• Quote: The ACA as redistribution

    Thomas Edsall in The New York Times:

    the Affordable Care Act can be construed as a transfer of benefits from Medicare, which serves an overwhelmingly white population of the elderly – 77 percent of recipients are white — to Obamacare, which will serve a population that is 54.7 percent minority. Over 10 years, the Affordable Care Act cuts $455 billion from the Medicare budget in order to help pay for Obamacare.

    Those who think that a critical mass of white voters has moved past its resistance to programs shifting tax dollars and other resources from the middle class to poorer minorities merely need to look at the election of 2010, which demonstrated how readily this resistance can be used politically.

    Please let me know whether you agree with Edsall’s numbers. Regardless, he captures an essential political reality.

    A small irony here. The current American elderly cohort is relatively prosperous and has secure access to health care. This is the result of the great progressive victories of the mid-twentieth century: the expansion of Social Security benefits, Medicaid, and above all Medicare.
    HistoricalPoverty2

    Fifty years ago, the elderly were far and away the poorest of Americans. Today they are not and that is because sometimes government really does work.

    @Bill_Gardner

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    • I really dislike how people carelessly toss around the phrase “cuts to Medicare” or here as a “transfer of benefits/resources”. It’s important to note that the “cuts” do not involve a substantial change in health benefits for Medicare beneficiaries, rather they are mostly from wringing out some of the inefficiencies in the system and slowing growth in reimbursements. Aside from some network narrowing (which is happening outside of Medicare as well), I’m doubtful that it will effect access substantially, even for Medicare Advantage, as there is too much volume for providers to ignore.

      Aside from that, Medicare beneficiaries complaining about expanding insurance to others, whom are often more in need, seems like hypocritical and entitled noise.

      • Cutting a program doesn’t “wring out some of the inefficiencies” of a program, in other words improve the program by cutting it’s funding. If it’s methods happen to be efficient or inefficient, it will remain as it was before, only now with less money to do the job it’s tasked to do. Cutting funding can only make the program less effective because it won’t have enough resources to do the job. When look at funding a program, the real question is whether or not the program is performing a worthy task. Greater efficiency would be achieved by allowing the program to keep the funds it saved by utilizing more efficient methods and applying those funds to further it’s mission. When cutting begins, everyone goes into a defensive mode rather than an effective mode.

        • Perhaps using the word “inefficiencies” was incorrect in this context (and I suppose I should be careful using such a technical term in economics for a response on this blog). Regardless, if you’re telling me some Medicare reimbursements couldn’t take a “haircut” w.o impacting beneficiaries meaningfully, and again the beneficiaries are entitled to no less benefits after PPACA, I call shenanigans. The fact that most docs will stay on Medicare post-cut implies that most docs were charging above their opportunity cost, and it’s not as if those $760B in cuts could have instead gone to program improvement.

          • “The fact that most docs will stay on Medicare post-cut implies that most docs were charging above their opportunity cost”

            That is not entirely true nor proven

            Many docs will be incentivized to:
            1)Stay on the program, but refuse new patients
            2)Stay on the program so that they are paid when covering for other docs
            3)Reduce the time seen with patients and see more patients more frequently.
            4)Add non Medicare approved services to provide for their Medicare patients
            5)Move to a concierge type system where they can still accept Medicare patients.
            6)Raise prices and increase services to non Medicare patients.
            7)Add related services such as selling vitamins.
            8)Refuse Medicare patients entirely
            9)Retire.

            These modifications of your statement along with others are not taken out of thin air. Studies have been performed. When physician charges have been cut the physician attempts to regain at least some of those lost revenues and that is one reason every time Medicare institutes cuts it appears Medicare costs go higher.

            • Great points, but I’m not arguing that #1-9 won’t happen, rather to what EXTENT #1-9 can/will happen and how meaningful that is to patient welfare. Current access and satisfaction with Medicare is better than many private plans and I don’t expect it to change substantially post cuts in reimbursement.

            • “Current access and satisfaction with Medicare is better than many private plans”

              Of course that is correct, but satisfaction is in part created by knowing one is only paying a fraction of what one should pay. Additionally though the satisfaction has traditionally been high it becomes less so as more and more restrictions are placed on Medicare. One further comment, though many more can be made, satisfaction diminishes when one gets ill and finds they cannot get everything they need. That is why the initial Medicare satisfaction for those on Medicare HMO’s was so high. Most of the seniors were well so after picking up their free glasses and hearing aids they gave high satisfaction marks.

              When looking to determine patient welfare we should be looking at the sick that need expensive care and not the well.

            • “but satisfaction is in part created by knowing one is only paying a fraction of what one should pay”

              I don’t want to get too off topic, but what exactly is the amount that “one should pay”? Did US consumers get much additional value for the massive growth in health spending we have seen in the past decade? You’re making it seem as if trade-offs aren’t neccesary which is silly, especially for a publicly funded program. Many private plans are also moving to more restrictive networks, is total value to patients REALLY being significantly affected? Not to beat a dead horse, but again, benefits are not being reduced. IMO. the cuts and payment reform away from FFS under PPACA will be good for patient welfare.

