Relevant and even prescient commentary on news, politics and the economy.

New Romney Campaign Ad: Ask Not What Your Medicare Taxes Can Do For THEM, …

A new Romney ad tells older voters to think of it this way: “The money you paid for your guaranteed health care is going to a massive new government program that’s not for you.

— Gail Collins, Middle-Age Blues, New York Times, this evening

What?  If current Medicare recipients, and those who will begin receiving it within the next 10 years, have already paid for Medicare for themselves, then—um—why does Medicare have to be saved by these two Republican saviors who will convert the system into a partial-premium-voucher system?

Oh. Wait. That very same budget plan that includes that Medicare proposal also includes a proposal to end income taxes on capital gains and on stock dividends and to reduce corporate income taxes—leaving a budget deficit of trillions of dollars.  And, well, the money for that defense-budget increase that these folks also propose has to come from somewhere, doesn’t it?  Other than just from the elimination of Medicaid expenditures for nursing home care for the elderly who’ve run out of savings during their nursing home stay, that is, since that alone won’t cover that huge revenue reduction, and anyway it’s good policy to force those nursing home residents to become self-reliant again.  I understand that we’re making progress in finding drugs to cure Alzheimer’s disease, but, still.  And anyway, unless a cure is found before the fiscal 2013 budget kicks in, there will be no federal money to fund continued research on it. 

So that leaves as the only option saving Medicare by destroying it.  No matter that the money that those under-55 youngsters paid for theirguaranteed healthcare will be going to a massive new program that’s not for them.  Well, okay, a program that’s for a few of them.  The ones who are living mainly off of capital gains and stock dividends.  A very few, I suspect.


The entire Gail Collins column is absolutely priceless—a definite must-read. 

Individualism vs. Collectivism: Thanks For the Ammunition, Ann

Ann Romney said in an interview airing Wednesday that her husband has no plans to release additional tax returns, saying “it’ll just give them more ammunition” and insisting that “there’s nothing we’re hiding.”

“We have been very transparent to what’s legally required of us. But the more we release, the more we get attacked, the more we get questioned, the more we get pushed. And so we have done what’s legally required and there’s going to be no more, there’s going to be no more tax releases given,” she said in the interview by NBC News. “And there’s a reason for that, and that’s because of how, what happens as soon as we release anything.”

Romney is releasing two years of his tax returns. Democrats have said what’s he hiding and demanded he make public the last 10 years or more.

Ann Romney also defended Romney’s character and said the “only reason we don’t disclose more is we’ll just become a bigger target.”

“Mitt’s financial disclosures when he was governor are huge if people want to really look and see any question they have,” she said. “The other thing they have to understand is that Mitt is as honest — his integrity is just golden. We pay our taxes, we are absolutely — beyond paying our taxes we also give 10 percent of our income to charity.”

She also said that the couple has had a blind trust since 2002 before Romney was governor and that they don’t know what’s in it.

“There’s nothing we’re hiding,” she said, later adding: “I’ll be curious to see what’s in there too.”

            — Ann Romney: No more tax returns, Tomer Ovadia, Politico, today

An article published recently by James B. Stewart in the New York Times titled In Superrich, Clues to What Might Be in Romney’s Returns, overlooked because it was published on Saturday, the day on which Romney made his Ryan announcement, explains that 2008 and 2009 were banner tax-break years for a large number of very wealthy people whose main or entire source of income comes from stock dividends and the sale of securities. 

The occasion for the article was the IRS’s release last week of “data from the 400 individual income tax returns reporting the highest adjusted gross income, writes Stewart. “This elite ultrarich group,” he says, “earned on average $202 million in 2009, the latest year available.  And buried in the data is the startling disclosure that six of the 400 paid no federal income tax.”

Which suggestions the likelihood that the Romneys paid no, or almost no, income taxes for 2008 and 2009. 

It does not take a math genius or a tax expert to recognize this.  That’s good, because I am neither.  But I am good enough in math (if barely) to know that 2006, the last year of Romney’s term as governor, ended before 2008 began. 

And, thanks to the Romney tax-returns controversy, I know that in 2009 the Department of Justice entered into an agreement with UBS, Switzerland’s largest bank, and other Swiss banks, in which the banks agreed to disclose to the U.S. government the identities of American holders of Swiss bank accounts, and that approximately 34,000 Americans took advantage of an amnesty program that the IRS and Justice Department offered, by which voluntary payment of back taxes and interest and penalties would remove criminal liability and public disclosure. 

And I have followed the Romney tax story closely enough during the last few months to know that the Romneys’ 2010 tax returns revealed a bank account with UBS, apparently opened in 2003, was closed sometime during that year and had $3 million in it when it was closed.  And that, according to news reports, Romney did not disclose this account on his Massachusetts financial-disclosure forms—although, unless my math ability (such as it is) fails me, 2003 ended before early 2007, when Romney’s term as governor ended. 

And that, also according to news reports, the 2010 returns show that the Romneys have a shell corporation in the tax haven of Bermuda into which they apparently were funneling income from overseas Bain investments, and that one day before Romney was sworn in as governor, the corporation’s shares were transferred to Ann Romney, and the corporation was not disclosed on Romney’s Massachusetts financial-disclosure forms.

