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November 28, 2012 9:23 AM “Entitlement Reform” and Health Care Spending

By Ed Kilgore

To hear most conservatives, Democrats are resisting “entitlement reform” as part of a fiscal “fix” for some combination of three reasons: (1) they fear the wrath of “the left” or “the base,” their counterpart to the folks on the Right that will go crazy if tax rates go up; (2) they are mired in the policies of the past, having for too long relied on expanded entitlement spending as bait for voters; and (3) they ultimately hope to make entitlements even larger as part of a plan to transform America into a European-style socialist state.

Interestingly enough, most of these assessments ignore what liberals are actually saying about the “entitlement reforms” conservatives keep proposing, at least with respect to the big targets of Medicare, Medicaid, and now Obamacare: they would move in exactly the wrong direction from steps needed to hold down the long-term costs of these programs, aside from the terrible effect they would have on beneficiaries. TNR”s Jon Cohen sums it up:

Contrary to what conservatives say and even many centrists seem to believe, the high cost of Medicare and Medicaid isn’t a by-product of government inefficiency. On the contrary, Medicare historically has held down costs as well as, if not better than, private insurance on a per capita basis. That’s thanks, in part, to the administrative advantages of a centralized government program and Medicare’s enormous power to set prices. Medicaid is cheaper still, to the point where, honestly, it’s underfunded. The programs keep getting more expensive, relative to inflation, because medical care keeps getting more expensive—and, in the case of Medicare, because of the increase in the number of people coming on the program. That’s due to a variety of factors: paying too much for services and to the people who provide them; delivering a lot of treatments that are unnecessary, unhelpful, or even harmful; focusing too much on acute treatment when we should be focusing on preventative care and other ways of keeping people healthy.

You don’t solve the problems Jon is talking about by privatizing Medicare and Medicaid delivery systems, or exposing beneficiaries or the states to higher costs, much less by dumping beneficiaries from the programs altogether. And you sure don’t solve them by disabling or reducing the scope of Obamacare, which introduces precisely the kind of reforms that might in the long run hold down health care costs.

Now it’s not surprising that most conservatives dismiss the legitimacy or efficacy of Obamacare’s reforms; it goes hand in hand with their refusal to accept CBO estimates that the reform initiative will reduce federal budget deficits. But that refusal is an act of ideological conviction, not “realism,” much less “courage.” Even if you consider liberal faith in the ability of the public sector to hold down costs irrational, it has a far better track record than the corresponding conservative faith in private health insurers, “personal responsibility” (i.e., higher costs for health care consumers), competition, and state government “efficiency.”

So let’s don’t accept the MSM assumption that Democrats are fighting what they secretly know to be the “right thing” on “entitlement reform,” and/or are just being childishly irresponsible in resisting benefit cuts, privatization or devolution. Yes, there may be some “reform” measures liberals are opposed to on grounds other than their combined ineffectiveness and cruelty; it’s never been entirely clear to me why Democrats so reflexively oppose greater means-testing for Medicare and Social Security (both are already means-tested in some respects). But there is an alternative path to “entitlement reform” progressives have been promoting all along, and it involves use of more, not less, public-sector leverage.

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • Ron Byers on November 28, 2012 9:34 AM:

    A lot of progressives are afraid the entitlement reform efforts will devolve into slashing funding without working reducing costs. Mere funding cuts can and will hurt people who have no alternative.

    That said I am totally open to making all of the social service programs more efficient.

    I do think the solution for social security is to raise the cap to $250,000 or so. I am not sure exactly how we deal with medicare but deal we must.

    Medicaid is the hardest nut to crack because it is a pretty tight program already. People using it don't have alternatives. Slashing medicaid could actually kill people and make the lives of others miserable. Obamacare should help medicaid at the margins, but only at the margins.

    Dealing long and hard with big pharma might be one way to cut medicare and medicaid costs.

  • T2 on November 28, 2012 9:35 AM:

    lets start with two points:
    Conservatives view Medicare and SocSec as tax drains converted to giveaway programs and they want to get rid of them.
    Social Security is easily fixable with a relatively small rise in the income cap....but since Grover Norquist doesn't allow raising any tax any amount for anything thats a GOP No.

    And for Medicare. Ms. T2 is in the medical profession, on the billing side, and believe me the costs generated for medical care are ridiculous. The cost of an aspirin in the hospital is crazy. Trauma care is unbelievable. And on and on....meanwhile the Medical Industry and Doctors make billions. There is plenty money to be saved there without jeopardizing healthcare or Medicare. Just get the lobbyists out of the picture and start working on it.

  • sjw on November 28, 2012 9:43 AM:

    "Yes" on the means testing for Social Security and Medicare. It should be a no-brainer for progressives: it's another chance for us to tax the rich and get more money for us to use for ourselves. What's not to like here?

