Social Security/Medicare: The Easy Fix
(1)
Why Medicare Is the Solution - Not the Problem
Robert Reich
Robert Reich's Blog
July 22, 2011
http://robertreich.org/post/7941066493

Not only is Social Security on the chopping block in
order to respond to Republican extortion. So is
Medicare.

But Medicare isn't the nation's budgetary problems. It's
the solution. The real problem is the soaring costs of
health care that lie beneath Medicare. They're costs all
of us are bearing in the form of soaring premiums, co-
payments, and deductibles.

Medicare offers a means of reducing these costs - if
Washington would let it.

Let me explain.

Americans spend more on health care per person than any
other advanced nation and get less for our money. Yearly
public and private healthcare spending is $7,538 per
person. That's almost two and a half times the average
of other advanced nations.

Yet the typical American lives 77.9 years - less than
the average 79.4 years in other advanced nations. And we
have the highest rate of infant mortality of all
advanced nations.

Medical costs are soaring because our health-care system
is totally screwed up. Doctors and hospitals have every
incentive to spend on unnecessary tests, drugs, and
procedures.

You have lower back pain? Almost 95% of such cases are
best relieved through physical therapy. But doctors and
hospitals routinely do expensive MRI's, and then refer
patients to orthopedic surgeons who often do even more
costly surgery. Why? There's not much money in physical
therapy.

Your diabetes, asthma, or heart condition is acting up?
If you go to the hospital, 20 percent of the time you're
back there within a month. You wouldn't be nearly as
likely to return if a nurse visited you at home to make
sure you were taking your medications. This is common
practice in other advanced countries. So why don't
nurses do home visits to Americans with acute
conditions? Hospitals aren't paid for it.

America spends $30 billion a year fixing medical errors
- the worst rate among advanced countries. Why? Among
other reasons because we keep patient records on
computers that can't share the data. Patient records are
continuously re-written on pieces of paper, and then re-
entered into different computers. That spells error.

Meanwhile, administrative costs eat up 15 to 30 percent
of all healthcare spending in the United States. That's
twice the rate of most other advanced nations. Where
does this money go? Mainly into collecting money:
Doctors collect from hospitals and insurers, hospitals
collect from insurers, insurers collect from companies
or from policy holders.

A major occupational category at most hospitals is
"billing clerk." A third of nursing hours are devoted to
documenting what's happened so insurers have proof.

Trying to slow the rise in Medicare costs doesn't deal
with any of this. It will just limit the amounts seniors
can spend, which means less care. As a practical matter
it means more political battles, as seniors - whose
clout will grow as boomers are added to the ranks -
demand the limits be increased. (If you thought the
demagoguery over "death panels" was bad, you ain't seen
nothin' yet.)

Paul Ryan's plan - to give seniors vouchers they can
cash in with private for-profit insurers - would be even
worse. It would funnel money into the hands of for-
profit insurers, whose administrative costs are far
higher than Medicare.

So what's the answer? For starters, allow anyone at any
age to join Medicare. Medicare's administrative costs
are in the range of 3 percent. That's well below the 5
to 10 percent costs borne by large companies that self-
insure. It's even further below the administrative costs
of companies in the small-group market (amounting to 25
to 27 percent of premiums). And it's way, way lower than
the administrative costs of individual insurance (40
percent). It's even far below the 11 percent costs of
private plans under Medicare Advantage, the current
private-insurance option under Medicare.

In addition, allow Medicare - and its poor cousin
Medicaid - to use their huge bargaining leverage to
negotiate lower rates with hospitals, doctors, and
pharmaceutical companies. This would help move health
care from a fee-for-the-most-costly-service system into
one designed to get the highest-quality outcomes most
cheaply.

Estimates of how much would be saved by extending
Medicare to cover the entire population range from $58
billion to $400 billion a year. More Americans would get
quality health care, and the long-term budget crisis
would be sharply reduced.

Let me say it again: Medicare isn't the problem. It's
the solution.

[This is drawn from a post I did in April, also before
current imboglio]

(2)
The Only Social Security Reform Worth Considering:
Raising the Ceiling on Income Subject to It
Robert Reich
Robert Reich's Blog
July 22, 2011
http://robertreich.org/post/7940507194

The very idea that Social Security might be on the
chopping block in order to pay the ransom Republicans
are demanding reveals both the cravenness of their
demands and the callowness of the opposition to those
demands.

In a former life I was a trustee of the Social Security
trust fund. So let me set the record straight.

Social Security isn't responsible for the federal
deficit. Just the opposite. Until last year Social
Security took in more payroll taxes than it paid out in
benefits. It lent the surpluses to the rest of the
government.

Now that Social Security has started to pay out more
than it takes in, Social Security can simply collect
what the rest of the government owes it. This will keep
it fully solvent for the next 26 years.

But why should there even be a problem 26 years from
now? Back in 1983, Alan Greenspan's Social Security
commission was supposed to have fixed the system for
good - by gradually increasing payroll taxes and raising
the retirement age. (Early boomers like me can start
collecting full benefits at age 66; late boomers born
after 1960 will have to wait until they're 67.)

Greenspan's commission must have failed to predict
something. What?

Inequality.

Remember, the Social Security payroll tax applies only
to earnings up to a certain ceiling. (That ceiling is
now $106,800.) The ceiling rises every year according to
a formula roughly matching inflation.

Back in 1983, the ceiling was set so the Social Security
payroll tax would hit 90 percent of all wages covered by
Social Security. That 90 percent figure was built into
the Greenspan Commission's fixes. The Commission assumed
that, as the ceiling rose with inflation, the Social
Security payroll tax would continue to hit 90 percent of
total income.

Today, though, the Social Security payroll tax hits only
about 84 percent of total income.

It went from 90 percent to 84 percent because a larger
and larger portion of total income has gone to the top.
In 1983, the richest 1 percent of Americans got 11.6
percent of total income. Today the top 1 percent takes
in more than 20 percent.

If we want to go back to 90 percent, the ceiling on
income subject to the Social Security tax would need to
be raised to $180,000.

Presto. Social Security's long-term (beyond 26 years
from now) problem would be solved.

So there's no reason even to consider reducing Social
Security benefits or raising the age of eligibility. The
logical response to the increasing concentration of
income at the top is simply to raise the ceiling.

[This post is drawn from one I posted in February -
before Social Security was as on the chopping block]

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