Free Trade in Medicare

An Alternative to Austerity
by DEAN BAKER


Washington policy debates are chock full of rich people telling poor and middle-class people that they will have to tighten their belts. In fact, in the crazy upside down world of Washington this passes for “courage.”

Cutting back Medicare is one of the favorite forms of belt-tightening being pushed by the elites. Many of the advocates of deficit reduction argue for raising the age of eligibility for Medicare from 65 to 67. Another favorite among this group is to require larger premium payments for Medicare from middle-class beneficiaries. Of course many Republicans would simply privatize Medicare and replace it with a voucher, which almost certainly would not be sufficient to cover the cost of health care.

It is striking in this discussion that no one advocating Medicare cuts ever proposes taking advantage of the lower cost health care systems in other countries. As every policy analyst knows, the problem of Medicare costs stems almost entirely from the fact that our health care system is incredibly inefficient. We pay more than twice as much per person for our health care as people in other wealthy countries even though we have almost nothing to show for it in the way of better health outcomes.

This enormous gap in costs suggests an easy opportunity for massive gains from trade. If people in the United States can get their health care from other countries there would be huge savings.
While it may impractical for most of the population to go to another country for most of their health care needs, this is not true for Medicare beneficiaries, the vast majority of whom are retired. Many retirees have friends and/or family in other countries. If they opted to move to another country to get their health care, there could be enormous savings that they could share with the government.

To take a simple example, the Medicare trustees project that the cost to the program for an average beneficiary in 2020 will be close to $16,000. Suppose the cost of providing care in the United Kingdom is half as much or $8,000 a year.

If Medicare paid for a beneficiary to get care in the U.K. instead of the United States, the savings would be $8,000 a year. It could pay half of this money, or $4,000 a year, to the beneficiary and still save $4,000 for each beneficiary that opted to go to the U.K. to get care. If 1 million beneficiaries (at 2 percent of beneficiaries) opted to take advantage of this sort of deal, the savings would be $4 billion a year. If 5 million beneficiaries took advantage of this opportunity the savings would be $20 billion a year.

Over a longer horizon the gains would be projected to get much larger as U.S. health care costs are projected to hugely outstrip the increase in costs in other countries. As a result, the savings from going to the U.K. or elsewhere could easily exceed $16,000 a year by 2030. This would mean both that the government’s savings would be increasing for each person that took advantage of this deal and also that many more beneficiaries would likely opt to get their care from other countries.

Once we go out 20 years, for many beneficiaries their share of the projected savings would more than double their income. The projected gap in health care costs are so enormous than the U.S. government could even pay a premium of 10-20 percent above the cost of health care in other countries and still have enough money left over to allow large payments to beneficiaries and huge savings to the government.

The point is simple. The story of those incredibly scary long-term deficit projections is a story of exploding health care costs. If these projections of exploding health care costs prove accurate, then the country would enjoy enormous savings by having Medicare beneficiaries get their health care from the more efficient health care systems in other countries.

If we were having an honest policy debate this sort of proposal for free trade in health care services would be front and center on the national agenda. After all, which is a better way to save money on Medicare, making people wait until age 67 to qualify for benefits or giving beneficiaries the option to get health care in another country and to put some money in their pockets?

However you won’t hear about free trade in health care in the Washington policy debates. The Washington policy elites love trade when it can be used to beat down the wages of auto workers or truck drivers. However when trade might jeopardize the income of the pharmaceutical and the insurance industries, and highly paid medical specialists, they don’t even want it to be part of the discussion. And since the elites control the Washington policy debate, folks can expect to wait until age 67 for their Medicare and/or pay higher premiums.

Koch Brothers Exposed

http://KochBrothersExposed.com

Cat Food Commission Releases 'Shock Doctrine' Draft Version

Fiscal Commission Recommendations: VA Co-Pays, Top Tax Rate 23%
Wednesday, November 10, 2010 by FireDogLake
by David Dayen

OK, here’s the draft document for the cat food commission co-chair’s mark. In addition, there’s a page with specific “illustrative cuts”, $100 billion in domestic spending and $100 billion in military spending. Between the two, you can get a sense of what Bowles and Simpson have planned. Keep in mind that this is more of a shock doctrine document than a blueprint; they have no support on the commission for all this, and they’re trying to gather it with this early release.

