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Archive for the ‘Medicare’ Category

Self awareness is supposed to be a good thing, so I’m going to openly acknowledge that I have an unusual fixation on the size of government.

I don’t lose a wink of sleep thinking about deficits, but I toss and turn all night fretting about the overall burden of government spending.

My peculiar focus on the size and scope of government can be seen in this video, which explains that spending is the disease and deficits are just a symptom.

Moreover, my Golden Rule explicitly targets the spending side of the budget. And I also came up with a “Bob Dole Award” to mock those who mistakenly dwell on deficits.

With all this as background, you’ll understand why I got excited when I started reading Robert Samuelson’s column in today’s Washington Post.

Well, there’s a presidential whopper. Obama is right that the role of the federal government deserves an important debate, but he is wrong when he says that we’ve had that debate. Just the opposite: The White House and Congress have spent the past five years evading the debate. They’ve argued over federal budget deficits without addressing the underlying issues of what the government should do, what programs are unneeded, whether some beneficiaries are undeserving… The avoidance is entirely bipartisan. Congressional Republicans have been just as allergic to genuine debate as the White House and its Democratic congressional allies.

By the way, I have mixed feelings about the final sentence in that excerpt. Yes, Republicans oftentimes have displayed grotesque levels of fiscal irresponsibility. Heck, just look at the new farm bill. Or the vote on the Export-Import Bank. Or the vote on housing subsidies. Or…well, you get the point.

On the other hand, GOPers have voted for three consecutive years in favor of a budget that restrains the growth of federal spending, in large part because it includes much-needed reforms to major entitlement programs such as Medicare and Medicaid.

But Republican inconsistency isn’t our focus today.

I want to address other parts of Samuelson’s column that left a bad taste in my mouth.

He argues that you can’t balance the budget merely by cutting discretionary programs. That’s technically untrue, but it’s an accurate assessment of political reality.

I’m much more worried about his assertion that you can’t balance the budget even if entitlement spending also is being addressed.

Let’s look at what he wrote and then I’ll explain why he’s wrong.

Eliminating many programs that are arguably marginal — Amtrak, subsidies for public broadcasting and the like — would not produce enough savings to balance the budget. The reason: Spending on Social Security, Medicare and other health programs… But even plausible benefit trims for affluent retirees would still leave deficits. There would still be a need for tax increases.

This is wrong. Not just wrong, but demonstrably inaccurate.

The Ryan budget, for instance, balanced the budget in 2023. Without a single penny of tax hikes.

Senator Rand Paul and the Republican Study Committee also have produced balanced budget plans. Even as scored by the statists at the Congressional Budget Office.

By the way, you don’t even need to cut spending to balance the budget. Spending cuts would be desirable, of course, but the key to eliminating red ink is simply making sure that government spending climbs at a slower rate than revenues.

And since revenues are expected to grow by about 6 percent per year, it shouldn’t take advanced knowledge of mathematics to realize that the deficit will fall if spending grows by less than 6 percent annually.

Indeed, we could balance the budget as early as 2018 if spending merely was restrained so that the budget grew at the rate of inflation.

But never forget that the goal of fiscal policy should be shrinking the size and scope of the federal government, not fiscal balance.

Ask yourself the following questions. If $1 trillion floated down from Heaven and into the hands of the IRS, would that alter in any way the argument for getting rid of wasteful and corrupt parts of the federal leviathan, such as the Department of Housing and Urban Development?

If the politicians had all that extra money and the budget was balanced, would that mean we could – or should – forget about entitlement reform?

If there was no red ink, would that negate the moral and economic imperative of ending the welfare state?

In other words, the first part of Samuelson’s column is right. We need a debate about “the underlying issues of what the government should do, what programs are unneeded, whether some beneficiaries are undeserving.”

But we’re not going to come up with a good answer if we don’t understand basic fiscal facts.

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One of the challenges of good entitlement reform (or even bad entitlement reform) is that recipients think they’ve “earned” benefits.

If you tell them that programs such as Medicare are unsustainable and need to be changed, some of them suspect you’re trying to somehow cheat them. After all, they were forced to cough up payroll taxes during their working year.

That’s true, but the real issue is how much did they pay in tax and how much are they getting back.

