Winning Progressive

(By NCrissie B)

The Preemptive Freakout du Jour is, of course, whether President Obama is about to “cave” in tax and budget negotiations with House Republicans. Last weekend, senior White House advisor David Plouffe said that successful negotiations would require concessions from both Republicans and Democrats:

The only way that gets done is for Republicans again to step back and get mercilessly criticized by Grover Norquist and the Right, and it means that Democrats are going to have to do some tough things on spending and entitlements that means that they’ll criticized on by their left.

Cue the Angst Mongers:

Okay. Deep breath.

Note the speculative scare words, such as “could be a raw deal for the middle class,” and “We have a lot of questions here about where this is going to end up, don’t we?”

Never mind that President Obama has plainly stated that Social Security is “off limits” in these negotiations. Never mind that the math is the math and, despite the chart Ed Schultz showed about the current deficit, a new report by the Congressional Budget Office shows that our long-term deficit is driven almost entirely by rising health care costs for seniors:

The aging of the baby-boom generation portends a significant and sustained increase in coming years in the share of the population that will receive benefits from Social Security and Medicare and long-term care services financed through Medicaid. Moreover, per capita spending on health care is likely to continue to grow faster than per capita spending on other goods and services for many years.

If progressives criticize conservatives for ignoring data they don’t like – and we should – then we can’t ignore data we don’t like … and the CBO’s data are very solid.

To solve our long-term deficit problem, we must flatten the growth curve on health care costs, and President Obama began working on that with the American Recovery and Reinvestment Act, which included funding for computerized medical records and comparative studies of treatment outcomes. The Affordable Care Act also includes provisions to reduce Medicare costs, but Christina Romer – former head of President Obama’s Council of Economic Advisers – wrote in June that Obamacare was only the first step in addressing the health care cost curve:

A natural approach is to strengthen measures already enacted. Once the payment advisory board has a track record, for example, perhaps it could be empowered to suggest changes in benefits or in how Medicare services are provided – say, along the lines of successful demonstration projects.

Likewise, the Bowles-Simpson bipartisan fiscal commission recommended, as part of overall tax reform, limiting the amount of health insurance benefits excluded from taxation. Like the excise tax on high-priced plans, this change would probably increase pressure to keep costs down.

Even larger departures from the current system may be needed. The law creates health insurance exchanges where individuals and small businesses can buy coverage. Including a reasonably priced public plan as an option could exert downward pressure on the price of private health insurance policies by increasing competition.

Yet Dr. Romer did not expect progress anytime soon, concluding:

Sadly, serious debate over further cost-savings measures may be a long way off. Some Republicans seem more interested in just limiting the government’s share of health care expenditures than in slowing overall spending. And some Democrats seem more interested in just preserving existing government programs than in making the entire health care system more efficient.

For the sake of the nation’s fiscal health, and the health and economic security of American families, it’s time to embrace cost containment in health care as the next great legislative challenge.

These are real challenges that demand serious discussions of alternatives and their benefits, costs, risks, and tradeoffs. President Obama and leaders in Congress will debate those. I don’t like all of the options currently on the table. I may or may not like all of the solutions eventually adopted. It’s too soon to know.

But it’s a whole lot more entertaining to have a Preemptive Freakout because … well … President Obama always caves in to Republicans anyway, right? Except he doesn’t:

In policy terms, Obama clearly had gotten the better deal. The trouble was that the political world and the public had been conditioned to see this episode as primarily a clash over the top-tier tax cuts – and on that Obama had not gotten what he wanted. Consequently, the media depicted the compromise as a loss for Obama, and progressive Democrats squawked mightily about the continuation of the tax cuts.

As Corn concludes:

In a recent White House meeting with labor leaders and progressive activists, Obama signaled he is ready to fight the GOPers – and this time dare the Republicans to block continuing the tax cuts for the middle class. But no one ought to forget that Obama, a progressive in his policy preferences, remains a pragmatist. What happened two years ago is not an indication that Obama is likely to yield in the new face-off, but that he will be assessing the political dynamics in gridlocked Washington and be willing to bargain hard for a good deal with true benefits. That’s not caving in. It’s governing.

