Posts Tagged ‘National debt’

Trading Medicare for the National Debt

Wednesday, June 8th, 2011

Slashing the soaring national debt will require some hard choices, but our representatives in Washington, D.C., need to do the right thing.  Writing in the New Yorker, James Surowiecki says that “Multitrillion-dollar piles of debt have a way of making people nervous, so it’s not really surprising that Washington is now in the throes of budget-cutting hysteria.  Republicans risked a government shutdown over a few billion dollars in spending cuts, and are now threatening to refuse to raise the government’s debt ceiling.  The ratings agency Standard & Poor’s lowered its outlook on U.S. debt because of concerns about the long-term budget.

“And Barack Obama has been speaking of the need to eliminate two trillion dollars in federal spending in the next ten years.  Yet, strange as it may sound, the federal government does not have a spending problem per se.  What it has is a healthcare problem.  The cost of most budget items typically rises at a reasonable rate, if at all, but the cost of Medicare, Medicaid, and the tax subsidy for employer-provided insurance has been rising much faster than everything else: in the past forty years, Medicare costs increased 8.3 per cent annually.  If they’re not controlled, Medicare and Medicaid will eventually be by far our biggest expense.  Preventing that is the key to getting our fiscal house in order.”

Representative Paul Ryan (R-WI) has proposed replacing the popular Medicare program by giving seniors less money to cover their healthcare needs.  Ryan wants to replace Medicare with a voucher plan that they would use to purchase private insurance.  This plan saves money because the value of the vouchers would rise at a much slower pace than healthcare costs; the government’s payments to seniors’ healthcare spending would get smaller.  As a result, seniors would have to spend more of their incomes on private insurance and out-of-pocket expenses, or go without.  The Congressional Budget Office (CBO) estimates that Ryan’s plan would significantly increase how much Americans spend on healthcare, since private insurers don’t curb costs as effectively as Medicare.  The upside to the national debt is that taxpayers would foot less of the bill.

According to Surowiecki, “The healthcare bill that Congress passed last spring represents a different approach.  It trims more than four hundred billion dollars from Medicare spending, and contains a host of initiatives designed to make the healthcare system more efficient and effective. In line with that, it creates a body called the Independent Payment Advisory Board (IPAB), which determines how much Medicare will spend annually.  The American healthcare system is riddled with waste and unnecessary and ineffective procedures.  Relative to every other industrialized nation, we spend more and our health outcomes are no better (and often worse).  In American medicine, supply often creates its own demand, and paying doctors on a fee-for-service basis encourages more high-cost procedures.  The IPAB, in conjunction with other cost-cutting provisions in the bill, would look to fix the skewed incentives that lead to overtreatment, bargain for better prices, and insure that we’re spending our money more effectively.  The Affordable Care Act is far from a perfect law, but the CBO estimates that, if implemented as planned, it could cut the long-term deficit by more than a trillion dollars.”

A Wonkbook poll reported in the Washington Post found that 84 percent of Americans oppose the Ryan plan.

The prospect of replacing Medicare with a voucher plan to bring down the nation debt makes a lot of people uneasy.  Americans generally like and trust their doctors and hospitals.  Additionally they like the ability to choose their own doctors, and don’t want them to stop treating Medicare patients because the fees are too low.  Surowiecki concludes that “This is the fundamental dilemma: we’re unhappy about the rising cost of healthcare, but we’re also unhappy about what we would have to do to curb it.  The ideal system, for most voters, would guarantee all seniors reasonable healthcare, stop the debt from getting out of control, and keep paying healthcare providers as before.  The problem is that you can only do two of those things at once.  The debate between Ryan and Obama is a debate over which of the three we’re willing to give up.”