So, yes, Ann, you’re hiding something.  You’re hiding whatever it is that would give your opponent ammunition, whatever it is that would make your husband a bigger target.  And that ammunition is that, whether or not you and he failed to disclose that Swiss account and any other Swiss accounts you held that were closed before 2010 until a gun was held to your heads in 2009, you and he employed tax loopholes and special tax rates that your husband and (even more so) his running mate plan to expand so as to eliminate the very need for offshore tax shelters.  They plan to make this country an overt tax shelter for the wealthy and, especially, for the very wealthy—that is, for people like you and your husband. They have made that central to their policy plans, while desperately trying to deflect scrutiny of those proposals. 

Stewart writes in his article, “Tax experts I consulted said these results almost certainly reflected aggressive use of tax-loss carry-forwards from 2008, since the stock market bottomed in March 2009 and rallied strongly during the rest of the year.”  Expressly under Paul Ryan’s plan, there will be no income tax at all on capital gains and on dividends.  Every year will be 2008 and 2009 for the Romneys!  Except, of course, for the need for aggressive use of tax-loss carry-forwards, and the like; no more need for that sort of thing.

A lot of eyebrows were raised on Sunday when Ryan, sitting next to Romney in an interview, told Bob Schieffer that he wants to end the tax breaks that apply only to the wealthy.  That’s nice, but of no effect.  A seminal part of his tax-and-budget plan, passed this year by the House, is the elimination of all income taxes on capital gains and dividends.  And although this would mean that many very wealthy people will pay no income taxes or estate taxes, and many other very wealthy people would pay income taxes at a single-digit rate, the elimination of these taxes would apply as well to the non-wealthy who have a capital gain or receive stock dividends, however small.  And so—voila!—Ryan’s statement, made with such earnestness, does not apply to the issue of taxes on capital gains and dividends.  Nor, for that matter, to estate taxes, which his plan entirely eliminates; some non-wealthy people leave small estates, after all.  And semantics is the name of their game, the objective of which is the enabling of ever more vast accumulations of wealth, utterly unfettered by tax obligations.  Pure and simple.

My big fear about the all-Medicare-all-the-time campaign that began last weekend with Romney’s Ryan announcement is that it allows Romney and Ryan to claim the mantle of straight talkers about what they warn is a Medicare-caused fiscal calamity that awaits.  They have yet to explain why, if they fear such a calamity, they propose to reduce federal revenue by trillions of dollars, through their tax-elimination-on-the-wealthy plan.  And when they stress, as they do again and again, that their destroy-Medicare-in-order-to-save-it plan will not end the current program for its current or relatively-imminent recipients (those who are 55 or older), maybe they’ll deign to reveal what programs will be eliminated in order to pay for Medicare for current recipients and baby boomers andand—the trillions-of-dollars tax cuts for the wealthy.

My suggestion: Hurricane disaster relief for the southern Atlantic and Gulf Coast states, which will vote for this ticket en force, and crop insurance and drought disaster relief for the plains states, which will vote for them and their budget plan in almost as large percentages. 

In 2005, Ryan now-famously advised his audience when he addressed an Ayn Rand fan club that they should make no mistake: current politics is a clash between “individualism” and “collectivism.”  And indeed it is.

Now, let’s ensure that the public knows the specifics.  

Essential Health Benefits and cost benefit analysis: can we maintain doctors’ incomes and provide decent care for all?

by Linda Beale

Essential Health Benefits and cost benefit analysis: can we maintain doctors’ incomes and provide decent care for all?

 So we thought we had finally created a national system of health insurance that would permit near-universal coverage for essential health benefits to every American.

But the Obama administration says it is not going to write rules regulating exactly what benefits must be covered.  Again bowing his head to the GOP personal responsibility/states’ rights mantras, the president is willing to let states “experiment” like they do with Medicaid.  Question whether this amounts to allowing right-wing states to shift benefits to private profits and away from care for Americans?
This goes back to the recommendation from a panel at The National Academic of Sciences, which said that the federal government should take cost into consideration in deciding what’s essential to be provided by health insurance plans under the reform act and that new benefits should be ‘offset’ by cost cutting elsewhere. Robert Pear, Panel Says U.S. Should Weigh Cost in Deciding ‘Essential Health Benefits'”, New York Times, Oct. 7, 2011, A14.
But a primary problem with cost-benefit analysis as typically understood is that it favors the status quo because any new benefit for which money must be expended will cost compared to the current system, and the benefit is much harder to turn into a quantitative number that will prove that the cost is worth it.  It is very hard to do truly ‘dynamic’ cost-benefit analysis–the assumptions used tend to be a one-size-fits-all and it is hard to calculate the way that the immediate benefit builds even more substantial long-term benefits and then result in much lower costs down the road,

so that current costs that will have substantial long-term benefits that may not add up to significant numbers until years or decades have passed will tend to be viewed as negatives, whereas maintaining a terribly ineffective and unjust status quo will be seen as positive.  Even more killing for any cost-benefit analysis of medical reform where part of the reason for the problem is the exorbitant pricing that creates large profits for doctors and for-profit hospitals is that If ‘costs’ take into account the fact that decent health care modeling should reduce the highest end medical provider incomes (like the excessive profits made by private nursing homes and hospitals and surgeons who do not work on salary, etc.), then of course the cost-benefit analysis will favor the status quo where those that have money get good care and those that don’t die.

