Medicare does “NOT PAY FOR ITSELF”
In the comments section of an earlier post 1/3 of Medicare Spending is Wasted, I had stated to everyone, “Medicare does NOT PAY FOR ITSELF.” This is what I meant by that comment:
“For more than a decade the the federal government has borrowed to pay for the rising cost of Medicare. Debt-financing of Medicare will increase sharply as the population over 65 doubles from 2010 to 2030 and the number of beneficiaries over 85—with the greatest medical needs—triple.”
Note, using borrowed money to finance Medicare is not something that will happen in the future. It began more than a decade ago. Yet, as the article notes: “Members of Congress are reluctant to argue with constituents who sincerely believe that they have ‘paid for’ Medicare with payroll taxes and premiums. Most find it more convenient to tiptoe around the minefield of Medicare financings.” So the charade continues even today.
People who believe that they have paid for their Medicare with payroll taxes and premiums are terribly naïve and do not realize how much Medicare actually costs or how much “Medicare for all” would cost.
The article goes on to explain the history of how we arrived where we are today and why I make the comment on Medicare:
“In the mid-1990s, Democrats proposed to balance the Medicare budget by limiting fees paid to physicians for services, while Republicans sought to contain the costs by transferring the program to managed care insurers and capping the annual per capita rise in premium subsidies.
In 1997 the leadership in both parties agreed to a plan that would eliminate borrowing for Medicare, principally by limiting the growth in the level of fees paid to physicians. That Medicare reform, along with increasing general revenues paid by taxpayers in the highest bracket, led to a federal budget that balanced in fiscal year 2000.
The balance turned out to be short-lived. In 2001 and 2003 Congress passed debt-financed reductions in income tax rates. And in 2003 it also suspended the application of ceilings on fees set in 1997. Later that year Congress used debt to finance a new Medicare prescription drug benefit and higher payments to Medicare managed care plans.
As a result, the portion of Medicare paid for with dedicated taxes dropped from 73 percent in 2000 to 53 percent in 2010, the year that the first of the Baby Boom generation became eligible for Medicare.”
“After the 2008 election of President Obama, Democrats sought Medicare ‘savings’ for the purpose of expanding other medical services rather than balancing the budget for Medicare. In order to offset the cost of expanded PPACA medical services for families with low incomes; they placed restrictions on reimbursement rates, provided incentives for more efficient delivery of medical care, raised the Medicare tax paid by taxpayers with high-earned incomes, and applied Medicare taxation to gains from investment.”
On the other side of the political spectrum, “Republican House Budget Chairman Paul Ryan exemplifies his party’s ambivalence toward Medicare reform. He ran as the vice presidential candidate on a ticket in 2012 that attacked the Affordable Care Act’s limits on Medicare reimbursements. Yet before and after that election, he incorporated those very cost-saving measures into his own budget plans.”
Incumbents from “both parties find it awkward to even talk about the practice of borrowing to pay for Medicare. Obviously, an extra layer of interest on debt simply increases the program’s long-term cost. Any attempt to highlight that issue naturally invites the question of whether to cut Medicare costs or raise tax revenue dedicated to the program. No mainstream politician seeks to cut benefits by almost half and down to the level payable by revenues from premiums and payroll taxes. Democrats condemn any increase in payroll taxation as ‘regressive,’ while most congressional Republicans have signed a pledge to oppose any tax increase.”
Both sides of the aisle feint a reluctance to either cut Medicare benefits or increase Medicare withholding taxes and an honest discussion with their constituents regarding Medicare financing knowing full well something must be done. Indeed, it is politically expedient to kick the can or the bucket into the next decade avoiding the third rail of Medicare.
What can we do? I will answer that question in my next post.
Notes and References:
1. “Pay As You Go” Medicare Washington Monthly, Bill White, June 23, 2014
2. Maggie Mahar writes the Health Beat Blog Maggie is also the author of Money-Driven Medicine: The Real Reason Health Care Costs So Much (Harper/Collins 2006). Mahar also served as the co-writer of the documentary, Money-Driven Medicine (2009), directed by Andrew Fredericks and produced by Alex Gibney. Before she began writing about health care, Mahar was a financial journalist and wrote for Barron’s, Time Inc., The New York Times, and other publications. Her first book, Bull: A History of the Boom and Bust 1982-2003 (Harper Collins, 2003) was recommended by Warren Buffet in Berkshire Hathaway’s annual report.
Maggie
people parse facts differently. i don’t know why you are so anxious to shout “medicare does not pay for itself!”
it could, and it should.
instead of hiding half the cost of medicare (closer to 40%), in the general taxes, “making the rich pay” a lot more than their “fair share”, and making them enemies of Social Security, and making the old come up with about 20% of the cost “out of pocket” when they are old and not working. we could
put all of the costs of Medicare on a transparent dedicated tax paid for as a percent of payroll by the people who will get the care. For those who honestly cannot afford even the about 7% (3.5% for the worker if paid the way SS is, with half the tax hidden as “The employer’s contribution”… this matters because the poor especially would only “see” a 3.5% tax, and it is doubtful that they would ever see the other 3.5%, which “most economists agree” is their money, even if there was no tax at all) … for those who really couldn’t afford it, a direct welfare subsidy would make sense. Because it would leave the general principle of “you pay for what you get” intact, while still providing welfare for those who really need it.
For the rest of us it is pretty childish to refuse to pay our expected medical costs in old age when there is an easy way… easy monthly payments in advance while we are still young and have a job.
You have, correctly i think, pointed out the dangers of a “government” monopoly on health care… but you propose paying for medical care by various taxes on the rich… combining the worst of government monopoly and the politics of envy and resentment.
Perhaps, letting the people pay, and know what they are paying, for their future… old age… medical care by “pay as you go,” which as far as i know only the government can manage… and letting them play the free market game while they are young,insurance rates are lower, and should be lower yet if the insurance companies are not having to pay for the higher costs of old age… would provide the kind of public/private competition you are looking for.
I appreciate your looking for creative answers to the health care cost problem… but there is a baby-bathwater issue here, and we are not germany.
Meanwhile telling workers (the poor) you did not pay for it, has adverse consequences you might want to think about. The rich already know they are paying more than their share.
The federal government has not borrowed “to pay for the rising cost of Medicare”. The federal government has borrowed to fully pay for everything that it pays for. Medicare is just one of those things. You could have equally said that the government borrows to pay for homeland security, national defense, congress, welfare, government salaries, etc.
To single out Medicare as the reason for borrowing money is unfairly placing the blame for the deficit on Medicare.
Dale has muddied waters already muddled by Maggie.
It is convenient to talk about Medicare as A program just as it is convenient to talk and THE Social Security Trust Fund. But Medicare like Social Security is legally and operationally a set of different though interrelated programs.
In the case of Medicare we have Part A Hospitals. Whose benefits are paid out of the HI (Hospital Insurances) Trust Fund which is funded by mandatory SECA payroll contributions. Part A and HI are like the OAS component of SocSec a PayGo Social Insurance program funded by current workers on behalf of the future retirees they hope to be.
In contrast we have Medicare Part B Physicians which is opt-in coverage by Part A participants who pay a monthly premium amounting to around 25% of Part Bs cost with the rest made up by direct transfers from ALL taxpayers. Which transfers are credited to the SMI (Supplemental Medical Insurance)Trust Fund. But it is critical to see that SMI and HI have very different positions in that the latter has been paid for (in principle) in toto by beneficiaries in THE PAST, while the former is only being paid for by beneficiaries IN PART and TODAY. That is the two Parts make quite different equitable demands.
This picture was complicated by the introduction of Part C (Medicare Advantage) about which I will not speak here and then by Part D Prescriptions which is best thought of as an add on to Part B.
Now Dale’s comment seems to equate ‘Medicare’ with ‘Part A’ and present it as all worker funded except for that part of it funded through Medicaid for the elderly poor. But this totally ignores the funding structure of Parts B and D which as Maggie points out (obliquely) are mostly funded by the General Fund and becoming a greater share of overall Medicare spending.
That is Dale is right at 50% wrong in his claim that workers qua workers are paying for Medicare. True for Part A (historically about 55% of total Medicare) but not true and NEVER true for the 45% and growing percentage of Medicare paid 75% plus by income tax payers Parts B and D.
On the other hand Maggie’s portrait, while accurate enough, would in my opinion be better explained in terms of the shift in proportion of Medicares total cost between worker funded Part A and retiree and income tax funded Parts B and D.
Only if you get these distinctions straight can you understand the role of the ‘Doc Fix’ in all this. Which has to do with limiting the percentage of overall Medicare funding from the General Fund and not as far as I can see in keeping Medicare from being ‘debt financed’. Because Part B (exacerbated by the addition of Part D) has always been ‘debt financed’ as long as the General Fund was and only not when the GF was balanced (for a tiny shining period in the 2nd Clinton term)
Thus Dale and Maggie are not only talking past each other but also past most everyone else.
There is no solvency constraint for the currency issuer. It isn’t about “affordability” or whether the system “pays for itself.” Listen to Greenspan’s answer to Congressman Ryan in this video. Pretend the question is about MC instead of SS. It makes no difference. What matters is Greenspan’s (most candid) response. https://www.dropbox.com/s/vb9vf01c2pr5qqa/Greenspan%20Full%20Version%20Good%20Sound.mp4?dl=0
Please don’t buy into the fiction that funding MC, even if it involves swapping dollar deposits for Treasuries is some sort of unsustainable con game. It plays right into the hands of Pete Peterson and his ilk.
Stephanie:
Welcome to Angry Bear. For once, I have to agree with Greenspan given I would placed most of the 2008 albatross around his neck. There is no solvency constraint for the US as we are monetarily sovereign and the issuer of currency. I believe it to be more an issue of transparency and understanding what we are paying for today. Hopefully Peterson and much of the AEI wil go away.
I have read that doctors incomes (take home, before taxes) make up only 10% of all nation medical care costs (overall — not talking about Med-anything). Any of you experts willing to put me wiser on that?
I am no expert but my brother is a speciality surgeon. And a huge part of his fees go to paying his staff etc.
So there would be nothing silly in seeing Physicians dragging down a full 45% of medical costs in any given medical delivery system while only having take home of 10% in pre-tax takehome.
Just as a $60 an hour auto mechanic or plumber isn’t taking home anything like that, in all those cases there is a lot of overhead buried in that per hour or per procedure price.
Medicare is the base of cash flow for the entire medical service system. Don’t think of Medicare as a way to supply health service to people but as a way to inject cash flow into the system. People and health have nothing to do with it.
Medicare’s ultra reliable cash flows begat our hyper profit oriented health care system. As all things in America eventually devolve into profit seeking and rent seeking.
No politician dares screw with Medicare because it threatens cash flow and profits for an industry which accounts for 15+% of GDP. As much as conservatives would love nothing better than to deny non rich people any health care they love even more the cash flow and profits the industry supplies.