So let’s bullet point some highlights:

• They’re nice enough to wait a whole year to implement the cuts; they wouldn’t start until FY 2012 – in other words, the next budget.

• Their goal is to put revenue and spending at 21-22% of GDP. Their plan would reduce the deficit below the recommended 3% of GDP by 2015, down to about 2.2%.

• They put in spending caps, maybe the worst idea known to man, the kind of program that has turned Colorado so sharply negative that the business community begged the state to lift them. These caps, which are unenforceable, as a current Congress cannot be bound by a previous Congress, would bush spending 18% below the baseline by 2020, a drastic bit of austerity.

• 75% of the solutions in the co-chair mark are spending reductions, 25% are tax increases.

• They want to add co-pays to the Veterans’ Administration and TRICARE, as well as pushing individuals covered by TRICARE into an employer policy. They also want to freeze noncombat military pay for three years. And, they want to end schools for families on military bases, instead reintegrating soldier’s kids into the public school system (because that’s so easy for a military family that moves every other year).

• They would cut the federal workforce by 10%, freeze all salary increases and bonuses for three years, and reduce Congressional and White House budgets by 15%. Surely this is the way to a better and more efficient federal workforce.

• They would eliminate all funding for commercial space flight, as well as the Corporation for Public Broadcasting, and increase fees at national parks and the Smithsonian museums.

• Increase co-pays in Medicaid and cost sharing in Medicare. In addition, the plan would cap Medicaid/Medicare growth, so that the government would have to either increase premiums and co-pays or raise the Medicare eligibility age if the cost grows above the baseline.

• Massively overhaul the tax code. They have a couple different options on this. In the first, there would only be three brackets: at 8%, 14% and 23% for the top bracket. All tax expenditures – $1.1 trillion, including the Earned Income Tax Credit and the child tax credit, would be eliminated. The corporate tax rate would go down from 35% to 26% as well. Option 2 borrows from the Wyden-Gregg tax reform, establishing rates at 15%, 25% and 35%, increasing the standard deduction, capping the mortgage interest deduction (and eliminating it for second homes), limiting the charitable deduction, eliminating other tax expenditures, and capping the employer deduction for health care. Corporate rates would also go down, with loopholes removed.

• They would increase the gas tax by 15 cents a gallon beginning in 2013, to pay for transportation projects.

• They would pay for the “doctor’s fix” by cutting other reimbursements to hospitals and drug companies, as well as through tort reform (yeah, that’ll do it). They would also speed up a lot of the cost controls in the health care law. They also ask, if health care costs are still rising after the implementation of the exchanges, for Congress to consider a variety of options, including this:

Add a robust public option and/or all-payer system in the exchange

• Reduce farm subsidies by $3 billion per year.

• On Social Security, gradually increase the retirement age to 69 by 2075. They would also institute progressive price indexing to cut scheduled benefits for middle and high-income earners. They would index cost of living increases to inflation and not wages. They would also increase the payroll tax to capture 90% of wages, rather than the current 86%. Social Security savings would stay inside the program to keep it solvent, not be used for deficit reduction.

There’s a lot more in there, but those are the highlights. It’s a very aggressive plan.

France Erupts! Contrasting with the US (2 articles)

Sarkozy Under Siege
By PHILIPPE MARLIÈRE

When he entered the Elysée palace in 2007, Nicolas Sarkozy dreamed of a glorious destiny. Enthusiastic commentators predicted that his casual populism would revamp the Bonapartist right, and that his Gallic brand of neoliberal policies would sell the “American dream” to a mistrustful population. Things have not gone according to plan. Sarkozy wanted to be the French JFK; today he looks more like Louis XVI awaiting trial in 1793. He may escape the guillotine, but his presidency is now under siege.