Yes, it’s governing. But governing is messy, and full of compromises and deals that look icky as we watch them happen. As John Godfrey Saxe famously said: “Laws, like sausages, cease to inspire respect in proportion as we know how they are made.”

Or Saxe would have famously said that, if so many people didn’t wrongly attribute his quote to Otto von Bismark and Mark Twain. Those mistakes happen when people substitute ‘sounds true’ rumors for actual facts. Just sayin’.

And yes, Ed Schultz, I’m sayin’ it to you, and the others who are busy with their Premptive Freakout. Enough. Go climb a tree and nibble on a macadamia. It’s a lot better for your blood pressure. And mine.

(Crossposted from Blogistan Polytechnic Institute (BPICampus.com))

(By Mark Bridger, cross-posted at That Mans Scope)

There has been a lot of discussion about what would happen to Medicare if Rep. Paul Ryan’s budget proposal ever became law. Democrats have claimed that Medicare will, in effect, be ended, and that people retiring in the future will be faced with huge increases in their healthcare costs — perhaps $1000 or more per month. Republicans have claimed that this is a lie and a scare tactic, that Medicare will simply be changed somewhat, and that reports of huge premium increases are simply exaggerations. Both sides cite a report by the Congressional Budget Office (CBO) called A Long-Term Analysis of a Budget Proposal by Chairman Ryan. The full text (pdf) can be found HERE.

Since there seems to be some controversy as to what this report actually says, I downloaded it and spent some time reading it; my wife, who is also a mathematician and has studied finance, did the same. Here is what we found out.

The report deals with budgets and deficit projections mostly related to Ryan’s plan to convert Medicare from a “single-payer” government program to a voucher-based plan entirely based on private insurers. In Ryan’s proposal, participants would purchase a health insurance policy from an approved vendor through a Medicare “Exchange”; vendors would have to insure all qualified (by age and citizenship) applicants, and could base their charges only on age, not on physical or pre-existing conditions.  It does not appear that the Ryan plan makes any assumptions or establishes any requirements about the type or quality of coverage that must be offered in the “Exchange.”  Coverage would be optional (no personal mandate) and not subject to any of the provisions of the 2010 Healthcare Reform Bill. The age of eligibility would gradually increase to 67 in 2033.

In order to help beneficiaries of the program (“seniors”) pay for private insurance, the government would provide uniform supplementary payments which would grow over time only with the “Urban Consumer Price Index,” which is far below the rate of health care inflation.  (There would also be some transfer of funds from plans with healthier members to plans with less healthy one, though it is unclear how or to what extent this would work; in any case, it would not affect the premiums that retirees pay.) These voucher payments from the government would go directly to the private insurers, exactly the same way that tuition payments would go to directly to schools under so-called “education voucher” programs championed by Republicans.

People currently on Medicare, or who would be eligible for Medicare before 2022, would be allowed to enroll in and be covered by traditional Medicare for as long as they wish. Younger people (basically age 55 or under now) would have to enroll in the Ryan plan. In effect, those currently retired people who only care about their own healthcare (and not that of younger friends, relatives, or fellow cititzens) need not worry about the Ryan plan.

So what will happen, according to the CBO, to people retiring in 2022 or later?

In order to analyze this, the CBO defines certain important phrases.

1. Baseline Healthcare Cost. This is the amount it would cost an average 65-year-old to purchase private health insurance comparable to what Medicare now covers. “Comparable” is a tricky term, since all policies, including Medicare, have built-in deductibles and co-payments. Thus, taking these into account, Medicare pays for about 80% of total expenses (actually 76%), statistically. The CBO mentions this specifically, and we adjust for that in our computations (see below).

2. Extended Baseline Scenario. This scenario projects Medicare expenses moving forward for folks who would be allowed to continue in traditional Medicare after 2022.  Is included for comparison between Medicare and “Ryan-care”.

3. Alternative Fiscal Scenario. This scenario assumes various changes to revenue (most lower) and outlays (mostly higher) based on proposed legislation other than the Ryan plan.  These policy changes include extension of the 2003 tax cuts, changes to provider compensation (e.g. to doctors) and other proposed or passed legislation. This Alternative Scenario is similar to the Extended Baseline Scenario above, but is more expensive.

