Grandma Is a Welfare Queen?

John Cogan writes at Wall Street Journal that the old folks are livin’ high on the hog on your tax dollars:

Readers may recall the 1950s TV show, “The Millionaire,” which portrayed stories of individuals who were given a “no strings attached” gift of money by an anonymous benefactor. Each week in one of the show’s opening scenes, a man representing the wealthy benefactor, John Beresford Tipton Jr., knocked on an unsuspecting recipient’s door and announced: “My name is Michael Anthony and I have a cashier’s check for you for one million dollars.”

That TV program is scheduled to return next year as a reality show, and the new recipients will be the typical husband and wife who reach age 66 and qualify for Social Security. Starting next year, this typical couple, receiving the average benefit, will begin collecting a combination of cash and health-care entitlement benefits that will total $1 million over their remaining expected lifetime.

WSJ illustrates this with a cartoon showing a gray-haired couple getting their million dollar check from Uncle Sam while some scrawny children pick through what’s left in a broken piggy bank. Not subtle. Generational warfare, anyone?

Of course, a million dollars doesn’t go quite as far as it did in the 1950s, and I assume (Cogan isn’t entirely clear) that the million dollars is the total amount of Social Security and Medicare Benefits the couple will receive from age 66 to whatever age most 66-year-olds make it to these days. frankly, given the cost of medical care, I’m surprised it isn’t a lot more than a million dollars.

It would take me years to pick apart all the misinformation in Cogan’s column, but let me just start with this paragraph:

Under the federal government’s fee-for-service Medicare program, every time a senior citizen meets with his physician or health-care provider for a check-up, lab tests or surgery, somebody other than the patient foots most of the bill. That such a program should produce runaway costs is hardly surprising.

First, it isn’t the Medicare program that is generating runaway costs. The costs are from the rise in the cost of health care, which is eating or economy. According to a recent report from the Millman consulting group, the average cost of health care for the average family of four has more than doubled since 2002.

Given the recent growling over Paul Krugman I hate to quote him again, but he’s most often the one who comes up with the data I’m looking for, so here he is, from 2009

I notice from comments that a fair number of readers think that Medicare has had runaway costs. What you need to ask is, runaway compared to what?

Here’s the raw fact, from the National Health Expenditure data: since 1970 Medicare costs per beneficiary have risen at an annual rate of 8.8% — but insurance premiums have risen at an annual rate of 9.9%. The rise in Medicare costs is just part of the overall rise in health care spending. And in fact Medicare spending has lagged private spending: if insurance premiums had risen “only” as much as Medicare spending, they’d be 1/3 lower than they are.

We don’t have a Medicare problem — we have a health care problem.

Cogan continues,

Over the years, the government has expanded the type of services covered, such as prescription drugs, and it has assumed a greater portion of the program’s finances. Medicare premiums paid by senior citizens once covered half of the cost of physician and related services. They now cover one-fourth. Copayments once covered nearly 40% of these services’ costs. They now cover only 20%.

Paying half of health care costs in, when, 1968? Versus paying one-quarter now? Given the explosion in health care costs, making the oldsters pay half of their costs today would be the same as putting them on ice floes to die. A lot more of them would simply not be able to afford health care than would have been true 40 or so years ago.

And let us not forget that the Medicare prescription drug benefit was set up by the Bushies to gouge the taxpayers for the benefit of the pharmaceutical industry, by not allowing the federal government to negotiate drug prices. According to Wikipedia, the Department of Veterans Affairs, which does negotiate, spends 58 percent less for drugs than Medicare does.

And the argument for lowering co-pays is that it encourages people to get to doctors while a health problem is small, as opposed to waiting until it’s grown into something nasty and harder to treat. In theory, it should help keep overall costs down, although I haven’t seen the numbers crunched. Which takes us to the “skin in the game” argument —

To fix Medicare, we must move away from the current system of fee-for-services and low copayments. First and foremost, copayments should be increased significantly. Medicare recipients need to have more skin in the game if they are to become cost-conscious medical consumers.

A lot of righties are in love with the “skin in the game” theory, which says that if people had to pay more of their own health care bills they would be better health care consumers, and costs would come down. There are a number of flaws in this theory, which Jonathan Cohn explains. One flaw is that most of us have no way to know what medical care we really need and what care is just a “frill.” We get the medical care our doctors recommend, assuming the managed care plan approves it.

