Health-care debate: a chance to get past paralysis

It took decades to get a law enacted. But if we're going to rethink the federal role here, should we also stop having the feds favor companies with tax breaks?

President Barack Obama signed health-care legislation in 2010  with 11-year-old Marcelas Owens of Seattle, left, looking on.

President Barack Obama signed health-care legislation in 2010 with 11-year-old Marcelas Owens of Seattle, left, looking on. Pete Souza/White House photo

The U.S. Supreme Court's current consideration of federal health-care legislation has triggered thoughts not only about health care but other policy areas where reconsiderations might be in order.  How should things work?

First, health-care and other so-called entitlements programs.

President Franklin Roosevelt's Social Security legislation, passed in 1935, was the landmark measure that gave the federal government a universal, safety-net function for the first time. The country was deep in depression and FDR wanted, most of all, to provide a safety net for needy citizens.  But the tradition had been for families, churches, charities, and localities to fill this role. He feared that a federal program benefiting needy citizens only could not gain majority support in the country or Congress.  So Social Security was designed to be "universal" — that is, benefiting every citizen, regardless of income.

Roosevelt was right.  A universal Social Security program passed the Congress and has benefited every retiree since. It has been financed by payroll taxes, withheld up to a worker's capped income level. Many retirees have thought that they had individual Social Security accounts to which they contributed over a working lifetime and from which they would derive benefits after their retirement.  (You can get an earnings statement from the Social Security Administration showing your contributions year-by-year. But your total contributions will never equal your eventual benefits. The eventual benefits will be small, if you die soon after retirement, or ample, if you are long lived). Social Security is an income-transfer program.  Its benefits are received by eligible senior citizens. It is financed by younger working citizens.

Depression-era workers were big Social Security winners. They contributed for only a few years, but got benefits over the rest of their lives. I can recall former Council of Economic Advisors Chair Walter Heller telling me, during his retirement, that he had received many times his total contributions to the system. My own Depression-born generation had a low birthrate and, thus, we were no great burden to the big wage-earning boomer generation behind us.

Our benefits begin to exceed our lifetime contributions about 10 years into retirement.  But demographics, in the end, rule. The high-birth-rate boomers are now entering retirement but there are not enough working-age Americans to finance their benefits at current levels.

How to address this problem? You could change Social Security from a universal program, benefitng everyone, to a needs-based program, as FDR originally considered. But public opinion would not accept that. The other options are straightforward:  Reduce benefits slightly; raise the eligibility age slightly; adjust the annual cost-of-living adjustments slightly downward; increase the amount of salary income subject to Fed/FICA withholding.  A mixed package, including some or all of the above, would fix the problem immediately. But, as we have seen, neither successive presidents nor a congressional majority have had the guts to do it. It will happen, however, when and if enough retired boomers and others become sufficiently alarmed to force their elected leaders to act.

President Lyndon Johnson designed the 1965 Medicare program on the model established 30 years earlier by his hero FDR.  He made it universal, with premiums to be paid by all during their working lives and benefits to be received by all over 65. A supplementary prescription drug benefit was added during the George W. Bush presidency, supported in particular by Democratic Sen. Ted Kennedy, paid for partially by premiums deducted from retirees' monthly Social Security payments. Johnson added in 1965 a Medicaid program designed wholly to benefit low-income Americans.  It is administered and partly financed by the states, which offer differing benefit levels.

Medicare is in more difficult financial condition than Social  Security. A combination of the same fixes would have to be applied to achieve long-term stability.

Over the years leaders of both political parties, of many interest groups, and in many non-profit and academic institutions strove for a federal health-care program which would provide benefits to all Americans, of all ages. In the 1950s and early 1960s, many of those who had backed Medicare proposed a universal, "single-payer" federal program, which would be similar to those in the United Kingdom, Canada, and many other countries.  There would be a government-run program that would, in effect, put everyone into a Medicare-like system.  The labor movement supported the concept.  It appeared in several Democratic national platforms.  But such a program could not be enacted, even when Democrats held the White House and congressional majorities.  There were financing problems.  Medicare-level payments to health-care providers (i.e., doctors, hospitals, laboratories, etc.) were not covering the cost of the services rendered. Non-Medicare patients and insurance companies were paying higher fees to subsidize Medicare and Medicaid patients.  If everyone shifted to a government-run program, therapies and procedures eligible for coverage either would have to be reduced or taxes would have to be raised sharply.


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Comments:

Posted Fri, Mar 30, 9:59 a.m. Inappropriate

The Afforadable Care Act is complex. So correct me if I'm wrong, but my understanding is that a catastrophic plan will be available along with the four others (Bronze, Silver, Gold, and Platinum) for purchase in the state exchange. It will be available in the individual/family market to those up to age 30 and to those who are exempt from the mandate to purchase coverage of other plans because their income is low.