One of the ways that the failure to adopt at least a public option or ideally a single (national) payer option for health care reform shows is that the panel suggested that the minimum coverage required should conform to what small employers provide–typically much less generous coverage than that provided by large employers.  As the October New York Times article on this noted, “This reading of the law was unexpected, but the panel said it was justified because small businesses ‘will be among the main customers for policies in the state-based exchanges.'”  Id.  Not surprisingly, the article also concludes that “the recommendation is likely to please employers and insurance companies and could cause concern among some advocates for consumers and patients with particular illnesses who want more expansive benefits.”  Id.  Again–just more evidence that the right option for health reform is an extension of Medicare for all, not this piece-meal attempt to appease health insurers and health providers by attempting to guarantee that they can still reap huge profits out of what should be a universally provided public good.

originally published axingmatter

The Road to Serfdom!!

Brad DeLong points us to a post from The Nation on early Koch brothers and Hayek The Road to Serfdom!!

Yasha Levine and Mark Ames:

Charles Koch to Friedrich Hayek: Use Social Security!: [I]n early June 1973, weeks after [Charles] Koch was appointed president of the Institute for Humane Studies. Along with his brothers, Koch inherited his father’s privately held oil company in 1967…. Koch invited Hayek to serve as the institute’s “distinguished senior scholar” in preparation for its first conference on Austrian economics, to be held in June 1974.

Hayek initially declined Koch’s offer. In a letter to IHS secretary Kenneth Templeton Jr., dated June 16, 1973, Hayek explains that he underwent gall bladder surgery in Austria earlier that year, which only heightened his fear of “the problems (and costs) of falling ill away from home.” (Thanks to waves of progressive reforms, postwar Austria had near universal healthcare and robust social insurance plans that Hayek would have been eligible for.)

IHS vice president George Pearson (who later became a top Koch Industries executive) responded three weeks later, conceding that it was all but impossible to arrange affordable private medical insurance for Hayek in the United States. However, thanks to research by Yale Brozen, a libertarian economist at the University of Chicago, Pearson happily reported that “social security was passed at the University of Chicago while you [Hayek] were there in 1951. You had an option of being in the program. If you so elected at that time, you may be entitled to coverage now.”

A few weeks later, the institute reported the good news: Professor Hayek had indeed opted into Social Security while he was teaching at Chicago…. He was eligible…. On August 10, 1973, Koch wrote a letter appealing to Hayek to accept a shorter stay at the IHS, hard-selling Hayek on Social Security’s retirement benefits, which Koch encouraged Hayek to draw on even outside America. He also assured Hayek that Medicare, which had been created in 1965 by the Social Security amendments as part of Lyndon Johnson’s Great Society programs, would cover his medical needs…. [T]aking on the unlikely role of Social Security Administration customer service rep, Koch adds, “In order to be eligible for medical coverage you must apply during the registration period which is anytime from January 1 to March 31. For your further information, I am enclosing a pamphlet on Social Security.”

(h/t Mike Kimel)

The Medicare Sky is Falling.. Accepting Medicare

by run 75441

The Medicare Sky is Falling

Part of the Medicare Sky Falling story is a claim that doctors are refusing to accept new Medicare patients because of low payments. It is common for politicians and pundits to pontificate declaring Medicare is broken. A doctor himself, Wyoming Senator Barrasso made the claim to CNN’s Candy Crowley recently.

Sen. John Barrasso mistakenly claimed that “57 percent of doctors don’t want new Medicare patients,” which isn’t true. His own spokeswoman admits he got it wrong.

National surveys have put the number who don’t take new Medicare patients as low as 14 percent, and a big American Medical Association survey last year showed only 17percent of all physicians said they were ‘restrictin’ Medicare patients (either taking none, or just some).”Senator’s Barrasso’s Medicare Mistake

See also Part 1, Part 2, and Medicare Breaks medical inflation curve

The claim is related to the implementation of the Sustainable Growth Rate formula which adjusts physician payments whenever the aggregate cost of Medicare exceeds the calculated growth rate. The Sustainable Growth Rate is outside of the ACA and since its inception has only been applied once in 2002. Congress has repeatedly delayed the decreases by applying short term fixes canceling out the planned SGR adjustments in reimbursements. The proposed 2012 budget also contained delays in implementation. The SGR was passed as a method to control the increasing aggregate cost of Medicare without consideration for the number of services provided.

On the other hand, 62% of Primary Care doctors said they would stop taking new Medicare patients if the SGR formula reimbursement cuts were implemented. To increase reimbursements for primary care, the ACA has in it provisions to increase primary care doctors reimbursements and at the same time reduce reimbursements for specialists.

Another claim by pundits and politicians is Medicare has been outstripping inflation. This has been true for a number of years; but, a more recent trend shows quite the opposite. Here again pundits and politicians have been claiming the reduction in doctors accepting Medicare patients has been the cause of such a decrease in Medicare cost. I believe we have debunked that claim earlier.

Given that rising healthcare costs drive the cost of Medicare, Medicaid, and even commercial insurance; it is outrageous that people would consider cuts in Medicare and Medicaid as a means to control overall healthcare costs or just give up the fight on rising healthcare costs and sacrifice the poor, the children, and the elderly to vouchers and buyer beware.