              I’m curious, are you a physician?

            • AD, I’m not sure how you got the impression that I would even casually think that tradeoffs are unimportant. They are the basis of economic decision making. When a very competent scientist becomes a practicing physician there is a trade off for society as society loses a potential producer that enters the service industry. It is a loss to the economy. That demonstrates how much I actually think about tradeoffs.

              I don’t care about physician salaries except where they affect patient care and the well being of society. I don’t know what a physician is worth, but I can say we spend far too much on health care. I have always been involved in more than one occupation. Though I worked long hours as a practicing physician I also involved myself in business founding or being an active partner in many successful adventures. I don’t need an economist nor an accountant to tell me the PPACA is not a reform of the market place. It is a catastrophe that will lead to higher costs, reduced access and reduced quality. It will also lead to a decrease in innovation and leave us with stagnation.

              If this is posted they might not post continued discussion on this board. Any further questions may be sent to EmilyAT@mail.com

    • I suppose it depends on the meaning of “is”, or in this case, “cuts”. More broadly, though, would Americans, including those elderly white people Edsall is concerned about, be better off with a little redistribution? Redistribution of health care, redistribution of income. Obamacare will achieve those “cuts” in Medicare spending only if health care is delivered more efficiently, so the savings (or “cuts”) can be redistributed to those who don’t receive adequate health care. Ezra Klein suggested yesterday that social security benefits should be increased not decreased to take account of the big decline in savings and private pensions; the alternative is a substantial reduction in living standards for the soon to be seniors. Where would funding come from? Redistribution. Many economists express concern that current high levels of inequality create financial and economic instability, and warn that the American economy will experience more financial and economic crises unless the level of inequality is reduced. Everybody, including the top 1% of income earners and the elderly white people Edsall is concerned about, would be better off if we avoid more financial and economic crises. How can we do it? Redistribution. Some argue we can grow our way to more health care, more savings for retirement, and economic stability if only we would eliminate redistribution. I suppose we will never be able to agree on the meaning of “is” or “cuts”.

    • It’s debatable whether it’s a transfer of *benefits* from Medicare recipients since the administration would argue that it’s the providers/insurance companies taking the haircut, not recipients. Crucially, no change to the promised benefits were made to Medicare recipients in ACA.

      Contrast with Paul Ryan’s Medicare premium support, which would change the program from defined benefit to defined contribution. That’s a far more fundamental change in the program. Given that nearly every R on Capitol Hill has voted for Ryan’s budget, it’s pretty rich for their talking points to include that ACA somehow changes the benefit package for Medicare recipients.

    • Could you make the argument that it also represents a soaking of the young, at least those who don’t have robust insurance, because many pay more?

      I’ve seen that argument made.

    • Interesting point, but it is not clear that opposition has come from seniors who view it this way. There is enough confusion on whether the reductions in Medicare expenditures will lead to reductions in care that I am not sure many people see this as a redistribution from white seniors to minorities.

      Making the elderly relatively prosperous at the expense of everyone else, with Social Security and Medicare, is evidence of government action. In that sense government works. Not everyone would agree that it is a desirable outcome.

    • Mr. Gardner

      What is the source of your chart? I suspect we could peel the onion and find your “small irony” not that ironic… or even not directionally actionable… or even not accurate (does it count transfer payments to those under 65?)

      First of all the “elderly” fifty years ago were all born in the 19th century. It makes no sense to compare the two groups.

      Second the “current American elderly cohort” has to be divided in thirds to make any meaningful analysis: the small group left that was born before the Great Depression (who paid only a relatively small amount into both SS and Medicaid), the large group born between 1930-1945 (who paid SS all their working lives but only paid into Medicaid about half their working lives), the small group born 1946-1948 (who therefore have paid for both SS and Medicaid their whole lives).

      NOTE 1: We don’t like being called “elderly.”

      No matter which cohort, 97% of the people on Medicare find it is not the “above all” success you seem to think it is. Only 3% of the people on Medicare — apparently very rich — use it standalone. Everyone else either depends instead on retiree insurance (37%), a public Part C Medicare Advantage health plan (28%), private Medigap insurance (20%), Medicaid (18%), the VA (around 1%) or a still working spouse’s insurance (another percent)… or — of those born in the mid 40s — are still working themselves (5%) because the government programs that you think are so great are so bad (or because we knew damn well by the time we were 40 that we could not depend on government).

