Arnold Kling  

More Passengers on the Titanic

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Kevin Drum writes,


here's an idea: expand Medicare (or create a similar program) to cover every person in America under the age of 21. And then let them keep it as they grow older. In ten years everyone under 31 would be covered. By 2050 at the latest the whole country would be covered — and probably earlier than that once the program reaches a critical mass. Taxes would rise slowly to cover each new cohort, employer healthcare would gradually go away, union contracts would have decades to adjust, and no one would have to give up anything they have now.

This is just watercooler conversation. I've given it no serious thought at all. But why not?


One problem is the fact that Medicare already faces tens of trillions of dollars of unfunded liabilities. Medicare is the fiscal equivalent of the Titanic, and the unfunded liability is the iceberg toward which it is headed. Those who would advocate adding passengers to the Titanic owe us an explanation of how they are going to deal with the iceberg.

I am really tired of people who think we can "solve" health care by re-arranging how health care is financed, without reducing our extravagant use of procedures that have high costs and low benefits. As far as that goes, Medicare is part of the problem, not part of the solution.

Reading things like this makes me wonder whether the Democrats are prepared to govern. They have spent 6 years elevating anyone who can say "Bush is evil. Bush is stupid" to celestial status. There is a large element of childishness that is going to ride in with what I'm guessing will be a new President, a bigger House majority, and a filibuster-proof Democratic Senate.


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COMMENTS (23 to date)
General Specific writes:

"There is a large element of childishness that is going to ride in with what I'm guessing will be a new President, a bigger House majority, and a filibuster-proof Democratic Senate."

Nowhere near the level of stupidity and childishness of the last 6 years. Total idiotic failure.

The Democrats can govern. The Republicans can't.

Kimmitt writes:

Why is Medicare responsible for large end-of-life spending? I can see theory both ways.

Michael writes:

Arnold is dead on. In my Case Management practice I see the results of the pervese incentives generated by free care. People behave exactly as you would expect they would. Care is demanded and expected up to the point that it's value is outweighed by the cost of time spent. The only patients balancing the costs and benefits of care are those who must pay a substantial portion out of pocket. Heath care savings boils down to someone saying no. It's going to be insurance companies, the government or individuals. We need to decide who is best able to make this decision.

Consumatopia writes:

Why is Medicare responsible for large end-of-life spending?

Good question, especially when we're talking about expanding it to kids, which one would think would move care away from end-of-life. Medicare costs are out of control (no more than all health care costs are out of control), but it's pointless to expect to reform Medicare while the benefits are concentrated on those with the most political power--the retired. I would expect an expansion to those with less power--kids--to dilute the factional interests of Medicare recipients and force the program to be more restrictive.

chris writes:
Reading things like this makes me wonder whether the Democrats are prepared to govern.

Ummmm...ok...but did you realize that this "idea" was written by a liberal blogger who includes the caveat

This is just watercooler conversation. I've given it no serious thought at all. But why not?

Sooo...What exactly does this have to do with the Democrats ability to govern? Have any Democratic leaders stepped up and endorsed this specific plan?

Tom Shefchik writes:

To say nothing can be done is not a solution. Maybe we should look into how every other civilized nation is providing not-for-profit health care to their citizens.

I know, I know. USA, USA, USA! We're the best, we know everything! You're with us or against us! The UN is terrible! Blah, blah, blah.

s writes:

Way to take Drum's post out of context, Arnold!

He's responding to Ezra Klein's eminently reasonable observation that the American public is generally afraid of already have. Drum's "solution" is simply a brainstorm: a way to overcome the political impediments on the road to universal healthcare.

Stewart Dean writes:

Thing one:
"Democrats can govern." Yes; if there is one thing that neo-conservatism has been superbly competent at it's that it has proven how badly a movement can govern that doesn't believe in governance.