How has Medicare been performing recently? Maggie Mahar at Health Beat Blog Deadlock Over The Debt: What It Means to You . . . touches upon the planned cuts in Medicare John Boehner proposes and lesser cuts offered by President Obama as a compromise to break the stalemate in Washington between the Democrats, the Republicans, and the Tea baggers. Wrongly identifying Medicare and Medicaid as the leading cause of rising healthcare costs, the House under John Boehner has sought to impose severe cuts in the programs which will in effect balance the deficit and budget on the backs of the poor, the elderly, and the children who depend upon Medicare and Medicaid heavily. Medicare and Medicaid are still on the chopping block for cuts under the recent compromise.

In an update to its S&P Healthcare Indices (12 month moving average), Standard and Poor’s reports Medicare cost trends decreased with costs growing at a rate of 2.64% annually in May. So, why attack a program whose costs are decreasing and out-performing the Commercial Index (private healthcare) which showed a 7.35% annual cost?

While both the Commercial and Medicare Indexes showed a slight uptick in May of .25 and .16, Medicare has consistently outperformed commercial healthcare insurance in controlling cost. Medicare’s performance comes in light of increased healthcare industry costs and a growing baby boomer population.

As Taken from, “US Healthcare Costs Rose 5.8% Over the 12 Months Ending May 11 According to the
S & P Healthcare Economic Indices

The Commercial Index (private healthcare) mirrors the growing costs of healthcare in the US. From the May 2010 levels, the Commercial Index reflects a 7.35% increase, Medicare 2.64%, and the composite of both 5.35%. The Medicare Index shows a widening gap between it and the Commercial Index which appears to be occurring from its control of costs. In effect, Medicare is dragging down the cost of commercial insurance and acting as a control on overall healthcare costs.

As Taken from, “US Healthcare Costs Rose 5.8% Over the 12 Months Ending May 11” S & P Healthcare Economic Indices

While hesitant to declare an outright victory and a long term trend in Medicare cost controls, David Blitzer of the S & P Indices in a conversation with Maggie Mahar indicated this is more than just a blip on the screen. He went on to add:

We tend to get data from the Centers for Medicare and Medicare about 1 to 1 1/2 years after the fact; this is why there is a widespread perception that Medicare spending is still rising 2% faster than GDP. S&P is giving us more current numbers, and while the S&P index is ‘is not perfect,’ Blitzer says, ‘it’s good.

While there is waste in Medicare, it is conceivable Medicare costs could be reined in even further through the ACA and enough such so as to match GDP growth and no more. To squeeze cost the ACA will look to the Advantage Programs Insurers, overpayments to Advantage insurers, payments for some preventable errors, annual increases in reimbursements to hospitals, nursing homes and other institutional providers, and with systematic changes to the today’s healthcare model which rewards providers for doing more than for better outcomes.

Interesting that S&P downgrades US Credit Rating while at the same time shows proof of entitlement programs driven by the cost of the healthcare industry are decreasing at a faster rate than their commercial counterparts.

The Medicare Sky Is Falling (Part 2)

by run75441

The Medicare Sky Is Falling (Part 2)

Chicken Little, Courtesy of “EW.Com Entertainment Weekly”

Over at The Health Beat Blog, Maggie Mahar explains why the collapse of Medicare HI is less likely with the passage of healthcare reform. The Medicare “Crisis: A Shaggy Wolf Story.

Potentially heading off the shortfall of Medicare funding is the passage of the ACA which is used by the Trustees to forecast a positive projection to Medicare. Before healthcare reform, Medicare HI would run short of funds in 2016. After its passage, the Medicare Trustees forecasted Medicare HI funding lasting to 2024 if Healthcare Reform program implemented. Why is such a delay in insolvency possible? Elmendorf’s (the same Elmendorf who helped kill Hillary-Care) Congressional Budget Office forecasted a $950 billion generated over the next decade from the passage of healthcare reform. Two areas account for most of the savings and the third area could not be measured:

Medicare will be shaving annual increases in payments to hospitals, skilled nursing facilities, home health agencies and other institutions by 1 percent a year for 10 years. The legislation explicitly exempts doctors, calling for reductions ‘in payment updates for most Medical goods and services other than physicians’ services.’ The CBO estimates that this provision will save $196 billion.

Secondly, the ACA raises another $750 billion, primarily by collecting new fees from the health care industry (which can afford the fees because it will have so many new customers); cutting overpayments to private insurers that are not delivering value for Medicare dollars; raising Medicare taxes for those at the very top of the income ladder; and reducing subsidies to hospitals that will no longer be absorbing the cost of caring for 32 million uninsured.

Additionally, The Affordable Care Act paves the way for Medicare to cut spending further, by proposing deep structural reforms that could, ‘transform’ U.S. health care ‘in both the way that it is delivered and the manner in which it is financed.’ The legislation ‘takes important steps in this direction by initiating programs of research into innovative payment and service delivery models,’ the Trustees explain ‘such as accountable care organizations, patient-centered ‘medical homes,’ improvement in care coordination for individuals with multiple chronic health conditions, improvement in coordination of post-acute care, payment bundling, ‘pay for performance,’ and assistance for individuals in making informed health choices.

It is the third point which was not included in Elmendorf’s projection of savings. By overhauling the healthcare delivery model, the Affordable Care Act through Medicare will reduce the healthcare industry cost inflationary cycle by changing how healthcare is delivered to patients and directly impacting the fees paid today. Instead of rewarding for volume of services delivered, the approach is to reward for value “by encouraging integrated, coordinated care that leads to better outcomes at a lower price. These are unprecedented reforms that have never been tried on a national scale (but have been implemented by the VA) which the CBO did not try to estimate just how much these structural reforms might save. As often is the case, over the long term what cannot be counted may count the most. Note that money saved from this change in services rendered will be above and beyond the $950 billion the CBO did score. These are dollars that could be used to cover the 2024 shortfall.”