      NOTE 2: Percentages add up to more than 100% because many Medicare beneficiaries choose more than one supplement

      • Dennis,
        The data are from the Census Bureau. And what is a better word than “elderly”? (I am 60 and will need the appropriate term very soon… )

        • Bill Gardner

          In reverse order

          — We tend to prefer ‘senior’ (or ‘senior citizen’ if senior is likely to be mixed up with a bunch of kids on the way to a prom) 🙂
          — Can you be more specific than Census Bureau for a source. Again I suspect it is measuring apples and oranges

    • “Please let me know whether you agree with Edsall’s numbers.”

      No, the raw data shows a completely different picture.

      Medicare certainly helped the elderly (transfer of funds from young people to older people), but the free market provided a higher standard of living for the elderly permitting, the ability of the elderly to live past 65, have substantially higher incomes during their working years, and have more income in their retirement years. In fact the higher standard of living made retirement for the masses possible. All this was mostly due to a vibrant market place.

    • Just a couple of point:

      A substantial part of the Medicare cuts had to do with reforming and recalibrating the payments to Medicare Part C or Advantage plans. Those plans, based on the American fixation that in all areas of the economy the private sector can do it better, were in fact starting to bleed Medicare revenues, including the Part A Trust Fund, dry. This was because the per capita reimbursement such plans were getting for enrollees was above the region-specific average per capita Medicare payments for those with regular or “classic” Medicare. The payments were excessive, the plans were to a large extent only attracting and keeping relatively healthy Medicare recipients, and not only was 76% of the Medicare population cross-subsidizing 24% of that population, but there was no evidence that (except possibly for some Medicare HMOs) the private sector was showing its magic powers.

      A huge chunk of the Medicare savings in the ACA were related to this problem, and to a lesser extent to limits in payments to a number individual and institutional providers. There is no clear evidence that these reductions in expected future Medicare expenditures will affect services or benefits.

      Not to mention that the huge problem of the Medicare Part D (Pharmaceutical Benefit) “doughnut hole” is fixed in favor of Medicare recipients by the ACA.

      The zero-sum characterization of the real world service availablity effects and of the political effects of the ACA on the Medicare population needs to be thought through and discussed with more knowledge, more discrimination, and less knee-jerk presumption about how this particular major reform was conceived and will impact on the U.S. population.

      • Dear Mr. Eitel

        It is not correct to say “A substantial part of the Medicare cuts had to do with reforming and recalibrating the payments to Medicare Part C or Advantage plans,” unless you define “substantial” as about 30%. By far, most of the $750 billion in cuts – depending on which 10 years you pick — were in payments to hospitals and skilled nursing facilities.

        Further it is both false and not very knowledgeable about the Medicare system to say “Those plans… were in fact starting to bleed Medicare revenues, including the Part A Trust Fund, dry.”
        — The capitation payments for those of us on public Part C Medicare Advantage health plans come out of the two trust funds in the same proportion as fee for service payments come out of them for those Medicare beneficiaries that use private Medigap or retiree insurance as their supplement.
        — The capitation payments did increase between 2003 through today – relative to the amount released for fee for service payments — because the percentage of Medicare beneficiaries on public Part C Medicare Advantage health plans increased from about 5% of the Medicare population to almost 30% of the total number of beneficiaries (and the number of beneficiaries also increased).

        But those funds would have been released at the same pace even if there were no Part C because of the Medicare population increase. And you can’t “drain” the Part B trust fund dry; it is replenished automatically by general revenue.

        Finally you say “but there was no evidence that (except possibly for some Medicare HMOs) the private sector was showing its magic powers.” I am not sure what you mean by that. No evidence of what? Over 75% of the public Part C Medicare Advantage plans are Medicare Advantage HMOs. As the extra capitation payments to Part C plans were cut back to parity in 2011 and 2012 (and I believe they should have been cut simply on a fairness basis) the cuts were felt by mostly the Part C PPOs and PFFS plans set up in 2005 to help the inner city and rural poor.

        Part C HMOs had never received a large percent over 100 in the first place. As of 2013, the Part C HMOs have been cut back to parity, not counting an allegedly illegal demonstration project initiated by the Obama administration (see page 297, second column, of the 2013 MedPAC Report to Congress). Counting the allegedly illegal Obama-administration demonstration project, Medicare HMOs are getting a 3% kicker in 2013.

        I agree that “the political effects of the ACA on the Medicare population needs to be thought through and discussed with more knowledge, more discrimination, and less knee-jerk presumption” but you have to get the facts from the source — not the press — in order to contribute to that discussion

    • Fifty years ago, the elderly were far and away the poorest of Americans. Today they are not and that is because sometimes government really does work.

      That may not be a sure thing, consider:

      I and my brothers and sisters could send 15% of our income to my parents to pay for their living and healthcare and/or we could have them move in with us and do what they can for the family like baby sit, a benefit to us and them. If we do that they have no income included in your chart and so they look on your chart like they are living in poverty. The Government forces us to send the 15% and counts it as income on your chart. In the latter case they are more likely to live on their own this may or may not be a benefit.