We now come to the key table which summarizes CBO’s analysis of the costs to government and to the individual of the Ryan plan versus (traditional) Medicare:

The first three lines show the present-day situation . The cost of Medicare coverage is about 89% of the cost of a comparable private plan. Because everything is related to this baseline private plan, we see that the government pays, for each individual, 54/89 = 60% (approx) of the cost of insurance, while that individual pays the remaining 40%. For example, a typical senior age 65 might pay Medicare premiums of $150 per month (Medicare parts B and D) and another $150 per month for supplementary insurance. (The CBO, in a note to this table, says “A beneficiary’s spending includes premiums, out of pocket costs for covered services, and payments for any supplemental insurance; see point 1 above). This comes to $3600 per year, which according to the chart is 35% of the cost of a private plan. Thus, a simple computation gives the cost of a private plan to be about $10,000 and the cost of Medicare coverage to be about $9000 — split between $3600 individual and $5400 government contributions.

Now let’s look at what happens in 2022 when the Ryan plan kicks in. On page 23 of the CBO report we see that it estimates the premium support (government) to be $8000 for a typical 65-year-old (both for Medicare and Ryan-care). According to the chart above, this is 39% of the baseline private plan cost. To find the individual’s contribution, you multiply: $8000 x 61/39 = $12,512; this amounts to a charge of about $1000/month for new retiree (age 65). For a senior on traditional medicare, however, the individual contribution would be $8000 x 27/39 = (about) $5538. Thus, the Ryan plan would add about $7000 to the cost of insurance for an average 65-year-old person in 2022.

However, 65 is not the typical age of a retired person, and the Ryan plan (unlike traditional Medicare) allows extra charges based on age. For example, on page 8 the CBO document estimates the average government expenditure over all retirees 65 and older to be $15,000, not $8000. Applying the same calculation as above shows that the cost to an individual under the Ryan plan would be around $23,468 (nearly $2000 per month), while the cost under traditional Medicare would be only about $10,384. The difference is $13,084.

Thus, the average retired person in 2022 would have to pay more than $1000 per month extra under the Ryan plan.

These calculations, based entirely on tables and data from the CBO report, clearly confirm the assertions made by Democrats about the costs to senior citizen retirees under the Ryan budget plan.

Finally, the CBO report mentions in at least 10 different places (pp. 4, 15, 17, 19, 21, 23) that the Ryan plan would increase costs for participants starting in 2022. The Ryan budget overall cuts government programs — especially Medicare — while keeping taxes level or reducing them. Since retirees, especially the poorer ones, pay little in taxes, this clearly has the effect of cutting the budget at the expense of these senior citizens. In fact, as the calculations we made above (more than $2000 per month premiums) show, very few of these people would be able to afford healthcare under the Ryan plan. Their choice would be to do without, or hope for the best at emergency rooms. (And who will pay for that?)

The bottom line, therefore, is that Ryan’s plan to replace Medicare with vouchers would require the average retiree to play between approximately $7,000 to $13,000 per year more for health insurance while eliminating much of the cost savings benefits of the Medicare system (which is far more cost effective than private insurance).  If you’d like to remind the public how much extra people would have to pay under the Ryan legislation that all but five Republican Senators and all but four Republican House members voted for, please do so by using our Letter to the Editor Campaign page to write a letter to your local newspaper.

(This post was contributed to by Bruce Schmiechen and Mark McCutchan)

As we’ve explained previously, the vast majority of our nation’s projected long term deficit is due to rising healthcare costs.  There are three primary responses offered to this problem:

* “Business as usual” – if we do nothing, health care will use up more and more of our nation’s resources thereby imperiling our long term fiscal solvency.  In addition, as we try desperately try to reduce our health care costs, decisions about how to do so will be in the hands of health insurance companies, leading to more rationing and more denials of coverage by insurance companies looking to pad their bottom lines.

* The Republican Response – Rep. Ryan and others in today’s GOP offer a free-market faith-based approach that seeks to shift health care costs away from the government and onto individuals by abolishing Medicare and replacing it with inadequate vouchers.  The theory is that if individuals feel more of the cost of health care, they will make cost cutting decisions.  In reality, individuals do not have the information or bargaining power needed to reduce costs and, instead, the Republican plan will simply lead to more people going without critical health care or paying more for such care.  In addition, given that Medicare and Medicaid are better at holding down costs than private sector insurance companies, the Republican plan will likely lead to higher overall health care costs even as government spending on health care goes down.