Without such a change in the delivery of healthcare, the cost spiral will continue. In Phillip Longman’s “The Best Care Anywhere,” the success achieved in healthcare delivery at the VA has not been rivaled anywhere in the private sector. In a fee for services scenario, the change does come at a loss of profitability when the switch is made to one based on better outcomes at lower costs. Phillips gives one hospital’s experiment in the private sector with integrating quality into its healthcare delivery:

Indeed, any health-care provider in the private sector that holds itself out as providing high-quality care for chronic conditions risks financial ruin. That’s a lesson Beth Israel Medical Center in Manhattan learned after it opened a new diabetic center in March 1999. To publicize the new venture, Beth Israel convinced a former Miss America, Nicole Johnson Baker, herself a diabetic, to pose for promotional pictures wearing her insulin pump. She also posed next to a man dressed as a giant foot, a dark reminder of how poorly managed diabetes often leads to amputation.

To avoid amputation and other dire outcomes, such as blindness and renal failure, the new center adopted a model of diabetic care that rivaled the VA’s in its quality. Highly coordinated teams taught patients how to check their blood sugar levels, count calories, and find the discipline to exercise, all while undergoing prolonged and careful monitoring. Within months, the center succeeded in getting the blood sugar levels of 60 percent of its patients under control — a stunning result that brought it national attention.

But the idealists who conceived this program forgot the business they were in. Health insurers would pay only piddling amounts to cover the cost of a diabetic patient seeing a podiatrist, for example, though such care is essential to reducing the risk of amputation. And insurers would pay even less same time, as word of the center’s excellence in diabetic care spread, patient volume increased by 20 percent a month. Soon the center was running a large deficit, and Beth Israel administrators felt compelled to shut it down. Between 1999 and 2006, three similar centers in New York folded based on the same model of care, and for the same reason. Quality doesn’t pay.

Any change in today’s healthcare delivery reducing the patient/client base and their need for medical services takes from the bottom line. The ACA under Medicare’s tutelage takes on fee for services directly and looks to change it to greater quality and better outcomes. If anything, the experiment at Beth Israel was successful for the patient/client base.

Maggie goes on to pick apart the arguments of the doomsday predictors and naysayers. Holding payment adjustments to a 2% yearly increase over a decade, Medicare will bank on expected productivity gains at hospitals, skilled nursing care facilities, etc. Comments of withdrawal from Medicare by providers and doctors are hollow threats (as doctors are exempted) as > than 50% of hospital revenue comes from Medicare. What hospital is going to withdraw? But, what types of productivity gains are implied?

Having supplies and equipment available on demand at the point of usage for nurses. If this does not sound like making CNC tools resident to the Cell, I don’t know what does. This cuts down on wasted movement.

· Proper inventory control to prevent the over buying of equipment by hospitals. One example cited a $20 million purchase of smart heart pumps over time because the inventory could not be found. Sounds familiar to industry also.

· By having accurate inventories and supplies at the point of usage, a nurse’s time is freed up from looking for supplies that are lost or missed placed and farther away from the patient. In the end a nurse’s time is spent as direct labor in delivering a product to the customer rather than Overhead and indirect labor.

· Fixing the mistakes and errors (most are preventable) being made in hospitals today through error proofing. An Office of the Inspector General, Department of Health and Human Services study found 1 in 7 Medicare patients suffer at least 1 adverse effect from hospitalization. This equates to 1.6 million per year and of that number ~180,000 die. The checklists used by pilots today before take- off could help hospitals and staff lower the incidence of mistakes in hospitals. “Adverse Events in Hospitals: National Incidence Amongst Medicare Beneficiaries”


Each of these productivity gains has an impact on the costs of operation within a hospital, a direct impact on the quality of the product rendered, and ultimately reducing the amount of time spent in the hospital. While a large part of medical expense is Labor, another part is the ineffective use of resource, assets, and inventory. Looking for the root causes in the end Medicare costs decrease as hospitals become more efficient.

(Rdan…formatting corrections made 6/17)

The Medicare Sky Is Falling

by run75441

“The Medicare Sky Is Falling”

Chicken Little, Courtesy of “EW.Com Entertainment Weekly”

A recently released Medicare Trustees report detailing the insolvency of Medicare HI has been used by conservatives and supporting news media to call again for an overhaul or privatization of Medicare to save healthcare for those on Medicare.

