Your 'none of my business' position is rather odd, considering your self-confessed great life experience.)
" You are trying here unsuccessfully to make me fill guilty for something I’m not responsible for, and which is beyond my ability to change."
I am not attempting to make you feel anything. I am merely pointing the errors of your argument which are ill supported even by your own self-confessed actions.
Although, frankly, your refusal to help detect crime and attempting to insure that people are not defrauded and robbed should make you feel gulity. Have you no sense of community?
"..., please arrange for positive incentives which will reward me if I avoid an X-ray, or an unnecessary lab test, don’t punish me and force me to avoid necessary treatments."
Duh! It is called Co-Pay. If you have an incentive not to abuse or even merely overuse the system then you will be less likley to do so. That incentive is in the form of making a substantial contribution to the costs of your health care. Can you not see this?
"... based on my personal experience."
I do not support the plan, never did. And your own actions support my arguments very nicely.
"In my book, this is meddling with the free market for no good reason."
I am favor of the free market, probably more than you are.
I want everyone to particpate MORE in the free market. I want everyone to pay their share and thus to have a vested interest in its success.
“The proposal is a good one” and the 2nd one: “The question we should be asking is not which of these proposals to support, the Coburn-Lieberman cuts or the Ryan reform. It is: How can we enact both?”
Here is what you wrote in your 2nd reply to me: “I do not support this plan; I never said I did”
Did the same person write both, or are other “editors” involved?
You completely missed my point on the first posting, so I wrote a detailed 2nd posting. I can no longer say that you missed it – you simply chose to ignore it!
In 2011 I exercised my legal right and joined Medicare to which I’ve contributed for decades. In your opinion, this shows lack of “a sense of community”, perhaps I need a community organizer to re-educate me?
My whole argument was about 2010, when I practically (not in theory) exercised the Lieberman-Coburn plan by paying high costs, without having any way to influence the system despite of those payments. However perhaps I showed lack of a sense of community?
John Locke and later Milton Friedman (who might perhaps be more in favor of the Free Market than even you are) told us that the way the Free Market works is that individuals act in their best self interest, and the whole community benefits. Carl Marx thought that “it takes a village” and you have to do what is good for the commun(ity).
What really showed me that you know that you have lost the argument is that without having a clue of who I am you stated: “I am favor of the free market, probably more than you are”.
Let me remind you that working for the magazine Bill Buckley founded doesn’t necessarily make you a Conservative; please remember this in the future.
Let's reform taxes and transfer payments (not just "entitlements". A debate on reform of this scope is necessary, not just the piecemeal plans to be fixing the last set of fixes. Such ideas as having all federal taxes in one clearly visible ("transparent"), a flat tax on DISPOSABLE income. Exempting health care and education as expenxes which contribute directly to productivity, thus justified as a means of building the tax base. Sounds too complicated? Here it is on one page:
1. All persons residing in the U.S. shall come together in “tax units”. Members need not be related, need not reside together, and a tax unit may consist of as few as one person.
2. Each year congress shall set a "minimum wage" and a "tax rate".
3. The following shall not be subject to taxation:
• An amount equal to a year's earnings (2000 hours) at the minimum wage, for each adult (age 20-65), decreasing 10% per year to 50% at age 15, and increasing 10% per year to 150% at age 70.
• All payments for necessary health care including medical care, pharmaceuticals prescribed by a health care professional, vision and hearing aids, and fees for health-enhancing entities such as gyms. Health care insurance premiums may be deducted but not health care expense paid for by such insurance.
• All educational expenses including day care for children or legally incompetent persons, the portion of state and local taxes used for education, and tuition, fees and educational materials for private school education, including that portion of parochial school tuition and other expenses going for non-sectarian education.
• All income saved into an account for investments; withdrawals from this account for the benefit of any member of the tax unit shall be reported as income.
4. The "tax rate" shall be applied to any income greater than the deductions listed above, regardless of amount.
5. Any municipality having greater than 100,000 inhabitants or any state may impose on their citizens a surtax which shall be applied the same as the Federal tax.
6. Tax units whose deductions exceed income, shall be paid a sum equal to the tax rate multiplied by the shortfall in income.