* The Progressive Response – The primary progressive responses to growing healthcare costs is to increase the role of government in providing health insurance, with the ultimate goal of a Medicare-for-all single payer insurance system.  This approach would save money because a single health insurance payer can have lower administrative costs than multiple private insurance companies and reduces the administrative burden on medical practices of trying to deal with hundreds of insurance companies.  That is why government programs such as Medicare have lower administrative costs than do private insurance companies and have a track record of more effectively controlling healthcare costs than does the private insurance market.  Rep. Jim McDermott (D-WA) and Senator Bernie Sanders (I-Vt) recently introduced legislation, entitled the American Health Care Security Act of 2011, which would create such a Medicare-for-all system.

The progressive response is likely to be the most effective and fair, as it addresses two of the major causes of high health care costs in the U.S. – administrative overhead costs and lack of health insurance – and does so in a way that avoids putting the burden of cost cutting directly on patients.  But given the rapid escalation of healthcare costs in the U.S., and the role that other factors play in those increases, even a Medicare-for-all system is not likely to do enough to bring healthcare costs down to a reasonable level.

The additional step that is needed is to bring the rising costs related to technological advances under control.  As we described previously, approximately half of the increase in healthcare spending is due to technological advances that lead to the use of more expensive technology, more surgeries, and more pharmaceuticals.  While some of this is highly beneficial, many of these advances provide little to no benefit over previous, cheaper treatment options.   The biggest thing we can do to reduce future health care costs, therefore, is to bring increased spending related to technological advances under control by assessing the comparative effectiveness of these advances before we start widely instituting them.

In his recent budget speech, President Obama proposed strengthening the Affordable Care Act’s Independent Patient Advisory Board (“IPAB”), which is designed to constrain Medicare spending by the federal government, and is the most serious proposal to address the problem of increasing healthcare costs.  Combined with the well over $1 billion that the Obama Administration has invested so far into comparative effectiveness research for medical procedures, technologies, and pharmaceuticals, the IPAB is designed to rationalize, rather than ration, health care spending and to help curb the cost increases related to technological advances that actually provide little to no added benefit over earlier cheaper options.

For starters, in trying to unravel the issues, let’s look at how the IPAB actually works.  Here is the official White House formulation:

15 experts including doctors and patient advocates would be nominated by the President and confirmed by the Senate to serve on IPAB.

IPAB would recommend policies to Congress to help Medicare provide better care at lower costs.  This could include ideas on coordinating care, getting rid of waste in the system, incentivizing best practices, and prioritizing primary care.

IPAB is specifically prohibited by law from recommending any policies that ration care, raise taxes, increase premiums or cost-sharing, restrict benefits or modify who is eligible for Medicare.

Congress then has the power to accept or reject these recommendations. If Congress rejects the recommendations, and Medicare spending exceeds specific targets, Congress must either enact policies that achieve equivalent savings or let the Secretary of Health and Human Services follow IPAB’s recommendations.

In essence, the IPAB is designed to make sure that the treatments that are being paid for are actually beneficial and by to find ways to prioritize the most cost-effective forms of treatment. It is important to keep in mind also that IPAB builds on other provisions in the Affordable Care Act aimed at comparative effectiveness, and would only take effect if those other provisions failed to achieve the goal of slowing the growth of Medicare spending.  Experts estimate that the IPAB proposal alone could save more than $400 billion from Medicare spending over the next decade.

While the IPAB currently exists, President Obama’s proposal is to make it stronger by limiting Congress’ ability to overrule IPAB recommendations.  While currently Congress has to approve IPAB’s recommendations, President Obama’s proposal is for Congress to only be able to vote to reject IPAB proposals, without amendments, and only if Congress replaces the proposal with equivalents savings.  Unfortunately, though perhaps not surprisingly, the response in Congress has not been encouraging. “The Health Care Blog” described the reaction to President Obama’s proposal to strengthen the IPAB:

It didn’t take long for the fireworks to start. The New York Times reported… that politicians from both sides of the aisle are lining up not only to deep-six the president’s latest IPAB proposal, but to get rid of it entirely. Republicans like Paul Ryan of Wisconsin cried rationing. Democrats like Pete Stark of California said such decisions are better left in the hands of Congress.

