Can Seniors Really Handle a Medicare Cut?

May 17th, 2011 at 11:56 am David Frum | 34 Comments |

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Jared Bernstein makes the point that Social Security provides more than 60% of the income for Americans over age 65. (h/t “Debs”)

There are a lot of implications here, but here’s one more to consider:

The Paul Ryan plan endorsed by so many GOP thought leaders is premised on the idea that sometime after 2021, we can begin to ask senior citizens to pay a large and ever rising share of their Medicare costs. Looking at Bernstein’s estimate of senior citizen income, one has to ask: How? Especially when we consider that the people now aged 54 are going to have to save up that money over a decade of slack job markets and presumably weak income growth.


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34 Comments so far ↓

  • Frumplestiltskin

    I look forward to a proposed Logan’s run/soylent green solution, everyone over the age of 65 can have their DNA collected with a promise to one day be “renewed” and then have their useless bodies be turned into fertilizer. Why save up for retirement at all?
    Too farfetched, well no more than Ryan’s pure fantasy proposal that the overwhelming majority of Americans will give up their healthcare and financial security so the Koch’s can have even more money.

    • JimBob

      Buffoonery at its best. Combined Medicare and Social Security have close to 100 trillion in unfunded liabilities. They are going broke faster than the actuaries predicted. So unless we start cutting both programs they country is finished.

      http://www.investors.com/NewsAndAnalysis/Article/572208/201105131854/Social-Security-And-Medicare-Finances-Continue-To-Falter.htm

      • TerryF98

        Yes we just have to gut Medicare so we can give the resulting savings in tax cuts to the rich. Ryan’s “plan” adds to the deficit for 10 years, then assumes unicorn and rainbows appear and finally balances the budget in 30 years.

        • JimBob

          Terry, Medicare has to be reformed. Only two ways to do it. Start rationing care for those over 65, or develop a market where competition can drive down costs. A single payer system results in long waits and rationing. We have to do it or Senior Citizens will take up the entire budget.

          And everyone needs to eat better. Fresh fruits and veggies work wonders. Diabetes is exploding in this country due to our diets. Stay away from fast food.

  • Watusie

    Well-off Americans are infinitely more well-equipped to handle a return to Clinton-era rates of taxation than seniors are equipped to deal with Paul Ryan’s “brave” “plan”.

    • LFC

      And don’t forget that part of Ryan’s “plan” is to use the Medicare savings to give yet MORE tax cuts to the wealthiest Americans.

  • Elvis Elvisberg

    Telling seniors they’re on their own makes no sense from a policy perspective, as you point out. Also, it makes no sense from a realistic political perspective– the Medicare phase-out doesn’t begin for ten years. We can safely put that on the list of things that will never happen, like “saving money via the prescription drug donut hole.” No future Congress will ever go along with leaving seniors without health care.

    Ryan fails to engage the root of the problem here: US-only astronomical health costs, with further increases projected.

    Fortunately, the party that isn’t, as Bruce Bartlett described the GOP, “sociopathic and greedy,” has enacted a number of policies to address the problem of health care costs. See: http://www.tnr.com/blog/jonathan-chait/86447/the-affordable-care-act-did-happen

    If Paul Ryan cared about the deficit, he’d be glad about the ACA. But he supported Medicare Part D, the Bush tax policies, and the invasion and occupation of Iraq. He quite plainly doesn’t care about the deficit. Nor does he care about health care policy. He just cares about the interests of the Party, and his little junior high school Randian fantasies.

  • mikewaz

    It’s important to look at the confounding factor of non-Social Security income. For the least wealthy quintile, Social Security is over 80% of their income. In contrast, the most wealthy quintile collects about 20% of their income from Social Security. That’s an astronomical difference. The wealthy might be hurt slightly by Ryan’s plan, but unless the means-test scales vouchers up substantially, the poor will be forced to choose between health insurance and necessities. Necessities win that battle every time.

  • think4yourself

    The only part of Ryan’s plan that I like is that it phases in. I would think that if someone is under 55, it is okay to tell them that it will cost them more in the future than it does for today’s retirees, but you have 10 years to plan for it and those costs won’t be draconian (as it will be under Ryan’s plan).