And especially in the age of managed care plans, as individuals in private plans we are hardly in a position to do comparison shopping of medical treatments, assuming we won’t bleed to death first. If you need care beyond what your Primary Care Provider can give you in an office visit, you go to whatever specialist he recommends that is in your managed care network. I can’t imagine how making us pay higher deductibles would make us “smarter shoppers” than we already are.

As Cohn says also, lots of real-world studies have shown that making people pay more for health care sets up a situation in which people spend fewer health care dollars in the short run but more in the long run.

In families with high-deductible plans, kids were less likely to get immunizations and adults were less likely to get cancer screenings. Not only did this seem to jeopardize the beneficiaries’ health, it also called into question the cost savings. After all, as the authors pointed out, it was possible the failure to get preventative care in the first year would lead to bigger, more expensive medical problems down the road.

This was not a surprising finding. The original, gold-standard study on high deductible insurance, also from Rand, found that people couldn’t discern between useful and unnecessary care. More recent studies have suggested that higher co-payments on prescription drugs discouraged seniors from taking medication to control high-blood pressure.

In theory, it ought to be less expensive overall to at least not discourage people from seeking checkups and health screenings and seeing a doctor for the small stuff, instead of waiting until a condition is really awful and more expensive to treat. And finally,

Giving people more skin in the game has distributional consequences. It shifts the burden of medical expenses onto those people with the most serious medical problems, which is, arguably, what insurance is designed to prevent.

See also Ezra Klein for more data and graphs that pretty much blows Cogan’s argument out of the water.

Yet Cogan continues,

The higher copayments can be offset by reducing Medicare premiums and offering more Medicare health plan choices. Rep. Paul Ryan’s proposal—to provide fixed annual grants to enable Medicare recipients to buy an affordable private insurance plan—is a fiscally sound way to achieve this outcome.

So to reduce costs, Cogin says, we must rely more on private insurance, even though the cost of private insurance has been rising more than Medicare. And we will offset rising copayments through lower premiums, even though every independent analyst who has looked at Ryan’s plan has said the subsidies it promises to provide won’t come anywhere near paying for those private insurance premiums, and seniors will end up paying substantially more for insurance than they were under Medicare.

Let’s hop over a lot of the nonsense and go right to the end —

So today’s seniors need to consider how they want the script for “The Millionaire” sequel to be written: There’s a knock at the door. We now know that on the other side there’s a check for a million dollars. When the door opens, do we really want to see our children, under the commanding gaze of Uncle Sam, presenting us with that check?

The reality is, that if we listen to people like Cogan (a fellow at the aptly named Hoover Institute), when the old folks die, instead of getting an inheritance their children will be stuck paying for the care they received before they died. In 2007, medical care cost for the last six months of life was averaging $36,000. Right now, Medicare absorbs most of that. Under Ryan’s plan, a large chunk of those future costs will be shifted to the “health care consumer,” which means the heirs will pay for it.

Soylent Green, anyone?

I don’t have the strength to go into Cogan’s ideas about Social Security, but he honestly thinks that privatizing the Social Security system “would allow younger workers to become millionaires through their own hard work and thrift” — as opposed to, I assume, the old folks who are greedily pigging out at the public trough. Seriously.

25 thoughts on “Grandma Is a Welfare Queen?

  1. No, I think it’s Grandpa’s a Welfare buck and a pimp, and Grandma’s a Ho!

    I’d like to take an analytical look at the (fictional) movie “Soylent Green” and see where, compared to our times, people decided they’d prefer to hear Beethoven, Tchaikovskyh and Grieg as they were drugged to death and be turned into crackers than face the everyday world.

    My guess it, it’s coming soon, if we haven’t already passed it.

    By the way, did anyone ever see the label on “Soylent Green?”
    Who was the manufacturer?

    Maybe it was “RYAN’S Soylent Green.”

  2. I’m pretty stunned by the whole intent behind Cogan’s article. Having a million dollars worth of benefits is not the same as getting a million dollars in cash (or a check, as the case may be). There’s a lot to pick at here.

    I only want to add something to your last paragraph. Investor’s Business Daily makes the WSJ look like the voice of moderation. A week or two ago, I read an article in the IBD extolling the wonders of Chile’s privatized social security system. Of course, the IBD thinks it’s just swell, and we ought to do that here. I remember reading something about Chile’s adventure in privatization years ago, that didn’t have quite the same glowing conclusion. Unfortunately the information is not at my fingertips, and it wouldn’t matter anyway, because, bastion of Democracy that it is, the IBD has no Letters to the Editor section. Their fair minded and omniscient editors are always right, so why would they need any correction from their readers?

