• Intergenerational Medicare war

    Austin posted on the political impossibility of Medicare payment rates being far below those of private insurance. John Goodman writes in the comments to Austin’s post:

    Obama Care pays for health insurance for the young and controls Medicare spending by ridiculous (and politically impossible) cuts in spending on the elderly and the disabled. Which is to say, Obama Care isn’t paid for at all.Tom Saving and I have even calculated how much seniors will lose as a result. For example, for someone turning 65 today the loss of Medicare spending is about $36,000 or about three years of benefits.

    I never have gotten the ‘it is illegitimate to pay for health insurance expansions with Medicare cuts’ line of argument. It acts as if Medicare beneficiaries live on Venus and taxpayers who finance Medicare live on Mars and are members of a different species. In fact, the two are quite closely linked. And even do things like eat Thanksgiving dinner together.

    My grandmother is 88 and a Medicare beneficiary. My mom is 69 and is a Medicare beneficiary. I am 43 and thankfully have health insurance that covers my entire family (wife + 3 kids), and I pay taxes so that my grandmother and mom can have health insurance (my wife also pays taxes). My children are 15, 14 and 10, and someday will pay taxes. I don’t know if they will have health insurance in their 20s, 30s, etc. or not. I could lose my job and then my entire family could be uninsured tomorrow.

    My grandmother and my mother like and love my family; they also like having health insurance, but they also would like for their child (and grandchild) and their grand children (and great grandchildren) to also have health insurance.

    If it is true that my mom will lose ~$36,000 in benefits if the ACA is implemented, it is also true that me and my kids will have to pay ~$36,000 more in taxes if it is repealed. With me?

    We spend by far the most per capita on health care in the world. It is far from clear we get our money’s worth. And we have a sizable number of persons without health insurance, including people who are paying taxes to support Medicare while they themselves are uninsured. We could spend more of our GDP on health care and finance expansions that way, but then we would either have to spend lots less on other things or raise taxes.

    It seems likely to me that we will only achieve insurance expansions by at least partly cutting Medicare expenditures to pay for them. And the good-bad news is that we are almost certainly spending lots on care that is not worth it. It is of course very hard to figure out what is not worth it, and harder still to do something about it. If we could get societal agreement on this as a goal (cover everyone, finance at least some of this via cuts to planned Medicare spending that is not worth it), then I am confident that we could successfully muddle through on policy terms (it would be hard, we basically have to try everything). And of course all of this is even harder since a dollar of savings is a reduction of someone’s income. It is harder even still since both sides, when in doubt, accuse the other of wanting to kill my grandmother.

    The last step of any reduction in Medicare costs over what they are projected to be absent reform is either the delivery of less care, and/or the payment of less for the same care. That is a fact. Be it IPAB, or vouchers, or whatever we are bickering about next year. There is no technical, painless way out.

    Update: cleaned up some places. By good bad news, I mean that if every dime of Medicare spending was productive (improved quality of life and/or expanded life), it would really be painful to cut; now it is at least possible to cut spending in a way that at least holds equal or even improves outcome.

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    • There is a fundamental distinction between shifting costs and reducing costs. Much of the current debate ignores that distinction.

      What’s wrong with cutting payment for ineffective care or care that’s not as cost effective as other care that’s just as good? If either a $500 or a $10,000 procedure will cure me, why should we pay for a $10,000 procedure? If a $1 pill is as safe and effective as a $20 pill, why pay for the $20 pill? The problem is going for the cheaper method cuts someone’s income, and they will do a lot to resist.

    • “I never have gotten the ‘it is illegitimate to pay for health insurance expansions with Medicare cuts’ line of argument.”

      I think the reasoning behind the argument is that Medicare is already on an unsustainable path, so using the cuts to pay for something else leaves us in the same hole. It is the equivalent of the guy with no savings and 20K in credit card debt buying a new big screen TV because he got a raise.

      The fact that the administration is continually being dishonest by double counting those savings is a good indication of why people make this argument. They know that even with $500B in cuts Medicare still has us on the road to fiscal ruin.