How Would You Balance the Budget? Preferred ratio of tax increases and spending cuts

[tjscott0]

Great article "Our Burgeoning Budgit & Politics of Avoidance".
Robert J. Samuelson - Our burgeoning budget and the politics of avoidance

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America's budget problem boils down to a simple question: How much will we let programs for the elderly displace other government functions - national defense, education, transportation and many others - and raise taxes to levels that would, almost certainly, reduce economic growth? What's depressing is that this question has been obvious for decades, but our political leaders have consistently evaded it.

From 2006 to 2035, federal spending goes from 20 percent of GDP to almost 29 percent. Social Security, Medicare and Medicaid (including Obamacare) account for all the increase. The reasons: More elderly people and climbing health costs.

Paying for bigger government would require a tax increase of about 50 percent. If we want to avoid a tax increase - while honoring existing Social Security and health-care benefits - we'd have to cut all other programs by about 80 percent. (And these figures are probably optimistic, because interest on government debt is assumed to remain low.) The problem is not reducing the deficit. It is controlling spending in a way that seems socially just, economically sensible and politically tolerable. If we are honest - neither party has been - it means asking how much we allow benefits for the old to burden the young through higher taxes, lower public services, slower economic growth and weakened national security.
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[M Paquette]

If only there were some way to cut back on the number of elderly people...

Hmmm...

 

[Independent]

But how much of the costs in the doctors' offices and hospitals are driven by the insurance companies and our present reimbursement scheme (billing, coding, rebilling, cost shifting, etc)?

The administrative costs of dealing with insurers is driven by the number of different insurers and plans. Doctors don't spend much per claim on Medicare because they run so many patients through the same set of rules. It gets expensive when they have lots of insurers, all with different "creative" ideas. So, IMO, the cheapest system from an administrative perspective is single payer (not that I think sp is best overall, just that it is best from the perspective that you're bringing up here).

From what I've read, the Swiss system is having problems with escalation of costs just as we are and just as the European socialized systems are. The two unavoidable contributing factors (high-cost new technology/drugs and an aging population) are present everywhere. In the US, most people today get the choice of one insurance company--whoever their employer uses. In the Swiss system, consumers get to choose from scores of different companies, and from several different levels of deductibles.co-pays. This competition is what the Swiss rely on to reduce costs, and their costs are about 30% below ours (as a % of GDP) and they achieve good quality universal coverage with very low waiting times and allow people to buy additional insurance if they choose.

In the US, employers have multiple insurers bidding on their business. My former employer seemed to change carriers every three years or so. The employer has every incentive to get the best combination of cost and service. The people making the decision have the time to carefully compare multiple proposals, and they are selecting the company that their own families will use. If competition between insurers is the answer, then we've already got plenty.

I don't think this is it.

 

[keegs]

Charlie Rose - The Deficit Debate

 

[Emeritus]

From what I've read, the Swiss system is having problems with escalation of costs just as we are and just as the European socialized systems are. The two unavoidable contributing factors (high-cost new technology/drugs and an aging population) are present everywhere. In the US, most people today get the choice of one insurance company--whoever their employer uses. In the Swiss system, consumers get to choose from scores of different companies, and from several different levels of deductibles.co-pays. This competition is what the Swiss rely on to reduce costs, and their costs are about 30% below ours (as a % of GDP) and they achieve good quality universal coverage with very low waiting times and allow people to buy additional insurance if they choose.

Just for convenience what is your definition of a ""European Socialized system" ?

For the record the "theory" from AEI etc is that companies shop among insurers for the best deal so there is competition but one level up.

The key in many cases is standardizing the product so that consumer price competition works.

 

[samclem]

The administrative costs of dealing with insurers is driven by the number of different insurers and plans. . . It gets expensive when they have lots of insurers, all with different "creative" ideas.

Maybe this is the type of situation where government involvement would be beneficial. If billing procedures and coding were standardized (not by the government, but by an industry group--as we do all kinds of other standards) it would significantly reduce costs within the system. Insurers would still compete by offering enhanced service/reduced costs in a myriad of ways, but the "interface" between the insurance companies and medical providers would be standardized. Participation in such a system might need to be mandated by the government (for any insurers/providers accepting govt vouchers, etc). Just as we mentioned with standardization of policy types and with the provision of information to consumers--government can facilitate competition.