Posted Fri, Mar 30, 10:54 a.m. Inappropriate

As usual, where to even start with this TVD column in terms of inaccuracies and unfounded and misleading statements. Most opinion writers recognize that they can't be expert in all fields. A big part of TVD's problem is that he feels he can write about everything knowledgably and accurately. That's impossible.
1) There will be enough workers in the future to finance current Social Security benefits. But the cap on income subject to the payroll cap has fallen below historical levels in terms of taxing at least 90% of wage income. If that cap is raised, that solves most or all of the long-term shortfall.
2) There's no need to raise the SS eligibility age, which already is going up to 67. And it's terrible policy besides. TVD and others who propose this never explain how people are supposed to wait and work longer to support themselves when it's become difficult or impossible for people in their 50s and 60s to find decent jobs with benefits, given rampant age discrimination.
3) The "same fixes" wouldn't work for Medicare, whose problems are part and parcel of the larger, profit-motivated, insanely costly U.S. health care system. The Affordable Care Act already contains many cost-saving features for Medicare and the rest of the health care system. Here is a recent article I wrote on 10 measures that would save Medicare money and improve quality of care that would not simply shift costs to vulnerable seniors, which is what TVD and his cronies propose to do.
http://managedhealthcareexecutive.com/savemedicare
4) U.S. private insurers, like all payers in all advanced countries, refuse to cover medical services they consider "not medically necessary" or experimental, etc. The U.S. government single-payer insurer, Medicare, actually is more generous in covering many services than private insurers are. On top of that, polls in Canada, Germany, France, Australia, Britain, etc. etc. consistently show that citizens in those countries are more satisfied with their national health care system than Americans are. And Medicare beneficiaries are more satisfied with their health care than Americans under age 65 in private insurance are. So much for that shopworn shibboleth.
5) TVD clearly has no understanding of the Clinton health plan, which I covered extensively at the time. I don't recall any significant concerns raised about possible corruption in the regional purchasing alliances.
6) Dick Nelson is correct that starting in 2014 under the Affordable Care Act, individuals and small employers buying coverage through the state health insurance exchanges will be able to buy a basic bronze plan that's relatively comprehensive but will feature higher cost-sharing.
7) Notice the disconnect between TVD's critique of the Clintons supposedly failing to consult with Congress on their plan, and his critique of Obama for not developing his own plan and relying on congressional committees to do so. You can't have it both ways, TVD.
8) As I've pointed out several times, Karen Tumulty in Time reported authoritatively that in May 2009 President Obama met with GOP leaders and offered them restrictions on med mal suits in exchange for their support for a reform bill, and they walked away. Obama and Baucus would have made big concessions to the GOP for their support but the GOP was only interested in killing reform and making Obama a one-term president. BTW, the Obama administration did successfully reach out and get broad health care industry support for the reform bill. It would never have passed otherwise.
9) The ACA does allow insurers to sell policies across state lines, in a carefully regulated approach. The Republicans want essentially unregulated national sales, which most knowledgable insurance regulators and experts will tell you would be a consumer disaster.
10) President Clinton didn't make his push for health care reform until after tackling the budget and NAFTA in his first year. But the toxic political fallout from those two efforts made it impossible to move health care legislation. TVD ignores the fact that Obama moved major economic legislation in 2009 (the stimulus package, auto industry bailouts, etc.) before tackling health care. But a fair look at what's happening during his presidency shows that waiting longer on health care would not have helped because Republicans were determined to block him, a fact which TVD refuses to face.
Overall, Crosscut would be better served limiting opinion writers to fields in which they have genuine expertise.

Posted Fri, Mar 30, 11:42 a.m. Inappropriate

Harris, if your health care facts rival your social security facts then your beef with TVD is based on differing opinions, not differing facts.

Posted Fri, Mar 30, 12:01 p.m. Inappropriate

Not being an expert, I thought that the article introduced some interesting ideas; but then read "Let free competition reign and prosperity ensue". Assuming that opinion is indicative of the depth of reasoning in the article, I can't give the rest of the ideas any credence.

psj

Posted Fri, Mar 30, 12:29 p.m. Inappropriate

Thanks for your comments. The Obama health-care plan, to my understanding, does make catastrophic coverage available to certain persons through a state exchange. The catastrophic coverage I am talking about, however, would be universal and provided to everyone, just as Medicare is provided to those over 65. This would make moot the issue of compelling anyone to buy a commercial product. With a reasonable deductible, the federal-budget costs of universal catastrophic coverage would be comparatively small. But it would fill a vital need for all citizens.