Jerry Critter and Bruce Webb’s comments above have it right (except that I cannot figure out who Dale is, Bruce?). The one thing missing from both this post and the previous post’s long string of comments is recognition that you cannot analyze whether eligible United States residents PAY FOR THEIR MEDICARE THEMSELVES (I;m not sure why we are shouting?) unless you
1.) look at Medicare beneficiaries in age cohorts and take out the disabled beneficiaries
2.) Include the implicit contribution by beneficiaries to their own Medicare expenses in the form of income taxes paid over their working lives (not just payroll tax)
3.) Include the pooling affect — which is the basis of all insurance — of both the money in the A Trust fund and the implicit contributions to the Part B trust fund
4.) Read the history of the debate that led up to passage of Medicare in 1965 and compare that with the debate that led up to passage of SS in 1935 or so
When you take steps 1-4 you find that
— People retiring today who worked the typical 40-50 years are paying their own way per the explicit stated intention of the 1965 Congress (on paper; of course the money was not kept in a lock box)
— People born before 1940 did not pay their own way per the explicit intention of the 1965 Congress (as opposed to the 1935 Congress which set up SS to take in contributions for five years before payouts began).
— People born after 1980, who will start demanding Medicare services in 2045… sorry about that… you paid for your great grandparents and now there is nothing left
Dennis:
Dale = Coberly.
I think if you go back to the previous thread and look at the comments or listen to the comments today, there is a cry for Medicare for all. The proposition of Medicare for all or even for the 40 to age 65 group may indeed be too expensive without raising taxes on constituents of which 90% have either seen their incomes stagnate or decrease since 2001. Furthermore Congress has been negligent in addressing the issue of a tax increase and discussing the issues needing to be taken to rein in the rising cost of healthcare beyond the PPACA.
The Washington Monthly was referenced. I assumed everyone looked at it?
In the late eighties, Reagan and Congress raised Medicare taxes on higher income seniors and promptly got it shoved down their throats. In 1990s, payroll taxes were raised and limits taken off of income for Medicare withholding. Premiums (approx. $100 per month today) for Part B were not touched as it was considered to be the limit on what seniors could pay and have deducted from their monthly Social Security checks without making them starve. Also and later in the 1990s, it was promised (and passed) that payments to physicians would be reined in. This has been a political hot potato since then with Congress passing yearly band aid legislation to postpone it. The “or” situation was making Medicare a private and commercial endeavor and was pushed by the Repubs. You, I, and the others know there is no incentive for the healthcare industry reining in cost short of crowding out the other necessities Louise Sheiner and Glen Lafollette (An Examination of Health-Spending Growth in the United States: Past Trends and Future Prospects”) wrote about critiquing Doug Elmendorf’s 71% of GDP scenario. Congress does protect the healthcare industry at the expense of its constituents.
After Reagan and Clinton, the 2001 and beyond Congress decided to pass the Medicare prescription plan (Part D) using debt to finance it, higher payments to Medicare healthcare plans (Advantage), and continued to postpone restraint on doctor fees passed in the nineties. With that action; “the portion of Medicare paid for with dedicated taxes dropped from 73 percent in 2000 to 53 percent in 2010, the year that the first of the Baby Boom generation became eligible for Medicare.” It begs the question (and you partially answered with your last statement), is this sustainable for the future and can we expand Medicare to cover more people? I think not. Sheiner and Lafollette in answering Elmendorf’s flawed study on healthcare costs suggested it was not sustainable either and something will be crowded out eventually mostly likely healthcare. So what is the plan? I think Maggie will suggest some ideas. The large type is to make people aware of the situation which I have summarized here and also that such a move to expand Medicare is easier said then done.
Your points 1-4 and subsequent results below are true; but, is Medicare balanced going into the future with todays withholding revenues. I would say it is not and an expansion to cover more people and taxing higher may not be possible given todays scenario.
Dale + Coberly = Dale Coberly
Much like Bruce + Webb = Bruce Webb
Dale and I are kinda old-fashioned that way and as old guys often forget the old baseball adage “Ya Can’t Tell the Players Without a Scorecard!”
When I am yelling at Coberly or he is yelling at Webb we are mostly ‘Dale’ and ‘Bruce’. Just like those Old Guys always bickering at the end of the bar at your local VFW or American Legion.
And BTW. ‘Get Off My Lawn!’ (Grumble, mumble)
People one of the better ways to look at AFC (Obama Care) is a comparison with PAEA which is being used to privatize a working asset to an extractive system that could then be dismantled. The only benefit of AFC seems to be the government and taxpayers will pay more into a parasitic system that is under AFC no longer able to dump sick people or deny insurance on Medicare, Medicaid, or Chip program. The only really positive part of AFC it does force (maybe) insurance carriers to accept already sick people.
Hidden in the AFC 17,000 pages is the provision to cut Medicare, which is new.
For those interested there is an AB article on how PAEA is being use to dismantle the postal system.
http://angrybearblog.strategydemo.com/2014/09/what-are-people-and-the-post-office-for.html#comments
Beene:
Did you mean ACA?
Bruce
I am not sure if it is I who am muddying the waters or you.
I was talking about Medicare.. as the program paid for in part by HI and part by general taxes as “an entitlement”… not SSI which is a welfare program.
I haven’t time to go back into this all over again now. But muddied is in the eye of the beholder. It may be that I was not clear, but it may be that you have grown to eager to find me in error.
Beene: Did you mean ACA?
Hi run, yes did type it wrong several times.
Run in my defense their are so many different ways Obama Care are referenced. Used AFC referring to Affordable Care Act.
Dennis Bryan
i am not at all sure i followed you… but “the money is all gone” betrays a failure to understand the idea of pay as you go.
granted that the existence of a “trust fund” muddies the pay as you go waters. but essentially… as you almost seemed to understand… while you are “paying for your grandparents” you are also paying for yourself. just as when you put your money in a bank you are paying for the house your neighbor builds with money he borrowed from the bank while at the same time you are paying for the eventual money you will withdraw from the bank, including interest.
the trust fund is NOT the thing. the payment of money in return for an “obligation” is… is the normal way money works when you aren’t thinking of a “cash on the barrelhead” instantaneous transaction… though there the “cash” is itself an “obligation” of the government to “pay” you “value” … as in “accept that cash for the taxes the government demands for its services” whatever those are
it’s worth thinking this through so you don’ get trapped by “the greedy grannies have stolen the kids’ future” lie.
Coberly
You’re reading too much into my comment. I am simply reacting to the shouted headline “Medicare DOES NOT PAY FOR ITSELF.” In fact it does pay for itself if you were born between around 1940 and 1980. I am not getting hung up on trust funds, lock boxes, how the money flows in or out, what the country should do next (but don’t saddle people under 65 with this crappy system) or any other aspect of Medicare. All I am saying is that if you look at what a typical retiree this decade and next paid in and will get out from an actuarial point of view, he or she paid his or her way.
So, no, I am not falling into a trap that I think my wife has stolen anything from our descendants. And yes I do understand “pay as you go” although that was not the promise of either LBJ or FDR (FDR probably believed SS would pay for itself; LBJ was probably lying about Medicare paying for itself).
Can anyone say how much of health cost growth is due to newer, high-tech treatments.
* * * * * * * * * *
I like to point out that — as far as SS retirement payouts are concerned — that per capita GDP grows twice as fast as population so there is no fundamental reason to fear SS shouldn’t be there tomorrow for today’s young. There may be a Great Wage Depression reason: that the folks who pay FICA (capped at 83 percentile income) are not only not sharing in that growth but actually going backwards in per capita income.
If OTH medical cost grow faster than per capita income growth, then, the question may become — assuming the end of the Great Wage Depression — do we want more cures or a more up to date kitchen?
There is the absolute/relative comparison to consider too. If health care costs double while per capita income grows only by half (over 25-30 years?): 85% (left over today) of 100 is 85 — 70% (left over then) of 150 is 105. Absolutely we are still better off (and we are not even counting the free gifts of higher technology — $600 3D smellavision).
If worst comes to worst — forget the up to date kitchen. I don’t see what all the moaning is about. Unless the Great Wage Depression continues. Anyone on this side of the Atlantic (besides the Teamsters) ever hear of centralized bargaining?
Odd money driven medical news: yesterday I was very unpleasantly surprised to discover that the amazing cafeteria at Chicago’s Northwestern Hospital has been permanently closed — replaced by a string of small shops that pay minimum wage instead of union (SEIU) wages and pay the hospital rent to be there. Nothing — nothing — is safe in this country anymore. (Get me Jimmy Hoffa.)
I don’t understand why Medicare For All would be too expensive for people, especially 40 to 65 year olds, to afford when private, for-profit insurance companies already do it? Are you telling me that they are much more efficient than Medicare even though they pull 15% off the top in profits?
So many of the details being worried in this discussion dissolve in light of the fact that the federal government issues our currency; it is not a currency user like households, businesses, and state and local governments. The federal government doesn’t need to tax or borrow to fund its operations, whether for Medicare or the military or anything else: it spends dollars into existence according to congressional appropriation. What is being appropriated is national resources, real material resources, real goods and services, not dollars collected by taxing or borrowing. We can decide as a nation who will receive Medicare and how great a benefit, but we cannot say that we can’t afford it. As the source of dollars, the federal government can always pay for anything that is priced in dollars. There is no shortage of healthcare providers or our ability to train more. There is no shortage of healthcare facilities or our ability to build more. There is no shortage of medical equipment and drugs or our ability to make more. We can claim as a nation that we don’t *want* Medicare for all, but we cannot claim that we can’t *afford* it.
So I’ll parrot Dean Baker and point out that generally speaking our medical costs are twice as high as any other developed country with middle of the pack outcomes. We have a cost problem not an insurance problem and to the extent that Medicare sets some basic fee schedules it helps moderate our horrendous cost problem to some degree.
The factor not mentioned is that a significant part of Medicare expense occurs at end of life or within last six months. Part of this is because we treat medical care as purely a consumer product which encourages conspicuous waste. Fee for service offers all the wrong incentives. There are some current initiatives in Medicare offer some hope of changing that model.
Finally, run is absolutely right, we do not have a spending problem. What we have is a problem of demagoguery that treats national budgets in a totally fallacious context. What we need is an understanding that spending and national budgets ought to be designed to fund the sort of government we want. It makes absolute sense that we should want our population to have access to effective health care, where effective refers to both actual care that supports a healthy population and costs that are not based on rent seeking.
Ezekiel Emmanuel has a thoughtful piece at Atlantic on end of life care and the NYT just did a good piece on rent seeking in medicine. The first has direct impacts on the Medicare discussion while the second is more about the broader healthcare environment.
Mark beat me to the point I was going to make. We pay enough in Medicare taxes to pay for our Medicare if we had a medical system with costs comparable to other wealthy countries. So I don’t mind “tax the wealthy” to make up the Medicare deficit at all – there are many people who are wealthy because we’re paying too much for health care. I’d rather the system be fixed, but until then I’m not anxious to pay the full amount of our bloated costs – I’ll let my employer pay, then ACA if I retire before 65, then Medicare.
