In the 1990s, it became increasingly clear that General Motors was in gradual decline. Yet, with the right leadership, GM still had time to restructure its staggering pension and healthcare obligations. Feckless leadership chose to pass these problems to the next generation - leading to GM's bankruptcy in 2009. America is in an eerily similar position. Like GM, America is burdened by overwhelming pension and healthcare obligations - over $50 trillion worth. Instead of restructuring these obligations, President Barrack Obama wants to expand America's biggest entitlement program: Medicare.
Like GM, America has a medical system it cannot afford and that allocates medical services poorly. At $34 trillion, future Medicare obligations are over $500,000 for an American family of four. If left unchecked, by 2050, Medicare will consume about 20 percent of GDP -- greater than America's total tax receipts. Not surprisingly, America spends more on health care than any other nation. In some respects, this spending is not in vain. America has the most advanced healthcare system in the world. Yet, America's healthcare system ranks low among developed nations and barely in the top quartile among all nations in terms of overall effectiveness. Accordingly, America should review its healthcare system and devise a better system to allocate medical services under Medicare.
There are two areas that America needs to target. The first is the breadth of Medicare. The second is how our tax system creates an incentive to "overbuy" medical insurance.
Medicare covers the wealthy and poor alike. Accordingly, the first step should be to narrow the focus of Medicare, not expand it. The Medicare/Medicaid system should be revamped to provide catastrophic healthcare for the poor. The change would require two steps. First, Medicare should only cover medical emergencies above a certain dollar amount (say, $15,000). However, to cover the initial $15,000 in costs, people would be required to carry a minimum health-care insurance policy with a private carrier. The federal government would mandate that the states establish a regime that would provide all citizens (particular poorer ones) access to such policies. States would, thus, require their citizens to carry "minimum liability health" (MLH) policies, similar to minimum liability car insurance required by many states. For poorer citizens, Medicare would pay for costs that exceed MLH policy limits; the wealthy would have private policies that provide comprehensive coverage. Thus, Medicare would be means tested and only the poor would be eligible for the catastrophic coverage provided by it. Wealthier Americans would either have to carry insurance above the minimum policy levels or pay for their medical care out of their own resources.
Tennessee currently has a minimum health-care insurance program similar to the one proposed. Tennessee's plan is premised on the idea that the amount of minimum insurance should be low enough that it is not cost prohibitive, but high enough to cover most medical incidents. The CoverTN plan provides $15,000 of insurance ($25,000 for families) and covers a majority of medical incidents in a given year. Doctor visits and many drugs are covered as well, with a modest co-pay. The cost for a young adult in good health (nonsmoker) is about $120 per month; the employee pays less than $40 per month. The remainder is split between the state and the person's employer. My plan would call for all Americans to carry a policy similar to the CoverTN. However, I would also impose a relatively modest deductible. Many might complain that this would be a significant burden on the poor; however, car insurance is less important than medical insurance and almost all auto insurance policies, including the ones bought by the poor, have a deductible to insure that the consumer comes out of pocket for at least something in the event of an accident. In the case of an MLH policy, a modest deductible ensures that every citizen bears at least some portion of the cost of healthcare services directly out of pocket, resulting in a more efficient allocation of medical services. This is something sorely needed in the current system.
The total cost of such a policy would be less than the CoverTN plan, given the deductible. Assuming a similar split between the state, employer, and worker, the total cost to an American earning the minimum wage would be about 6% of his or her pre-tax earnings, including the deductible. The unemployed and very poor would be eligible for further assistance by the state to cover premiums and the deductible, as is the case in Tennessee.
Medicare would thus be converted into a catastrophic regime covering the poor after the $15,000 policies ($25,000 for families) were exhausted. Accordingly, Medicare would be a means-tested entitlement program, designed to provide poorer Americans with a minimal level of catastrophic medical care. The Medicare system would be supported by tax dollars. Congress would establish an annual budget for Medicare that targets a particular percentage of GDP (e.g., 5% of GDP). The government would determine the level of benefits that could be provided based on the Medicare budget, requiring difficult decisions on the part of US policymakers. However, given means-testing and coverage provided by the $15,000 policies, the scope of Medicare coverage for poorer Americans could be quite expansive.
Most Americans, of course, would keep their current medical insurance. This is a positive, since most insured Americans are happy with their medical coverage. But, in addition to providing for their own medical insurance or costs in old age, more affluent Americans would also be taxed on their medical insurance benefits, as suggested by former President George W. Bush.
Under current law, employers can deduct insurance premiums paid on behalf of employees, but employees do not include these benefits as compensation. Thus, the US Treasury loses out on significant tax revenues. Worse yet, by providing this tax subsidy, our tax laws encourage Americans to "overbuy" insurance and arguably overuse medical services.