    I guess with Medicare on the docket in DC, the WSJ is being timely in doing what it can to sway the argument in their favor.

  3. Consider the source: WSJ. This is the same stock-market-booster rag that supposedly was covering the financial industry. How did their awareness work out on that one? Anything “pro-business” is presented as good, because it REALLY IS good for them and their audience/supporters/advertisers/banker buddies. Just another case of “follow the money” journalism.

    Facts just do not matter to these people. Ordinary people do not matter to these people. We just need to turn over everything to a nursing home, a funeral chain and a few financial fraudsters, then die before we collect any Social Security or employer portion of retirement benefits. Oh, and we should all take out reverse mortgates, too, just to help pay for everything that we didn’t have enough cash savings to pay for.

    I really wonder how many baggers have the kind of money that would be necessary to survive in their Galtian fantasy world.

  4. This is really stupid. The WSJ makes it sound like this couple gets handed a suitcase with $1 million in it. They don’t. Instead, two people get some money and some healthcare. Figure the husband and the wife both live another 12 years. then divide $1 million by 12, then split it in 2 (half to husband, half to wife). It works out to about $42,000 per year per person, in money AND health benefits.

    That’s not an outrageous amount, especially when you consider health care costs.

    • It works out to about $42,000 per year per person, in money AND health benefits.

      And, of course, that’s an average. I’m guessing that most seniors get a great deal less than that, and others require hundreds of thousands of dollars in medical care, for cancer treatment or long-term hospitalization.

  5. OK, I pay $96m or $98 a month for Medicare Part B out of my SS check (I’m 70). And I suspect that over the remaining years of my life, I will probably get more in bennies than I will pay in. But, and this is a big BUT, over my working life, from age 15 to age 62, I contributed a lot more to the well being of this country than I was ever paid.

    So the equity in the country went up between 1956 and 1003 and now I am drawing on that equity.

  6. I was thinking about a commercial for the 2012 election. Bear with me.

    A very young teen rushes into a hospital room and hugs Grandma in a typical hospital bed. IV drip and heart monitor beeps. Mom of the you girl follows at a more dignified pace and tells the young girl to leave – she has to talk to grandma.

    Gist of the discussion – Mom found out from Grandma’s doctor that heart surgery can save her life bot she’s not covered. Privatized Medicare won’t pay, and grandma couldn’t afford the supplemental policy she needed. Under her medical condition it’s a death sentence. Mom offers to pay, clearly disparate for her mother’s life. How would you pay? You can’t possibly borrow that much – you have no equity in the home… Only one place – the College fund set aside for the granddaughter (now absent from the room).

    Grandma veto the only lifeline she has with the injunction, “When Kathy is old enough, after she graduates from College, she should know the price we paid. Because once this nation cared about her people and it must care again. The change will have to come from her generation – for both of you.”

    Cut from the hospital room to scroll a description of the Ryan Plan specifics with the sound of the heart monitor in the background – changing to the constant ‘flat-line’ tone at the end.

    I think the whole play could be done in a minute and be effective and persuasive across two generations. Because the plight of seniors does fall on their children.

  7. One thing I have in common with wingnuts and baggers (it’s okay, they oppose having to be PC) is that I believe our society is in serious decline. We blame different people and political movements, but sometimes it’s hard not to remember that great Molly Invins and say, “Just stick a fork in us, because we’re done.”

    I am a simple man so I tend to look at things that are readily apparent, like our priorities, for example. I am not a Christian, but I seem to remember something to the effect that we should “honor our father and mother”. I also seem to be entertaining an unusual definition of the word “civilized”. So it is altogether understandable that I have a notion that part of the role of government, the aim of society and the requirement of civilization is the care of the elderly and the less fortunate. If I were to take the socialist view as exemplified by an historical figure who once remarked, “From whom much is given, much is reguired”. (I am sure the quote is imperfect, but you get the reference.) I would certainly oppose the tack that certain elements of our society have chosen.

    As a purely practical matter, it makes perfect sense to look at the alternatives. I have the real life experience of having cared for my elderly mother for just over four years. She was a Reagan Republican, who never thought to consider the contributions of FDR and LBJ until it was obvious at then end that they had saved her bacon. And they saved mine as well. It would have been a severe financial hardship to keep my mother out of a nursing home without SSI and Medicare. It may be a moot point because she probably would have died bankrupt a decade or two before the end of her long life. As it was, she had a pretty good run. I freely admit that the support that she got from SSI and Medicare also helped me, because I didn’t have to choose between bankruptcy and seeing my mother suffer.

