Let the Means Testing Begin - Sebelius Proposes Medicare Changes

I have always felt that means testing for Medicare and Social Security was inevitable.  Liberal groups have opposed the idea because means testing changes the entitlement programs from covert wealth redistribution schemes to overt wealth redistribution schemes. Liberals believe being overt, i.e. "transparent" about the wealth transfer would undermine popular support.  To which I reply, "Great, who cares?"  The programs are going bankrupt, popular support or otherwise, making them less important to the social fabric of the middle class, especially upper middle class will allow for some sensible discussion of further reform.  A recent letter to the NYTimes captures the liberal thinking quite well.

Social Security is our most successful antipoverty program, more successful than any welfare grants. Medicare is our most successful medical care program, more successful than Medicaid. In each instance the program available without means-testing works better, without stigma and with general approval and political support. Means-testing turns applicants into potentially fraudulent beggars for charity.
. . .
Entitlements without means-testing unite us into one country. Means-testing divides us into rich and poor, each resenting the other. Our tax system is a much more effective mechanism to deal with disparities in wealth and income.

The letter was responding to an Op-Ed piece by Yuval Levin discussing how the two programs might be means tested.  While I quibble with some of the particulars, I don't see any other long term solutions.

Right on cue, the administration's budget for HHS contains the following gem:

President Barack Obama’s plan to raise Medicare premiums for upper-income seniors would create five new income brackets to squeeze more revenue for the government from the top tiers of retirees, the administration revealed Friday.. . .“Means testing” has been part of Medicare since the George W. Bush administration, but ramping it up is bound to stir controversy. 

The plan itself is complicated. The bottom line is not: more money for the government. 

Obama’s new budget calls for raising $50 billion over 10 years by increasing monthly “income-related” premiums for outpatient and prescription drug coverage. The comparable number last year was $28 billion over the decade.

Inside the details of the plan are increases in premiums and a freeze on adjusting income brackets for inflation.  It is interesting to me only that the administration is floating this idea with little fanfare.  House Budget Chair Paul Ryan is asking Kathleen Sebelius for more details of the plan.  My hope is that this gets more publicity, so the nation starts to realize that we can really only afford to pay for medicare for the poor as part of a welfare program.

SOTU Brutus?

I missed the delivery of the State of the Union (SOTU) address tonight, but read the text.  As usual, the President has conveniently forgotten facts and argues against straw-man positions that Republicans have never taken.  Before I plunge in with criticism, there were some things that were good, or at least not that awful.

Is Uncle Joe falling asleep back there?

• With the exception of path to citizenship, Obama said most of the right things on immigration reform.  I especially liked this quote: And real reform means fixing the legal immigration system to cut waiting periods, reduce bureaucracy, and attract the highly-skilled entrepreneurs and engineers that will help create jobs and grow our economy. If only I thought he really meant it.
• He made a feeble call for compromise, which would have been nice if he had practiced it any time over the previous four years.
• He calls for means testing Medicare, of course, he doesn't call it that, stating obliquely that he will "ask more from the wealthiest seniors." I actually believe this is a good idea, because as the level at which means testing for medicare falls, which is inevitable, given its problems, political support for the status quo will be undermined.  Without getting specific, he says that he will propose more cost savings from Medicare.  That would be great if it were not for our experience with him, that when he offers no specifics, he actually has no plan.
• Deficit reduction gets a lot of air time.  That in itself is evidence of how the tea party has changed the political dialog.
• He talked about bursting the college bubble.  I like that he points out that college costs are soaring and threatens to link federal aid to reigning in costs.  Emphasizing the known link between good technical education at two year schools and employment was also good to read.

Of course there were multiple lapses of memory and disregard for fact:

• He calls sequestration harsh, blames the Congress for passing it, neglecting that he signed the bill.
• Standard accounting treatment of assets that are depleted is called a tax loophole.
•  He conveniently ignores that the federal government created the college bubble through various loan and scholarship programs.
• al-Qaeda is a shadow of its former self. Really? How do they strike deep into the desert and take over an Algerian gas plant? 
• We will invest in new capabilities for the armed forces.  I hardly think so when you signed the sequestration law that significantly cuts their budget.  If true, he will have to cut troop strength even more, because that is the only place to weapons development money.
• He waves the bloody shirt of Newtown to propose gun control that would not have prevented the tragedy at Newtown.
• He claims credit for increased natural gas production even while his EPA works furiously to make extraction more difficult.