Federal taxes for Medicare don’t pay for anything, they simply destroy existing dollars. It doesn’t make any sense to claim that the *source* of dollars needs to tax (or borrow) to fund operations. There may be good reasons to tax/destroy existing dollars, for instance to regulate aggregate demand in the economy to control inflation, but it’s not required to fund Medicare or any other federal program. Controlling the costs of healthcare and addressing income disparities from *how* Medicare dollars are spent are separate issues from the actual funding of Medicare. If we want Medicare for all, we have our agent, Congress, appropriate the resources to do this. The dollars that are spent into existence as a result are merely the way we *account* for the appropriation of the actual goods and services required to provide Medicare. Keep you eye on the ball: the issue is not money – money is an idea, a measurement, not a thing, and we can no more run out of money than we can run out of inches or ounces. The issue is our capacity, our ability to provide good healthcare for all, and there is no shortage or scarcity of the real resources required to do this.
Mike B
what’s wrong with “tax the rich” is not a justice problem, but a political problem, and perhaps a psychological problem.
as long as the rich think they are paying more than their fair share they will keep fighting to kill the program entirely. as long as the poor can say “i paid for it myself” they will be …. oh, i don’t know how to say this without sounding like a republican but note that the republicans get votes by saying it… it is a Truth about human psychology… the republicans are lying, because they use a “truth” to enable a “lie,” but people do like to feel that they “paid for it myself” and they don’t like to think they are paying for someone else.
my modest proposal to to gain the political and psychological benefits of that truth by letting workers pay for their own retirement and health care as long as they can. There may come a time when, as Denis above says, they have to give up the 600 dollar smellavision if they are going to pay for the heatlh care they need… and there may even come a time when they simply can’t pay for the health care they need at all… i am not very sympathetic about the first eventuality, but when the second eventuality occurs we are going to have to make some decisions, and i hope “make the rich pay” is not the “correct” solution at that time, because it will mean we have come into a world where “the rich” are a permanent class of owners and pay for everything because the rest of us are in everything but name their slaves. in that case they will no more pay for your higher medical expenses than you would mortgage your house to pay for your elderly dog’s last few days.
neither, in fact, will YOU pay for someone else’s health care when it begins to affect your “life style.”
the “47%” of workers do NOT think of themselves as victims and refuse to take responsibility for themselves, but the 2% or so of “progressives” WANT them to think that way…. even while acting horrified that someone should accuse them of it.
Dennis Byron
barring a couple of phrases i am not sure i understand, you seem to be understanding this much the way i (think i) understand it.
As for FDR however, I think he not only thought SS would pay for itself, he took steps to make sure that was the way it was designed. It still pays for itself after all these years, and can continue to pay for itself forever as long as the workers understand that they DO have to pay for their retirement what it will cost… allowing for the time value of money. current best estimate is that this will cost them an extra 2% of their pay after many years, when their pay will be about a 100% higher (an no I am not counting “the boss’s share” which you can count if it pleases you… doesn’t change the basic facts.)
I also think Medicare can “pay for itself” but again the people have to decide that about another 7 to 10% of their income is a reasonable price to pay for a longer and healthier life, without financial anxiety.
I think it is. And I think it is stupid to tell them they can’t afford it, or it is a huge burden that someone else should pay for them. It could get that way, but we don’t need to shoot ourselves in the head to avoid possible high medical costs a century from now, or even twenty years.
Joel Palmer
depends on the details. if you are saying the government can just print the money and we can have “medicare for free” i don’t agree, and i don’t like the psychology.
if you are saying the government can find a clever tax and borrow and print money way of creating the resources (human work) that will rise to fill the need without creating “inflation” that will destroy the economy… in ways that inflation has in the past… you may be right. but that remains to be shown.
Jerry Critter–And EVERYONE (I really hope everyone will read this one comment. I’ve spent quite a big of time on it.)
Jerry wrote: “The federal government has borrowed to fully pay for everything that it pays for. Medicare is just one of those things. You could have equally said that the government borrows to pay for homeland security, national defense, congress, welfare, government salaries, etc.
To single out Medicare as the reason for borrowing money is unfairly placing the blame for the deficit on Medicare.”
I am afraid that Jerry entirely missed the point of this post.
Unfortunately, this was one of the first comments on the thread, and it sent the discussion off in a direction that has nothing to do with the post.
I am NOT BLAMING MEDICARE FOR THE DEFICIT. Of course the government borrows money to pay for most activities. I thought everyone knew that.
I am NOT WRITING ABOUT THE DEFICIT. I am not in any way agreeing with Pete Peterson that Medicare is unsustainable. I don’t think that we need to raise the eligibility age, or shift more costs to beneficiaries. As I
explained in my last post, Medicare is beginning to squeeze some of the waste out of the system. As it continues to do that—over time–it should be
sustainable. (Though as I have noted, In about 15 years, we’ll have a new problem–an epidemic of
Alzheimer’s that I think will require separate funding through inheritance and VAT taxes. This is what other countries do. But that’s a separate issue.
The Medicare that we have today (with relatively few patients suffering from Alzheimer’s) will be sustainable when and if we stop over-paying for drugs and devices, overpaying for preventable hospitals errors, over-paying for uncoordinated care, and over-paying for treatments, surgeries and tests that provide little benefit for the patient, putting him at risk without benefit.
When I Note that the Government Must Borrow to Fund Medicare my Point is Simply that Most Americans Sincerely Believe that their Pay-Roll tax contributions and the Premiums they pay when on Medicare fully fund Parts A& B (and now D) of the program. Thus They Don’t Realize just How Expensive Medicare Really Is. That is the Point of this Post.
Jerry goes on to say: “I don’t understand why Medicare For All would be too expensive for people, especially 40 to 65 year olds, to afford when private, for-profit insurance companies already do it? Are you telling me that they are much more efficient than Medicare even though they pull 15% off the top in profits? –
What Jerry–and many people –don’t seem to understand is that Private insurers are insuring people 45 to 65 Without the Help of Borrowing From the govt.’s general revenues.
This is something to keep in mind when comparing the cost (and efficiency) of private insurance under Obamacare to what Medicare for All would cost. Is private insurance terribly efficient? No. But under Obamcare it has turned it to be more efficient than most people expected. In the Exchange all policies have to cover all essential benefits (including many benefits that Medicare does not cover) and yet a combination of regulation and competition has brought down premiums. 2014 premiums in the Exchanges were much lower than expected, and 2015 premiums are not much higher. In many cases, they are lower. (Premiums on my Exchange plan are going down about 10% next year–and it will still be a Zero deductible plan with low co-pays and the same network of providers.)
And by the way, Jerry and everyone– Medicare does NOT take 15% off the top in profits.
Insurers keep 15% to cover profits AND Administrative Costs (which equal 3/4 of the 15%)
Administrative costs (the cost of administering the program) include:
— all of the customer service people who answer the phones
— all of the people who process the paperwork as customers switch in and out of plans,
— advertising that tells customers what plan X offers that plan Y doesn’t, —–the taxes that insurers pay to the government (including taxes that help pay for the subsidies that help low-income and middle income people buy insurance under Obamacre
— all of the people working at private insurance companies who
try to ferret out and stop fraud (including doctors charging for treatments and tests that the patient didn’t need–and which expose him to risk without benefit)
—all of the people at some insurance companies who set up
“wellness programs” and free smoking cessation programs to try to help
customers stay healthy
— all of the people at private insurers devising ways
to reduce end-of-life costs (and end-of-life suffering) by letting patients go into hospice long before Medicare does,
— all of the people at private insurance companies using their electronic records to see which patients benefit from which drugs–and which ones are hurt by those drugs. Unlike Medicare many private insurers refuse to pay for certain drugs for certain patients because medical evidence shows that those drugs hurt–and in some cases kill–those patients.
Private insurers spend about 12% of your premiums on the activities I just listened. They spend 85% on direct payments to doctors, hospitals and reimbursing patients. Just 3% goes to profits. That’s right 3%.
Goggle “Ezra Klein” and “single payer” and you’ll find his brief, excellent article explaining that while drug-makers, device-makers, many hospitals and many doctors make enormous profits, insurers have a profit margin that averages 3%. I think it’s titled “What Liberals Don’t Understand about Health Insurance”
(Klein is a rare bird–a left-liberal who is willing to question liberal doctrine,
think about it, do research, and get to the truth. I know him pretty well, and have debated him by email a great many times. We generally agree. He is not “a sell-out” (as some single-payer advocates say). He is simply very intelligent–too intelligent to buy into any ideology that depends on misinformation. He is also capable of changing his mind–a true sign of the ability to think critically, which means being able to critique your own assumptions, or ideas that you have clung to for a long time.
Here is something to think about– Take another look at the list of how private insures spend 12% of your premiums, and ask yourself how much does Medicare spend on those items?
— Medicare does not spend much trying to reduce fraud. (Congress won’t give it the money to do that. Too many lobbyists represent for-profit hospitals, nursing homes, and some doctors who are stealing from Medicare.)
–Medicare does not spend as much on customer service. (Because insurers are competing with other insurers for market share, they have to put quite a bit of money into customer service, or their customers will switch to another company. Traditional Medicare isn’t competing with anyone, and so, like many government bureaucracies, provides mediocre (at best) customer service.
— Medicare doesn’t pay for wellness programs or free smoking cessation programs. (Imagine what the tobacco lobbies would say!)
Private insurers do this, not because they are kind, but because t hey understand that if their customers stay well for most of their lives, they will
be less expensive. And customers who get free wellness programs are more like to stick with that insurer. (This is one reason why turnover is so low at Kaiser Permanente.
—Medicare also doesn’t pay doctors for the hours it takes to talk to patients and try to help them manage their chronic diseases. Many private insurers do. (In general, Medicare pays docs to DO THINGS to you–not to listen to you and talk to you.)
—Medicare doesn’t have to handle paper-work as customers switch in and out of plans. It is the only government plan for people over 65. . If you don’t like the fact that it won’t let you go into hospice unless two doctors say you are within 6 months of dying– too bad. Medicare doesn’t make exceptions. (The result is that the average Medicare patient goes into hospice
less than 10 days before he dies. Until then he is being tortured in an ICU
or over-treated in a hospital–and Medicare pays for the torture.
Many private insurers will now let you go into hospice much sooner, and they get the benefit of spending their final months of life free of pain, and
getting the counseling they need to come to terms with the fact that they are dying.
—Many private insurers now also pay doctors for the time it takes to have lengthy discussions with patients about how much treatment they do or don’t want, at the end of life. Do they want to be put on a respirator? If you
suffer from Alzheimer’s and can no longer recognize friends and family, do they want to be fed through a feeding tube? Do you know what palliative care is? Do you want it? There are a great many questions to consider. These conversations take a long time.
Medicare won’t pay for them because Congress won’t let it. Congressmen
refer to such conversations as “death panels.”
Am I saying that private insurance is better than Medicare? Sometimes yes, sometimes no. In general, the non-profits are best, though Aetna has pioneered in many areas involving hospice and palliative care. Aetna will even let you continue treatment while in hospice.