The French are deeply unhappy with the way they have been governed, but their main grievance is about pension reform, which is seen as a cynical ploy to make ordinary people work more for inferior entitlements, while bailed-out bankers and the rich get tax rebates and continue to enjoy the high life. Over the past month, six national demonstrations have gathered together an estimated average of 3.5 million per action day. The latest, on Tuesday, was again a big success.

The movement is popular: 69% of the nation back the strikes and demonstrations; 73% want the government to withdraw the reform. And high school pupils have now joined the fray. Over 1,000 high schools are on strike as the youngsters take to the streets to protest against mass unemployment and the raising of the retirement age. The government has patronisingly labelled them as “manipulated kids”, but these comments have backfired and served only to galvanise the young, who have hardened their resistance and taken further interest in the reform. When interviewed by the media, pupils come across as articulate and knowledgable. Parents worry about their children's future, so they will not stop them from striking.

In France, strikes and demonstrations are seen as a civilised and effective way to enact one's citizenship. Students are expected to join marches from an early age, receiving by the same token a “political education”. France's youth have always scared governments because of their radical potential. Student demonstrations of late have been invariably popular because people know that the young have been badly hit by unemployment over the past 30 years.

University students are preparing to strike as well. Sarkozy, like Louis XVI in 1789, does not seem to have grasped how volatile the situation has become. He should know better. Since May 1968, all governments have been forced on the ropes every time youngsters have entered a social movement. This time it could prove crucial in helping to reach a tipping point; a stage in the conflict where the balance of power switches from the government toward those opposing the pension reform.

Last week, Sarkozy had to send in riot police to reopen fuel depots blocked by strikes in several places. Yet several hundred filling stations had to shut because they had run out of supplies. Lorry and train drivers are also starting strike actions.

How can the current situation be interpreted? Undoubtedly, the rebellion seems durable and runs deeper than the question of pensions. The reform has triggered a web of collective actions that are now spreading fast. Discontent is fuelled by low incomes and unemployment, but also by the impact of the crisis on people's daily life, the arrogance of the Sarkozy presidency, corruption cases and police brutality.

There is a sense of moral outrage at the imposition of a neoliberal medicine to cure an illness caused by the same neoliberal policies. The French are not hostile to reforms: they just demand those that redistribute wealth and allocate resources to those who need it the most. Any comparison with May '68, however, may be hasty. Then, France was experiencing a period of economic prosperity. Today, events occur in the context of a deep economic depression. This is why the political situation is potentially explosive. Radicalised workers and youngsters are forcing the unions to up their game. The normally toothless Socialist party has pledged to return the retirement age to 60, should it come back to power in 2012.

One can envisage two possible scenarios. Opposition to the reform hardens, in which case Sarkozy may have to water it down or even withdraw it. This would mark the first major popular victory in Europe against the post-2008 neoliberal order. Alternatively, Sarkozy stays put and imposes a deeply unpopular reform, in which case the political price to pay for the incumbent president would be very high, should he decide to run again in 2012.

*****

Why French Protestors Have It Right 

By MARK WEISBROT

The demonstrations that have rocked France this past week highlight some of its differences from the United States. This photo, for example, shows the difference between rioting in baseball-playing versus soccer-playing countries. In the U.S., we would pick up the tear gas canister and THROW it – rather than kick it -- back at the police.

More importantly the French have decided to take to the streets in the millions to defend hard-won retirement gains – including large-scale strikes and work stoppages. French populist rage is being directed in a positive direction, unlike in the United States where it is most prominently being mobilized to elect political candidates who will do their best to increase the suffering of working and middle-class citizens. (It must be emphasized, since the media sometimes forgets to make the distinction, that only a tiny percentage of France’s demonstrators have engaged in any kind of property damage and even fewer in violence, with all but these few protesting peacefully.)

I have to admit it was perplexing to watch the French elect President Nicolas Sarkozy in 2007, a man who campaigned on the idea that France had to make its economy more “efficient” like America’s. In reality, he couldn’t have picked a worse time to peddle this mumbo-jumbo. The housing bubble was already bursting in the United States and would soon cause not only our own Great Recession but also drag most of the world economy into the swamp with it. So much for that particular model of economic dynamism.

