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August 25, 2011 11:25 AM It’s Not a Long-Term Deficit Problem

By Jonathan Bernstein

I think everyone has already linked to CBPP’s piece on the effects of raising the Medicare minimum age from 65 to 67 already, but just to add in my two cents: the key context for all of this is that what people call a long-term budget problem is really only an artifact of the long-term health care costs problem.

As long as health care costs (and, as the popular ages, demand for services) continue to spiral up, it’s going to create huge problems. That’s true if the problems are mainly found in government budgets, or in the private market. After all, if you completely eliminated Medicare or any other form of government-subsidized health care, you would no longer have a federal budget problem…but the economy isn’t going to be very happy if seniors stop buying whatever they are currently buying and rapidly blow their savings on health care. Or, as CBPP points out, if companies go broke paying for retiree health benefits.

The bottom line is that unlike a real budget problem, which could be solved by either cutting spending or raising taxes, the problem here is a broader economic problem, and it calls for a broader economic solution. That was the point of all the cost-control efforts in ACA, and believe it or not there are some hopeful signs that perhaps it’s going to work. Of course, maybe it won’t. The point is that cost-shifting away from the government (“cutting spending”) which absolutely can work to solve purely budgetary problems just won’t work in this case.

[Cross-posted at A plain blog about politics]

Jonathan Bernstein is a political scientist who writes about American politics, especially the presidency, Congress, parties, and elections.

Comments

  • Lance on August 26, 2011 1:15 PM:

    Just to be clear, the problem is that health care costs (and health care worker wages) are rising twice the rate of inflation of the rest of the economy.

    That is simply not sustainable.

    Already, Americans are paying twice per person for health care than most advanced industrialized countries...

    ... and getting worse medical outcomes. On average, Americans will die two years younger than necessary because of avoidable medical errors or untreated conditions.

    We don't merely have the opportunity to cut the increase of health care costs in the future. We can cut the actual costs right now.

    Remember, while the government pays Social Security to you...

    it pays Medicare to Millionaires like Rick Scott.

    Don't just buy into commercials saying cutting Medicare is cutting your health care.

  • JohnMcC on September 19, 2011 5:52 PM:

    Mr Lance correctly makes the point that 'health-care inflation' is the essential problem. If our health/sickness expenses were in perfect lock-step with the inflation/deflation rate of the overall economy, a solution would be simple. There is a deeper level to that however. The expectation of service that people have is also inflating. Everyone expects to have a heart cath lab available when they have a heart attack. Everyone expects the 'health care system' to have a helicopter available when their spouse or child has a horrible traffic accident. 25 yrs ago these services weren't expected.

    So: Yes, healthcare costs are rising faster than the overall economy and this is a problem but better healthcare services are being provided. We are actually getting what we pay for.

    The problem really is managing the healthcare sector to continue the increase in 'productivity' without breaking the bank.

  • john aponick on November 06, 2011 8:58 PM:

    A major component of the rising cost is the self promotion of the industries. If you watch television, note the pharma industry promoting drugs and asking us to ask our doctor. These drugs sometimes are supplements to others we are taking. Which is first the problem searching for a solution or a solution searching for a problem.

    In addition, health care has become a profit center. Corporations own not only the insurance providers but the health care providers. It is a double whammy.

    Last, but not last, is the concept that if you don't feel well or have a serious health problem, you seek help. People have always chose life over death. They expect to live. In the past, affordable primary care was almost universal. Today, it is rationed and controlled, not by small practitioners, but by large corporations. The financial goals are different and the comments towards the users are different.