Let me be clear– Like Medicare, Private Insurance is Also Terribly Wasteful. In many cases it overpays docs and brand-name hospitals even more than Medicare. It also
pays for some unnecessary treatments and over-priced drugs.
But not as many as Medicare does. Traditionally, Medicare has paid “no questions asked” (This is what docs like; Medicare doesn’t hassle them.) Private insurers are more cost-conscious (they have shareholders that they have to answer to) so they will question doctors and ask for medical evidence that a patient truly needed a particular treatment.
In the 1990s, private insurers actually made a big effort to cut back on waste by “managing care.” The problem is sometimes they denied needed care. Rather than looking at medical evidence they just looked at what it cost. In other cases, they were right. They refused to pay for care that did not good–and hurt patients. Nevertheless, both patients and doctors were outraged. So private insurers pretty much gave up trying to “manage care”
paid for whatever a doc decided to do (even if it was a money-driven decision) and passed the cost on in the form of spiraling premiums.
But now under Obamacare, private insurers are saying that if Medicare begins using medical evidence to decide what to pay for, private insurers will follow Medicare’s lead.
In this way, under Obamacare, both private insurers and Medicare could
reduce waste, and break the cycle of healthcare inflation that has made healthcare unaffordable for most people.
The big problem is that Congress is Medicare’s board of directors. (And it would serve as board of directors for any govt program–including Medicare
for all–unless we set up new regulatory agencies that do comparative effectiveness research and use it to decide what to pay for and how much to pay.)
The good news is that under Obamacare, Medicare is trying to break away from Congress.
This will take time. But it is beginning to happen.
When it does, “Medicare for all” will be possible. It will be much, much less expensive, and at that point,
we might well reform Obamcare by adding a public option.
Coberly–
I’m afraid you don’t have any sense of what Medicare costs–or what it will
cost
In terms of future cost, you don’t factor in the hundreds of millions of
dollars of unpaid long-term-care that relatives (mainly women) have
been providing for husbands, fathers and fathers-in law.
Already, they are saying “No,” we can’t do this. We have jobs.
And chldren. Some of us are single mothers. We live in California and the sick relative is in New York.
You also don’t seem to understand how little money the average American has.
coberly– Continued–
Sorry, I accidentally posted comment before I finished.
The average middle-class family has total income of $46,700.
That’s JOINT income before taxes. Half of all Americans earn less.
Half earn more.
Do you personally know many families trying to raise a couple of kids
on $46,700, joint, before taxes?
Half of all Americans have Less than that
As for people over 65, average income is $20,000 a year–that’s all income including Social Security, dividends, etc. etc. etc.
The only people who could afford to contribute int he way you imagine is
the top 10%—and even in that group those on steps 90 to 97 of
a 100 step income ladder have seen no increase in real income in the
last 10-15 years.
Meanwhile, over that span, the cost of health care has been rising 7%, 8%, 9% a year. Only recently (since 2010) did it slow.
So the cost of Medicare has been outstripping their ability to pay for it.
The top 3% has done very well. But that’s too few families to fund
Medicare through income taxes, or the taxes you suggest.
Inheritance taxes– to capture wealth, not income–and VAT taxes– to capture the income and wealth that wealthy older people spend on luxury items is the only way to do it.
This is why every other developed country in the world does it.
And they, too are having a very hard time trying to pay for long-term
care for their elderly.
A great many people assume that the average American family–or at least the top 20% have far more money than they do.
This is because they are upper-middle-class, well-educated, and most of the people they know have six-figure joint incomes.
My guess is that fit that profile, and so just don’t have a good sense of
how little income Americans have.
The key to covering our expenses is to tax Wealth, not just Income.
.
Everyone:
I mentioned Ezra Klein’s excellent article on insurance company profits and single payer. Here it is (excerpted):
(He begins by talking about what Michael Moore has to say about Obamacare and single-payer );
But Moore’s analysis relies on a common mistake that distorts both the benefits of single-payer systems and the deficiencies peculiar to Obamacare.
Insurers are the bogeymen of American health care. That’s in part because they do a lot of the unpopular stuff: They’re the ones who charge you money for health care, who say you can’t get something you want, who your bosses blame when they deduct more money from your paycheck to cover health costs. And it’s hard to see what value they add to the system.
Yet the problem with the Affordable Care Act isn’t the insurance industry. In fact, the main benefits of nationalized health care can be achieved in systems with hundreds, even thousands, of for-profit insurers.
“By 2017,” Moore writes, “we will be funneling over $100 billion annually to private insurance companies.” The insurers will use the bulk of that money, however, to pay hospitals and pharmaceutical companies and device manufacturers for medical care.
A clearer way to think about this is profits — and insurers aren’t where the big profits in the health-care system go. In 2009, Forbes ranked health insurance as the 35th most profitable industry, with an anemic 2.2 percent return on revenue.
To understand why the U.S. health-care system is so expensive, you need to travel higher up the Forbes list. The pharmaceutical industry was in third place, with a 19.9 percent return, and the medical products and equipment industry was right behind it, with a 16.3 percent return. Meanwhile, doctors are more likely than members of any other profession to have incomes in the top 1 percent.
Klein then compares the cost of care in the U.S. to other countries.
An MRI costs, on average, $1,121 in the United States and $363 in France. An appendectomy costs $13,851 in the United States and $4,782 in Switzerland. A birth by cesarean section costs $3,676 in the United States and $606 in Canada. A bottle of Nexium — a common acid-reflux drug — costs $202 in the United States and $32 in Britain. (Related: “Why an MRI costs $1,080 in America and $280 in France”.)
HERE IS THE MOST IMPT. SENTENCE IN KLEIN’S ANALYSIS.
The dirty truth about American health care is that it costs more not because insurers are so powerful, but because they’re so weak.
There are few truly single-payer systems in the developed world. Canada has one, as does Taiwan. Most countries rely on many, many insurers. Germany, for instance, has more than 150 “sickness funds.” The Swiss and Dutch health systems look a lot like Obamacare’s health-insurance exchanges. In France, about 90 percent of citizens have supplementary health insurance. Sweden has moved from a single-payer system to one with private insurers. Yet all these countries pay vastly less for drugs, surgeries or doctor visits than Americans do.
Why? Because in every case the government sets prices for health-care services and products. Insurers in Switzerland don’t negotiate drug prizes with Pfizer. The Swiss government simply sets its drug prices and lets Pfizer decide whether to sell in Switzerland — or not.
NOTE form Maggie — THIS IS THE KEY– THE GOVT’S IN OTHER COUNTRIES REGULATE PRICES. THEY TELL DOCTORS, DRUG-MAKERS ETC.
WHAT THEY CAN CHARGE. THIS IS WHY THEIR COSTS ARE SO MUCH LOWER– EVEN THOUGH THYE HAVE PRIVATE INSURERS>
In the United States, insurers negotiate with hospitals and drug companies on their own — and they pay more as a result. In fact, because of their weak negotiating position they frequently use whatever price Medicare is paying as a baseline and then, because they lack the power to strike a similar deal, add a percentage on top.
Joshua Gottlieb, an economist at the University of British Columbia, found that when Medicare increases what it pays for a service by $1, private insurers increase their payments by $1.30.
That leaves the United States with the worst of both approaches: Prices aren’t set by the market, but they also aren’t set by the government. Consequently, Medicare’s negotiating power is weakened by the threat that drug companies or hospitals will opt to do business only with higher-paying private insurers. We simultaneously miss out on the efficiency of a purely private system and on the savings of a purely public one.
If insurers lose on negotiating with medical providers, however, they’re much better than the government at innovating on insurance design. Co-pays and deductibles aren’t popular, but they work.
Many insurers are experimenting with ways to create incentives for better health, including using personal technology — everything from e-mails to smartphone cameras. (The disastrous introduction of the Obama administration’s HealthCare.gov Web site hardly instills confidence in the government’s capacity to exploit digital medicine with similar efficiency.)
“Single payer isn’t a panacea,” said Uwe Reinhardt, a health economist at Princeton University. “The magic they have is setting rates. But neither Medicare nor Canada has done anything innovative on the delivery side. Taiwan is trying a little bit but not a whole lot. By and large they just pay bills.”
The limitations of single-payer systems became clear during the health-care debate, when the Congressional Budget Office projected that premiums for a public option would be higher than premiums for private insurance — unless a public option could avail itself of Medicare’s pricing power.
NOTE form Maggie:: IiN OTHER WORDS, a public Optoin would cost MORE than Private Insurance UNLESS CONGRESS Passed a Public Option that told Doctors, Drug-Maker sand DEVICE MAKERS HOW MUCH THEY CAN CHARGE.
Do you see Congress Doing that? Congress (all Republcians and Most
Democrats HATE price regulation. And most of the doctors who support
single-payer (and public options) never, ever talk about how we need to regulate their fees. They like to pretend our health care is so expansive because of the insurers. As Ezra says, “insurers are the bogyeman. We want to hate them because they are the ones who sometimes say NO.
We like to think that our doctors and our hospitals are all “patient-centered– they they care far more about us than about earning money. IN some cases this is true of doctors. Not true of many hospitals. And the most expensive doctors (specialists) are, by and large “money driven”
Note also: MEDICARE DOES NOT REGULATE OUR DOCTORS PRICES.
FEES for each and every test and treatment are set by a small committee, called the RUC. It is made up mainly of specialists. It meets behind closed doors. There are no public debates. And MEDICARE ALMOST ALWAYS FOLLOWS ALL OF RUC’s Recommendations. IT has enormous power.
(Against we’re talking about het lobbyists who represent specialists.)
Hospitals also have great lobbying power. This is why Medicare over-pays many specialists while also agreeing to pay for treatments that their patients don’t need. Medicare also over-pays hospitals–though hospitals don’t want you to know that. Compare what Medicare pays hospitals and docs to what what other countries do . . .
Back to Ezra: This next paragraph is important:
A health-care system that followed international best practices would direct the government to set rates. Or it would let insurers band together and negotiate rates collectively — a practice called “all-payer rate setting.” But it wouldn’t need to eliminate private insurers. It’s good for consumers to have a choice of insurers, who have real incentives to innovate and devise better ways to keep customers healthy and costs down.
It’s health-care providers — not insurers — who have too much power in the U.S. system.
As a result, they have the most to lose if health-care prices fall. But, as is often the case, political power flows in part from popularity. So politicians who routinely rail against for-profit insurers are scared to criticize — much less legislate against — for-profit hospitals, doctors or device manufacturers (though drug companies come in for a drubbing now and then).
These are the people who work every day to save our lives, even if they make us pay dearly for the privilege. No one cheers when you take them on.
Everyone— LET ME ASK YOU TO READ MARK”S COMMENT:
He understand what Run and I are saying:
Ark
September 24, 2014 11:08 am
So I’ll parrot Dean Baker and point out that generally speaking our medical costs are twice as high as any other developed country with middle of the pack outcomes. We have a cost problem not an insurance problem and to the extent that Medicare sets some basic fee schedules it helps moderate our horrendous cost problem to some degree.