“The gravest threat to Medicare is doing nothing. If we do nothing, not only will Medicare collapse but so will our fiscal house.” Thursday, May 26, 2011; Senator Dan Coates Indiana

This is not the first time a politician, a think tank, or the news media has predicted the demise of Medicare due to exhausting its funds (Table 1). Both Medicare and Medicaid have also been identified numerous times as being the cause of rising healthcare cost resulting in calls for drastic over halls, privatization, state voucher programs, complete elimination, etc. In any case, 40 years later Medicare is still here and its funds will not be exhausted as claimed in the recent New York Times and Wall Street Journal articles. Instead, the program will not be able to meet its entire obligations for Medicare HI. At the Chicago Tribune, Eric Zorn culls from the news media examples of the sky falling in on Medicare: Medicare is Going Bankrupt Again” May 5, 2011

“The Medicare hospital trust fund faces bankruptcy by 1976 and taxes must either be raised or benefits reduced the senate finance committee was told today.” Chicago Tribune, July 2, 1969

“In the last few years, when it appeared that the Medicare trust fund would run out of money in 1987-89… But the need seemed less urgent after the Congressional Budget Office issued new estimates last September indicating that the Medicare trust fund would not go bankrupt until 1994.” The New York Times; January 20, 1985

“The Medicare hospital insurance program faces bankruptcy by 1996, two years earlier than projected last year.” The Washington Post; April 1, 1986

“Medicare trustees reported Wednesday that the program’s financial outlook is getting worse, touching off a new round of debate over the future of the federal health insurance system for the elderly and disabled. According to the trustees, who give the program a fiscal checkup every year, the fund that pays Medicare hospital bills dipped into the red last year and will go broke in early 2001. That’s a year earlier than they predicted in 1995.” “DIRE FORECAST SPARKS NEW MEDICARE DEBATE TRUSTEES’ REPORT USED AS FODDER FOR POLITICAL SALVOS BY BOTH SIDES,” The Chicago Tribune; June 6, 1996.

Chicago Tribune

40+ years and the “EverReady” Medicare HI Bunny is still solvent as Eric Zorn shows in the chart above and details in his article. Much of today’s issues can be blamed on a smaller working Labor Force resulting in lower tax revenues.

The attack on Medicare with the threat of vouchers or overhaul has never had justification beyond “the sky is falling” proclamations. Furthermore such an overhaul would have no impact upon rising healthcare costs. Try (I did) finding out what certain services cost so you can control the cost of an outcome in a privatization scenario, when you are seriously ill, and the answers or non-answers from your doctor and the staff will only forestall your diagnosis/remedy. Similar to a 401K, the impact of proposed privatization and voucher plans shifts the burden of rising healthcare costs and risk to the healthcare recipient who will have far less of an impact on those rising costs as an individual and far less on a healthcare system encountered. The same as private insurance, Medicare and Medicaid reflects the rising cost of the healthcare industry intent on the selling of service, procedures, and product with Medicare being more efficient in controlling those costs in comparison. In the end; a few tweaks here and there as Coberly, Bruce, and others have suggested will provide a temporary fix to Medicare without impeding access to healthcare and not provide a solution to rising healthcare costs.

Medicare Breaks the Inflation Curve

Besides her comments on the growing lack of influence of the AMA on Healthcare reform Maggie Mahar at Health Beat Blog writes about Medicare breaking the cost curve of the healthcare industry.

Medicare Breaks the Inflation Curve

Today, S&P released data tracking the growth of health care costs which showed that over the year ending March 2011pending rose at an annual rate of 2.78% posted for the Medicare Index in its six-year history. (Hat-tip to Kent Bottles for calling attention to this report on Twitter). This news is, as Bottles says, “very important”, not to mention timely, given the deficit debate in Washington.)

By contrast, over the same 12 months, health care costs covered by commercial insurers rose by 7.57%. Still, as the chart below shows, even these costs (tracked by the “commercial index”) have been falling, down from a peak inflation rate of nearly 10 percent in the 12 months ending in July 2010 to 7.5% in the 12 months ending March 2, 2011.

Why is health care inflation decelerating? In the commercial sector, the recession no doubt plays a major role. Insured patients often have high deductibles that must be paid before they receive care. As a result, hospitals report that patients are putting off elective surgery. Thus, commercial insurers are paying out a lower share of premiums. (See for example, Cigna’s most recent financial report which shows patients’ “relatively moderate use of medical services”.)

At the same time, it’s worth noting that commercial insurers’ reimbursements to hospitals continue to rise; the Hospital Commercial Index’s annual growth rate hit a peak of 9.36% in May of 2010, and as of March 2011, it still stands at an unaffordable 8.36%. This suggests that, even if hospitals are seeing fewer patients, they continue to “do more” to those patients who come through the door, billing insurers for more tests and treatments.

Meanwhile, hospitals with market clout have been ratcheting up their prices. Commercial insurers who want brand-name hospitals in their network have no choice but to over-pay. They then turn around and raise their premiums, passing the cost on to their customers. (Some claim that hospitals charge private insurers more because Medicare underpays—and thus they must make up for their losses by “shifting costs” to the commercial insurers. But economist Austin Frakt (The Incidential Economist) has written a compelling paper which reveals

If one is talking about hospital prices, perhaps a shift of 20 cents on the dollar is a justifiable estimate—which means far less than that ends up in premium increases.

Other economists agree that “cost-shifting” is greatly exaggerated. In some cases, marquee hospitals are simply gouging insurers.)

As measured by the Hospital Medicare Index, the amount that Medicare is paying out to hospitals, has fallen sharply and down from 8.30% in August 2009 to 1.18% in March 11. This is surprising. Medicare patients have less reason to postpone care:

• their deductible for Medicare Part B is just $162 (as of February, 2011),

• while their Part A deductible for hospital care ($1,132) is significantly lower than the $2,000 to $5,000 deductible a growing number of privately insured patients pay.

Medicare patients also have not been hit as hard by high unemployment and they may not be able to find a part-time job, but at least they don’t lose their Medicare if they lose a job.