So Congress, which has demonstrated an acute inability to control health care spending, is pushing back against the President. It’s not surprising that the GOP would reject anything the President proposed, since their agenda is essentially to kill Medicare and kill health insurance reform under the ACA.  But the negative response includes some Congressional Democrats, who want to maintain their current prerogative to control Medicare spending.

The IPAB isn’t an easy answer to all of the complex issues involved in cost constraint moving forward. But it does:

* establishes a process to begin addressing the difficult questions.

* offers a framework for reducing healthcare costs that’s based in transparency and aggregation of the most complete data possible

* brings the process of budgeting, planning and proposing constraints on the least effective and most costly practices into the daylight

* places this critical decision-making – and inevitable debates – into the public sphere and out of the hands of folks invested in those aspects of our health care system that have brought least benefit to patients while maximizing industry profits.

The tangled political processes of Congress – any Congress controlled by any party – cannot be relied upon to effectively manage this essential and complex task.  IPAB doesn’t strip Congress of any responsibilities or engagement. It’s not a dictatorial board and certainly not a “death panel.”  But the principle and process mandating the Independent Patients Advisory Board doesn’t rest on the assumption that politicians can effect what they clearly cannot.

As noted on The Health Care Blog, “One of the reasons Medicare costs are out of control is that every effort to rein in spending in one Congress is usually overturned by subsequent Congresses.”

Deficit reduction is a real issue, but most of the issues marking the deficit debate in our current Congress aren’t serious or real.  It’s a great idea to have a serious debate about how best to enact health insurance reform that broadens coverage, guarantees quality care and begins to control costs.  It can be done, but – in the current parlance of our nation’s commentariat – it requires serious adults in the room and an admission of where out-of-control spending actually exists. Unhinged ideology, special interest agendas and turf wars seem to govern the rhetoric and actions of too many legislators.  Serious and adult voters will have take our own measures in 2012 to address the inability of our current Congressional majority to even begin to get serious or act like adults.  The President has made a significant step forward.  But he’ll need a lot of help to make the IPAB actually work.

In order to help rationalize healthcare spending and avoid rationing of healthcare, take action by contacting your federal legislators and the President, and writing a letter to the editor of your local newspapers to:

* urge support of the Medicare-for-all proposal in the Sanders-McDermott American Health Care Security Act of 2011

* urge support of President Obama’s reasonable approach, through the Independent Patient Advisory Board  to reign in the growth of Medicare spending without harming the benefits that our nation’s seniors should and do receive

* push back against Republican proposals to abolish Medicare and eliminate health care reform

Winning Progressive’s Series on America’s Health Care System

America’s health care system was placed in the spotlight from the very beginning of the Obama administration, and rightly so for several reasons – good health is important to a successful citizenry, health care was out of the reach of many Americans, and the federal budget expense devoted to ensuring good health for its citizens is rising unsustainably.

Our Winning Progressive series on the American health care system will discuss what drives health care costs higher, Obama Administration plans to reduce these costs while expanding coverage to more Americans, and how other countries have tackled the challenge of keeping its citizens healthy.

Part 1 – Six Factors Driving Health Care Cost Sky-High

(by Mark McCutchan)

U.S. health care costs have been going up dramatically over the last 50 years, both in total expenditure and as a percentage of the GDP (graph 1).

Graph 1 –U.S. Health Care Costs vs. GDP (in $Billions)

In 2007, the U.S. spent $2.26 trillion on health care, or $7,439 per person, according to the Office of the Actuary (OACT) of the Centers for Medicare and Medicaid Services , 16% of our nation’s GDP.  Health and Human Services expects expenses to continue rising to 19.5% of GDP by 2017.

Warren Buffett appeared on CNBC last year to call the nation’s health care spending “untenable,” comparing “out of control” costs to a “tapeworm eating at our economic body.”

Here are the top six factors driving health care costs higher.  Some can be addressed directly by effective governmental action, while others are cultural and demographic in nature and will take much longer to address.