The factor not mentioned is that a significant part of Medicare expense occurs at end of life or within last six months. Part of this is because we treat medical care as purely a consumer product which encourages conspicuous waste. Fee for service offers all the wrong incentives. There are some current initiatives in Medicare offer some hope of changing that model.
Finally, run is absolutely right, we do not have a spending problem. What we have is a problem of demagoguery that treats national budgets in a totally fallacious context. What we need is an understanding that spending and national budgets ought to be designed to fund the sort of government we want. It makes absolute sense that we should want our population to have access to effective health care, where effective refers to both actual care that supports a healthy population and costs that are not based on rent seeking.
Ezekiel Emmanuel has a thoughtful piece at Atlantic on end of life care and the NYT just did a good piece on rent seeking in medicine. The first has direct impacts on the Medicare discussion while the second is more about the broader healthcare environment.
As Mark (and Ezra Klein) point out: We have a cost problem, not an
insurance problem. Insurers are not the reason are costs are so high–
the reason is because we don’t regulate the prices that everyone is
the system is charging: docs, hospitals, drug-makers, and device-makers.
Mark is also right about end-of life care As I not in my comment above, we
spend too much on end-of-lfie care because we let doctors hospitals do whatever they wish to dying patients–and we encourage over-treatment by paying them fee-for-serivce– The more they do , the more they earn.
Meanwhile patients have very little say about what is done to them. .Even if your family tries to intervene your hospitals ethics committee can (and often does) rule that your family is not acting in the patient’s best interests.
At the same time, patients are often afraid of offending their doctors–or disappointing their famlies–by saying “Enough– please, I can’t take any more.”
See the articles by Zeke Emmanuel that Mark refers to. Zeke is an oncologist (so he has seen many people die) and a medical ethicist (so he is not
money-driven. He truly puts patients first. He is also brilliant–and one of my favorite people in the reform movement. Fearless, honest, and he tells it
like it is.
If Medicare would let people go into hospice earlier (long before the last 10 days of life), their quality of life would be much begetter, and costs would be lower. (Much evidence on this.) Palliative care –which gives patients options and protects them against overly-aggressive doctors by
telling them that they have options– also saves money, and most importantly, reduces misery.
Finally and most importantly, end-of-life care is Not the biggest expense
in our health care system.
Chronic Care is the biggest expense. Chronic care refers to treating people who suffer rom chronic diseases (diabetes, slow-growing cancers, MS, severe depression,
Parkinson’s, etc. etc. etc. ) They are so expensive because the patient doesn’t die right away. He needs treatment over a period of years (thus we call them “chronic diseases)
Here the problem is that Medicare doesn’t pay doctors for the hours it
would take to talk to patients about how they can begin to manage their chronic disease. If a diabetic goes for regular eye checks, he won’t go blind. IF he is very careful not to cut his foot is much less likely that he will need multiple amputations. People who are severely depressed need
counseling as well as medication. (If they go for that help, they are much
less likely to be self-destructive in way that lead to much higher costs.)
But talking to people about how to manage their chronic disease takes time–a great deal of time. Like all teaching, it’s a repetitive activity.
The doctor must be patient–and repeat the same things over and over again. He needs to listen to the patient , and hear what the patient is saying that he can and can’t do.
But Medicare doesn’t pay doctors to listen to and talk to patients . It pays them to Do Something: Cut, Burn, etc.—when much of that could have been avoided if the disease had been better managed earlier on.
This is a major way that Medicare needs to change if we are going to rein in waste–and raise the quality of care.
–
Coberty–
You suggest that people could pay for their healthcare (Medicare for All)
if they just paid 7% to 10% of their income.
Consider this: in France, Switzerland and most of Western Europe
people pay put to 10% of their income (in the form of taxes–and not just income taxes) to cover universal healthcare.
And in these countries, their total health care bill is often half of what the U.S. spends on health care.
This means that we would have to pay up to 20% of our incomes to
fund “medicare for all.”
OR we would have to significantly reduce how much we pay for everything
while also reducing over-treatment.
That is what I am arguing for.
In addition, I am pointing out that in a country where we refuse to pay the majority of Americans a living wage, where we refuse to provide affordable day care, where we refuse to fund public education K- college,
only the wealthy (top 10%) can begin to foot the bill.
We need to do all of these things: stop over-paying; stop paying for over-treatment, and begin tasking wealth (not income) at the top.
Meanwhile, when comparing what percent to income Europeans pay for a system that often costs half as much, I’m skipping over the fact that in Europe there is a middle-class that is significantly better off than our middle class. They live comfortably. and
can afford to pay more in taxes than that family earning $47,600, joint,
living in a country where many things are more expensive than in Europe (housing, education, childcare, etc. etc. etc.)
Everyone–
This time, I’m not trying to reply to all individual comments.
But I do agree with what some of you say. (For instance, no we can’t just print money and go on spending more and more on healthcare. We would wreck the economy.)
Thanks for all of the comments. I hope you’ll read my longer comments
addressed to Everyone at the end. They are meant to clarify the post.
Re chronic care see this –
http://www.newyorker.com/magazine/2011/01/24/the-hot-spotters
Chronic care is mostly an incentives issue, ours are all wrong. We pay for procedures and someone with a chronic illness is a rent seekers dream. More tests, more procedures, more money for the providers. On the patient side, there needs to be some incentives (and responsibility) for the patient or their advocate to make good decisions. I have a friend who is 86 and diabetic. Every month or so she was ending up in the ER without of control readings. She’s now in a nursing home solely because of this management problem. Her doctor visits are expensive for Medicare and the cost of the nursing home is borne largely by Medicaid. If good home health care was available and she was given the tools and education to manage her illness, a good deal of money would be saved.
I have a chronic illness, psoriatic arthritis. My particular case is relatively severe. I cringe when I see Phil Mickelson advertising for a large drug company. The drug he advertises is outrageously expensive. No one should be going to a doctor asking for this drug and there are cheaper alternatives for mild cases.
Our patent systems give drug companies licenses to steal. There are far better and cheaper ways to fund research and testing. This applies to medical device companies as well, the appliances used in my hip replacements cost $10,000. There is no way they cost that much to manufacture or develop or test. The major expense is marketing.
An additional element here is our tendency to simply consume medical services without thought to cost. I’m fortunate, my rheumatologist and I have worked to manage my illness. Maybe I’m odd but I don’t see the point in getting an MRI every time my back hurts. I waited eighteen years to get one of my hips fixed because a good orthopedic surgeon explained the risks in doing it when I was younger (likelihood of a revision).
Medicine isn’t a consumer good. The point and purpose of medical care is not to consume a product but to maintain some reasonable level of health, first by preventing illness and, when illness comes, treating it with realistic expectations.
Now some folks might call that rationing and in some sense it is but more accurately it is aligning expectations with outcomes and creating financial incentives that do that. To solve our cost problem we must squeeze rent seeking behaviors out of the system while aligning attitudes towards health not simply consumption of services.
The average middle-class family has total income of $46,700.
That’s JOINT income before taxes. Half of all Americans earn less.
Half earn more.
Do you personally know many families trying to raise a couple of kids
on $46,700, joint, before taxes?
Half of all Americans have Less than that
As for people over 65, average income is $20,000 a year–that’s all income including Social Security, dividends, etc. etc. etc.
More precise language, please. Are we talking about families or Americans. Are we talking about joint income or individual? Are we talking about medians or averages?
Reason I ask: http://www.census.gov/hhes/www/cpstables/032014/faminc/finc01_000.htm
The MEDIAN family (not household, not individual) had $63,815 in income. Families trying to raise a couple of kids had a similar amount of income – depends on how you cut it – but families with one or more children had median income of $62,161, families with one child had median income of $61,444, and families with 2 children or more had median income of $62,842.
For families where the age of householder is 65 or over, the median income is $51,486.
And in support of the prior, according to the Fed Survey of Consumer Finances: http://www.federalreserve.gov/econresdata/scf/scfindex.htm “families” comprised of “Couple with Child(ren)” had a median income of $74,600 and “Single with Child(ren)” had median income of $27,900. Families where the age of head was 65-74 had median income of $45,900, and where the age of head was 75 or older had median income of $28,500.
Maggie
I’m not arguing with you … yet.
But this caught my eye (so far):
“What Jerry–and many people –don’t seem to understand is that Private insurers are insuring people 45 to 65 Without the Help of Borrowing From the govt.’s general revenues.”
yes, but people 45 to 65 have lower medical costs than people over 65.
government doesn’t need to borrow from general revenues, or even tax for general revenues to pay for medicare… we can still pay for it ourselves… or could if we weren’t more interested in that 600 dollar smellovision.
we might want to plan for the day when we all have Alzheimers, but i don’t think we need to act on that assumption yet.
coberly:
6 comments to Maggie from 5:30PM to 6:03PM. Have you ever tried to gather your thoughts together and nest them in one cohesive reply?
Maggie said
“And by the way, Jerry and everyone– Medicare does NOT take 15% off the top in profits.”
jerry didn’t say it did. he said Medicare does NOT take 15% off the top in profits so we ought to be able to afford it. ..
you, i think, are arguing that even without the 15% profit, medicare is more expensive… because of lack of competition?
this way lies confusion.
Maggie said
“That’s right 3%.
Goggle “Ezra Klein” and “single payer” and you’ll find his brief, excellent article explaining that while drug-makers, device-makers, many hospitals and many doctors make enormous profits, insurers have a profit margin that averages 3%. I think it’s titled “What Liberals Don’t Understand about Health Insurance””
3% of a hell of a lot of money is a hell of a lot of money. the insurers make a 3% profit on top of the profit that the providers are making.
just in case one of us doesn’t understand this try an example:
the provider charges you 1000 dollars, say 50% of that is profit. the insurance company charges (all of us) 1030 dollars.. 3% profit for handling our money. but they are making 30 dollars and we are paying 1030 dollars. If we had a single payer that kept the profits of the provider in line.. we would pay 500 dollars plus or minus. I think that is the issue. If I could make 3% profit on a couple of trillion dollars i think i would be doing just fine.
what i was trying to say above is that the insurance company has no incentive to “control costs” if it can charge a percent of those costs as profit.
“Klein is a rare bird–a left-liberal who is willing to question liberal doctrine,
think about it, do research, and get to the truth. I know him pretty well, and have debated him by email a great many times. We generally agree.”
Klein was calling Social Security a “jobs kiling tax.” If that is your idea of intelligent, we disagree.
Maggie said
“Coberly–
I’m afraid you don’t have any sense of what Medicare costs–or what it will
cost
In terms of future cost, you don’t factor in the hundreds of millions of
dollars of unpaid long-term-care that relatives (mainly women) have
been providing for husbands, fathers and fathers-in law.
Already, they are saying “No,” we can’t do this. We have jobs.
And chldren. Some of us are single mothers. We live in California and the sick relative is in New York.
You also don’t seem to understand how little money the average American has.”
I know how much it costs today..(550 Billion in 2012). I don’t know how much it WILL cost… neither do you. Panicking is what Peterson wants us to do. One thing…. up to a point it will cost what we want it to cost… up to that point I am saying we ought to pay for it ourselves.
as to how much money the average american has… i estimate i have about one fourth the average. I am not impressed with “we can’t afford it” yet.
