2011 May 24 Tuesday
Americans In Denial About Medicare And Social Security

Since the majority insists on denying the obvious a US sovereign debt crisis is inevitable.

WASHINGTON ó Theyíre not buying it. Most Americans say they donít believe Medicare has to be cut to balance the federal budget, and ditto for Social Security, a new poll shows. The Associated Press-GfK poll suggests that arguments for overhauling the massive benefit programs to pare government debt have failed to sway the public. The debate is unlikely to be resolved before next yearís elections for president and Congress.

Bottom line: the Republicans are going to run away from Social Security and Medicare cuts. The US total debt will continue to grow faster than the US economy, and the US won't be able to avoid a sovereign debt crisis.

The US government deficit is about 10% of GDP. Social Security and Medicare outlays are going much higher due to an aging population and medical costs that rise faster than the rate of inflation. In the face of these fundamentals the American people like to tell absurd jokes to pollsters.

In the poll, 54 percent said itís possible to balance the budget without cutting spending for Medicare, and 59 percent said the same about Social Security.

Democracy begins to fail as soon as the majority figure out they can vote stuff for themselves at the expense of their future selves or future generations.

Share |      By Randall Parker at 2011 May 24 07:16 PM  Economics Entitlements

California kid said at May 27, 2011 4:01 PM:

I expect hyper-inflation while claiming that there is no inflation. I expect Wiemar. There are too many pressure groups. With a country of minorities and a brow-beaten majority, there can be no consensus. One group or the other will always feel persecuted or exploited. It's a mess, it's a train wreck. It's a juggernaut train headed towards a canyon where the bridge is out and the conductors keep saying everything's OK, not to worry.

At my age, all I can do is a cynical post-mortem-in-advance on the society. As a younger man I think maybe I would look for an exit if one can be found. Consider that any good country is probably keeping it quiet. If they're smart. Look at countries that you never hear about in the news.

sg said at May 28, 2011 9:38 PM:

I can't stand Democrats, but one thing they know is that people can't handle the truth. They wanted the health care bill to get cash flow. The truth is the US already has universal health care. Much of it is funded directly by the gov't, Medicare, Medicaid. The rest is paid for/cost shifted privately. Because we constantly import more poor non-paying folks, the private cost shifting situation has reached a crisis. The government needed a way to force people to pay without giving them service. The easiest way to do that is to tell them they will get service. That is the point of the health care bill. The number of productive is decreasing as the demand for production increases. I agree, a sovereign debt crisis is inevitable.

Woozle said at June 5, 2011 2:15 PM:

What, are we in denial here that there would be no Medicare shortfall if it hadn't been for the Bush tax cuts plus two wars plus the Republicans deciding public health programs were the best source of "other people's money" to raid for their corporate buddies?

Also, claiming that the US has universal healthcare is a bad joke. Trying to blame increasing healthcare costs on immigrants is another bad joke. Demonize much?

Randall Parker said at June 5, 2011 8:01 PM:


Medicare (at least for Part A) is paid by a separate tax and its trust fund is usually judged separately. To my knowledge Bush did not cut any Medicare tax and Obama increased the Medicare tax rate on higher income people.

The Medicare trustees say Part A will burn thru all accumulated surpluses by 2024 and then be underfunded. The picture has worsened due to slow economic recovery. I expect it to get much worse due to Peak Oil and other worsening constraints on US economic growth.

I do not see some of Obama's attempts at Medicare cost-cutting as sustainable. Paying less to general practitioners is something Congress has played with for many years. Too many doctors drop out of Medicare because low payments do not cover their costs. Then Congress hears too many complaints and raises rates.

Woozle said at June 6, 2011 5:36 AM:

I'll have to go back and find my sources; I may be conflating Medicare, Medicaid, Social Security... The bit about the Trustees' statement seems familiar, though, and there was some kind of twist to it.

That said, I would not be at all surprised (anymore) to find unsustainability lurking in Obama's actions in any area.

Woozle said at June 6, 2011 6:03 AM:

One puzzle piece, from Kucinich's 35 articles of impeachment against Bush in 2008:

...pursued policies which deliberately drained the fiscal resources of Medicare by forcing it to compete with subsidized private insurance plans which are allowed to arbitrarily select or not select those they will cover; failing to provide reasonable levels of reimbursements to Medicare providers, thereby discouraging providers from participating in the program, and designing a Medicare Part D benefit without cost controls which allowed pharmaceutical companies to gouge the American taxpayers for the price of prescription drugs.