And there was the plain awful stuff.

• Imperial overreach on climate change, the usual: if Congress won't act, then I will.
• More shovel ready public works.  Worked great last time.
• More green energy subsidies. Worked great last time.
• Another wasteful "Head Start" like program. For an indictment of Head Start, read here.
• Another minimum wage increase that will predictably increase unemployment.
• And there was this whopper: That is why my Administration has worked tirelessly to forge a durable legal and policy framework to guide our counterterrorism operations. Throughout, we have kept Congress fully informed of our efforts.  His illegal and unconstitutional targeting of American citizens, anywhere in the world, without authority is a heinous violation of the constitution.  Congress should rescind the authority granted the President after 9-11 because they have been stretched beyond meaning. 
• Some scheme to make sure that stricter voting laws are removed in red states.

I'm glad I didn't watch the speech, knowing Obama's style of delivery would only made it more unpalatable.  Someone I know who supposedly had some inside preview of the speech told me I would be surprised.  I was not.  This speech was devoid of any concrete proposal that will see the light of day in this Congress, with the possible exception of the immigration portion.  Meanwhile, folks, read the whole transcript here, and then check the debt clock on the right side of the page.  Let me know if the speech matched the seriousness of our dilemma.

Odds and Ends

I started following Chris Reed on Twitter and where ever he publishes articles, especially on his calwhine.com website. He has written a great piece for the always provocative
City Journal on the issues facing San Diego and California in the next election cycle. A few nuggets.

It [Prop B] would end defined-benefit pensions for all new city hires except for police officers, instead providing pensions similar to 401(k)s. It would prevent pay sweeteners from being added to base salary when calculating pensions, and it would require city workers to pay a bigger share of their pension costs.
. . .
He’s [DeMaio is] also a vigorous advocate of “managed competition,” in which public-employee groups bid against private providers on the provision of government services. San Diego’s version of managed competition—which DeMaio would like to expand upon—so far has driven down the cost of municipal fleet maintenance, street sweeping, and printing. “Managed comp” carries the promise of extending to government—at last—the productivity revolution that has transformed the private sector over the past 30 years.

He also points out how Democrats deal with the unions has led them down a path of corruption and cronyism. One more nugget.

DeMaio’s effort faces ferocious resistance. California is so beholden to union power that the head of the state Democratic Party actually endorsed a policy under which students suffering epileptic seizures couldn’t receive life-saving medicine unless union nurses dispensed it. From the unions’ perspective, DeMaio must be stopped. DeMaio and supporters gathered the signatures to place Prop. B on the June city ballot only after overcoming opposition efforts to intimidate signature-gatherers, including radio commercials warning that signing petitions would lead to identity theft. DeMaio, who is gay, also has faced baiting over his sexual orientation (a rich irony in gay-friendly California).

Mitch Daniels was my 2011 choice to run for President. He had social conservative chops but had said it was more important to concentrate on the budget and reforming entitlement. But he has disappointed me with his support for Dick Lugar. I understand that Lugar helped Daniels get his start in politics, but we need to think about moving the Republican party in a new direction. Here is Daniels' endorsement, notice how he is short on specifics.




Put not your trust in politicians, I guess.

I saw Marco Rubio on the Hannity show today, defending Paul Ryan's Medicare plan in very sensible language. He clearly made the valid point that without reform for tomorrow's retirees, the program will go broke. It's the adult thing to do, reforming medicare, which is why the President isn't participating in the discussion. Rather he sends Geithner to the Hill with this message for Ryan. “We’re not coming before you to say we have a definitive solution to that long-term problem. What we do know is we don’t like yours (Ryan's budget proposal.)” Thanks. Sometimes I wonder if anyone is paying attention to shenanigans like this. Why would seniors think that Obama is going to do anything but raid medicare for Obamacare and let the whole program go hang in the long run?

Reforming Medicare and Fraud

Medicare is both one of the most costly and popular entitlement program, rivaling social security in annual outlays. Medicare is projected to spend $623 billion in this fiscal year, 2011 compared to $748 billion for social security. What is not widely reported is the high level of fraud and theft involved in a system that is designed to quickly reimburse doctors, albeit at low rates. Further, the reimbursement rates for medical devices are out of control. Many of the fact in this article come from a Reason magazine article by Peter Suderman, Medicare Thieves, which is not available on line.

