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Paul Kleyman Headshot

Obama Health Cuts Would Pinch Rich, but Harm the Rest

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SAN FRANCISCO, Calif. -- President Obama is getting the same limp praise this week for his budget plan from liberal commentators he received last week for his listless jobs program, but ignore the chat-ocrats for a moment, and turn past the dominant page-one stories about what it all means for the 2012 presidential race.

Instead, try reading the actual reporting, if you can find it. I found some Tuesday morning in the New York Times back on page A16. Robert Pear, a stalwart health policy reporter at the Times' Washington Bureau for the last couple of decades, filed a particularly telling analysis about how the president's plan actually plans to "save" $320 billion over the coming decade.

The president, Pear reports, "would start charging co-payments to frail homebound older people who receive home health services. And he would reduce the growth of federal payments to states for treating low-income people under Medicaid."

The administration, intent on denying it is declaring class warfare, had budget director Jacob J. Lew deny "that the White House was going after rich people." Pear quotes Lew saying that in the president's plan "there is a lot of pain, and it's spread -- it's spread broadly and we think fairly." Pain for all -- it's a good thing, but how fair is it really?

What budget director Lew calls "fairly" done amounts to a plan that pinches pennies from the wallets of the wealthy, mainly by allowing the Bush tax cuts to lapse, while literally doing harm to millions of vulnerable people who will be left in the cold and by the hospital curb without health care, as if health care is a mere budgetary line item.

It's as if the radio broadcaster at the Hindenburg blimp disaster hadn't cried out, "Oh, the humanity," but has shouted, "My God -- what's this going to cost America to clean up?"

Pear reports that the debt-cutting plan would raise Medicare premiums by about 30 percent for new beneficiaries who buy private insurance to help fill gaps in Medicare.

The article explains, "Many beneficiaries choose these private Medigap policies because they want the financial security they get from the extra insurance. But the White House said this protection 'gives individuals less incentive to consider the costs of health care and thus raises Medicare costs.'" That is, because the insurance covers more, the administration says they use it too much, with some charges spilling over to Medicare.

The Obamacare cuts would boost premiums for higher-income beneficiaries. Now, only about five percent of the 48 million Medicare beneficiaries, the most affluent ones, pay the additional surcharge. But Obama's plan would freeze the higher premium amount so that in the coming decade inflation will push more and more people in the middle class over the payment threshold. Instead of one in 20 of the highest earners paying a higher premium for Medicare if they get MediGap insurance -- the White House plan is that one in four will have to pay.

Does anyone seriously think it will stop there? Obama, the democrat, is planning to do that deliberately in the name of fairness.

The Medigap strategy is a stopgap cost-reduction measure of the worst kind. It's a complicated issue, so bear with me.

Pear reports that making people with Medigap insurance pay more toward the cost of Medicare is being done because more affluent elders get the extra insurance for their "financial security." That's the White House economic view, but it's as far askew of human reality as economists can get. It's crass idiocy.

The fact is that Medigap insurance was created, as the article explains, to fill gaps in coverage -- in actual care -- for some (but not all) things not included in Medicare. The "financial" protection emerged only with the unfettered escalation of U.S. health care costs -- more than anywhere in the industrialized world because of the massive health-industry lobby here -- and with worse health outcomes than countries that spend half as much as we do.

Medigap policies were created to keep federal Medicare costs lower and allow more affluent people to get care others can't afford. It gave the health insurance industry a meat bone. And many studies have shown that those who have it -- mostly the white middle class -- are healthier and may even live longer than those who don't have it.

So rather than improve Medicare to take advantage of the health lessons of Medigap patients, this Democratic White House is pushing a plan that says it's just financial protection, so the government should get a bigger cut of the action. Of course, that will make it harder to afford over time for more and more people.

And guess what? The Obama stopgap plan to limit federal Medicare costs does nothing to cut rampant health care inflation overall. So nicking away around the Medicare and Medicaid edges does nothing to stop the overall rise in costs -- the real reason we have a national health cost problem. Private insurance plans for workers will keep going up, too, unless your employer doesn't offer it, of course.

Budget Director Lew's statement that those who have Medigap insurance have had a disincentive to consider the cost of their care. To whom, to the government? That falsely presumes individuals make such decisions in the same way they might load up goodies on a trip to the Macy's White Sale.

Patients make those decisions when they are ill and worried based on advice from medical practitioners -- that is, doctors. Interesting that the Obama plan would use the patient savings to keep from cutting payments to those doctors and other providers.

There are flaws in those patient-doctor decisions, some addressed by the president's Affordable Care Act, such as the studies of medical practice in different parts of the country and best practices to use national data to guide better and more cost-effective care. So if there are abuses, there are also existing ways and coming reforms to address those.

But as a rule, Medigap insurance helps people get necessary care -- care that should be available to all -- not bargains at Nordstrom's or Bloomingdale's.

So will we have a sicker country with greater demand on already stressed families, thereby degrading our already reduced American productivity?

I don't know what your grandmother said, but the refrain I always heard was, "If you have your health, you have everything." It wasn't "If you have your health insurance, you're unpatriotic and getting too damn much."

Then there's the fact that the plan will cut preventive care and reduce spending on Medicaid for the poor and for middle class seniors and people with disabilities who have no other option for long-term care. But that's for another article.

Meanwhile, stay healthy.