Why are Medicare costs slowing? It appears that “costs for Medicare patients are being better contained than those covered under commercial insurance plans,” observes David M. Blitzer, chairman of the S&P Index Committee. And the provisions in the Affordable Care Act that will put Medicare on the road to financial solvency haven’t even begun to kick in. Meanwhile, conservatives argue that we must privatize Medicare, because taxpayers cannot affords “runaway” government entitlement programs. I wonder how they explain the S&P report.

Town Hall Meetings on the Ryan Budget Raise Concerns

Various congressional representatives held town hall meetings recently, and the news channels and print media were abuzz with the lively give-and-take, including shouting matches. See, e.g., House G.O.P. Members Face Voter Anger Over Budget, New York Times, Apr. 26, 2011; Republicans facing tough questions over Medicare overhaul in Budget Plan, Washington Post, Apr. 22, 2011.

The issue–the House’s adoption of the Ryan budget proposal and its clear agenda of overturning New Deal safety nets embodied in the current understanding of Medicaid, Social Security and Medicare.

Those at or near retirement are worried that the Ryan proposal will hurt everybody. The Ryan proposal comes with frequent disclaimers about protecting the already older population and needing to act now to protect our grandchildren, a clear effort to massage the message to appeal to current grandparents. See, e.g., House G.O.P. Members Face Voter Anger Over Budget, New York Times, Apr. 26, 2011 (noting Webster’s statement that “not one senior citizen is harmed by this budget” while implying that it is necessary to prevent grandchildren from “looking at a bankrupt country”); Congressional Republicans go home to mixed reveiws,, Apr. 26, 2011 (noting North Carolina GOP Rep. Renee Ellmers’claim that “If you’re 55 and older, your Medicare and Social Security will not change”).

But the Ryan proposal clearly envisions mechanisms that would likely lead to decimation of these programs–either through turning them into limited vouchers (Medicare proposal); turning the funds over to the states to use as they see fit (Medicaid proposal) or limiting benefits (Social Security proposal) in ways that will –probably sooner rather than later– hurt everybody.

  • These proposals take place in a context of expansive, concerted attacks on these “entitlement” programs, often failing to acknowledge the historic support for these programs or their foundation in the recognition that federal support is required to protect against the abject poverty and humiliating degradation that accompanied the Great Depression;
  • Benefits for elderly and sick Americans are cut to provide savings to offset some of the loss of revenues from tax cuts for Big Business and the wealthy, both of whom already pay relatively low taxes, in what hardly seems a bargain to the working poor, the elderly or in fact the overwhelming majority of Americans who are not in the top 15% income or wealth distribution. (This in spite of Ryan’s claim that there is no huge tax cut for big corporations and the wealthy–he asserts that the proposed 25% rate is “in exchange for losing their tax shelters”. See, e.g., Evening News coverage of Paul Ryan holding Wis. town meetings, at;photovideo )
  • In spite of the high cost for the vulnerable poor and elderly of these budget proposals, they don’t appear likely to achieve their proffered rationale of reducing debt and deficits–in fact, the CBO has said that the Ryan budget proposal will result in higher deficits and bigger debt burdens over the next decade.
  • It appears shortsighted to wring one’s hands about a “bankrupt country” while considering only one potential solution, especially when that solution is highly detrimental to the most vulnerable populations, and without considering the full facts regarding the amount of debt, the ability of the U.S. to weaken the dollar further to aid unemployment and debt payment, the ability of the U.S. to raise taxes judiciously rather then merely cutting spending, or the ability of the U.S. to let the tax law play out as it is currently slated to do (with the Bush tax cuts that were extended 2 more years over their originally intended short life due to sunset in 2012). As Jim Johnson, a former Ryan supporter who has “grown increasingly disgusted” with Ryan noted, “[Ryan] says Medicare is unsustainable. I’m thinking, ‘Yeah, it’s because medical costs are out of control.’ …Why isn’t he attacking it at that level?” Congressional Republicans go home to mixed reviews, CBS
  • Any voucher system for health care will inevitably fail to cover increasing health care costs, resulting in rationing even the most basic health care by socio-economic class–the very problem that Medicare, Medicaid, and the limited health care reforms undertaken by the last Congress were intended to address. The Center for Budget and Policy Priorities concluded that out-of-pocket medical costs would skyrocket for low-income seniors; the Washington Post’s Fact Checker Glenn Kessler (in GOP Lawmakers tout Medicare reform by stretching a comparison to the health benefits they receive, Apr. 29, 2011) notes that the CBO analysis concluded that the Ryan Medicare system would pay only 32% of health care costs by 2030, compared to 70-75% if traditional Medicare remained in place.
  • Addressing the problems in the U.S. health care system solely by market means that put the onus on health care recipients to seek cost-savings has failed miserably over the last forty years and cannot help but fail more spectacularly when the Medicaid backup is weakened and the nature of health care needs is such that one of the best antidotes to market problems (the only one permitted in radical market thinking that objects to regulatory safeguards)–informed consumers who can review options and select among competing providers–is simply not applicable. Car accident victims don’t shop for surgeons; cancer victims don’t know enough to select based on price; etc.
  • The Ryan proposal appears one-sided in its decision to cut spending on potentially vulnerable populations rather than to address the means through which health care is provided or to consider ways to control profit-taking in the health care system. The market ideology of the proposers leaves many options that might work better off the table (single payer; tax on excessive compensation; revamping the non-profit hospital system; attaching strings to the R&D and other tax expenditures in the tax code; using the clout of a national system to negotiate better doctor and drug pricing for Medicare and Medicaid, etc.);
  • Many of those states that would acquire more control over the use of Medicaid funds are controlled now, as is the House, by people who have announced their intent to cut taxes on the wealthy and business while cutting or taxing pensions and health benefits for public employees and cutting funds available for Medicaid and other poverty-directed programs; it is not a difficult leap to see the interrelationship of these trends;
  • Plans to cut benefits for those who may enjoy them in the future pave the way in at least two ways for decisions shortly thereafter to cut benefits for those who currently enjoy them: first, by creating lowered expectations; second, by creating an unfair disparity that supports an “us against them” attitude between the current elderly and those who will get lesser benefits in the future. (Note that this resembles the way the right has encouraged an “us against them” attitude of private workers, who have been deprived of union benefits through the harsh anti-union tactics used by Big Business, against public employees, who have generally benefited in the past from more reasonable attitudes towards unions fostered in legislative bodies that have, in the past, understood the nature of the bargain that public employees make (which might be summarized as ‘work hard, get paid less than you could in the private sector, and accept later benefits in pensions and health care for lesser salary/percs now).