  • c u n d gulag on November 28, 2012 9:49 AM:

    Want to keep SS and Medicare solvent for decades beyong their current solvency?

    Take off that cap!

    FICA is the most regressive tax in America.
    Workers making less than $106,800 (last I looked) have paid 12.4% of their total wages into the programs (until the recent 'holiday').
    Those making MORE, pay 12.4% only on the first $106,800 of their wages, and not a penny more!
    That cap should be on all income - make some sort of a carve out, donut hole, or lowered rate on investment income, if that'll help sell ending the cap.
    EVERYONE should be paying 12.4%!

    Social Security shouldn't even be in the same home, let alone on the table. Untouched, it is fine for another 20+ years. Eliminating the cap, extends that life for decades - if not centuries.

    And, handled properly, Obamacare will bring money into state's Medicaid coffers - if the idiotic Republican Governors agree to it.

    Now, maybe, after Obamacare has been tested, and tweaked, it can take some of the burdon off of Medicare and Medicaid - but NOW is NOT the time to test that theory out.
    Let the program prove it's worth, and then we can all look at what savings we can get by substituting parts of it with Medicare and Medicaid.

    Let all of the Bush tax cuts end. And THEN start negotiating with the Republicans over tax cuts for the poor and middle class.
    THAT's good politics.

    And, if anything significant is done to SS, Medicare, and Medicaid, by a Democratic President and Senate, is anyone under the impression that the Conservatives WON'T use that as a cudgel to beat the Democrats over the head for a decade or more.
    Making anything except cosmetic changes in any of the three programs, is just BAD politics - IT'S POLITICAL SUICIDE!!!

  • bh on November 28, 2012 9:51 AM:

    Yes, there may be some “reform” measures liberals are opposed to on grounds other than their combined ineffectiveness and cruelty; it’s never been entirely clear to me why Democrats so reflexively oppose greater means-testing for Medicare and Social Security (both are already means-tested in some respects).

    Well, let me help then: it will undermine political support for those programs -- they'll become a 'poor people thing' like Medicaid -- while delivering trivial savings, because there just aren't enough people who'd qualify for reduced benefits under any humane standard. Combine that with the failure of defined-contributions programs -- they're delivering terrible average returns and people never contribute enough -- and you have yet another "common sense" centrist trope that's utter crap.

  • LaFollette Progressive on November 28, 2012 9:52 AM:

    "...it’s never been entirely clear to me why Democrats so reflexively oppose greater means-testing for Medicare and Social Security"

    In a nutshell, it's because means testing shifts a program from being something that middle class white people view as an earned benefit for them and people like them, into being a welfare program that takes from them and gives to less-deserving poor people.

    So, to a significant extent, introducing means testing is a policy conservative politicians like to tout (in the short term) as a way to make themselves look both compassionate and fiscally responsible, while (in the long term) playing into their cynical narrative of kiss-up, kick-down class resentments.

    To be a little less cynical, programs that take from all to benefit all are more broadly popular than programs which take from some to give to others, for good reason: because they build a sense of shared investment and shared responsibility in our national well-being, rather than furthering the everyone-for-themselves ethos of the American right wing.

  • c u n d gulag on November 28, 2012 9:57 AM:

    sjw,
    The minute we 'means test,' one minute later, those who'll have to pay, will start to refer to the programs as "welfare."

    In today's politics, "Welfare" is a 4-letter word that makes "Entitlement" seem positively capitalistic.

    And the meme will be that, now not only are the blacks and browns luxuriating in idleness, and unearned T-bones, Caddies, and Colt 45's, but the poorer seniors and handicapped are just paler versions of this "Moocher Class."

    And yes, I know that there are "caps" on what can be collected by the wealthiest - let's keep that as the only 'means test.'

    IMHO - EVERYONE needs to have a stake in, and collect a piece of, these "EARNED BENEFITS" programs.

  • ejcarrig on November 28, 2012 9:58 AM:

    Do we trust private or public sector to manage basic human benefits? I don't have confidence that the private sector to do the right thing and the government has the skill to. We need for them to compete.

  • Peter C on November 28, 2012 10:03 AM:

    We really can't expect a good 'bi-partisan' solution until Republicans are willing to join an honest discussion of the problem instead of engaging in a 'debate' (at best) or a 'diatribe' (more frequently). Until then (and I don't foresee much chance of this for quite some time), we'll have to solve the problem without them.

    Sadly, I know of no Republican who is engaging honestly; they see everything as an opportunity to promote their political goals and have been utterly unwilling to work to actually solve problems. This is because they don't want 'Government' to work; they want it to go away. They feel that when government effectively deals with real problems it is a blow to their core philosophy. I can't see how bargaining with them can possibly make anything better. It only involves mixing in the failure that they'd like to include.