    So what kind of “beacon on a hill” do some of us imagine? 45,000 Americans die each year because of lack of medical care. Are there those who would double or triple that figure? Should we lower the life expectancy? Should we double the poverty rate? What use is literacy for the “servant class” anyway? We need to find out who we are again.

  8. For those who have forgotten, the Wall Street Journal is now owned by Rupert Murdoch.

  9. @goatherd: Luke 12:48 “From those to whom much has been given, much is expected”. It’s one of my all time favorite bible verses. It’s translated a number of ways, this is the version that sticks in my head.

  10. Old folks need to have more skin in the game? Is he kidding me? I’m an R.N. and the medical industry feeds at the trough of old people. Medicare recipients equal INCOME, large INCOME, to doctors, hospitals, pharm cos., etc. and trust me, they milk Medicare for as much as they can get. It’s not the old folks demanding services they don’t deserve, it’s the medical providers who do things like order unnecessary tests, overtreat, overprescribe, even schedule redundant office visits because every time they do so CHA-CHING, there’s money put in the till. People think it’s because MDs are practicing defensive medicine. Not exactly. There’s plenty of physicians (especially specialists) making fat bank by doing things like performing coronary artery bypass grafts on 89 year olds (a 6 figure surgery) instead of medically treating them and making them comfortable in their last days. I’ve seen it plenty.

  11. I went through similar situations (goatherd mentioned) with my Mom and brother.
    It was very unpleasant.
    Kinda along this line, Florida has a new law requiring those applying for welfare to take a drug test. The applicant is required to pay for the test, and will be reimbursed if he / she passes.
    My unofficial poll shows this idea is VERY popular with those I know.
    I, of course, think the idea is beyond lame and cruel.
    When I was a kid, my Mom made the bad choice of divorcing my Dad (on the advice of her mother and crazy sister). This put my Mom in the position of a single mother with no skills beyond being a nurses aid ( Central Florida, 1960’s) with 3 kids. Then she had a series of health issues that forced our family into poverty and on the welfare train. I remember the humiliation of going to the county facility to pick up powered milk, rolled oats, and blocks of cheese.
    I don’t understand the logic of this new law. Almost everyone I know thinks decriminalizing marajuana is a good idea.
    Surveys show that over 40 % of Americans use recreational drugs; if Alchohol, tobacco, and caffein are counted, that number jumps considerably.
    I suppose the image conjured by the law is a bunch of lazy non-whites sitting around popping pills or toking the day away; which suggests there is a them vs. us mentality.
    Once again, this law has not been fully thought through. Those who cannot access the basic necessities of life will be forced to desperate Measures.At that point, simple help will morph into law enforcement and incarceration.With a still struggling economy, many families are having a hard time, especially with the high cost of fuel and basic needs.
    The class who wishes to do this is always screaming that we are a “Christian” nation. I don’t recall Christ requiring drug tests for the people he fed when he multiplied the loaves and fishes. Rumor has it he will return sometime in October, perhaps we can ask him then.

    Chief, you hit the nail on the head.
    Great comments all around.

  12. Doug,
    Good ad! You should make it yourself, if you can’t get someone to do it.

  13. goatherd,
    Yeah, we’re just about done.
    Well, first, we need to realize that all of us are responsible, in one way or another other, for what’s happened.
    But, I think it stems from two things:
    First, the “Two Santa Theory,” which I’ve mentioned before.
    Democrats, for all of their faults, from FDR to LBJ, had, when presenting great social programs like SS, Medicare, Medicaid, etc., made sure that they were paid for.
    Republicans realized that people liked those kinds of programs, and it was hurting them badly. And what they decided to do was to give people what they want WITHOUT paying for them – like tax cuts, etc.
    So, since Reagans time, up through Little Boots, Republicans exploded budgets and debt and Democrats had to come in and reign them in, and hence weren’t able to expand any social programs – like Medicare for all.
    You keep running up debt, and eventually you are where we’re at. And this, of course, feeds nicely in Grover Norquists bathtub.
    Now, we’re not at the crisis point that the Conservatives keep screaming about, but without doing some things about it, it will get worse.