Consider this: in France, Switzerland and most of Western Europe
people pay put to 10% of their income (in the form of taxes–and not just income taxes) to cover universal healthcare.
And in these countries, their total health care bill is often half of what the U.S. spends on health care.
This means that we would have to pay up to 20% of our incomes to
fund “medicare for all.”
Europeans have lower household income than Americans, so doubling the percentage isn’t precise, even if taking the health care bill comment at face value. For example, the median *household* income (different basis than my earlier comment, which was *family*) in France, in 2010, was 29,200 Euros, or roughly $38,800. http://www.ecb.int/pub/pdf/other/ecbsp2en.pdf
10% (assumed from italicized excerpt) of that is $3,900, which would be a little less than 16% of the median $49,300 in U.S. household income (in 2010).
Re insurance companies
i have proposed that the government “single pay” for insurance the way states single pay for highways: write the specifications and let the projects out for bid. the insurance companies can compete for the business.
but without single payer there is no way for people to pay for their lifetime expected costs over that lifetime instead of all at once at the end when they don’t have the money.
nor is there any incentive to keep either the providers or the insurance companies honest.
speaking of which, we couldhave an honest conversation about this… but even this much conversatioin is wearing me out and no one is listening to us.
Magie
thing is, I agree with Mark too. at least i think i do. and with you in your comment re Mark.
but I don’t follow your logic from there. we can sure as hell find a way to provide “counselling” without paying a doctor to do it. government run clinics could be a start. why government run? because up to now the private sector has managed to deliver medical care at twice the world average cost. you seem to be calling for more private care because “competition will keep costs down.” seems i have heard that before.
Magie said
“Coberty–
You suggest that people could pay for their healthcare (Medicare for All)
if they just paid 7% to 10% of their income.
Consider this: in France, Switzerland and most of Western Europe
people pay put to 10% of their income (in the form of taxes–and not just income taxes) to cover universal healthcare.”
I based my 7 to 10 percent on the “fact” that a 2.9% tax today pays 40% of medicare costs. i was talking in that case about just putting all of medicare costs onto the payroll tax where people could see it and know what theya re paying for,… and avoid those after retirement “premiums.”
as for paying for ALL medical costs… i am thinking that if the insurance companies say they need to charge old people 7 times as much as they charge young people, then old people’s costs msut be 7 times as much, and since these are paid for by Medicare, then picking up the young people’s cost should add about 25% to that 7% talked about in the first lines of this comment. my guess was not intended to be authoritative… could well be changed by actual figures…. but comparison to switzerland or france is not to the purpose… at least not the way you make it.
we could, you know, bring our costs down to theirs, so we would not have to pay 20% to match their 10%.
you seem to be accepting as given that we can’t control our costs, or our congress, so we just need to turn ourselves over to the “non profits” and the “medical ethicists who don’t care about money.” just like the non-partisan experts who tell us SS is doomed. doomed.
Run
yes i have considered gathering my thoughts together. but as between number of comments and long comments, i prefer number.
Maggie,
Unless I missed it, I don’t think you really answered my question,
” Are you telling me that they are much more efficient than Medicare even though they pull 15% off the top in profits?”
You concentrated on my 15%. Granted, it should have been 15% in administrative costs and profits. But that does not change the basic question. If private, for profit and not-for-profit insurance companies can provide insurance that people can afford (granted many people have company supported insurance) why can’t Medicare For All? The premium can still be partially paid by the company you work for. Basically, everything can remain very similar in terms of how the premiums are set and paid. Plus you get the bargaining power and/or the power of the government to set prices.
It seems to me that you are saying Medicare For All would be much more expensive than private insurance. Am I wrong there? I don’t see why it should be more expensive than private insurance for providing the same service.
Run75441
September 24, 2014 6:09 pm
coberly:
6 comments to Maggie from 5:30PM to 6:03PM. Have you ever tried to gather your thoughts together and nest them in one cohesive reply?
Run,
Maggie wrote seven comments. Have you ever tried to gather your thoughts and consider why you didn’t ask her to nest her comments in one cohesive reply?
Maggie let me make one narrow point.
The 3% ‘average’ profit of the insurance industry is distorted by the fact that fully 50% of that industry is officially non-profit (Blue Shield etc). If you examine the financial statements of for profit entities like Aetna you will find their margin is (unsurprisingly given the simple arithmetic) 6% on average. And this after the huge rents extracted in both the for profit and non profit sub sectors by management.
That is AHIP likes to cry poor in much the same way that GE and Big Oil justify the fact that they end up with negative tax bills and so refunds. Even though they find ways to pay their CEOs seven and eight digit compensation packages.
That 3% number is meaningless without layers and layers of context.
Dale your 10:06 ignores the fact that Part A is only half of Medicare’s cost and so all your calculations based on the affordability of a 3.5% SECA rate ignore the fact that half of the system is not funded by SECA.
And if you think that this was somehow clear in your original comment them read it again. I said “muddied” because you made the fundamental mistake of allowing a part stand for the whole.
And turning to another topic. Posters are not trespassers on their comment threads. No matter how many comments they add. Commenters on the other hand can be trespassers and trolls simply by hijacking threads with multiple comments and so turning them into the Movie Guy/A_ron//CoRev/FA/Jack and dare I say Coberly show. The rights and responsibilities are not reciprocal.
Dale and lest you cite the 7% number to show that you did not ignore the 50% factor this doesn’t a take into account that while workers “pay” for “their own Part A” via SECA they don’t do it in the current year.
Worker/retiree ratio is often invoked in distorted ways. Still it is true that it takes more than two workers paying 3.5% of their incomes to support a single Medicare beneficiary. And so maintaining coverage for that retiree out of their current income WHILE paying for their own current year equivalent of Part A would mean more than 2X times that 3.5% PLUS the existing 3.5% to cover just 50% of their ‘Medicare for All’. And the same basic calculation goes for the current portion of their income tax used to pay for Part B. In order to maintain Part B for current beneficiaries AND pay for their own, their contribution would have to more than triple. If confined to those sources of SECA and income tax.
Which I think is a big part of Maggie’s point. Most ‘Medicare for All’ proponents simply ignore the existing externalized costs of paying for existing retirees and the worker/retiree ratio underlying that.
Bruce,
“And so maintaining coverage for that retiree out of their current income WHILE paying for their own current year equivalent of Part A would mean more than…”
That is exactly what people do now – pay into Medicare AND pay premiums for the current insurance coverage.
Jerry exactly.
Which is why adoption of ‘Medicare for All’ Isn’t the Magic Elixer most proponents suggest. Which I think is Maggie’s point. You can only extract so much money via elimination of rent extractors. At least from those rent extractors mostly riding on the bigger rent extractors which in this case is the Industrial-Medical Complex.
To some degree AHIP is just the flea sucking the blood of the vampire bat that is the AMA and the Medical Device industry.
“Cherchez le dollar”
Bruce
I think your arithmetic is muddled. Or your logic.
a 2.9% payroll tax pays for about 40% of ALL of “medicare” parts A, B, C, and D.
2.9% of 40% is 7% of 100%.
I hardly think I am hijacking a thread when I reply to comments which called me out by name.
It is not necessary to find dollars to pay for Medicare for some or for all. It is necessary only that we have at present or have the capacity to create the personnel, facilities, equipment, and supplies to provide Medicare services at whatever level we decide is appropriate. Dollars are created as an act of will when the federal government credits the accounts of vendors and service providers – this is what it means to have a fiat currency. Where do the points on a scoreboard come from? The federal government is the scorekeeper of the dollar. Dollars are credited/created when it spends, and are debited/destroyed when it taxes. There may be perfectly good reasons to tax away unearned income such as extracted economic rents, but those dollars functionally vanish, they do not pay for Medicare or anything else. When the game is over and the scoreboard is reset, the points don’t go back into a storehouse to be used in the next game. Every dollar the federal government spends is a new dollar, not a recycled dollar. Our federal government does not need our tax dollars to fund Medicare or anything else. The issue is real resources: if our economy can produce the goods and services required for all to have good healthcare, and it can, then our federal government can pay for it. Affordability is not the issue.
well, i certainly said that badly.
i should have said if a 2.9% tax will pay for 40% of Medicare, a 7% tax will pay for all of it.
it’s late and i’m tired.
i did not enjoy trying to respond to all of Maggie’s comments, but I thought there was some possibility of having an honest conversation and coming to understand some things better.
I was wrong.
If we raised the Medicare tax by 4.1% to 7% and dropped the income tax by 4.1%, Medicare would be fully funded with no additional burden to people.
Dale 7.0% of payroll by people 64 and younger would pay for Medicare for people 65 and older. But since people 64 and younger in the workforce represent roughly twice as many people as those 65 and older then the 7% that would pay for the half a retiree would need to be 21% to pay for the Medicare for that worker plus continuing 1/2 share of the retiree.
Most proponents of expanding Medicare (not necessarily including you) ignore the legacy 1/2 retiree piece plus the double price for the current worker and think you can just expand Medicare by charging everyone the $100 or so partial premium for Part B.
Did your original comment add clarity to this stream of argumentation? Or muddy it? Maybe the fault is in me but I got mired down trying to wade through your muddied muddle.
Break out how a worker could pay for his Part A plus his Part B premium the 75% share the government currently contributes to Part B plus his half share of the Part A for the retiree plus 1/2 of the 75% of the General Fund contribution for that retirees Part B and find a way to fit in under 7% of payroll. Maybe it can be done. I don’t think it can but what I do know is that you haven’t done it. Or even seen the difficulty resulting from ignoring the incidence of current taxation and spending AND the differences in finance between A and B.
“Klein was calling Social Security a “jobs kiling tax.”
Cob,
Can you link to this?
EMichael
sorry, i can’t. it was at the time they were calling for the payroll tax holiday. i think it may have been in the New Yorker.
Bruce
I still don’t follow your logic, but i said 7% to pay for “medicare” not “medicare for all.” to get to “medicare for all” i noted that if the insurers want (say they need) 7 times as much from an old person as they do from a young person, that would suggest that if a 7% tax is paying for “all of medicare for old people” then the same number of young people could be insured (at young persons cost) for 1%, and since there are about two young people for each old person, the two could be insured for 2%. 7 +2 is 9. i called it 10 for a round number and i did say i had no particular faith in the logic of the calculation and asked for someone who had the real numbers to give it a go.
still waiting for that. but arm waving is not real numbers.
elsewhere i read that it will cost the average person about 300k in medical bills over a lifetime. i divided that by 40 work years and came up with 7500 per year or about 18% of wages. a different answer, which i pointed out and again asked for real numbers.
the same site gave some other numbers that did not agree with the 300k figure, as it was not clear exactly what the numbers meant i was unable to “make sense” of them. i pointed out that there was a hiccup in the numbers. Only Jack saw the hiccup… or only Jack (neoJack) bothered to point it out, but he was a hiJacker, so who cares what he thought?
you seem to think you have some real numbers, but i can’t make any sense of them either. this is not to say they are wrong. only that i can’t make any sense out of them. where have i heard that before?
hope this is not a hijack.
ungathered thoughts:
whatever the real numbers turn out to be… now and in the future
the question remains:
first, can we pay for “medicare” entirely with a dedicated transparent tax on the principle of “worker pays”. i think the answer is almost certainly yes.
second, can we pay for “medicare for all” entirely….worker pays…. that is, without turning the United States into the Socialist States of America?
third CAN we turn … into the Socialist States of America? This is America, after all, with it’s own history and politics.