    That should be part of the fix as should tax increases along other innovative ideas to restrain increases in medical costs. That is a whole wide-ranging conversation that should not be ideologically based (I know, good luck with that).

    Some questions I would ask are:
    (1) Why have medical costs skyrocketed at rates much higher than the general rate of inflation over the last 10 years?
    (2) Most medical expenses happen in the last 6 months – 18 months of a person’s life, is there anything that can be done about that in a humane way?
    (3) Many of the diseases that cause high medical costs have lifestyle issues as a significant part of their causative factors (poor eating habits, lack of exercise, etc.). These diseases include diabetes, coronary disease, stroke, cancer, asthma, etc. Populations that eat diets that are vegetable based and natural live an average of 10 years longer with much less cost for those diseases. Given that evidence, what lessons can be applied to the general population?

    Unfortunately, the real fix is not something our population would agree to, because it would be someone telling them how to live their life. If as a nation we changed to a society that ate a primarily vegetarian diet, based on foods in their most natural state (not processed) and exercised 4-5 times per week, in 20 years our costs for healthcare would probably drop in half. This would lower health costs from infections or complications received while in the hospital. On top of that, if we developed a policy that encouraged end-stage management based on providing comfort while dying versus heroic measures to extend life no matter what the consequences or for how long, we could dramatically cut health care costs.

    I don’t see that happening because the medical/pharmacutical/insurance industry makes too much money and won’t if people are healthy (as an example in my area they spend millions advertising lap-band surgery, also billions on commercials for Cialis and Viagra – an issue that will often resolve itself with proper eating and exercise).

    • balconesfault

      (2) Most medical expenses happen in the last 6 months – 18 months of a person’s life, is there anything that can be done about that in a humane way?

      Death Panels!

      Seriously, the original version of HCR did try to introduce more physician consultation with the elderly so they could plan for end of life issues. That’s the most humane way – for the elderly to come to grips with the concept that bushels of money might be spent on highly invasive (and sometimes painful) procedures that have a low probability of extending their lives more than a few months … enabling many of them to make the decision to limit the amount of intervention so that their loved ones aren’t saddled with that decision when the patient is incapacitated.

      Some will choose to want Medicare to spend every last dollar available to keep them alive for as long as it can … some will choose a more peaceful hospice care experience. But it will be their choice.

      This should be an inherently conservative position. And it was … up until it became a tool to attack the Healthcare Reform process with. This was far and away a disgusting act of demagogery that should put into question the integrity of every politician who repeated that “death panel” charge.

      • balconesfault

        Many of the diseases that cause high medical costs have lifestyle issues as a significant part of their causative factors (poor eating habits, lack of exercise, etc.). These diseases include diabetes, coronary disease, stroke, cancer, asthma, etc. Populations that eat diets that are vegetable based and natural live an average of 10 years longer with much less cost for those diseases. Given that evidence, what lessons can be applied to the general population?

        A sad fact is that the private insurance companies model actually disincentivizes spending on prevention.

        Why?

        a) since consumers will regularly change insurance companies – the long-term benefits of aggressive spending on prevention will often be recouped by competitors

        b) some things – like exercise – can actually push up short-term healthcare expenditures by insurance providers. In the short run, someone who runs regularly will have more visits to the physician because of knee, ankle, muscular problems than a couch potato. Of course – in the long run there are plenty of reasons why the person who runs regularly will have lower healthcare costs, but then see (a)

        c) as an industry, the more money is spent on insurance, the greater gross profits are. Why should they press for industry-wide cost control?

    • Stan

      One answer to question 1 is that insurance companies in the US don’t have enough negotiating power to contain costs as effectively as the single payer organizations in France and Canada and the private but tightly regulated insurance industries in Germany, the Netherlands, and Switzerland. This is the conclusion of articles by Uwe Reinhardt and others in Health Affairs, an academic journal devoted to medical economics. Another answer, also suggested by Professor Reinhardt, is that medical administrative costs in the US are much larger than in the other OECD countries because of our reliance on private insurance.

      Unfortunately, the Obama administration felt (rightfully in my view) that it had to buy the acquiescence of the insurance and medical care industries to get its bill passed, so I’m afraid we’re going to be stuck with this situation for a long time.

