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?
Hereâ€™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% â€” 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 â€œonlyâ€ as much as Medicare spending, theyâ€™d be 1/3 lower than they are.
We donâ€™t have a Medicare problem â€” we have a health care problem.
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 proposalâ€”to provide fixed annual grants to enable Medicare recipients to buy an affordable private insurance planâ€”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.