While there are no reliable numbers on the amount of medicare fraud, the GAO made an estimate of $48 billion in improper payments in a 2011 report. Because this did not include the drug program, and was only an estimate, the actual rate of fraud is potentially much higher. Fraud against Medicare is reportedly very easy to accomplish. In prepared testimony before the House Ways and Means committee, Aghaegbuena Odelugo testified: DME fraud is incredibly easy to commit. The primary skill required to do it successfully is knowledge of basic data entry on a computer. Additionally required is the presence of so- called “marketers” who recruit patients and often falsify patient data and prescription data. With these two essential ingredients, one possesses a recipe for fraud and abuse.
. . .
Physicians are given a “unique physician identifier number” (UPIN) to prove that the physician is who he/she claims to be. These numbers are readily available to the public online. The UPIN can be a useful tool for a fraudulent DME provider to exploit.
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I would like to finally talk about what I perceive to be the most significant flaw in Medicare: the rates of reimbursement. I do not know who decides, or how the decision is made, but the rate of reimbursement for certain pieces of durable medical equipment is beyond exorbitant. An example is the case of the knee braces. These items are available on the market to a DME provider for less than $100.00. Medicare, however, reimburse, if I remember correctly, approximately 1,000% of this cost. Back braces that cost approximately $100.00 are reimbursed at a rate of almost 900%. Wheelchairs that cost less than $1,000.00 are reimbursed at almost 500% of cost. For anyone engaging in fraud, these numbers are too good to be true.

On the last point, even if you are not engaging in fraud, these numbers are too good to be true. One might try to institute various reforms of the system to catch the crooks, but that would be unpopular, as physicians and patients would be left waiting for payment or services respectively. The private insurance markets are much more effective at detecting fraud. Further, the whole fraud issue obscures questions around patient abuse of the system in which they have no financial stake.

This is why I am in favor of Paul Ryan's plan to allow senior's to shop for their own insurance with medicare dollars. It is a necessary first step in reforming the system. First, given the private sector's higher success in combating fraud, the savings can be used to reduce spending on the program. Second, if we were to repeal Obamacare, then the insurance market place could open up novel cost sharing proposals that would stretch senior's insurance dollars for when they really needed costly medical care.

Ultimately, I understand that the U.S. has a robust social safety net. But I think we have gone overboard. We aren't a country that promises cradle to grave support, like socialist Europe. The vast majority of Americans need to enter old age having planned for their retirement, not reliant on social security and medicare as their sole means of support. To this end, I support rationalizing these programs a step at a time, to wean people from them, and give them back more choice.

Root Causes of the Ballooning Debt Crisis

Robert J. Samuelson, who I respect, but do not always agree with, reminded me of the fact that the political leaders refuse to talk openly about the real source of the debt problem. In an article partly titled "It's the Elderly, Stupid" he makes the case that source of the trouble is that over the last half century the changing social contract has made

". . .the federal government’s main task into transferring income from workers to retirees. In 1960, national defense was the government’s main job; it constituted 52 percent of federal outlays. In 2011 — even with two wars — it is 20 percent and falling. Meanwhile, Social Security, Medicare, Medicaid and other retiree programs constitute roughly half of non-interest federal spending.

These transfers have become so huge that, unless checked, they will sabotage America’s future."

Unfortunately, right now, there are no votes and zero leadership to start cuts to medicare and social security right now. If we are to stop borrowing, that would have to happen. I need to ask my fellow tea partyers whether we want to explicitly state that we have a goal of cutting social security payments immediately and whether we think that works politically. Samuelson goes on to state:

What he [Obama] hasn’t done is to ask — in language that is clear and comprehensible to ordinary people — whether many healthy, reasonably well-off seniors deserve all the subsidies they receive. That would be leadership. Obama is having none of it. But the shunning is bipartisan. Tea Party advocates broadly deplore government spending without acknowledging that most of it goes for popular Social Security and Medicare.

Is the critique correct? If so, what do we want to do about it? My answer is that entitlements must be means tested, if there costs are to be brought under control. The other part of the equation is the percentage of the population that is over 65, which is set to double by 2035. This has been taken as a given, but I think that if we set out to massively increase immigration of skilled younger workers, we can overcome that issue as well. Right now, I know of no one else advocating this position.