I think that the answer to third is “no.” That is not because i have any personal objection to “socialism,” but that i think the politics of trying to achieve it in America will result in the exact opposite.. the triumph of the hard right.
i think the answer to second is “maybe.” “probably” if people make some grown up decisions about what is worth spending their money on .. less smellovision and probably less medical care or at least less expensive medical care. i say “grownup” because what i hear is everyone expecting someone else to pay for it. it won’t work. even if “the rich” pay for it, the money will come ultimately from lower wages and higher prices for “the poor.”
certainly paying for all of medicare by the payroll tax requires only a change in perception… it is already paid about half by the payroll tax and about 20% by “premiums” paid by the workers after they are not longer working… which is just stupid. and the about 40% paid by general taxes is at least partly paid by “the workers” in taxes, and almost certainly paid by them in reduced wages and higher prices…
I think Maggie is making a valuable contribution in focusing our attention of the actual costs of medical care, the dangers of political corruption in “single payer,” and the possibilities of lowering costs through “competition.” I hate to see her throw it all away by jumping to the “make the rich pay” solution. it’s a fantasy. and it’s a dangerous fantasy in the present political reality of America today.
grammar police: i am aware of the redundancy. i just got carried away with the music.
Cob,
Then you should not say that Klein said it. Doubt there are many people who do not understand that ending the payroll tax cut was bad for the economy. Big difference between that and calling SS a “jobs killing tax.”
EMichael
looked, can’t find it. maybe i should not say it again, but here is this:
http://beforeitsnews.com/politics/2010/12/why-ezra-klein-is-wrong-about-the-payroll-tax-holiday-and-fdr-is-right-302995.html
coberly,
from Table 112: http://www.cdc.gov/nchs/hus/contents2013.htm#115
total national health expenditures were $2.7 trillion in 2011.
from: http://www.census.gov/hhes/www/cpstables/032012/faminc/finc01_001.xls (warning Excel file)
average family income in 2011 was $81,000 and there were 80,500 family units, for aggregate family income of $6.5 trillion.
2.7 trillion/6.5 trillion = 41%.
The other way of looking at this is per capita health expenditures is $8700 (from the same Table 112 above – and not all that far from the $7800 I had guessed doubling Maggie’s 10% for EU countries earlier). Mean family size is 3.14 people, for an aggregate expenditure of $27,300 per family. So total family expenditures for healthcare on $81,000 of average family income is 34%.
It seems the difference between 34% and 41% is in the Census definition of family. That is, if I take $2.7 trillion and divide by $8,700 per capita expenditures, I get 310MM people. If I take 310MM people and divide by average family size of 3.14, I get 100MM families, versus the census reporting 80MM.
Perhaps, since we are talking about health insurance, we should look at insurance expenditures on health care instead of total healthcare costs. Insurance premiums only pay insurance costs…plus insurance administrative and profit costs.
Jerry, Table 112 (or Table 114) shows personal health care to be $2.3 trillion or 84% of National Health Expenditures. So you could haircut my implied tax rates to 29%-34% if you were assuming everything in a tax rate. Household contributions to health expenditures is about 25% (from Table 120 = 28% shown in the table x 84% referenced above), so you could further haircut it to 22%-26%.
“for an aggregate expenditure of $27,300 per family”
Beyond silly. Things are bad enough, you don’t have to make them worse.
eMichael,
you’re always asking other for links and proof, so please explain with citations why $27,300 is “beyond silly”
Because there are an awful lot of singles in the US that are not a part of a family? Because Medicare is around 20% of all medical spending? Because taking an average family income and dividing it by total healthcare spending means nothing?
oops,
Should be
Because taking an average family income and dividing it by total healthcare spending per family means nothing?
Because there are an awful lot of singles in the US that are not a part of a family?
You’re right, I should’ve done it by households instead of Families. http://www.census.gov/hhes/www/cpstables/032014/hhinc/hinc01_000.htm
There were 121MM households in 2011, with an average income of 69,677, for aggregate household income of $8.4 trillion. On an individual level, there were 215MM over the age of 15 with income averaging $39,660, for aggregate individual income of $8.5 trillion. Running through the remainder of my numbers, 2.7 trillion of national HC expenditures is 32% of aggregate income. 84% of that is 27% of aggregate income. 75% of that is 20% of aggregate income.
The mean household size is 2.55 people. So the mean household expenditure at $8,700 per capita would be $22,185.
Because Medicare is around 20% of all medical spending?
Not relevant, considering Coberly was looking for the numbers to solve for “Medicare for all”
Because taking an average family income and dividing it by total healthcare spending means nothing?
I misunderstood the way Census defined families. The Fed SCF, which I reference more frequently, includes “Singles, no children” as a line item among their Family structures.
Better, but still not real relevant as it deals with basically an artificial and meaningless number in average income.
Couple that with Census income and it is worse. CBO is much better. And incidentally, a lot less income.
http://www.cbo.gov/sites/default/files/cbofiles/attachments/10-25-HouseholdIncome.pdf
Bruce–]
You say that non-profit insurers have low profit margins while for-profit insurers have high profit margins. (In fact, sometimes they do, sometimes they don’t. I’ve been watching insurers for more than 25 years. Would never invest in them — they are the “price takers”– paying too much for
everythingg– while drug-makers, device-makers, hospitals and doctors are the “price-makers”– charging whatever they wish.
More importantly, you’re missing the point. Those who call for Medicare for all pretend that if we eliminated private insurers, we would slash
health care costs.
The truth is that overall, health care insurers average profits of just 3.2%. So by eliminating them, we just wouldn’t save that much.
Average profit margin in the health care sector as a whole–over 12%. http://www.vox.com/2014/9/2/6089693/health-care-facts-whats-wrong-american-insurance
As Ezra Klein says: “That’s where the money is.” That’s where we need to trim.
CBO is much better. And incidentally, a lot less income.
there’s nothing in your link that demonstrates this is the case. And actually, Table 1 from http://www.cbo.gov/sites/default/files/cbofiles/attachments/44604-AverageTaxRates.pdf shows the average before tax 2010 income (defined as: “Before-tax income is the sum of market income and government transfers.”) as $92,200 per household.
Yes, averages have the potential to be distorting when discussing the connotation of average family. But when talking about what type of tax rate would need to be applied in order to fully fund a program, averages (or aggregates) are the more appropriate measure.
e-michael—
was wondering where you were.
You are correct– the CBO numbers on income are calculated in a more sophisticated way, and they also show low income.
But I tend to look at family income rather than household income (which includes households of 1 person, households of 8 people who are not related) because I am interested in how hard or easy it is for Americans to raise children–feed them, and educate them.
This is a social problem, but as a wise economist once said: “we don’t just live in an economy.We live in a society.”
They are many wealthy singles in the U.S. The latest Fed numbers on incomes and inequality show the highest median incomes among people who are 35 to 45 and 45 to 55– Many of them are single or childless couples.
Jerry Critter:
You write:
“It seems to me that you are saying Medicare For All would be much more expensive than private insurance. Am I wrong there? I don’t see why it should be more expensive than private insurance for providing the same service. –
But the point is that Private Insurers are NOT PAYING FOR THE SAME Services.
Often Private Insurers Refuse to pay for ineffective services. For instance, private insurers recently have begun to Refuse to pay for Proton Beam Therapy for prostate cancer. There is no evidence that it saves lives. And it is hugely expensive– the equipment needed is the size of a football field–often it requires building a new wing on a hospital. But hospitals like it because it adds to their “marquee value”– at appearance of better care. And the equipment makers LOVE it– Huge profits
So Congress won’t let Medicare refuse to pay for it
This is all about the influence lobbyists have on Medicare via Congress — whether we are talking about spine surgery, PSA tests that leads to
unnecessary harmful treatments, ICU care instead of hospice, most screening for cancer (fishing expeditions that lead to over-treatment) and a great many over-priced drugs and devices.
Medicare usually doesn’t ask questions–it just pays the bills.
Private insures do ask questions. Those that are most efficient monitor care, spend money trying to keep patients well (free smoking cessation is by far the best “wellness” program) , and spend a lot of money investigating fraud.
Medicare does none of these things. Congress won’t let it.
Mjed-
You write “average family income in 2011was $81,000
This, I’m afraid, is an example of how little you (and some other Medicare for All advocates) know about basic arithmetic.
$81,000 is a “mean” average– the add up the incomes of all of the households and divide it by the number of households. It distorts
“average” because the billionaires at the top lift the average way beyond what people in the middle earn.
A “”mean average” represents what a household in the middle earns. Half of all households earn more; half earn less. It is not distorted by high incomes at the top.
Bruce —
You write: “Which is why adoption of ‘Medicare for All’ Isn’t the Magic Elixer most proponents suggest. Which I think is Maggie’s point. You can only extract so much money via elimination of rent extractors. At least from those rent extractors mostly riding on the bigger rent extractors which in this case is the Industrial-Medical Complex.
“To some degree AHIP is just the flea sucking the blood of the vampire bat that is the AMA and the Medical Device industry”
Thank you. That is precisely what I am saying. And this is what Ezra Klein means when he points out how weak the insurance industry is.
Maggie,
I’m quite aware of what I was citing and well understand the differences between means and medians and the potential for distortion in using means instead of medians. I was intentionally precise with my language.
On the other hand, when you say: “The average middle-class family has total income of $46,700. That’s JOINT income before taxes. Half of all Americans earn less Half earn more. Do you personally know many families trying to raise a couple of kids on $46,700, joint, before taxes?” without citation when the MEDIAN income of all FAMILIES was $60,236 in 2010 (http://www.census.gov/hhes/www/cpstables/032011/faminc/toc.htm), or the MEDIAN income of all HOUSEHOLDS was $49,276 in 2010 (http://www.census.gov/hhes/www/cpstables/032011/hhinc/hinc01_000.htm) it makes me question your understanding despite your credentials.
Jed:
Are you aware of what you are saying? How does your answering comment answer Maggie’s comment to you?:
I do not see the connection.
M.jed,
I would pay more attention to what is included in those government transfers. Employer paid health insurance, Employer fica taxes, Medicare benefits, SNAP, etc.
Also, I am not really interested in average family income. From that table, 40% of households have incomes more than $48,000 less than that average. 60% of households have incomes $26,800 less than that average.
Maggie,
Where have I been?
Staying away from people that cannot seem to understand that Medicare wastes a lot of money because providers of healthcare are greedy bastards and Congress is full of greedy, stupid bastards.
