Will Obama's Bold Vision End the Myth of Entitlement Reform?

As President Obama begins his second term, he does so with an expansive vision for America.

“America's possibilities are limitless,” he said in his inaugural address, “for we possess all the qualities that this world without boundaries demands:  youth and drive; diversity and openness; an endless capacity for risk and a gift for reinvention.   My fellow Americans, we are made for this moment, and we will seize it - so long as we seize it together.”

There are many potential roadblocks toward achieving that bold vision.  One is the myth that entitlement reform must be a part of it.

The reason that entitlement reform is at the top of some political agendas has nothing to do with the growth in entitlement programs today.

Some people with these agendas don’t like any government-run programs and won’t listen to the facts about them. 

Those who do look at the facts see the rapid growth in Medicare and Medicaid spending through 2009.  According to the Center for Medicare and Medicaid services, Medicare spending increased by an average of 10.9 percent per year between 1967 and 2009, and Medicaid spending by an average of 10.7 percent per year between 1975 and 2008.

They believe that this rate of growth is not sustainable.  But since the beginning of President Obama’s first term, we haven’t sustained a growth rate even close to this.

A report from last September and two more reports released in the last couple of weeks – one from the Department of Health and Human Services (HHS) and another from the Bureau of Labor Statistics (BLS) – show just how far the myth is from today’s reality.

The new HHS report found that per capita Medicare spending increased by just four-tenths of one percent in 2012, following increases of only 3.6 percent in 2011 and 1.8 percent in 2010.

And according to some new BLS data, the overall medical inflation rate last year – which should tell us something about Medicare and Medicaid growth in the coming year – was 3.2 percent. 

There is a much more immediate health spending problem about which policymakers should be worried – one that entitlement reform could make worse. 

High health costs may burden state and local governments.  But they burden people who rely on Medicare and Medicaid far more.

In an article entitled the High Cost of Out-of-Pocket Expenses published in September by the New York Times, Judith Graham summarized from a third recent study.  The study found that during the last five years of life:

• People on Medicare spend $38,688 on medical costs.
• People with Alzheimer’s spend $66,155. 
• The top quarter of spenders spend a whopping $101,791.

Some policymakers love talking about the unfairness of the “death tax.”  How about the unfairness of this hidden “pre-death tax” that gets bigger every time elected leaders cut entitlement spending? 

Entitlements are not the problem.  The cost of health care is.  Entitlements are – and always have been – the solution to the problem of a middle class forced into poverty by high health care costs near the end of life. 

And while entitlement reform may reduce government expenditures, it will only do so at the expense of those who need Medicare and Medicaid the most.

President Obama said it well in his address. 

“We must make the hard choices to reduce the cost of health care and the size of our deficit.  But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future.  For we remember the lessons of our past, when twilight years were spent in poverty, and parents of a child with a disability had nowhere to turn.  We do not believe that in this country, freedom is reserved for the lucky, or happiness for the few.  We recognize that no matter how responsibly we live our lives, any one of us, at any time, may face a job loss, or a sudden illness, or a home swept away in a terrible storm. The commitments we make to each other - through Medicare, and Medicaid, and Social Security - these things do not sap our initiative; they strengthen us.  They do not make us a nation of takers; they free us to take the risks that make this country great.”

Contact Paul Gionfriddo at gionfriddopaul@gmail.com. Twitter: @pgionfriddo.  LinkedIn: www.linkedin/in/paulgionfriddo.  Facebook: www.facebook.com/paul.gionfriddo.

Entitlement Reform Could Lead to Mental Health and Health Care Armageddon

It was hard to witness the embarrassing spectacle of politicians responding to the credit downgrade by circling their firing squad yet again.

I’d like to see some grown-ups emerge from the mess.  But I’m not holding my breath.

Sources: CBO, GIH, KFF, CDC, NAPH

Our debt problem was caused by tax cuts that didn’t create jobs, wars for which we didn’t pay, and an unsustainable and under-regulated financial bubble that burst.  It wasn’t caused by entitlements.

Despite this, politicians are pushing entitlement myths and reforms.  But in the unsteady hands of this unstable Congress, entitlement reform could result in a health and mental health care Armageddon that could blow us all back into the 19^th century – the stone age of modern medicine.