Here’s a very sobering chart from the recently released Long-Term Fiscal Outlook from the Congressional Budget Office.

It shows that people in their 50s, 60s, and 70s paid, on average, between $45,000-$65,000 of taxes into Medicare. That’s a big chunk of money, but it’s far less than the $160,000-$270,000 that Medicare will spend on them.

Medicare individual tax spending

I’m tempted to say that current retirees and older workers are being charged for a hamburger but they’re getting a steak.

But that’s not accurate. As most recipients will tell you, Medicare leaves a lot to be desired, which is what you might expect with a government-run system.

So the right way to look at the program is that recipients are being charged for a hamburger, they’re getting a hamburger, but taxpayers (the ones who make up the funding gap) are being charged for a steak.

Which is why structural reform is the only good way of dealing with the program’s giant unfunded liability. As explained in this video from the Center for Freedom and Prosperity.

As discussed in the video, the reform (which has been part of the Ryan budget that’s been approved by the House) basically leaves the program as is for current retirees and older workers, but younger workers are allowed to move to a new system that gives them – upon retirement – the ability to choose their preferred health policy.

P.S. Don’t forget that we also need to reform Medicaid and Social Security, the other two big entitlement programs.

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According to my reader poll, Michael Ramirez is the nation’s best political cartoonist.

His new masterpiece about entitlements is a good example of his talent. In one image, he manages to convey how the system lures people into danger by offering the illusion that they can get something for nothing.

Ramirez Entitlement Cartoon

The cartoon is an apt illustration of where we are today with programs such as Food Stamps and disability, with ever-greater numbers of people being lured into lives of dependency.

In other cases, though I’m afraid we’ve already passed the point of biting the hook, particularly for many of the middle-class entitlements. We’re now being reeled in and face a very real danger of being turned into euro-style fish filets.

Though if I’m allowed to extend the metaphor, many people are working to reform Social Security, Medicare, and Medicaid in hopes of escaping the hook of dependency and fiscal crisis.

But it’s very important to realize that not all entitlement reform is created equal. As I explained back in 2011, the left would be more than happy to impose price controls and means testing as part of a “grand bargain” that seduces gullible Republicans into accepting a tax hike.

Which is why this Glenn Foden cartoon hits the nail on the head.

Foden Entitlement Cartoon

Sort of reminds me of this Ramirez cartoon. Simply stated, Republicans are dangerously susceptible to bad deals, which helps to explain why tax-increase budget agreements are always fiscal disasters.

The moral of the story is that we need the right kind of entitlement reform, but that won’t be possible until at least 2017.

P.S. If you want a tragically funny look at how the welfare state changes people for the worse, read the politically correct version of The Little Red.

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What’s the most absurd “health” expenditure by government?

Your tax dollars at work

There are lots of potential responses, including $240 million for penis pumps. Or how about the fact that Obamacare allows taxpayer-subsidized viagra for sex offenders?

But another potential answer is cosmetic surgery for “droopy eyelids.” Here are some of the details from a Miami Herald report.

Aging Americans worried about their droopy upper eyelids often rely on the plastic surgeon’s scalpel to turn back the hands of time. Increasingly, Medicare is footing the bill. Yes, Medicare. The public health insurance program for people over 65 typically does not cover cosmetic surgery… In recent years, though, a rapid rise in the number of so-called functional eyelid lifts, or blepharoplasty, has led some to question whether Medicare is letting procedures that are really cosmetic slip through the cracks — at a cost of millions of dollars. …From 2001 to 2011, eyelid lifts charged to Medicare more than tripled to 136,000 annually, according to a review of physician billing data by the Center for Public Integrity. In 2001, physicians billed taxpayers a total of $20 million for the procedure. By 2011, the price tag had quadrupled to $80 million. The number of physicians billing the surgery more than doubled. …surgeons also acknowledge an increased awareness of the surgery fueled by reality television, word-of-mouth referrals, and advertising that promises a more youthful appearance. And doctors concede they face increased pressure from patients to perform eyelid lifts, even when they do not meet Medicare’s requirement that peripheral vision actually be impaired.

Yet even though the Medicare requirements aren’t being met, these surgeries are still taking place. Why? Well, because the doctors and old people both realize that Uncle Sam will pay the bill so long as you make a nebulous claim that peripheral vision is affected.