    So, that’s the first part of the picture. Now, the second point is where you add a lashback from Conservatives to the ’60’s and ’70’s, where people fought for Civil Rights, Womens Rights, and the right NOT to go into the military to get killed in a stupid and futile war. We had a powerful middle class then. And a powerful middle class starts looking out for other people besides themselves. If you’re poor, you don’t give a crap about much besides you and yours. So, Conservatives went out and over the last 40 years have virtually eliminated America’s middle class.
    Now, throw in a Democratic Party that lost its way, and left its home on Main Street for the cash, glitz and glamour of Wall Street, and you have people who vote against their best interests because they really don’t see anyone in their corner, and hence the Republicans “divide and conquor’ approach stayed effective, using race, homosexuality, age, xenophobie, etc.
    That’s as brief a picture as I can paint, and it’s a bleak one. We might still have a chance to improve out lot, but time is running out and I’m not confidant.

  14. And another thing: The “skin in the game” notion of medical payment is an utter delusion or a simple lie disguised as reasonableness. I go for number 2, BTW.

    It is not possible to “price shop” medical procedures unless they are discretionary things like plastic surgery. Wait till your child is projectile vomiting has his eyes crossed from intra-cranial pressure. You are not going to comparison shop surgeons or facilities. You are going to go with the doctor you know, the surgeon you have had past success with, and be glad you have insurance. Most people never know that moment and never have that expense. That is why insurance works: total costs are spread out over large populations, and catastrophic events become ripples in the cash pool. When you remove the likely frequent users into a pool of their own, of course it will have higher expenses. That is the group insurance companies want to dump on the government so that they can skim the cream off the generally lower-frequency users. The real “skin in the game” is the way the insurance companies and their hired legislators and lobbyists want to skin us all when we become high-cost users.
    When you go to the doctor, a recommended set of blood tests is handled by the doctor’s usual lab that picks up daily. How are you supposed to shop around for an accurate or more affordable lab to do exactly the tests checked off on the form? How can you know?

    Who wants low-bid surgery? “Come on out back, young fella. I just sharpened the scythe last week. Fix ya right up here!” Going overseas for major surgery was quite fashionable a couple of years ago. I have not heard much about it since then, though. And good luck on recovery if something goes wrong in Cheapsliceistan.

    The funniest part, though, is the diversion of SS funds into private accounts. Was Cogan institutionalized during the episodes of the last couple of years? Can he seriously think what he suggests is anything short of lunacy? Put the money where there is even less oversight. At least we got some interstate highways and other infrastructure out of our taxes. I’d hate to buy another Goldman employee a house in the Hamptons. The gated communities I’d suggest for Cogan and his ilk are located in upstate New York, too. Around Ossining.

    • Was Cogan institutionalized during the episodes of the last couple of years? Can he seriously think what he suggests is anything short of lunacy?

      I did some checking on Cogan. He appears to be a 50-something fellow who has served Republican administrations in a variety of capacities. No surprise, he was on George W. Bush’s Commission to Strengthen Social Security. He also serves on a number of corporate boards, including at least one corporation in the pharmaceutical industry. And, of course, there’s the Hoover Institution, a long-time generator of crackpot right wing ideas.

      “It is difficult to get a man to understand something when his job depends on not understanding it.” — Upton Sinclair

  15. The other night Jon Stewart, while eviscerating Fox News for their attempt to gin up a scandal about a rap poet going to the White House, complained that they had become so lame that it wasn’t even work to make fun of them anymore. It’s like they were just ‘phoning it in’ and that took a lot of the fun out of it for Stewart in ridiculing them. When he showed a clip of one of their personalities doing the exact thing he had said he would never do, Stewart said it took longer to air the clip than it did to find it.

    I kind of feel the same way about the Wall St. Journal editorial page. It used to be they at least tried to appear as intelligent, business-oriented conservatives, even if they often were really just propagandists. But lately they just print any old crap. You don’t even need to understand the issue to spot the lies and BS anymore – the columns are often self-contradictory.

    It’s like, now that they’ve fully realized their dream of creating a sustainable market of people inside their bubble that just read and watches Murdoch vehicles, they don’t even have to pretend to be plausible anymore. Their audience will absorb anything they spew, and it doesn’t have to withstand the slightest critical thought, because they won’t have any.

  16. erinyes …That’s a shame about the drug testing for public assistance …The unspoken code in plain english is…”Don’t feed the porch monkees”. Sad to say, but that’s the absolute truth to the reasoning behind Florida’s decision to implement drug testing. If you can’t stop them with poll taxes or literacy tests..then just starve them out of the state.

    I see where you say that potential recipients who pass the drug test will be reimbursed the cost of the test…so that means that the taxpayers will pay for the cost of the test…and Solantic will get all their money either way.

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