But Sarkozy had a lot of help from the major media, which was quite enchanted with the American model at the time and helped promote a number of myths that formed part of his campaign. Among these were the idea that French social protections and employment benefits were “unaffordable in a global economy,” and that employers would hire more people if it were easier to fire them, and if taxes were cut for the rich.

Sarkozy has recently abandoned one of his most politically unpopular tax cuts for the rich, but there may be others. But he had also promised not to raise the retirement age for the public pension system. This has contributed to the mass outrage at his current proposal to raise it from 60 to 62, for those taking the reduced benefits, and from 65 to 67, for full benefits. (In the United States Social Security system, most people opt for the reduced benefit that is available beginning at age 62; full benefits are available, for those born after 1959, at 67.)

Once again most of the media thinks the French are being unrealistic, and should just get with the program like everyone else. The argument is that life expectancy is increasing, so “we all” have to work longer. However this is a bit like reporting half of a baseball score (or soccer if you prefer). On the other side is the fact that productivity and GDP also increase over time, and so it is indeed possible for the French to choose to spend more years in retirement, and pay for it.

France’s retirement age was last set in 1983. Since then, GDP per person has increased by 45 percent. The increase in life expectancy is very small by comparison. The number of workers per retiree declined from 4.4 in 1983 to 3.5 in 2010. But the growth of national income was vastly more than enough to compensate for the demographic changes, including the change in life expectancy. The situation is similar going forward: the growth in national income over the next 30 or 40 years will be much more than sufficient to pay for the increases in pension costs due to demographic changes, while still allowing future generations to enjoy much higher living standards than people today. It is simply a social choice as to how many years people want to live in retirement and how they want to pay for it.

If the French want to keep the retirement age as is, there are plenty of ways to finance future pension costs without necessarily raising the retirement age. One of them, which has support among the French left – and which Sarkozy claims to support at the international level -- would be a tax on financial transactions. Such a “speculation tax” could raise billions of dollars of revenue – as it currently does in the U.K. – while simultaneously discouraging speculative trading in financial assets and derivatives. The French unions and protesters are demanding that the government consider some of these more progressive alternatives.

It is therefore perfectly reasonable to expect that as life expectancy increases, workers should be able to spend more of the lives in retirement. And that is what most French citizens expect. They may not have seen all of the arithmetic but they can see intuitively that as a country grows richer year after year, they should not have to spend more of their lives working. An increase in the retirement age is a highly regressive cut that will hit working people hardest. Poorer workers have shorter life expectancies and would lose a higher proportion of their retirement years. Workers who have to retire early because of unemployment or other hardships will take a benefit cut as a result of this change. And of course this cut would not matter to the richest people who do not rely on the public pension system for most of their retirement income.

France has a lower level of inequality than most of the OECD countries and is one of only 5 – out of 30 OECD countries -- that saw inequality decrease from the mid-80s to the mid-2000s. It also had the largest decrease in inequality in the group, although all of it was from the mid-eighties to the mid-nineties. The country has until now resisted at least some of the changes that have rolled the clock back for working and especially low-income citizens in the high-income countries. The European authorities (including the European Commission, European Central Bank, and International Monetary Fund) are currently accelerating these regressive changes in the weaker Eurozone economies (e.g. Greece, Spain, and Ireland). All of these institutions and many politicians are trying to use the current economic problems of Europe as a pretext to enact right-wing reforms.

Polls show more than 70 percent support for France’s strikers despite the inconvenience of fuel shortages and other disruptions. The French are already sick of right-wing government, and that is also part of what is generating the protests. France has a stronger left in than many other countries, and one that has the ability and willingness to organize mass protest, work stoppages, and educational efforts. They are fighting for the future of Europe, and it is a good example for others. Hopefully, here in the United States, we will be able to beat back any proposed benefit cuts to our much less generous Social Security system, that are looming on the horizon.