In the US, employers have multiple insurers bidding on their business. My former employer seemed to change carriers every three years or so. The employer has every incentive to get the best combination of cost and service. The people making the decision have the time to carefully compare multiple proposals, and they are selecting the company that their own families will use. If competition between insurers is the answer, then we've already got plenty.

My employer's interests are not the same as mine. Let's look at a situation most of us can evaluate more easily: Company selection of 401(k) providers for workers. Just as with medical care, the company spends a lot of time selecting a provider. After looking at the cr*ppy funds and high fees incorporated in many of these plans, is anyone willing to argue that the experts at the company do a good job of looking out for the best interests of workers? Are corporate considerations (low cost to the company, ease of doing business, provision of unstated "inducements", etc) maybe a lot different from the factors I'd weigh if picking a provider for my 401(k)? Why should we think the situation is better regarding health insurance providers?

 

[Emeritus]

Are corporate considerations (low cost to the company, ease of doing business, provision of unstated "inducements", etc) maybe a lot different from the factors I'd weigh if picking a provider for my 401(k)? Why should we think the situation is better regarding health insurance providers?

I agree completely on the facts, the more interesting question is the rationale. I had part of the Maryland statewide portfolio for faculty members for both health benefits and retirement. We had the same health benefits as all state employees, but somewhat different 403 (b) choices.

The key rule on health benefits was that all bidders had to provided exactly the same required services and compete for those service on price. (NB This is state as PURCHASER not as Regulator) I had to nail AETNA to the wall twice when they tried to duck a State required mandated payment

On the 403 (B) (Roughly equivalent to 401 K the choices were fairly limited but all respectable (Fidelity & TIAA) These were not required to be identical but they had to meet certain maximum cost and service requirements.

 

[Independent]

Maybe this is the type of situation where government involvement would be beneficial. If billing procedures and coding were standardized (not by the government, but by an industry group--as we do all kinds of other standards) it would significantly reduce costs within the system. Insurers would still compete by offering enhanced service/reduced costs in a myriad of ways, but the "interface" between the insurance companies and medical providers would be standardized. Participation in such a system might need to be mandated by the government (for any insurers/providers accepting govt vouchers, etc). Just as we mentioned with standardization of policy types and with the provision of information to consumers--government can facilitate competition.

Yes. I'm sure that some people would say the gov't is "killing innovation" by doing this, I wouldn't be one of them.

My employer's interests are not the same as mine. Let's look at a situation most of us can evaluate more easily: Company selection of 401(k) providers for workers. Just as with medical care, the company spends a lot of time selecting a provider. After looking at the cr*ppy funds and high fees incorporated in many of these plans, is anyone willing to argue that the experts at the company do a good job of looking out for the best interests of workers? Are corporate considerations (low cost to the company, ease of doing business, provision of unstated "inducements", etc) maybe a lot different from the factors I'd weigh if picking a provider for my 401(k)? Why should we think the situation is better regarding health insurance providers?

The difference between medical insurance and 401k fees is that the employee pays the 401k fees while the employer pays most of the medical insurance premium. I'm sure my employer works hard to find the lowest cost insurance provider.

 

[Gone4Good]

But, how do the Swiss get the lower costs without the profit incentive to insurers? It looks like the profit motive for insurers isn't critical to efficiency.

That would be a good question to answer before we attribute causality to their insurance system. Is it because their medical system doesn't make extra money by preforming a bunch of unnecessary procedures? Is it something cultural? Do they, maybe, deal with end of life decisions more rationally than we do here, or do they also try desperately to extend GrandMa's life by throwing money at expensive hail-Mary treatments? Are they just healthier overall?

 

[M Paquette]

Only the Swiss basic insurance (compulsory coverage) is non-profit. Supplemental plans can be operated for profit. Supplemental plans include things like dental coverage, or private ward (that is, a private room rather than the ward floor) hospitalization.

 

[samclem]

That would be a good question to answer before we attribute causality to their insurance system. Is it because their medical system doesn't make extra money by preforming a bunch of unnecessary procedures? Is it something cultural? Do they, maybe, deal with end of life decisions more rationally than we do here, or do they also try desperately to extend GrandMa's life by throwing money at expensive hail-Mary treatments? Are they just healthier overall?