  • LaFollette Progressive on November 28, 2012 10:03 AM:

    Also, what gulag said. The most effective and progressive fix for SS and Medicare is to phase out the cap. That should, without question, be the opening offer by Democrats when pushed to "reform" entitlement programs.

  • Joe Friday on November 28, 2012 10:06 AM:

    Congressman Keith Ellison made an excellent point on the PBS Newshour yesterday, that we've already made a trillion and a half dollars of spending cuts (austerity which is preventing the national economy from bouncing back as quickly as it should have), now it's time for the wealthy to do their share and pay more taxes.

  • T2 on November 28, 2012 10:11 AM:

    @PeterC....it's hard to see how the current edition of the GOP can remain a player in national decision making. It's become more of a splinter group than a party, using their remaining clout to simply halt government rather than help it. Either it will keep going down that dead-end road or, perhaps in 2014, start putting responsible policy makers into the government instead of lunatics. It's really hard to get useful policy as long as one of the three branches is controlled by someone like Michele Bachmann or Eric Cantor. Then there's this 60 vote thing in the Senate.

  • biggerbox on November 28, 2012 10:22 AM:

    We shouldn't even be talking about entitlement reform or a Grand Bargain. Democrats have already put up their side of the deal - we've made a lot of cuts, and we passed Obamacare to help control medical costs. Now it's time for the other side to pony up on their side of the "bargain" already. They shouldn't get to demand MORE from our side.

  • exlibra on November 28, 2012 11:21 AM:

    If we took the stupid cap off the Social Security contributions, we could, maybe, even lower the rates of those contributions to, say 10 or 11%?

    But I agree that means-testing of the payouts is not the route to take, for the reasons stated by several commenters above.

  • zandru on November 28, 2012 12:00 PM:

    "“personal responsibility” (i.e., higher costs for health care consumers)"

    Mr. Kilgore, I thought that "personal responsibility" meant not going to see the doctor until they wheeled you in on a gurney. Because otherwise, you'd be "over-using" the health care system.

  • Jeff on November 28, 2012 12:53 PM:

    @c u n d agulag - "Let all of the Bush tax cuts end. And THEN start negotiating with the Republicans over tax cuts for the poor and middle class."

    @biggerbox - "They shouldn't get to demand MORE from our side."

    YES!!

    Give them nothing! Reform later, maybe. Right now, take what's in the bag, what's the law - the expiration of the Bush tax cuts, and on Jan. 3 start negotiating. This seems like a no-brainer to me. Am I missing something?

    I've used this analogy before, but it's like in Monopoly. We've got Park Place and Boardwalk with hotels, the Republicans have landed on Boardwalk and owe us $2,000. But they're saying, "Ok, we'll give you the 2 grand, but you have to give us the utilities."

    No, no, no.

    Don't cave on this. We've got them right where we want them. Obamacare, Medicare, SS...it's all OFF the table. We hold the cards, we should dictate what gets negotiated. On Jan. 3rd!

  • bdop4 on November 28, 2012 1:49 PM:

    In addition to what's already been discussed, the reason Medicaid and Medicare are expensive is that an extremely large percentage of recipients need constant care.

    Unlike private healthcare insurance companies, these programs don't have the luxury of having healthy policyholders paying premiums month after month without needing expensive care.

    As a Californian, my biggest priority for the new Democratic super-majority is to elect under the ACA to establish a single-payer program. If a number of states can prosper from single payer, we can go national with it.

  • LWC on November 28, 2012 9:49 PM:

    Honestly Mr. Kilgore, you don't understand why means testing SS and Medicare is bad idea? 25 years ago my father explained to me that the only way to keep either program healthy and supported was to make sure they were universal programs. There are already so many huge differences between the wealthy and the rest of us, please don't advocate for yet another. Please rethink this and write a new post. Thanks

  • jhm on November 29, 2012 7:38 AM:

    Important not for policy ideas, but 'bigoverment vs. small government' framing:

    "Achieving [universal health security along with universal retirement security by the simplest and most efficient means] requires somewhat bigger government — but only on paper. Today the actual scale of government is disguised, because politicians and policymakers fail to describe tax-favored private health insurance and private retirement saving accounts as “government” or “entitlements.” In public discourse we need to expand the definition of “entitlements” to include the tax-favored private savings and health insurance that chiefly benefit the few, not just the public spending programs that benefit the many."


    http://www.salon.com/2012/11/27/the_fiscal_cliff_is_a_lie/

  • Wyoming Medicare on December 04, 2012 2:43 AM:

    Health care spending is increasing day by day. Insurance premiums already increased. Government should take action on this.

    http://www.medicarewyoming.com/