Thing two:
If for-profit healthcare can provide incomplete health care and make billions in spite of enormous inefficiencies, it is likely that a single-payer system could provide complete health for the same or less money. All the other major industrialized countries do...or is America perhaps incapable of doing as well as the French or Canadians?
Al I can think is that the right-wing has a deep, belief-based revulsion to having some basic medical care for all Americans...and the rest is rationalization. This has become blindingly clear (to any but the right-wing faithful) in S-CHIP: Scrooge stealing Little Tiny Tim's crutch and using it for firewood.
Sorry: it's a form of bigotry.

Kevin Drum writes:

I used to read this blog, but this is why I don't bother anymore. Ad hominem rants really don't do you any credit, Arnold. For the record, though:

Answer #1: We would deal with the unfunded liability by raising taxes, as I said in my post.

Answer #2: This was a one-paragraph blog post, not a white paper. As it happens, I'm all in favor of reducing unneeded medical procedures (though I'd note that conservatives and libertarians usually react to serious proposals along these lines by screaming about "rationing"). Other countries that have sensible national healthcare schemes haven't solved this problem completely (and nobody ever will), but they do a demonstrably better job than we do.

Hyman Rosen writes:

The point of moving health-care to government funding is, one, to get every person covered, and two, to stop tying payment for health-care to employers. How to reduce the cost of care is a separate issue which can be addressed regardless of who is paying. Most employer-payed insurance plans have no incentives for reducing costs either.

And the way to pay for Medicare is the way to pay for any other government program. Taxes.

joeo writes:

Universal health care in other countries is cheaper than than health care in the US. They pay doctors less, have fewer administrative overhead costs, and centralize specialist services. It isn't childish to want to move to universal health care.

Arnold Kling writes:

I'm sorry, Kevin, but you did not say in your post that you would raise taxes to cover the unfunded liability. What you said was "Taxes would rise slowly to cover each new cohort"

That says how you would pay for *additional* people on Medicare, but does not explain how to deal with the impending deficits in the system as it exists.

So you think it will be necessary for our government to tell people that they cannot get all the medical procedures they would like. Fine. Then don't call your program Medicare for All. Call your program Medicare-Minus for all, to indicate that you are going to take something away from people.

What irritates me is that you make it sound like there is an easy, something-for-nothing solution for health care. Everyone on the left seems to believe that, and that is not good preparation for people getting ready to govern in the real world.

Steve W writes:

Kevin never said that what he was proposing was an easy something-for-nothing solution. What he said was, here's an idea I'm tossing out, let's discuss it.

As for Medicare's unfunded liabilities, Ezra Kline had a good chart recently showing that Medicare's problems are due largely to out of control health care inflation in general, not problems with the program in particular. It's our health care system as a whole that's the fiscal equivalent of the Titanic. And Drum and Kline and many others have been talking extensively about how to fix it, which pretty clearly involves covering more people AND controlling costs.

Dabney Braggart writes:

One other issue: Medicare costs as much as it does partly because it, by design, serves a pool of heavy users of medical services*. Adding healthier people to the pool would not have the same effect as adding another cohort of old people; childhood diseases and conditions would still be expensive, but for children and young adults removing obstacles to getting routine medical care (to keep colds from turning into pneumonia, to slow or check the progress of type II diabetes, to catch early those cancers which do hit the young, u.s.w....) should work to reduce average costs (oh, yeash, and human suffering).

*Similarly, Medicaid is designed for poor people, who traditionally tend to be more ill (where are the bus terminals in N.Y.C.?).

lilybart writes:

by a single payer plan. Who can dispute that?

And no one said we should all get free care. Medicare premiums would have to rise, and for most people, basic doctor appointments, AFTER one a year, would be out of pocket.

There is a plan that will work. SS has a 3% overhead. I dare any company to better that.

kj writes:

Looks like Arnold got his ass kicked on this one.