Just like doctors and scammers will agree on a diagnosis of “bad back” or “mental illness” in order to get somebody on the taxpayer-financed disability gravy train.

In other words, once politicians create a pile of free money, people will figure out ways of getting their hands on that money.

That’s true for all programs.

But because of the amounts of money involved, Medicare is a far bigger problem than other programs, as explained in this video.

Which is why we desperately need the right kind of entitlement reform.

P.S. You won’t be surprised to know that other nations also have crazy government-financed health systems. In the United Kingdom, for instance, you can get a boob job at taxpayer expense. The government in the United Kingdom also provides taxpayer-financed sex trips to Amsterdam. And the bureaucrats at the European Commission get penile implants at public expense.

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This is a tough question.

I obviously want comprehensive reform of all entitlement programs, so selecting just one is a bit of a challenge. Sort of like being asked to pick your favorite kid.

Would I reform Social Security? That’s a logical choice. It’s the biggest program in the federal budget, so it’s presumably the biggest problem.

And it sure would be nice to have personal retirement accounts, just like Australia, Chile, and other nations that have modernized their systems.

CBO Health Care Long Term Spending ForecastBut Medicare and Medicaid are growing faster than Social Security and the Congressional Budget Office projects that those two entitlements eventually will become a bigger burden on taxpayers than Social Security.

And since our goal should be to minimize the long-run burden of government spending, that suggests that it’s more important to reform the healthcare entitlements.

But which program should be fixed first?

There’s certainly a strong case to deal with Medicare. The health program for the elderly already is very expensive and it’s going to become even more of a budget buster because of demographic changes.

Moreover, shifting to a “premium support” system would be good for seniors since they would have the ability to pick a plan best suited to their needs. Basically the same type of system now available to members of Congress.

All things considered, though, I would deal first with Medicaid. There are three reasons why I would target the health program designed to supposedly help the poor?

  1. Medicaid is hugely expensive today and will become even more costly over time.
  2. The block-grant reform proposal is a good first step for restoring federalism.
  3. Obamacare can be partly repealed by block-granting the exchange subsidies as part of Medicaid reform.

For more information, here’s my video explaining how to reform the program.

I’m not going to cry – or even complain – if politicians instead decide to fix Medicare or Social Security. Just so long as they’re taking steps in the right direction, I’ll be happy.

What I don’t want to see, however, is a gimmicky plan such as Simpson-Bowles that merely papers over the underlying problems for a couple of years. The wrong type of entitlement reform is probably worse than doing nothing.

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When I travel, particularly overseas, I run into a lot of people who are totally confused about the American healthcare system.

For all intents and purposes, they think the United States relies on the free market and that government (at least in the pre-Obamacare era) was largely absent.

So they are baffled when I tell them that nearly one-half of all health expenditures in America are directly financed by taxpayers  and that the supposedly private part of our healthcare system is massively distorted by government interference and intervention.

When explaining how government has screwed up private health insurance, I talk about third-party payer and  how genuinely private insurance works for home ownership and automobiles. And I cite examples of genuine free markets for cosmetic surgery and even (regardless of your views) abortion.

But from now on, I think I will simply tell people to watch this superb video from Reason TV.

This shows how a true free market operates. Efficiency and low prices are the norm, and consumers get a good deal.

My only quibble is that the video doesn’t explain how government policies – such as the healthcare exclusion in the tax code – should be blamed for the grotesque waste, inefficiency, and featherbedding in most parts of the medical industry.

But that’s a minor gripe. You should share this post with any and all fuzzy-headed friends and colleagues and tell them this is how smoothly the market would work if the government simply would get out of the way.

And if they want another example, here’s a report from North Carolina on free-market healthcare in action.

If we want this kind of system to be the rule rather than the exception, we need to scrap the healthcare exclusion in the tax code as part of a switch to a simple and fair flat tax. That will help bring some rationality to the health insurance market and address the part of the third-party payer crisis caused by indirect government intervention.

Then we also should reform Medicaid and Medicare to help address the part of the third-party payer crisis caused by the direct government intervention.

P.S. As this poster cleverly illustrates (and as Ronald Reagan correctly warned in the second video of this post), government is the problem, not the solution.

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