Is is surprising that left-leaning activist groups like Move-On point to the Ryan budget proposal as a “naked, unapologetic attack on working Americans for the sake of Big Insurance and the riches of the rich” (quote from Move-On email on this matter)?

Guest post: No Assumptions for a Change

Guest Post From Robert Bowman, M.D.

No Assumptions for a Change

Assumptions are often incorrect and the assumptions are incredibly inaccurate in primary care and in basic health access. When one starts with the assumption of more pay, then it is easy to rationalize more training or more complexity of care – even when there is little evidence other than assumption.

Primary care is often more difficult than specialty care.

A major reason is that the design of health care in the United States destroys primary care delivery. Reasons for primary care to be challenging are the complexity of the patients, the lack of support staff, the lack of primary care trained support staff, the lack of experienced support staff, the broad scope of primary care, the lack of respect for primary care by those who clearly have little clue regarding primary care delivery, and participating in smaller operations that are neglected by the health care design.

The fragmentation of care with even more fragmentation on the way is a problem. The required context of care includes major care provided by Americans most left out of the designs for health and education – who often cannot access care other than the basics.

The reimbursement for primary care that is less than the rapidly increasing cost of delivering primary care forces primary care practitioners to do additional efforts outside of primary care to support their primary care practices.

The decision to pay more for care other than primary care is arbitrary. This design was set up beginning 100 years ago by those who envisioned domination of all of health care and who assumed their superiority. Even in the 1940s medical leaders still understood the challenges facing generalists – because some generalists still were in leadership positions and other leaders had been generalists prior to their specialization. Once the entire context of selection, training, and practice support was designed subspecialist, this understanding was lost and the current assumptions reigned unchallenged.

The subspecialty and academic forces reached their domination in the last decades, rebounded from the managed care reforms with even greater domination – and the United States has all of the cost, quality, and access consequences now that cripple our nation and its people.

There is supporting evidence for primary care complexity as greater at the current time. This includes the fact that two-thirds of primary care graduates (28,000 from six sources) depart primary care. All types are departing primary care with 55 – 85% of graduates after graduation other than family medicine graduates (who have fewest other options). There is lower national health spending on primary care (5% is all there is) and the locations where primary care workforce is highest percentage also receives lowest health care spending at 5% for rural locations and 5% for underserved locations. Established
primary care practitioners have continued to depart primary care even during the 1990s periods of increasing policy support (PA, IM),

Few that are found in direct patient care primary care delivery from nurse, advanced nursing, nurse practitioner, PA, and IM training. Pediatric and medicine pediatric training both now yield less than a majority for primary care as well. In all of these types as well as in family medicine, a minority fraction of the training is spent on primary care. Primary care basics are taught, but it takes a lifetime of dedication to patients and to primary care delivery to even begin to comprehend primary care. Compare primary care and specialty care after a decade of care delivery. Who is worth more – my vote is for a dedicated primary care practitioner in a continuity location with a continuity team? Perhaps many if not most would contest this, but most comparisons are apples and oranges as primary care is so poorly understood.Training that yields primary care as a side effect of specialty care is also apples and oranges as the RN, NP, PA, MD, and DO primary care should be primary care in selection, in training, and in a lifetime of care delivered.

The US needs a foundation of primary care – a balance between primary care and other care. The designs must support this. Even 80% of physicians support more funding for primary care delivery (Leigh) but when asked to give up a few percentage points of reimbursement (that might not even impair pay), physician support melted away.

Once again I would note that nations need designs for care that serve nearly all in a nation nearly all of the years of their life in nearly all locations not a design that serves few for a few years in a few locations.

And there is always a nice video to review such as We’re Number 37 in health outcomes (, not to mention a health care design that cripples our economy, all levels of government from schools to federal, our children, and our children’s children.

The current design ensures more graduates from NP, PA, DO, and MD with each passing year as well as higher percentages entering non-primary care as well as higher percentages of primary care graduates entering non-primary care. What we have is more like fantasy as compared to assumption.

Robert C. Bowman, M.D (