You’d better get back to the dike, there is going to be some more holes soon.
M.Jed
I was going to say your numbers look too scary to be real. but in any case the world is full of numbers, most of them misleading or bogus. i’d like to see a careful analysis. i’m too lazy and ignorant to provide one of my own, but so far i will stick to the “fact” that Medicare as it is, all parts, could be paid for with the payroll tax without materially affecting the lifestyle of the workers… about 7%, of which most workers would see about 3and a hald percent, and this would prepay all the “premiums” the elderly are now paying, and reduce their share of the part of the income tax that now goes to help pay for medicare.
no reason to do this except to keep us honest with ourselves… and even help Maggie make the case that Medicare is more expensive than we think… while saving Medicare from those who want to cut it.
I think to approach a reasonable idea of what “medicare for all” would cost, you might want to begin by looking at what “premiums for all” under Obamacare cost, add this to “all of Medicare” and start looking for ways to cut costs… without cutting care.
I am guessing that Obamacare plus Medicare, including the hidden general taxes and the surprise late life premiums, would add up to what “medicare for all” would cost.
I suspect those other numbers you cite will turn out not to mean what they seem.
but if i am right about O + M, then we are paying it already. and all Medicare for all would do would be to bring it out into the daylight where we can see what we are doing.
E-michael–
I asked Where Have You Been?
and you replied:
“Where have I been?
“Staying away from people that cannot seem to understand that Medicare wastes a lot of money because providers of healthcare are greedy bastards and Congress is full of greedy, stupid bastards.”
I sympathize. I’ve been dong this for 8 years (ever since I published
Money-Driven Medicine in 2008.
You can imagine how frustrated I am.
It is enormously difficult to spread the truth because:
a) Americans want to believe that drug-makers and device makers are
creating ever-more expensive products because they truly care
about malling better products
b) Every American wants to think that his doctor and his hospital
Cares about Him.
Everyone–
Someone on this thread comp alines that I didn’t give a citation ofr the fat that marian Family income is not $46,700.
Here it is http://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf
This is from the new Federal reserve report on incomes which came out about2 two weeks ago.
It also points out that over the past 6 years the average middle-class family (earning median income) has seen their incomes fall by over $6,009.
Think about that this means for parents trying to raise kids on roughly $50,000 joint, before taxes.
I don’t think that most people realize what has happened to the middle-class since 2008 (not to mention int he preceding 25 years.
4
Coberly–
You continue to insist that most or at least many) Americans could apy for their own healthcare.
I have suggested that probably you don’t realize how little most Ameriican earn, thanks to our very low minimum wage and the fact that the vast majority of Americans have seen no real income gains since 1980.
I urge you to take a look at this Federal Reserve repot. It came out just a couple of weeks ago, and documents how income has fallen
for 90% of Americans . http://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf
Those in the top 10% have done better, but in the past 7 years, even those in the lower two-dhirds of the top 10% have barely managed to stay in place.
Thy top 3% has done very well. But there are way too few people in this group to fundMedicare for all.
And the lower 80% are really hurting –just scraping by. They cannot help fund Medicare for all. (See the Fed report).
Note: the top 3% now earn about 1/3 of all income in the U.S. They also hold well over half of net assets .
This is why the bottom 80 to 90% have little income and so little assets.
Meanwhile, those over 55 have seen their incomes drop in recent years, and many have lost jobs. Most will not be able to find a new job that pays
close to what they once earned. Some will find part-time jobs. Others will remain unemployed from their late 50s until they go on SS at age 65.
They cannot afford to pay more into Medicare.
Please read the Fed report. It is very good.
run, “average” when used colloquially can be interpreted as the technical words from statistics for “mean”, “median”, or “mode”. In my experience, people who know statistical jargon use “average” only to mean “arithmetic mean” (in part, because arithmetic mean is the output of computer programming functions, e.g., Excel, for “AVERAGE”). I presumed that Maggie knows statistical jargon and understands the difference between the two, and she presumed I didn’t, though I will admit, “mean average” vs. “mean” average is a distinction without a difference to me. And her language was sloppy, imprecise, and (I suspect, unintentionally) misleading.
As for which statistical term should be used in reference to the colloquial average to use in assessing the tax rate that one would need to apply in order to generate the revenues to pay for Medicare for all, it’s clearly the arithmetic mean. Medical costs (whether insurance premiums or total expenditures) per unit (whether family, household or individual) are X. There are X units. Tax rates would equal [medical costs per unit] divided by [income per unit]. Assuming units are the same basis, you can cross them out in your equation, which leaves you with [medical costs]/[units]. Using the median instead of the arithmetic mean in this case would be nonsensical.
coberly,
you calculate 7% for all of Medicare (which I’ll accept at face value, the objections aren’t worth getting into). Medicare is a little more than 20% of National Health Expenditures. You’re free to question how much waste/fraud/abuse is in the National Health Expenditure number but about 20% is correct and easy to find. 7%/20% = 35%.
Said another way, it’s also pretty commonly cited that U.S. healthcare expenditures are 17-18% of U.S. GDP, so a tax on all of GDP to fund all of U.S., healthcare would have to equal that (absent cost controls in some form). Individual income is < 100% of U.S. GDP, Wikipedia's not my favorite source, but apparently, people don't like reading CBO, Fed, or Census links, so "In 2007, all households in the United States earned roughly $7.723 trillion" http://en.wikipedia.org/wiki/Household_income_in_the_United_States#cite_ref-41
and in 2007, U.S. GDP was 14.48 trillion, http://data.worldbank.org/indicator/NY.GDP.MKTP.CD?page=1
so aggregate household income income was 53% of GDP. If healthcare expenditures are 17.5%/53%, that's 33% of income.
Keep in mind that in theory, household income would be higher if companies paid employees cash instead of paying for a portion of their health care premiums, which would serve to lower the tax rate.
Jed:
You know Jed, this topic was not even included in Maggie’s post. You made a point in a return comment and you could have left it at that instead of the repetitive trolling you are doing now which is off topic to the post itself. Both Dan and I offered you an opportunity to post on AB as a guest to get your topics out there. You have not accepted the offer. If you did, this could have been the topic of an independent post where you could have discussed the very topic on median, average, colloquial, arithmetical averages, etc. and how people misuse them. Instead you have chosen to take this entire thread off topic to the main post to suit yourself. It is not the only thread where you have done this.
You are valued at AB; but, you are getting wearisome and are abusive.
Maggie,
Think about that this means for parents trying to raise kids on
roughly $50,000 joint, before taxes.
is (again, I believe, unintentionally) misleading. As I said earlier: “the Fed Survey of Consumer Finances: “families” comprised of “Couple with Child(ren)” had a median income of $74,600 ” I also noted that single parents had median incomes much lower, but since you used the word, “joint” in your description, I’m assuming you’re referring to 2-parent households when you say “parents”, rather than parents collectively as in “parents everywhere”.
sorry – “which leaves you with [medical costs]/[units]. ” should read “[medical costs]/[income]”
MJed
thanks for staying with me. but probably to no immediate avail.
i think i know what the statistics say. what i am having trouble with is what the statistics mean. what is “health care spending”?
so i am more inclined to ask “what are we paying for health care now?”
as in your argument with Maggie, the difference in words may be hard to detect… but the difference in money may be significant.
my argument… and i hope maggie is listening… is that “so far” it looks to me like people can pay for their own heath care… on a “percent of income” basis as in the case of Social Security proper.
Part of my “belief” is that people seem to be silly… they want a new car, they understand they have to pay for that… but they seem to have the idea that they shouldn’t have to pay for their health care… because it might mean they wouldn’t be able to buy a new car.
i have made far less than the people Maggie is crying about (the 90%) all of my life. i have never had a new car. i also don’t go to doctors much… i understand i am lucky. but i also know people who go to doctors too much, and those who want “insurance” to pay for every aspirin they take.
second part of my “belief” is that “so far” we ARE paying for it ourselves… we just hide that fact from ourselves. that’s why i want to know what the total “insurance bill”… leave out whatever those other “medical costs” are until we know how they fit into the “health insurance” picture.
it may be that i am quite wrong. but so far i am not persuaded by Maggies rhetoric, your numbers, or sniping from my friends.
i had intended to drop out of this…no fun for me. i still intend to.
so here is my proposed parting shot: you aren’t going to settle anything here, or even influence how it is settled.
Coberly,
I misunderstood you were looking for insurance only.
http://www.cdc.gov/nchs/data/hus/2013/115.pdf
Total health insurance is 1.8 trillion in expenditures of which private health insurance is 786 bn in expenditures and another 190 bn in admin costs (admin is not included in the 1.8 trillion). These are 1.9x higher than Medicare expenditures, so that would be an additional 13%, on top of your 7%. The remaining insurance expenditures include Medicaid, CHIP, DOD, Dept of Vet Affairs, and a catch all “other”. There’s also $300 bn of out of pocket expenses not included in the 1.8 mentioned above.
Hence 1.8 tn in insurance plus 300 bn in out of pocket plus 190 in private admin, 80 in public health, 150 in investment, and 190 in other third party payers and programs gets you to total health expenditures of 2.7 trillion.
run,
“What is the difference between households and families?
A family consists of two or more people (one of whom is the householder) related by birth, marriage, or adoption residing in the same housing unit. A household consists of all people who occupy a housing unit regardless of relationship. A household may consist of a person living alone or multiple unrelated individuals or families living together. You may access all of the CPS definitions at https://www.census.gov/population/www/cps/cpsdef.html”
fwiw – you seem to be the only one who can nest comments. I don’t see that as an option, and considering none of the other commenters have nested comments, I’d assume they can’t either.
Jed:
I did not ask the question; “What is the difference between households and families?” I asked you to define families. Furthermore, your last sentence is off topic.
“total health expenditures of 2.7 trillion” m.jed
M.jed, do you know the total health insurance premiums in a given year for private health insurance?
run, you’re a real peach. You may access all of the CPS definitions at https://www.census.gov/population/www/cps/cpsdef.html”
but I was trying to anticipate other questions and included the Census definition. Since you’re apparently unwilling to click through, I’ll quote it in its entirety for you: “A family is a group of two people or more (one of whom is the householder) related by birth, marriage, or adoption and residing together; all such people (including related subfamily members) are considered as members of one family. Beginning with the 1980 Current Population Survey, unrelated subfamilies (referred to in the past as secondary families) are no longer included in the count of families, nor are the members of unrelated subfamilies included in the count of family members. The number of families is equal to the number of family households, however, the count of family members differs from the count of family household members because family household members include any non-relatives living in the household. ”
beene,
as I mentioned earlier: “private health insurance is 786 bn in expenditures and another 190 bn in admin costs”
Furthermore, so is yours.
jed:
Again off topic with this: “you’re apparently unwilling to click through, I’ll quote it in its entirety for you.” Your comment is an assumption by you Jed without basis. Furthermore, I did not ask you when the Census Bureau started to use this definition. Neither did I ask about unrelated subfamilies. I did ask you “to define families.” Thank you for the definition. I will be back later.