  • valkayec

    Perhaps US politicians should take a look at the reason why the Chinese people save so much, rather than spend. James Fallows, who writes for the Atlantic and lived in China, states that average Chinese people save heavily, refusing to spend more than necessary on themselves, because they have no social safety net. They know the costs of retirement and most particularly health care will drain or destroy their savings, so they save heavily all their lives to pay for their medical and retirement expenses.

    Certainly, we in the US can do that too. But not starting 10 years out from enforced changes. The change, if it is not going to be totally disruptive, needs to start at the beginning of a working life, not most of the way through it. But another problem exists with this model, namely that consumer spending will decrease dramatically. For a nation, and world, that depends upon an economy of consumer spending, that kind of decreased spending would have huge ramifications for businesses, states and the federal government.

    What I don’t get is why so few politicos and pundits simply don’t look around and envision the unintended consequences. Why is it that every policy appears simplistic and not well thought out?

  • DFL

    Frumplestilskin, soylent green is people!

  • KellyRek

    Regarding think4yourself point 3 … I would support a type of healthcare reform modeled after auto insurance, where people who chronically speed, drive dangerously, and get into traffic accidents — they get punished with higher premiums.

    Why isn’t this principle applied to Obamacare? … where people who chronically eat junk food, refuse to exercise, and become obese (with type-2 diabetes) — they should get punished with higher premiums — just like the bad drivers.

    Why do I, in my 50′s, get punished with higher premiums for my age, yet not get rewarded with lower premiums for my healthy lifestyle? (I keep my weight down, I exercise every day, and I eat right.)

    In auto insurance, it’d be unfair to force the good drivers, who obey the law, to pay the same high rates as the crazy drivers. So why isn’t this logic applied to health insurance?

    Albeit, Obamacare does include the provision to allow self-insured companies to implement “wellness programs” via the Safeway Amendment. But this wouldn’t be universally available to all insurance holders. The regulations to implement this (for qualifying businesses) are complex and would demand the expertise of an attorney. (Lawyers aren’t cheap!)

    The regulations for Obamacare are thousands of pages long. That’s why it’s so ridiculous to have central planners to dictate every aspect of human and entrepreneurial activity. The small businesses and the individual citizens should be allowed to have at least some freedom to learn from our own mistakes. We mustn’t look to the Federal Government to take total care of us. (Meanwhile, individual responsibility could be encouraged with the assistance of family, friends, church, and charitable organizations.)

    • balconesfault

      Why isn’t this principle applied to Obamacare? … where people who chronically eat junk food, refuse to exercise, and become obese (with type-2 diabetes) — they should get punished with higher premiums — just like the bad drivers.

      Lol. No, we wouldn’t be hearing screams from the right wing about how Government is attempting to completely take over people’s lives if there was any provision in the HCR bill that directed insurance companies to do this, would we?

      Sheesh. Think man. The right wing is having full on conniption fits because Michelle Obama is merely suggesting (not mandating) that parents learn more about the right kinds of diets for their children.

      I sometimes believe that the level of cognitive dissonance it takes to be a Republican today must produce greater stresses in the Body Politic than the San Andreas Fault introduces to the North American Continent.

    • drcme

      Kellyrek: if having to change doctors is an outrage, you should be advocating for the only system where you could go to ANY doctor or ANY facility you choose: universal single payer.

  • balconesfault

    James Fallows thoughts on social spending … in his own words:

    For now, the significance of the vote is moving the United States FROM a system in which people can assume they will have health coverage IF they are old enough (Medicare), poor enough (Medicaid), fortunate enough (working for an employer that offers coverage, or able themselves to bear expenses), or in some other way specially positioned (veterans; elected officials)… TOWARD a system in which people can assume they will have health-care coverage. Period.

    That is how the entire rest of the developed world operates, as noted yesterday. It is the way the United States operates in most realms other than health coverage. Of course all older people are eligible for Medicare. Of course all drivers must have auto insurance. Of course all children must have a public school they can attend. Etc. Such “of course” rules offer protection for individuals but even more important, they reduce the overall costs to society, compared with one in which extreme risks are uncontained. The simplest proof is, again, Medicare: Does anyone think American life would be better now, on an individual or a collective level, if we were in an environment in which older people might have to beg for treatment as charity cases when they ran out of cash? And in which everyone had to spend the preceding years worried about that fate?