As to Meyer's usual broadsides, I can only offer facts as I know them
and my interpretations of those facts. I am of course not ignorant of the subjects of which I write. I am a student of New Deal history and was for many years a member of the executive committee of the Roosevelt Institute, which makes the Four Freedoms awards and is affiliated with the FDR Library at Hyde Park, NY. I was assistant to Vice President Humphrey during the introduction and passage of Medicare and Medicaid. I was principal author and/or represntative of the Presidential nominee in preparing several Democratic national platforms which included health-care planks. I was president of a Democratic policy institute which published
health-care monographs. I served for several years on the four-person board of a non-profit entity established by Sen. Ted Kennedy to develop health policy. While running a D.C. consulting firm, I dealt with
clients in the health sector and, additionally, wrote about health and other issues in a regular newsletter for institutional investors, in
a column in each issue of Financial World magazine, and in essays for
national newspapers. So I am not shooting from an uniformed hip when I discuss health-care issues. Those looking for me to pursue a straight partisan or ideological line on health or other issues will be disappointed, however.

Posted Fri, Mar 30, 2:35 p.m. Inappropriate

TVD, citing your bonafides from decades ago obviously does not make you an expert on the Clinton plan or the Affordable Care Act (given your many factual misstatements and oversights) or many other issues you pontificate about. And it doesn't even make you an expert on the history and politics of Medicare's creation, since you refuse to acknowledge the plain history that Medicare was a Democratic partisn achievement that conservatives bitterly opposed and not a single Republican co-sponsored. How about for once addressing facts and evidence that don't fit your arguments (facts as documented rather than "facts as you know them"), instead of dismissing criticism as partisan sniping? In fact, the Affordable Care Act would require that nearly everyone have at least basic coverage, both the individuals and small groups in the state insurance exchanges and other Americans who have coverage through their employers. Having the government provide basic coverage directly to everyone through a Medicare-type program would be fine by me, but try getting that through the Republicans in Congress. You're still not dealing with the reality of their total intransigence. You're also not realistically facing the substantial taxpayer-borne cost of such a program. While it might well be a good deal for Americans and the country, it would require a sizable increase in taxes to pay for it. And in case you haven't been paying attention, Republicans and conservative Democrats are saying NO NEW TAXES.

Posted Sun, Apr 1, 8:27 p.m. Inappropriate

I have to agree with psj. An interesting article but I also said WTF when I read, "Let free competition reign and prosperity ensue".

Such a broad Republican message point with no explanation. Plus it's just completely untrue. When the S&Ls; were set 'free', a few years later, we got the S&L; crisis. When the energy markets were set 'free', a few years later we got the Enron crisis. (which cost Seattle City Light $1.7 billion btw). When the mortgage markets were set 'free', a few years later, we got the meltdown of the entire world financial markets. When the nuclear industry was set 'free' in Japan, we got the Fukushima meltdowns, which will be a mess for at least 2 decades.

The most unforgivable part of this article is that TVD should know better. He has deep knowledge of policy matters as he so states. Yet it seems like the people who have worked in DC are the biggest suckers out there, swallowing this notion of 'free markets'.

There is no such thing as a free market. Without government regulation you have no market. Without regulation, would a bank even exist? The only reason the dollar has any value is because of the good faith and credit of the United States Government, NOT because of Goldman Sachs, Bank of America or any other financial corporation.

Would anyone be stupid enough to put money into 'Paul Ryan's Free Market Bank'? This bank would of course not be ensured by the FDIC. A bank without regulation is just legalized theft. Money goes in but it never comes out. It's just like Bernie Madoff. That's the free market. Anyone who thinks a 'free market' exists is either delusional or pumping the propaganda to get others to believe in free markets. They don't exist.

Posted Sun, Apr 1, 11:20 p.m. Inappropriate

Richard, TVD should know better? If he has "deep knowledge" of policy matters, how could he make such a deeply bogus statement? You're being way too generous here. Let's honestly call out b.s. without being so Northwest Nice.

Posted Tue, Apr 3, 5:12 a.m. Inappropriate

Harris. I agree. I am simply stunned when people use such phrases as the 'free market'. It instantly shreds one's credibility to use such republican party one-liners.

Take for instance the practice of insurance companies to drop people who have paid insurance premiums for years after they require major medical care. That's the 'free market' and polling shows the public is happy to have that regulated and eliminated, while the 'free market' advocates want to preserve that practice.

Another application of this practice would be for people to quit paying their mortgage and keep living in their homes. After all, why should banks expect money from homeowners? This isn't much different from insurers dropping people after paying decades of insurance payments and providing nothing. So why should banks expect payments for decades just for providing housing?

So "Let free competition reign and prosperity ensue" is indeed an absurd phrase. But it seems like people who do time in DC are prone to accept the absurd and even advocate for it.

Posted Wed, Apr 11, 10:52 a.m. Inappropriate

As Dick Nelson and I pointed out, contrary to what TVD claimed, the Affordable Care Act allows people to satisfy the individual mandate by obtaining what is essentially catastrophic coverage. See this AP article today.
http://seattletimes.nwsource.com/html/nationworld/2017948426_apussupremecourthealthcaremisunderstanding.html?prmid=4748

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