Eat-Your-Spinach Budget Reforms

Democrats seem to have more “street smarts” than Republicans when it comes to grass roots politics.

In 1983, both parties agreed to cut Social Security benefits by raising the retirement age and adopting other reforms. How did they explain that change to voters in the next election? Republicans typically told voters they had to “pare back the program to something we could afford.” Democrats typically said they had “saved Social Security.”

We are seeing a repeat of that exercise, now that both parties agree that entitlement spending (Social Security, Medicare, Medicaid, etc.) is completely out of hand. The Republican message to voters is: we have to suck it in, tighten our belt, make do with less. I’ll bet that most Democrats will find a way to argue that they’re doing the beneficiaries a favor, no matter what spending cuts they agree to.

Eat Your Spinach

Basically, the Republican message tends to be: eat your spinach. The Democratic message tends to be: we may serve you spinach, but we’ll tell you it’s cherry pie.

Why is it important to know these things? Because we absolutely have to do something about entitlement spending — especially health care spending. And for that to work, I believe we need the natural skills of both political parties. From Republicans, we need the reform ideas. From Democrats we need to be able to shape the reforms and sell then in a way that makes them palatable.

I have a lot of respect for anybody in public life who takes on the thankless task of proposing ways to control Medicare spending. First there was Alan Simpson and Erskine Bowles, co-chairs of the president’s National Commission on Fiscal Responsibility and Reform. Then there was Paul Ryan and Alice Rivlin, the House Republican and the Democrat who once directed the Congressional Budget Office. Then, there was the Ryan House Republican budget proposal. Sen. Joe Lieberman (D-CN) and Sen. Tom Coburn (R-OK) have a proposal. And word has it that there are many other look-alike proposals being conjured up by members of Congress in both parties.

All these proposals have one thing in common: they try to slow the rate of growth of Medicare by shifting costs to the beneficiaries. If government spends less on the health care of current retirees, the retirees will have to make up the difference out of their own pockets. If the government spends less on the next generation of retirees, young people will have to prepare to spend more of their own money during their retirement years. For example, the Lieberman/Coburn proposal would:

  • Increase the age of eligibility for Medicare from 65 to 67, phased in over a period of years;
  • Increase out-of-pocket deductibles (although increasing protection against catastrophic expenses).
  • Increase means testing, so that wealthier retirees would pay for more of the cost of their coverage.

Although each of the proposals is “bipartisan,” the left regards them as essentially Republican ideas. In a sense they are right. These are basically eat-you-spinach reforms. They are all pain no gain. They shift costs to people without giving them any new tools to be able to bear the increased burden they will be asked to carry.

Here is a better (and more palatable) idea: combine the spending cuts with a set of new tools that makes it easier for the beneficiaries to bear the burdens. I believe seniors would accept higher deductibles and co-payments under Medicare, provided that we do other things to help them make health care more affordable.

Former Medicare Trustee Thomas Saving and I recently proposed nine ways to empower seniors in the medical marketplace. They include allowing Medicare beneficiaries to use the services of walk-in clinics, urgent care centers, surgi-centers and doc-in-the-box outlets. Each of these services costs less than traditional care. That’s why they exist. They are mainly catering to patients who are buying care with their own money. Most do not accept Medicare patients because Medicare’s fees are too low.

Saving and I proposed to let Medicare pay whatever fee other patients are paying. Barring that, let the senior top up Medicare’s fee to pay the market price. Since the fees charged by a walk-in clinic are less than the fees charged by a primary care physician’s office or a hospital emergency room, this proposal would make medical care more affordable. And since walk-in clinics are usually easy to get to and involve very little waiting, this proposal would make care more accessible.

For young people a similar principle applies. In return for reducing future spending under Medicare, young workers need to be able to save in a tax free account to be able to pay for more of their own care once they reach retirement.

In general, people will accept less from government, provided they are given new freedoms to provide for themselves.

Comments (15)

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  1. Vicki says:

    Like the video. Clever.

  2. steve says:

    “Republican message to voters is: we have to suck it in, tighten our belt, make do with less. I’ll bet that most Democrats will find a way to argue that they’re doing the beneficiaries a favor, no matter what spending cuts they agree to.”

    Hmm. Actually, the GOP says it is saving Medicare. In the last election they claimed that Dems were cutting Medicare and creating death panels. Both parties pander to the seniors.

    Steve

  3. Davie says:

    This is a great proposal.

    I hope (probably in vain) that the same balanced, reasonable approach taken by this article is applied in Washington. Washington despartaely needs to go beyond shell games and adopt intelligent, win-win solutions like these.

  4. Keith says:

    Interesting, but I’m not entirely convinced that this pragmatic approach addresses the underlying problem: the long-term sustainability of a program that pays out benefits in the present using funds supposedly reserved for the payout of future benefits. It seems to me that all we’d really be doing is kicking the can down the road (not that that’s not at least a start).