7. There shall be no federal tax on corporations or other business entities.
8. The Office of Management and Budget shall compute revenues to be expected using the newly set tax rate and minimum wage, applied to the previous year's reported incomes. No expenses in excess of that amount may be made without approval by 75% of each house of Congress. This tax shall be the only source of revenue for the federal government.
"The proposal outlined in this editorial is slated to save $0.600 Trillion over 10 years on Medicare. Given the magnitude of the numbers admitted to by the trustees of Medicare itself this plan is a band-aid on a severed artery."
This clearly and unambiguously speaks to the Lieberman plan as that is the number the article cites. And you can also read from the quote I am clearly against this plan. I am astonished that you can not see what is plainly there in my original post.
":John Locke and later Milton Friedman (who might perhaps be more in favor of the Free Market than even you are) told us that the way the Free Market works is that individuals act in their best self interest,"
You read the quote but you did not understand it. Part of your "Enlightened Self Interest" is in making sure the system is not abused, robbed or etc. because YOU will have to pay for those losses.
I would be willing to bet any sum of money you care to wager that Friedman would not support your position that robbery, fraud, abuse and etc. of the system on which we all depend is not partly your problem.
Enlightened Self Interest means you want to preserve and improve the system so it remains a permanent benefit to you and your progeny. I stand on my original post in reply to your own words regarding your responsibilities to protect the system in order to preserve your continued opportunity to benefit from it.
" and the whole community benefits. Carl Marx thought that “it takes a village” and you have to do what is good for the commun(ity)."
Which is often in your interest as in the case we are considering. Try reading Smith's "Wealth of Nations," if you have already done so re-read it. BTW, I spent 7 years studying the Soviet Union so I am willing to hazzard that I am fairly aware of Marx's theories.
The Enlightened Self Interest of Smith is more than simply abusing the system (or even merely ignoring its welfare) in order to maximize your immediate short term gain. You will ultimately pay for all the abuse the system suffers. How odd that you still do seem able to grasp that most basic of economic concepts regarding self interest.
"What really showed me that you know that you have lost the argument is that without having a clue of who I am you stated: “I am favor of the free market, probably more than you are”."
I have an excellent idea of who you are when you say such things as:
"It is not my job to ensure that the system is not abused defrauded robbed etc."
A true supporter of free market capitalism would never support such a position. I want your rights protected as much as my own because if you are allowed to be robbed, abused, etc. then what stops them from doing that to me, if not now then later? What keeps me from having to ultimately pay for your losses? (Hint: the answer is I WILL pay for thoses losses.)
If you think that protecting the property rights of others is not your concern then I most definitely stand on my original quote.
I am manifestly more a supporter of capitalism than you are. Your support of capitalism is nothing but a confused support of 'I'll take mine and to blazes with the rest of you.' That is not capitalism but barbarism.
I support other's property rights as much as my own because they provide the goods and services I need. If I allow them to be robbed I am going to pay for that. Why should I pay for anyone else's greed. Let them pay for what they want and I will do the same.
"Let me remind you that working for the magazine Bill Buckley founded doesn’t necessarily make you a Conservative; please remember this in the future."
I do not work for National Review and I never said I did. And I am most definitely a conservative. Please remember that in the future.
I will put it to a vote of the readers of this post:
Am I, Eristic, based on what you have read here and elsewhere, a true Conservative?
I will abide by the vote.
To those of you voting perhaps you can offer your thoughts on Gadl's conservatism as well.
Your wild unfounded personal attacks on me will not get you anywhere, as it seems that 7 years of study did not do you any good.
You seem more like a RINO in the mold of the Bill Clinton White House, than a true Conservative. You don’t let the facts confuse you; you just ignore them or try to twist them.
You say that a plan is good, and that the only question is how to enact it, and then you say that you are against it – it probably depends on the definition of the word “is”?
A citizen who paid for Medicare for decades is finally able to use the plan including the “Medigap Insurance” which is offered in the free market is accused by the “writer for the editors” who doesn’t work for NRO of fraud and abuse – you really learned your lesson in the Soviet Union, and you call yourself a Conservative.
I don’t need the readers of your shallow column to decide how Conservative I am and as per Milton Friedman – take your shoes off before you use his name for your confused explanations.
This is my last posting on this issue – I hope I don’t come across such demagoguery again.
"• All income saved into an account for investments; withdrawals from this account for the benefit of any member of the tax unit shall be reported as income."
Can you please elaborate on this point. Who's income?