The President created, manipulated, and disseminated information given to the citizens and Congress of the United States in support of his prescription drug plan for Medicare that enriched drug companies while failing to save beneficiaries sufficient money on their prescription drugs. He misled Congress and the American people into thinking the cost of the benefit was $400 billion. It was widely understood that if the cost exceeded that amount, the bill would not pass due to concerns about fiscal irresponsibility.

A Medicare Actuary who possessed information regarding the true cost of the plan, $539 billion, was instructed by the Medicare Administrator to deny Congressional requests for it. The Actuary was threatened with sanctions if the information was disclosed to Congress, which, unaware of the information, approved the bill. Despite the fact that official cost estimates far exceeded $400 billion, President Bush offered assurances to Congress that the cost was $400 billion, when his office had information to the contrary. In the House of Representatives, the bill passed by a single vote and the Conference Report passed by only 5 votes.

In other words, Bush is partly or largely responsible for Medicare's insolvency because he maneuvered (through lies and misinformation) Congress and the American public into approving a plan that was not fiscally sound.

This is probably not the whole picture, of course, but it seemed like an important piece. The obvious solution is to repeal the Part D changes. That would technically be a "cut", but it would be a cut that makes sense. (Caveat: I'm not sure who would be negatively impacted by this change. What problem were the Part D changes intended to solve? Did they solve that problem?)

Meta: this isn't just a problem of "we're spending too much", it's more "we're spending money stupidly, on stuff we wouldn't actually want if we knew all the relevant facts".

Woozle said at June 6, 2011 6:14 AM:

Also also... Private insurance spends about $1 on administration costs for about every $3 paid in premiums. Medicare spends $1 on administration costs for roughly every $50 of funding. (If those figures are in dispute, I can go look for sources.)

This would seem to imply that every dollar cut from Medicare overall is going to end up costing Americans (especially those with lower incomes) about 16 times as much, if they have to get that same coverage from a private insurer. (Realistically, it will increase deferred health maintenatnce, which costs even more.) How would that be saving money and investing in the future?

Woozle said at June 7, 2011 12:05 PM:

Oops, bad math... sorry about that... the conclusion is the same, but the word problem is more like this: $1 spent on private medical care buys 66 cents of care, while $1 spent on Medicare buys 98 cents of medical care.

So private medical care costs about 50% more than Medicare (and often doesn't do well at preventive care and other measures that can save money in the long run -- though I think some of those issues will be addressed by various Obamacare provisions that will be kicking in slowly over the next half-decade).

Paul137 said at June 8, 2011 11:32 AM:

Woozle doesn't have the full story on relative administrative costs between Medicare and private health insurers. (I'm not saying he or she is being devious, just that there are important things left out.)

1. Medicare's "cases" are, on average, more expensive (older people, end of life, etc.) so the same employee-hours of administrative burden per case amount to a smaller amount of fractional cost for Medicare, compared to the private insurers.

2. Unlike private insurers, Medicare doesn't have costs for revenue-collection; that's handled by other parts of the federal government, so those costs don't show up in Medicare's administrative budget. But those costs still exist.

3. Private insurers spend some administrative resources combating fraud. Medicare doesn't. As a result, Medicare fraud amounts to about $60 billion per year, as reported by both the Washington Post and CBS's Sixty Minutes.

I think the federal government should have NO ROLE AT ALL in provision or financing of health care. But given that they do, why not try to improve things one step at a time -- such as doing something about that gargantuan Medicare fraud -- and thus demonstrate some basic competence on non-controversial things? Instead, that is, of trying to do these insanely, unworkable "comprehensive" monstrosities.

Woozle said at June 9, 2011 2:56 PM:

Paul137: I would be interested in seeing (and collecting) your sources on those pieces of information.

On looking into Medicare more intensively, I was at first very discouraged by much of what I saw in Wikipedia, which seems to be confirming much of what has been said here -- specifically, that the GAO has stated repeatedly that Medicare will be in trouble financially in less than a decade.

On digging into other sources (ironically, one provided by an opponent of Medicare) I find that your first claim was refuted in 2009.

For your second point, I would be very surprised to find that those costs were comparable to (or higher than) revenue collection costs for private insurers. Medicare revenue collection is rolled into the larger tax revenue collection "service", and I would think that economies of scale would be in full force.

For the 3rd point: what you're saying, then, is that Medicare would probably cost even less per person if they allocated more money to fight fraud. This seems a reasonable suggestion.

And for your conclusion... I too would prefer to see the government not involved in healthcare, but what I don't see at present is any mechanisms whereby such healthcare could be (a) monitored for quality and (b) delivered universally (i.e. even to those who can't afford to pay for it). I have some ideas for how this might be done, but are we at least agreed that it's a solution for which there is a problem? In discussions about getting government out of healthcare, I have yet to see anyone seriously addressing these issues.

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