A Few Words on Health Care Reform and Medicare Buy-In

From Ezra Klein:

“[Doctors] should be forced to work in a way that doesn’t hurt society. That, after all, is the guiding principle behind the insurance reforms: Insurers will have to live with a market that society can live with. Similarly, providers will have to live within a market that society can afford. That will mean a strict budget, at least within the federal programs (and over time, as the private programs become unaffordable, they will probably come on budget as well). …

“It’s that or national bankruptcy. And the problem, if left untreated, will only get worse, and the eventual correction, when it comes, will only be more severe. That, however, is exactly what they’re asking Snowe, and the rest of Congress, to permit. The fear with Medicare buy-in is that Medicare pays somewhat lower rates than private insurers because it tries to live within a budget, even if it fails. But like it or not, that’s the future, or one variant of it.”

Am I being hypocritical in allowing Ezra Klein to use the words “national bankruptcy?”

I don’t think so, because as I said in the earlier post, the long-term debt problem is, and always has been, about health care costs. The financial crisis and recession didn’t help by adding 40% to our long-term national debt, but in the long term even that pales in comparison to Medicare. So if you are serious about our nation’s fiscal problem, and there is a big, big problem, you have to have a solution to health care — which most of the most strident “deficit hawks” don’t.

Ferguson, for example, goes on ominously about how entitlements (including Medicare) will eventually force us to reduce defense spending, marking the end of our superpower status; but all he says is that we need to balance the budget within the next five to ten years, without saying how, and without mentioning health care. This is silly. Balancing the budget in the next decade would be nice (from a fiscal standpoint), but it’s of questionable relevance. Successful measures to reduce long-term health care costs (“bend the curve”) will have little impact in the next 5-10 years (although the sooner we start them, the better), so the only way to balance the budget in that timeframe is by tackling second-order problems. There’s nothing wrong with solving second-order problems, but it won’t solve the long-term problem.

Whenever someone writes about the national debt and the decline and fall of America and doesn’t talk about reducing health care costs, I wonder what the purpose of the article was in the first place.


Originally published at The Baseline Scenario and reproduced here with the authors permission.

One Response to "A Few Words on Health Care Reform and Medicare Buy-In"

  1. Hugo Penteado   December 14, 2009 at 1:11 pm

    Very good. Although it surprises me how many US people are concerned about US as a militar power, but my concern about this war culture around the world is useless…