So how about it, fellow SLOBs and fellow tea partyers? What do you want to do about social security and medicare?

The President's Lies About Medicare

President Obama and Facebook chief executive Mark Zuckerberg hold a town hall in Palo Alto, Calif., April 20, 2011. (Credit: Declan McCullagh/CNET)

Obama has been on a tear lately, accusing Paul Ryan and Republicans of wanting to destroy Medicare as we know it. This is frankly an outrageous lie, because Medicare as we know it, will not survive no matter what proposal passes. It is unaffordable and rife with fraud. Its expenses keep climbing faster than inflation and price controls, the Obama solution, will only cause severe rationing, which will also end Medicare, as the rich, then the middle class leave the system. If that doesn't fundamentally change Medicare, what does?

From the WSJ discussing the board that Obamacare has created to control Medicare costs.

Starting in 2014, the board is charged with holding Medicare spending to certain limits, which at first is a measure of inflation. After 2018, the threshold is the nominal per capita growth of the economy plus one percentage point. Last week Mr. Obama said he wants to lower that to GDP plus half a percentage point.

Mr. Ryan has been lambasted for linking his "premium support" Medicare subsidies to inflation, not the rate of health cost growth. But if that's as unrealistic as the liberal wise men claim, then Mr. Obama's goals are even more so. Medicare grew 2.1 percentage points faster between 1985 and 2009 than Mr. Obama's new GDP target. At least Mr. Ryan is proposing a workable model for bringing costs down over time by changing incentives.

Time for Democrats to get serious about the fact that fundamental changes are required. I am not reading that the President is trumpeting the ability of unelected bureaucrats to actually control costs.

We need to face the facts as a nation. People are living longer, so they want and demand more medical care. The cost of medical care will increase and there are fewer workers to pay into the system. The math is very straightforward. When I retire, I am going to have to shoulder more of my health care than my parents did under Medicare. The only question is the form this will take. Mr. Obama does the country, nor his re-election chances no favors by pretending otherwise and by using demagoguery on this issue.

Let The Demagoguery on the Left Begin

When I saw the WSJ Headline this morning, GOP Aim: Cut $4 Trillion, I thought, look out, this will bring out the vitriol from the left. When I read on, that the key to the plan was to remove Medicare as a single payer for the elderly, I knew this would hit a nerve.

First, the facts. Paul Ryan is going to release a plan that would move those currently under 55 into a "premium support" system rather than to Medicare as it is currently structured. This will shield the federal government from the skyrocketing costs of the program, but will end Medicare as we know it. Cue the howls, the Republicans are ending Medicare. True enough, but if a better and more affordable way to insure seniors can be found, what difference does it make. Frankly we can not afford the current system, given the trends.
Will seniors have to do a better job saving for and managing their own health care? Yes. Why is that a bad thing? Market competition, while not a panacea is certainly preferable to the current system that is rife with fraud and is slowing falling apart as doctors opt out and the queue gets longer for the ones that remain.

Over at DailyKos, the focus is on the fact that this ends Medicare, as if calling it a sacred cow will save it from the inexorable economics that are already killing it. Josh Marshall of TPM is quoted:

The Ryan plan is to get rid of Medicare and in place of it give seniors a voucher to buy health care insurance from private insurers. Now, what if you can't buy as much as insurance or as much care as you need? Well, start saving now or just too bad.

The Republican rebuttal to this tripe is that if the current system isn't dramatically changed, then seniors will have zero health care help from the government. It is a strong man argument, comparing a still functioning system of today against Ryan's proposal, when the actual comparison is against a bankrupt system that helps no one once it goes bust in the future.

E.J. Dionne, another reliably lefty writer, is also quoted in Kos from his WaPo article.

Will President Obama welcome the responsibility of engaging the country in this big argument, or will he shrink from it? Will his political advisers remain robotically obsessed with poll results about the 2012 election, or will they embrace Obama’s historic obligation — and opportunity — to win the most important struggle over the role of government since the New Deal?

He is asking the President to act irresponsibly, as if the party will never end, and risk his re-election on the hope that the public will buy into the shrill messaging of years past. But I think we are beyond that. The Tea Party has educated the public, they are ready to deal with this.

Exit questions. Is this a political winner for Republicans? Will Obama lead a spirited counter-offensive in defense of all things governmental?