Yes. Interesting that this desire for rigor and looking for other explanations for cost savings comes up as we are discussing a system that uses private insurance, provides a high degree of individual choice, and has costs much lower than our present system (expressed as a portion of GDP). I hope that same appetite for alternative explanations for cost savings will apply when we look at govt-run health care (UK), or single payer plans (Germany) as models for us.

 

[Emeritus]

, or single payer plans (Germany) as models for us.

Germany is not a single payer system. For a quick introduction to the German health insurance system see
Health insurance

 

[Gone4Good]

Yes. Interesting that this desire for rigor and looking for other explanations for cost savings comes up as we are discussing a system that uses private insurance, provides a high degree of individual choice, and has costs much lower than our present system (expressed as a portion of GDP). I hope that same appetite for alternative explanations for cost savings will apply when we look at govt-run health care (UK), or single payer plans (Germany) as models for us.

You give the impression that I wouldn't support implementing the Swiss system here, but you actually have it backwards. I do support their approach and would be fine implementing it here because it has all of the critical components necessary to provide health coverage to the sick and the aged. What's strange, is that you give the impression of supporting the Swiss system, but apparently disagree with everything that makes it work. (An individual mandate is unconstitutional, forcing companies to sell a prescribed product stifles innovation, subsidies destroys incentives, etc.) What gives?

 

[samclem]

What's strange, is that you give the impression of supporting the Swiss system, but apparently disagree with everything that makes it work. (An individual mandate is unconstitutional, forcing companies to sell a prescribed product stifles innovation, subsidies destroys incentives, etc.)

Individual mandate: Yes, I think it is probably unconstitutional. If the SCOTUS finds otherwise, then I'm sure the executive branch will press ahead with an individual mandate. If it is unconstitutional, then we'll proably get universal access without universal coverage. As I mentioned here.

It's possible that in the US "universal coverage" will look a lot different from anywhere else--more like "universal access and the government will do everything possible to help everyone afford coverage. Those who don't sign up, if not ruled legally incompetent, will not be taken on as the collective responsibility of everyone else at the national level. When they get sick, States can choose to have programs for them, or they will be left on their own or to the voluntary help they can get from others." Tough love, but maybe that's what freedom looks like.

Prescribed products: As I know I've mentioned many times, I favor standardized products as a means to improve competition. I'd think it best if insurers could go "over and above" in each product, but every insurer's "Plan Silver" or Plan D" would contain at least the same minimum items.

Subsidies: Again, I've consistently mentioned that subsidies (actually, transfer payments from the wealthy to the less wealthy) will be part of any solution.

 

[samclem]

The Simpson-Bowles commission is supposed to issue a report on 1 Dec. While Bowles says he is "optimistic" that they'll get the 14 votes out of 18 needed to approve a recommendation, I doubt it will happen. I'm surprised Intrade isn't covering it, but I couldn't find it there.

 

[M Paquette]

Individual mandate: Yes, I think it is probably unconstitutional. If the SCOTUS finds otherwise, then I'm sure the executive branch will press ahead with an individual mandate. If it is unconstitutional, then we'll proably get universal access without universal coverage. As I mentioned here.

If the mandate to 'purchase a private product', in this case insurance, is found unconstitutional, any sort of 'universal access' will be severely handicapped to prevent the expected sort of gaming, that is, going without insurance til a medical need arises, and only then trying to buy coverage.

I also expect to see some pretty entertaining cases as the finding of a universal mandate being unconstitutional is applied to other intriguing, but mostly unnoticed mandated items. This could easily become a 'be careful what you wish for; you just might get it' matter.

 

[samclem]

I also expect to see some pretty entertaining cases as the finding of a universal mandate being unconstitutional is applied to other intriguing, but mostly unnoticed mandated items. This could easily become a 'be careful what you wish for; you just might get it' matter.

I'm trying to think of good examples. People frequently mention the requirement to purchase auto liability coverage, but that's clearly not applicable (driving on public roads is a privilege, the states are clearly allowed to levy requirements for those choosing to exercise a privilege.)

The constitutional question of whether the federal government can require states to run these health programs (under the "commerce clause") is also an interesting one. If that is found unconstitutional, then some of the federal marijuana laws might also come under fire, which might be a good thing. Lots of the other mandates on states are really requirements that must be met to receive federal funding (which was, of course, originally taken from people and corporations from the states, but never mind that).