While Medicare is expensive, it is a bargain compared to the cost of health care brokered by private insurance. Medicare's overhead is 2-3%, therefore delivering 97 to 98 cents on the dollar for health care. Private insurance takes roughly 25% for administration, marketing and shareholder profit - accounting for a non-productive $200-300 billion a year in the health care economy. There's no question that cost-containment of the care itself is important, but continued attachment to the current employer-private insurance model will perpetuate the growing uninsured, crush the competitiveness of American business, and fail to meaningfully reduce per capita costs (already double those in higher performing countries with universal coverage and superior outcomes).

napablogger writes:

Arnold, you are completely right here. Democrats seem oblivious to how much this is going to cost and how stretched out our tax money is already. There is the unfunded liabity of social security, but worse than that is the unfunded liability of pensions to government employees that is now at about 4.6 trillion. No one talks about that, and a lot of Federal retirees are now getting over 100% of their highest salaries as a retirement benefit, besides their health care. They are getting generous COLA's, retiring younger and living longer than ever.

Then there are the unfunded liabilities for health care for retirees and pensions for public employees on the local levels, nationwide that also runs into the trillions and governments are so strapped that many of them are just not paying into them at all, which is precipitating a huge disaster. In California it is over $200 billion for local, ie cities and counties, alone. The state is near that figure for retirees now. Remember, the same taxpayers that have to support these Federal programs are paying more and more locally as well.

If you cancel the "Bush tax cuts" for the wealthy, you get about $200 billion. That won't even cover one years deficit. They are going to have to raise taxes so much to cover all this that it is going to hurt the economy, and I fear, start a downward spiral.

I could go on with big bills we aren't paying now that are going to cascade down on us but you get the point.

How in the world are we ever going to pay for the obligations we already have???

Tom writes:

"The Democrats can govern. The Republicans can't."

Yeah! Na Na! Na Na Na! Sheesh.

richard writes:

"Medicare's overhead is 2-3%, therefore delivering 97 to 98 cents on the dollar for health care. Private insurance takes roughly 25% for administration, marketing and shareholder profit - accounting for a non-productive $200-300 billion a year in the health care economy."

This statistic is a bit misleading in the sense that Medicare basically functions to cut a check for elderly citizens. Even in the instance that the Private Insurer was the most efficient insurer ever to grace the face of the earth it would have a higher proportion of overhead compared to medicare because of the population it covers. That is not real cost savings. For instance, consider two populations: A covered by private insurers, B covered by Medicare. Let's assume A and B cover the same number of people and expend the same amount (not percentage) on overhead costs. Population A has an Age Range from 18-65. Population B has an Age Range of 65- and older (I think that age for Medicare eligibility). Population A requires on average $X of treatment. Population B requires on average $3X of treatment. Which group's insurer has a lower percentage overhead. Well B, the Medicare provider's population. And it will get smaller (or by your notion, more efficient) the higher the cost. That doesn't do much for cost control.

richard writes:

""The Democrats can govern. The Republicans can't."

Yeah! Na Na! Na Na Na! Sheesh."

I agree with Arnold's sentiment on the folly of medicare for all or as he aptly calls it "adding passengers to the titanic".InsertTextHere That said, the bit about Democrats joining the real world is somewhat off base. At this point both parties are barking mad and it is simply a question of whose worse? Pick your poison, "adding passengers to the titanic" and other various and sundry idiocy, or, let's impose democracy over and over and over and over again.

Richard, I appreciate your response but can't agree for two reasons: (1) regardless of the differences in age-related service volumes, private insurers distribute billons for marketing and shareholder profit; in Medicare 100% of those dollars go for patient care; and (2) real administrative costs are linearly related to service volume - if a Medicare pt. generates three times as many claims, there will be roughly three times as much processing work. Importantly, the private insurers disproportionately devote admin. work to designing and implementing barriers to care. That's why Medicare Advantage is doubly wasteful, forcing Medicare through the administratively more expensive private managed care sieve, while overcompensating the insurers at 112% of the going rate. The most efficient health care payment mechanism, by hundreds of billions, is direct payment from Treasury to provider, be it by agreed-upon FFS schedule or capitation. The incremental costs of interposing private brokerage add no value to medical care while adding crushing expense to the U.S. economy.

Chris Collins writes:

I think the S.S is doing its job and needs to stay in place the way it is now. Now don’t get me wrong I would for S.S. to span across our entire country regardless but it’s never going to happen, its just to much money. I just hope S.S. can stay around until I’m old enough to use it.

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