To encourage a more efficient allocation of medical services, Americans should be taxed on any employer medical subsidies above that of the MLH policy. This would eliminate the incentive on the part of workers to overbuy insurance and raise much-needed tax dollars, which could be used to support a leaner Medicare program.
By re-sizing our Medicare system to one we can afford, targeting Medicare to cover the neediest Americans and eliminating tax subsidies that encourage middle income Americans to overuse medical services, America can avoid the fate of GM and maintain its competitive position for decades to come.
If Alabama chooses not to participate, fine. After all, they are getting back $1.66 for every dollar they put in, so they would just do the rest of us a favor. Same goes for the other red states.
A common misconception is that the red states are paying higher taxes than those in blue states. In fact, blue states carry the red ones.
Read Brett Arend's article in Market Watch.
http://www.marketwatch.com/story/in-health-care-plan-give-secession-a-chance-2009-10-12
I learned today, my husband's software company was told awhile ago to not hire any North Americans just Asians and Indians. This company has it's headquarters in California. His brother's company a huge well known company also located in California, which I noticed was a big winner in the rally on wall street yesterday, also was told during the summer not to hire any North Americans. WTF!
Medicare isn't the problem, it's corporate america that has bought our government and working against Americans in their own country.
It should be treasonous to have companies work against American workers but allowed to use our country for their own benefit.
Medicare should be exteneded to all Americans. We need to get rid of the corporate terrorists that have destroyed our democracy and destroying us economically.
I would like to see an initiative added to all ballots during the '10 election BANNING corporate donations to ALL politicians OR a requirement that all donations be put in one big pot to be divided equally to fund ALL (incumbents and wannabes) campaigns with a ban on personal spending. Let's level the playing field for elections and may the best person win, regardless of party affiliation! NO MORE SPECIAL INTERESTS! We also need to limit the election cycle, it is way too long.
Between 1970 and 2000, Medicare costs increased by a factor of 16; private healthcare insurance costs for the same services increased by a factor of 25. This, despite the fact that Medicare supports older, sicker, more medically complex patients while private healthcare can pick and choose their customers and still denies 20% of all claims! Yet the author asserts we cannot afford Medicare?
We need a strong public option now, as a competitive cost containment measure. A great way to do it would be to expand Medicare to those not currently covered, at cost. Let the insurance companies continue to compete at the upper end of the market, but let's take life-and-death decisions out of the hands of those whose sole consideration is the profit motive.
Just asking.
America spends more on healthcare than any other nation because of greedy in$urance corporations.
Take your neocon corporate propaganda and put it somewhere without solar illumination.
I think 15% is not ambitious enough. Medicare's administrative costs are currently 2-3%, compared to the 30% costs of private insurers. So eliminating the private insurance bureacracy alone could knock roughly 28% off of health care costs.
It is a myth that private insurance makes-up for Medicare with cost-shifting. The inefficienices of hosptials in addition to their 25% overhead cost makes healthcare in America costly and inefficient. Medicare is not the problem, though everybody loves to blame it. The problem is with our supposedly private-enterprise health delivery system that is guaranteed a profit however iefficient they may be.
And no entity is guaranteed a profit - part of the problem with our health care system is that many entities from providers (hospitals, clinics, etc.) have failed over the last few decades as have insurance companies.
The whole problem started when the HC industry was created and the insurance companies saw how much money came into the coffers from premiums paid by consumers. All that money ignited the greed of the CEOs etc. to get a piece of the pot which is why we have the problems we are now facing. It is all based on greed! It is also why W tried so hard to privatize Social Security, a big pot of money that the financial industry could not get their hands on. Can you imagine where our seniors would be today if Social Security had been in the stock market when the house of cards collapsed?
For years they had underfunded and used as a tool, the overly optimistic expected returns on their pension plans to hide the issue [management estimates]. Instead, they as company management chose to pay dividends to their shareholders even as they lost market share and incurred massive financial losses.
Then there is the curious case of Ford, which by the way had the same agreed to pensions (under pattern bargaining) executive and other pensions were similar as well. Ford is surviving just fine. Unlike GM, Ford has been more realistic/honest about funding their legal obligations.
To state that the pension liabilities were unsustainable is just flat out wrong.
Now, this guy's prescription for Medicare/Medicaid is BS from the get-go, and obviously is premised on retaining the controlling position of for-profit insurance companies. The appropriate "fix" for Medicare is to remove the cap on FICA/Medicare earnings and perhaps raise the FICA/Medicare tax rate by 0.5 - 1%. Medicare premiums could probably stay as they are, and remain graduated by income level. Merge Medicare/Medicaid and open eligibility to anyone who wants it. Enact both employer and individual mandates that cover everyone. As a sop to "free marketeers," leave for-profits in business, but revoke anti-trust immunity. Anyone who wanted to could buy those policies. Few would want to, so we could thus let for-profits die a natural death.