    On the other hand, perhaps the introduction of market-based options like those you list will reduce the cost of healthcare to the point that gov’t financing is no longer necessary, except for the poorest members of society.

  5. Joe S. says:

    I think I agree with you.

  6. Devon Herrick says:

    Once given, benefits can never be taken away. The question is… why did Congress enact additional benefits to the Medicare Part D program only to begin worrying about long-term budget reforms 18 months later?

  7. Brian says:

    I like these ideas. One thought that comes to mind, is with respect to this:

    “For young people a similar principle applies. In return for reducing future spending under Medicare, young workers need to be able to save in a tax free account to be able to pay for more of their own care once they reach retirement.”

    I have to wonder how bad inflation is going to be down the road. Will it rise at steady, historic levels, or will it become horrendous as some predict. If inflation does become worse, the money saved in these tax-free accounts may not pay for as much of our care by retirement. The accounts need to collect interest.

  8. Bob Geist says:

    I am still waiting for everyone to jump on Greg Scandlen’s idea for Medicare: Scandlen, Greg. Bringing Health Savings Accounts to Medicare. September 28, 2005. Find it by Google “HSAs in Medicare”, Scandlen.

    As usual, fine post, John.

    Bob

  9. Al says:

    John G., somewhere I must be missing something.

    Doc A is a doc in the box and you wish to allow him to be paid more than the Medicare prevailing rate.

    Doc B is an office doc who has higher listed prices, but is paid less than what you are willing to permit Doc A to be paid.

    Why should Doc A be paid more than Doc B? How does paying more to Doc A more than Doc B save money?

    Why beat around the bush? Reinstate balanced billing.

    1) BB can reduce the amount of money Medicare has to pay in order to keep doctor’s offices open.
    2) BB is a true market approach
    3) BB places more skin in the game which reduces care that has only marginal benefit.
    4) BB thus reduces total expenditures on the program
    5) BB has the additional benefit of providing more physician care in the Medicare market place since no physician will be opted out and the tendency towards VIP type docs might be reduced. No objection to the VIP doc, but typically the number of patients treated by a VIP doc is only a fraction of those treated by their non VIP competitors.

    If niceness is part of your policy then you could return some of the money saved to the patient and the taxpayer.

  10. John Goodman says:

    AL: I don’t disagree. Balanced billing was one of the reforms Tom Saving and I recommended for Medicare. See our post here:

    http://healthblog.ncpa.org/a-better-way-to-approach-medicares-impossible-task/

  11. Al says:

    Thank you John, I know you support balanced billing as I read and commented on that blog. I recognize that you are trying to provide a multiplicity of ideas where you might find some preferable over others. However, I don’t understand why you want to favor Doc A over Doc B. especially since Doc B’s fees don’t represent what he is paid.

  12. Paul Nelson says:

    Medicare healthcare spending needs a dose of reality testing. The reality is that our healthcare industry is the most inefficient of the world’s advanced countries, and our agricultural industry is the MOST efficient among these same advanced countries. Before Medicare, our healthcare industry represented 6-7% of the GDP, and now it is 17-18% of the GDP.

    Reducing the national cost of healthcare is “job-one” for solving the finances of Social Security. Currently, nothing in Congress would improve the fundamental inefficiency of our nation’s healthcare industry. Playing with cost-shifting to Medicare eligible citizens would be a return to no health care at all for many senior citizens. When that happens, what kind of physicians would be attracted to care for their needs?

  13. frank timmins says:

    Paul Nelson. Unfortunately, having an efficient agricultural system doesn’t exactly compare with a having an efficient healthcare system. In agriculture, technology increases production (efficiency). In healthcare, technology increases demand. Sorry, but it’s apples and oranges. Same answer though – healthcare cannot be “managed” by third parties. Let the market set the prices and then help “manage” the resources of the poor. Food Stamp protocol might be a good starting point.

    And somehow the term “cost shifting” just doesn’t seem appropriate when used as “cost shifting to Medicare eligible citizens”. Doesn’t that ignore the reality that in fact healthcare costs for Medicare recipients are already costs that have been shifted to “non Medicare” recipients. Instead of “cost shifting to Medicare eligible citizens” maybe the better characterization would be “shifting less cost to the non medicare eligible citizens”.

  14. Rizalicaal says:

    There is no such thing as a common blood test . ALL blood tests are SPECIFIC that is, you ned a blood test for each seipifcc chemical or disease.Now, there are many tests that are commonly done . that is , the doctors do the same test for almost all of their patients. This would include things like blood sugar, cholesterol, red blood cell count, oxygen level, etc.If they test for nicotine, then yes, smoking will show up.But frankly, smoking shows up first on your breath and on your clothes.