    There are countless areas in which America does it one way and everyone else does it another, and I say: I prefer the American way. Our practice on medical coverage is not one of these. Despite everything that is wrong with this bill and the thousand adjustments that will be necessary in the years to come, this is a very important step.

    • think4yourself

      The libertarian viewpoint is that it’s not the State’s responsibility to provide for things that people ought to be able to provide for, for themselves. An individual has a responsibility to put enough aside to pay for their care for when they are no longer able to do so for themselves. In fact, I think most true libertarian’s wouldn’t think it’s the government’s job to police those providers who fraudulently take advantage of people, that life is Caveat Emptor because the more you regulate providers the more you limit personal freedom. That’s why you’ll see some poster’s on here suggest we should eliminate agencies such as the EPA, the FDA, Department of Education, etc.

      I agree we need to find ways to encourage personal responsibility (food choices, exercise, etc.). But I doubt that anyone on this board thinks we should mandate that everyone should be a vegan who only eats raw vegetables, fruits and nuts even though if everyone started to do so today, we would have an immediate lowering of medical costs and the obesity level would drop by 50% within one year. A libertarian would consider any suggestion an interference in their personal lifestyle (I don’t see Ted Nugent giving up hunting).

      • balconesfault

        The libertarian viewpoint is that it’s not the State’s responsibility to provide for things that people ought to be able to provide for, for themselves.

        I understand that.

        An individual has a responsibility to put enough aside to pay for their care for when they are no longer able to do so for themselves.

        OK. But the economic pragmatist notes
        (a) that there will always be those whose services the free market “bids down” to the point where such savings are functionally impossible
        (b) the nature of the free market will exacerbate this problem by giving many poor and lower class workers a trade-off between things that might extend their lifespans in the short run (more nutritious foods, safer cars, less dangerous jobs, safer neighborhoods, being able to hire people to do dangerous things around their home, shorter commutes, purchasing medical insurance) and saving money for old age medical care. This is kind of a Hobbes Choice.
        (c) there will always be some number for whom other factors (poor investment choices, poor health limiting earning potential, special needs children) leave them unable to save sufficient resource for old age

        As a society – why should we decide that individuals have that responsibility – when clearly (a) we are prosperous enough to shoulder the responsibility societally, (b) enforcing that responsibility will result in people dying from treatable conditions in their old age, (c) enforcing that responsibility will provide a competitive advantage in the short term to those who not shoulder the responsibility.

        Doesn’t it just make more sense for us to treat healthcare as a public good, so that people can budget and save for truly discretionary items?

        Or do you really feel that access to life-saving healthcare in one’s old age really should be discretionary?

  • SteveT

    This is where the GOP FINALLY reached it’s Waterloo. They have nothing to offer voters except cuts to programs which maintain their lives.

    • JimBob

      Get in the real world. The Ryan Republican plan is almost the same as what Federal Employees have now. Retired Senators Congress men and women. Give seniors a big check so they can go out in the market and buy a plan that meets their needs. It is the same thing as Medicare part D which has worked very well.

  • Nanotek

    it’s amusing to watch conservatives feverishly defend social engineering

  • KellyRek

    @Nanotek
    There is no such thing as a free lunch. When businesses and individuals receive money or benefits from the government, there will always be strings attached. Therefore, social engineering will be the consequence, whether we like it or not.

    When we expect more security from the government, we sacrifice an equal amount of liberty. How much liberty are we willing to sacrifice? How much economic security do we want?

    Do you want most of our economic security to come from the Federal government? Wouldn’t it be preferable to shift the balance of power to the state and local level? And wouldn’t it be preferable to empower the individual? Let’s celebrate our freedom to voluntarily help one another. Let’s celebrate our freedom to voluntarily join civic organizations and religious groups. Please do not allow the big government and big business to micromanage our healthcare.