The Social Security and Medicare Trust Funds still have surpluses.  They aren’t responsible for the debt.  In fact, Social Security Trust Funds hold U.S. debt, just like China.

We can do two things about future Social Security and Medicare costs.  We can cut benefits, which our citizens don’t want, or raise Social Security and Medicare taxes to pay for the benefits people do want.  It would take a 1%-2% Medicare tax increase to preserve Medicare as it is today for the next three generations.

Medicaid is a different story.  Medicaid doesn’t have a trust fund.  It contributes to the federal deficit and debt, and we need to lower its cost. 

However, the federal deficit this year will be at least $1.3 trillion.  The entire federal share of the Medicaid program is approximately $300 billion. 

Suppose Congress passed the most radical entitlement reform possible – eliminating the entire Medicaid program – as Texas Governor Rick Perry once proposed.  The federal deficit would still be over $1 trillion.

The debt wouldn’t go down much, either.  Our national debt is over $14 trillion today.  Before the passage of the recent deficit reduction act, the CBO projected that the debt would grow to $23 trillion by 2020.  The Act reduced this by almost $1 trillion in Round 1, with at least another trillion to come in Round 2. 

If Medicaid’s $300 billion per year, plus inflation, were made part of Round 2 cuts by the “SuperCongressional Committee,” the U.S. debt would still be almost $20 trillion in 2020.

This assumes that there would be no bad outcomes from such a radical action.  However, eliminating Medicaid would kill health and mental health care in America. 

If Medicaid were eliminated, then the number of uninsured people would mushroom to one-third of our population.  Many would have chronic diseases.

We would witness the first major fallout within a few weeks.  Sixty percent of nursing home beds are funded by Medicaid.  So nearly every nursing home in America would collapse, unable to finance their operations.  Frail elders and people with chronic conditions would be released.  Social services providers would be overwhelmed.

Within a few months, the fallout would spread to every community health center in America.  Without Medicaid, which accounts for 37% of CHC revenue, they, too, would crumble.  Millions of their patients would flood into hospitals for care. 

Most hospitals could probably survive this onslaught for a year or two, but the pressure on them would be terminal.  Public hospitals, which get 35% of their revenue from Medicaid, would fail first. Then private hospitals, which get 17% or more of their revenue from Medicaid, would fail, leaving vast areas of our national landscape without emergency, trauma, or surgical care. 

Behavioral health services, which get 26% of their revenue from Medicaid, would implode next.  People with mental illness would be out on the streets or hidden away without services.

Private physicians could hold out a little longer.  But within a few years, patient-hoarding would be their only survival strategy, and most of their practices would die.  A few urgent care centers, surgical centers, and concierge practices would remain, but their prices would skyrocket.  Few could afford them.

By 2020, without Medicaid pretty much all that would be left of our health system would be our public health services and our $20 trillion debt.  A significant percentage of 14 million healthcare jobs would be lost.  Life expectancy would plummet to pre-1900 levels, and most diseases would be death sentences again.

“Entitlement reform” is a new catch phrase for politicians who do not want to face reality.  To balance our federal budget and pay off our accumulated debt, we will have to raise taxes, pay for the wars we’ve already fought, and create more jobs – including jobs in the public sector, in which one in every six U.S. workers is employed.

The discourse in our Congress must be more grown-up.  We must pay for what we have already consumed and what we want in the future.

But paying bills is a bigger nightmare to some politicians than destroying our health and mental health care systems.  So the demonizing myth of entitlements will continue.

If you have questions about this column or wish to receive an email notifying you when future Our Health Policy Matters columns are published, please contact gionfriddopaul@gmail.com.

Column note:  There are more hyperlinks than usual in today's column, and I want to thank especially the Congressional Budget Office, SAMHSA, the Center for Medicare and Medicaid Services, the Center for Budget and Policy Priorities, Grantmakers in Health, the National Association of Public Hospitals, Gallup, the Federal Bureau of Labor Statistics, the Kaiser Family Foundation, and the Centers for Disease Control and Prevention for the valuable information they make available through their web sites for use by people like me!