1.      Technological Advances – The Congressional Budget Office, reviewing a number of studies, has estimated that approximately half of the growth in healthcare costs in the U.S. is due to technological advances that allow for more treatment of more diseases.  Such advances can provide significant benefits to individuals receiving treatment and to society as a whole.  New technology, surgical procedures, and pharmaceuticals, however, are typically not subjected to an evaluation of their benefits versus their costs and, as a result, many expensive new technologies or procedures that become very popular among doctors and patients offer little to no benefit over the much cheaper approaches that they replace.  For example, the $1.5 million da Vinci robot, which performs various surgical procedures, adds $8,000 to the cost of heart bypass surgery, yet there is no evidence that it leads to better outcomes than traditional surgery.  “The trick is we really need research to know how to use these tools in a manner that will be preventive and predictive, to tailor the tests and interventions to what the patient really needs,” says Herb Kressel, radiologist-in-chief at Beth Israel Deaconess Medical Center in Boston.

2.      High Administrative Costs – According to Vermont’s Independent Senator, Bernie Sanders, approximately 30% of every healthcare dollar spent in the United States goes to administrative costs rather than to delivering care, and that includes marketing costs, bureaucracies to handle all the paperwork involved, and a thick layer of profit for everyone involved – drug, equipment and supply manufacturers, insurance companies, and for-profit hospitals. One of the big advantages of a single payer system is that the vast majority of this administrative expense is eliminated, as doctors have to deal with only one insurance entity.

3.      Lack of Health Insurance – According to the CDC, about 16% of Americans do not have health insurance.  The uninsured tend to get less preventative care, which delays treatment until there is a much bigger and more expensive problem to treat; they are also more likely to use emergency rooms, the most expensive form of care.   The cost to the health care system for treating the uninsured was almost $100 billion in 2001, the latest report available.  The cost to the uninsured in the form of lower productivity, enjoyment of life, and potential development has been estimated to fall between $65 and $130 billion per year.

4.      High Patient Demand: Direct-to-consumer marketing of prescription drugs was legalized in the US in 1997 (who among us doesn’t recall those commercials to “ask for the purple pill”?), and drug makers now spend over $4.3 billion on media ads in newspapers, magazines, TV and the internet to encourage potential patients to ask for their brand at the doctor’s office.  Doctors wishing to keep their patient are only too happy to oblige, contributing to the climb of US prescription drug sales from $145 billion in 2000 to $307 billion in 2010.  The growing abuse of prescription drugs, especially pain medication available at pill mills, has been estimated to cost $18 billion annually, before considering the lost lives, productivity, and criminal justice expenses.

5.      Poor Lifestyle Choices: Spurred by the abundance of convenient junk foods, effective neural marketing by Frito-Lays and other processed food manufacturers, and less free time to prepare healthy alternatives, Americans have developed a diet high in fat, sugar and caffeine over the last few decades.  Combine this with a 8 hours/day screen habit and loss of exercise time, and you have a recipe for an explosive rise in obesity, heart disease, and diabetes, increasing the demand for related health services.  The Congressional Budget Office has estimated that 12 percent of the growth in health care costs between 1987 and 2001 was caused by increased obesity in the U.S.

Graph 2 – US Population, Overweight & Obese

6.      Aging Population and End of Life Care – Our senior population is growing rapidly; the population eligible for Medicare (65 and older) is expected to rise from a current 40 million to 82 million by 2050, while the members of society in need of expensive end-of-life treatments, those age 85 and older, may rise from nearly 6 million today to 19 million by 2050.  Twenty-five per cent of all Medicare spending – about $125 billion – is for the 5% of patients who are in their final year of life, and most of that money goes for care in their last couple of months which is of little apparent benefit.  Our current health care system emphasizes avoiding patient mortality at any cost, without considering the importance of end-of-life decisions for patients and their families that can provide meaning and comfort.

In Part 2 of this series, we will cover competing proposals for reducing health care costs, and how progressive proposals offer the best approach for reducing health care costs without harming people in need of care.