    Personally, I’ve had my own doctor for the past 15 years. By 2014, because of Obamacare, I will lose him! The company I work for has over 50 employees. They will be mandated to provide me with insurance of their choosing which will dictate which doctor(s) I’d be forced to see — and not my current physician. This is an outrage!

    President Obama’s claim that with his healthcare reform, “we could keep our own doctor,” … is a blatant lie. Under Obamacare, I will lose control over my own healthcare. And I will lose my doctor.

  • jwmorris

    There are other reasons for illness than bad lifestyle choices. What about genetic disorders? auto immune disorders? If catastophe hits (and it could hit anyone at any age), is it just a case of “that’s the breaks – tough luck you are on your own”?
    In my case I am referring to a long term illness of crohn’s disease. Treatment is now over $20,000/yr and I have been diagnosed for 27 years. Luckily I work for a company which still mostly provides for health insurance so that I can keep working and pay all my bills & taxes & a small amount of savings. Without the medications I would not be able to work and forced to rely on disability.
    Isn’t it better for people to continue to work and be productive?
    I know that I probably could never find another job at this stage. So I just have to hope that I keep my job as long as possible.

  • SteveT

    Actually, Kelly with any luck at all maybe you’ll die before then and your doctor choice won’t be a problem.

    Both you and your doctor need to grow up. Nothing lasts forever. Many WORKING people don’t have access to a doctor at all. Their companies don’t offer health insurance and they make too much for government programs. You never had control of your healthcare. It was always based on your insurance. If you love your doctor so much, continue to see him privately and pay for it out of pocket. There’s no such thing as a free lunch after all.

  • Frumplestiltskin

    There is no such thing as a free lunch.

    Of course there is, have you ever heard of fishing? Hell, last weekend I had myself a very nice free lunch.

    And KellyRek, do you buy your own insurance? Or does your company provide it, if your company provides it they already choose who your doctor is. And what is wrong with you anyway, you are aware that Doctor’s are licensed professionals…I have had my Doctors switched multiple times because my company changed insurers, I did not shriek like a child at the prospect, I simply went to the nearest one that was on the list.
    And you can continue to go to your own doctor, buy your own insurance or pay out of pocket, but don’t hold 300 million Americans hostage to your own bizarre and childish phobia.

  • Rabiner

    JimBob:

    “Get in the real world. The Ryan Republican plan is almost the same as what Federal Employees have now. Retired Senators Congress men and women. Give seniors a big check so they can go out in the market and buy a plan that meets their needs. It is the same thing as Medicare part D which has worked very well.”

    Except that people over 65 have much higher medical costs than the Federal Employees that are on private insurance. The average 65+ year old cannot afford private insurance, nor would private health insurance companies provide affordable insurance for 65+ year olds. That’s why we have Medicare in the first place. Medicare Part D didn’t work well in that it just subsidized Medicare Advantage for substandard care (considering the additional costs) and didn’t allow Medicare to negotiate drug prices with companies (which led to higher than anticipated drug inflation).

    • JimBob

      Rabiner, it is the same plan retired federal employees have for the most part. We either develop a market or Seniors will face big time rationing of care. Demographics and medical technology have made this necessary. Also people like me should not qualify for any government subsidy. I will be able to afford my own insurance and health care. We have to start means testing. Commonsense. If not care for Seniors will eat up the entire budget. One huge government transfer payment from the young to the old.

      • ottovbvs

        Rabiner, it is the same plan retired federal employees have for the most part. We either develop a market or Seniors will face big time rationing of care.

        a) it’s not the same but that’s just another of Jimbo’s porkies
        b)Jimbo doesn’t think a situation where seniors are having to pay 70% out of pockets and don’t have the means to do so represents rationing, he calls it the working of the market.

  • Rabiner

    Kelly:

    “Do you want most of our economic security to come from the Federal government? Wouldn’t it be preferable to shift the balance of power to the state and local level? And wouldn’t it be preferable to empower the individual? Let’s celebrate our freedom to voluntarily help one another. Let’s celebrate our freedom to voluntarily join civic organizations and religious groups. Please do not allow the big government and big business to micromanage our healthcare.”