(In today’s installment of the Common Sense Guide to the Great Deficit Debate & The Future of Our Economy reader Bruce Schmiechen, who has the blog The Titanic Sails at Dawn, focuses on how Social Security is not causing deficits, and how long term funding problems for Medicare are due to rising private sector health care costs.  Part 1 of the Common Sense Guide is available here, Part 2 is available here, Part 3 is available here, and the complete document can be found at Bruce’s blog.)

ATTACKING SOCIAL SECURITY

We constantly hear in the media that Social Security is “in crisis,” but as Princeton University economist and N.Y.Times columnist Paul Krugman notes:

Social Security has been running surpluses for the last quarter-century, banking those surpluses in a special account, the so-called trust fund. The program won’t have to turn to Congress for help or cut benefits until or unless the trust fund is exhausted, which the program’s actuaries don’t expect to happen until 2037 — and there’s a significant chance, according to their estimates, that that day will never come.

Meanwhile, an aging population will eventually (over the course of the next 20 years) cause the cost of paying Social Security benefits to rise from its current 4.8 percent of G.D.P. to about 6 percent of G.D.P. To give you some perspective, that’s a significantly smaller increase than the rise in defense spending since 2001, which Washington certainly didn’t consider a crisis, or even a reason to rethink some of the Bush tax cuts.            

The  truth is that Social Security is better funded into  the  future than any other federal program in our history. According  to the  most recent projections of  the Congressional Budget Office, Social Security will be able to pay full benefits  through the  year 2044 with no changes whatsoever. And any shortfalls that might possibly occur decades from now are a small part of the overall deficit problems.                   

To bring the picture of assault on the middle class full circle, former Labor Secretary Robert Reich has traced any actual prospect of future shortfalls in Social Security funding directly back to the growth in income inequality: 

“Back in 1983, the ceiling was set (in a deal forged by President Reagan and a Democratic Congress) so the Social Security payroll tax would hit 90% of all wages covered by Social Security… Today, though,  the  Social Security payroll tax hits only about 84% of total income…because  a larger and larger portion of total income has  gone to the top.  In 1983, the richest 1% of Americans got 11.6% of total income. Today, the top 1% takes in more than 20%.”    

The simplest way to resolve any future concerns about paying full social security benefits would be to tax all incomes equally – social security taxes are capped at $106,800.  Which means that someone earning a million dollars per year pays the same amount of social security tax as someone earning $106,800.  That’s a tax rate for millionaires of a just a bit over 10% of the Social Security tax rate paid by anyone making $106,800 or below.  Lift the cap on taxable Social Security income, equalize the rates across the spectrum – “working poor” to middle class to wealthy – and the Social Security “crisis” (mostly a hype by those who want to privatize or greatly diminish the program) would either disappear or become easily manageable. Statistics about increasing average life-expectancy mask the reality that people engaged in strenuous occupations where working to 70 is not a reasonable option are among those most reliant on Social Security to provide sole income in their old age. Nor do these folks’ life expectancies track the “average” – they are shorter.

WHAT ABOUT MEDICARE?   IS HEALTH CARE UNAFFORDABLE?

The worst news regarding long-term deficits is overwhelmingly in projections of growing health care costs that radically outpace any other area of potential inflation.  According to the Center for Economic and Policy Research:                        

Through Medicare and Medicaid, the government pays for approximately half of the country’s health care, almost all of which is actually provided by the private sector. Thus, the bulk of our projected rising budget deficits are due to skyrocketing health care costs… If our per person health care costs were the same as for any other wealthy country, then the U.S. would face huge surpluses in the long-run rather than deficits.                

The above chart shows past federal spending and projected increases in federal spending as a percentage of Gross Domestic Product over the decades. Rising health care costs – which are even less restrained in the realm of private market insurers than they are in government-administered insurance programs – are the greatest threat to our nation’s future prosperity.

The health care reform legislation enacted by President Obama and Congressional Democrats was an important step toward extending coverage and gaining consumer control over our health care system, but it is critical that we not only defend Affordable Care’s reforms, but improve upon them substantially. It can be done. Models in other countries that provide high-quality universal coverage exist. This issue, not some generic hysteria about deficits, is critical and must continue to be addressed. Meanwhile, repeal of the Affordable Care Act would – according the non-partisan Congressional Budget Office – actually increase deficits significantly.                   

(Part 5 of the Common Sense Primer – focusing on how the Republicans’ “fiscal resposibility” proposals are scams that are aimed at building conservative political power, not cutting the deficit – will be posted on Monday, April 4)

Here at Winning Progressive, we will be discussing some of the primary benefits of the health insurance reform legislation throughout the week. Health care is the political issue that matters to me most.  My spouse is a young adult who has had cancer for the past nine years.  She had no health insurance when she was diagnosed. The political red tape of dealing with the coverage of her care was as caustic and painful for her as the disease itself.  Additionally, my father has dementia.  I am extremely fortunate that my employer now provides very good health insurance for my spouse and me, and that Medicare is there to take care of my Dad’s medical needs.  But I live in fear of what would happen if I lost my job or my employer was no longer able to afford our health insurance plan.  In addition, I realize that tens of millions of Americans are nowhere near as lucky as I am, as they do not even have health insurance to worry about losing.

For those of us concerned about health insurance, this is an exciting week. On Thursday a number of major provisions of the historic health insurance reform legislation that President Obama and Congressional Democrats passed earlier this year go into effect.  Before we discuss these new provisions, let’s take a look back at how broken the pre-reform health insurance system is.  Looking back is important not only because it provides an idea of the size of the problem that President Obama began to address, but also because it provides a clear picture of what Republicans, who have promised to repeal health insurance reform, would try to return our country to if they get back into power.

The numerous inadequacies in our pre-reform health care system can be categorized into four basic categories.

• Denying Coverage to Those Who Need It Most: The entire point of a health insurance system is to make sure that people are able to pay for medical coverage when they are sick.  Unfortunately, the pre-reform health insurance system enabled health insurance companies to regularly deny coverage to those people who need it the most.  For example, it was legal in 45 states for health insurance companies to deny people coverage for pre-existing conditions.  So, if you had cancer or diabetes, a health insurance company could either deny you coverage altogether or deny you coverage for that disease.  While that might make sense for health insurance industry profits, it does not make sense for people who are ill.  An even worse industry practice is known as rescission, which is when a health insurance company will happily take your premiums until you get sick, and then find an excuse to eliminate your coverage.  A 2009 Congressional investigation found that three major insurance companies had avoided paying $300 million in claims by rescinding coverage for 20,000 policyholders after they got sick.

• Escalating Costs: Health care costs in the U.S. are out of control.  Our country spent $2.2 trillion on health care in 2009, which is more than 16% of our national economic output.  That figure has skyrocketed from only 9.1% in 1980 and 12.3% in 1990.  As a society, we now spend an annual average of $7,400 per person on health care, which is almost double what other industrialized nations spend.

• Inadequate Results: It would perhaps be worth spending so much more than the rest of the world on health care if we got better results.  But we do not.  Instead, the U.S.’s average life expectancy of 78 years old is three years less than France’s 81 years, even though France spends only $3,600 per person per year on health care.  In fact, a recent study from the Commonwealth Fund found that in comparison to other industrialized countries, the U.S. ranks last in efficiency, quality, and equity of care.

• Declining Coverage: Despite spending more on health care than any other country on the planet, the U.S. has by far the highest percentage of people who lack coverage.  In 2000, there were 39.2 million uninsured Americans.  By 2009, that number had increased to 50 million.  Approximately 66% of the uninsured are from a household with at least one full-time worker, and an additional 14% are from households with at least one part-time worker.  Much of the decline in coverage is due to the fact that fewer employers are covering their employees.  In 2000, 66% of employers provided coverage, but by 2009 that number was down to 58.9%.  A recent study from Harvard Medical School found that as many as 45,000 Americans die every year due to a lack of health insurance.  The uninsured also are more likely to be hospitalized for avoidable health problems because they lack access to preventative care.

In short, the pre-reform health care system in the United States costs too much, achieves too little, covers too few, and does not support people who need it the most.  That is why the Democratic reforms that we will be discussing here over the next week are so important.

Do you support the efforts of President Obama and Congressional Democrats to reform our nation’s broken health care system?  If so, write a letter to the editor of your local newspaper thanking them and urging your neighbors to make sure that we do not allow the Republicans to turn the clock back on the progress we have made.