    Those are all nice talking points but without policy prescriptions behind each of them they mean absolutely nothing to anyone with a brain. What do you mean by ‘shifting the balance of power’ for health care to the local level? How do you want to ‘empower the individual’?

    I wish we got rid of the employer requirement to provide health care to employees, but I also wish we made health care benefits taxable as if it were income. Destroying the linkage between work and health care would be beneficial in increasing labor mobility since so many people only work someplace for the benefits.

  • ottovbvs

    And wouldn’t it be preferable to empower the individual?

    These nitwits love these abstractions. What the hell does this mean? We’re going to empower individual seniors to die more rapidly beccause they have no access to healthcare at the time in their life when they most need it?

  • Manchurian.Candidate

    Did these morons just figure this out now? Anyone with half a brain knew that the Bush’s Medicare drug plan would create huge deficits. Starting January 2011, 10,000 new retirees will be reaching the age of 65 for the next 25 years. They will live longer, but sicker lives needing lots and lots of drugs, and more expensive medical treatments.

    Where did they think the money to pay for all that was going to come from? Just give them something for nothing. Well they got their wish.

    Snap out of it, future cuts are unavoidable. FUBAR.

  • KellyRek

    Rabiner:

    I agree with your response to JimBob concerning your argument against Ryancare.

    “The average 65+ year old cannot afford private insurance, nor would private health insurance companies provide affordable insurance for 65+ year olds. That’s why we have Medicare in the first place. Medicare Part D didn’t work well in that it just subsidized Medicare Advantage for substandard care (considering the additional costs) and didn’t allow Medicare to negotiate drug prices with companies (which led to higher than anticipated drug inflation).”

    I also agree with your comments directed at me:

    “I wish we got rid of the employer requirement to provide health care to employees, but I also wish we made health care benefits taxable as if it were income. Destroying the linkage between work and health care would be beneficial in increasing labor mobility since so many people only work someplace for the benefits.”

    Both SteveT and Frumplestilstkin need to recognize that Obamacare does not break the chains of the worker tied to his employer’s healthcare plan. The individual is not empowered to choose his own insurance (taking into account the tax penalty from the Federal government.)

    Rabiner, what I mean by shifting the balance of power more to the state and local level (regarding healthcare) is that the states should be allowed to have their own versions of healthcare reform as living laboratories of “what works and what doesn’t.” The ordinary citizens have greater access to the lawmakers at the state and local level. The Federal government is far removed from the concerns of Middle America; instead, lobbyists and Wall Street rule that domain.

    As a specific example, Vermont has adopted Green Mountain Care. It is a single-payer version of healthcare reform. But this reform cannot take effect unless it receives a waiver from Kathleen Sibelius.

    At the whim of the Health and Human Services secretary, she has all this power to dictate to the little state of Vermont whether or not to allow Green Mountain Care. Other states may be proposing alternate versions of healthcare reform. (Massachusetts already has Romneycare.)

    Kathleen Sibelius has this incredible power over the states, approving this and rejecting that. In essence, the Federal government picks the winners and the losers.

    It would be better to repeal Obamacare. Let the states decide their own versions of healthcare reform. If Vermont’s plan succeeds, then great! If not, then go to plan B.

    Our country is so huge, it’d be a grave mistake to impose a centrally planned prescription of Obamacare from distant Washington D.C. — whose primary objective is to serve the interests of the healthcare industry, not the healthcare consumer.

    By the way, if I were to live in Vermont, and if Kathleen Sibelius were to grant the waiver to allow Green Mountain Care to be implemented … then I’d be able to choose my own doctor! But under Obamacare (here in the state of Arizona), I’d lose my choice and be forced to accept the insurance plan of my employers’ choosing, not my own. Thus, Obamacare does not empower the individual; it instead relegates the healthcare consumer to the third party entity that makes the healthcare decisions for him or her. (I would not be allowed me to keep my own doctor; the Federal government will mandate me to accept an insurance policy that would dictate who’ll be my new doctor.)

    Vermont’s Green Mountain Care:

    http://pnhp.org/blog/2011/02/15/the-vermont-health-bill-a-brief-overview-from-the-single-payer-perspective/

    http://repbillfrank.com/LegReports/2011/H202%20Q&A.htm