Wednesday, April 13, 2011
When policy types discuss bringing SS into balance they are really talking about 2047 and beyond when the "trust fund" is exhausted and revenues no longer match benefits. If we did nothing, then in 30 years and benefits simply matched revenues that would effectively be a cut in benefits to about 75% of their scheduled value. That said, in 30 years we should be wealthier and in the intervening decades we at least have the ability to plan accordingly. The elephant in the room is the Trust Fund. Starting this decade we will have to redeem the IOUs (or special issue bonds) in the trust fund to pay out benefits. What will this entail? Raising taxes. So really the issue with social security in my view is not the long term balance but meeting obligations over the next three decades.
One of the easier means of bringing social security into balance is means testing it. Such a policy would likely bring social security into balance and would do so while protecting the most vulnerable. This solution is generally favored by right of center policy types whereas left of center policy types dislike means testing as it would undermine the universal nature of Social Security and render it more like welfare. The ironic thing though is that left of center policy types also favor means testing but conducted through a different mechanisim, lifting the payroll cap. Lifting the payroll cap itself does very little to balance social security as revenues and benefits are tied. So if you pay more taxes into the system you will also get higher benefits. Some modest savings would be generated as the benefit formula is somewhat progressive (though the distributional effect of social security is probably slightly regressive when you take into account the correlation between wealth and health). However, thus the only way to actually balance social security by lifting the cap is to the sever the link between revenues and benefits. At that point you have made social security much more redistributive and undermined its universality. Sort of sounds like welfare. And in the end, there isn't anything wrong with welfare, a just and decent society provides a safety net. But let us not fool ourselves, Social Security reform is not a discussion about preserving it as a universal entitlement, it is whether means testing will be affected by higher taxes or lower benefits. Given that you can only raise so much in revenues, and we will need to raise significant amounts for medicare, it seems the sensible solution is to means test through lowering benefits for the well off.
Friday, April 08, 2011
I look at health care and I see the rand study, which appears to be backed up by this recent study, and see health care cost inflation as primarily a function of the 3rd party payment system and a lack of cost sharing. So to me, the ideal health reform would feature creating a universal risk pool and mandate people to buy a naked high deductible health plan with premium and deductible assistance for the poor. I take it as a given that if people have an incentive to economize that they will comparison shop and this will force providers throughout the system to innovate in how they deliver care. However, I think the greatest weakness in this view is that it treats health care as a normal good and presupposes people will be unabashed in getting the best value for their dollar. But people don't always approach health care as a function of healing. A lot of health care involves signaling how much you care. So it's possible in my market driven health care utopia what in fact would happen is that health care would be a proxy for loved ones to demonstrate their love and care for others by spending exorbitant amounts.
Thursday, April 07, 2011
I love Dwell. It's one of my favorite publications and my particular fancy is when they feature some old rich dudes off the grid cabin. But the nice type, with Ikea furniture and solar panels, not like the Unabomber type. I would aspire to this lifestyle but the lack of sewer hookup really seems like an impediment.
Wednesday, April 06, 2011
Mickey Kaus flirts with contrarianism but comes out on the side of common sense when he states the following about Ryan's budget plan: "I have to reluctantly conclude that it’s … a near-suicidal act that will lead Republicans off the cliff". I think the Ryan plan is a conversation starter but in many ways is unserious. I don't have issues with voucherizing medicare or block granting medicaid (though, most do) but do find it spurious that the defense budget is untouched, there are no additional revenues nor any serious discussion of tax reform (cutting rates with some hand waving about loopholes does not count as serious). So if I were the democrats I would be licking my lips for when Ryan's budget comes to a vote. This will provide a lot of campaign fodder. But what is interesting to me is a counterfactual in which instead of banking on the unpopularity of healthcare reform republicans provided bipartisan cover in exchange for making the bill a better bill. There are a lot of things Republicans could have put into play: Capping and then phasing out the Employer exclusion, making an HDHP the minimum benefit, tort reform, buying across state lines, etc. Clearly if Mitch McConnell used his leverage towards such an end the gains the republicans saw in the House and the Senate would have been diminished, though still substantial. However, this is probably a naive sentiment, having tackled health care in a constructive manner there might be sufficient residual goodwill to reform entitlements and the attendant debt burden.
Tuesday, April 05, 2011
Paul Ryan is set to unveil his plan to reform Medicaid and Medicare. I think his proposals have a snowflakes chance in hell of passage but they might get the debate headed in a positive direction. Ryan's plan basically comprises of two elements: Block granting medicaid and providing those currently under 55 with vouchers to purchase health insurance once they are eligible for Medicare. One of the criticisms that has annoyed me regarding the voucherization of Medicare has been the discussion that by setting the growth of Voucher at CPI+1 that the vouchers over time will cover less care as it will not keep pace with medical inflation. My complaint is not that this isn't necessarily a valid criticism but rather a hypocritical one. Many of the same critics have champion IPAB which is the major driver of cost savings for Medicare in PPACA. The reason they champion IPAB and the reason it would save money if the proponents of IPAB are correct, is that IPAB will be successful in reducing access to care. If that is a virtue of IPAB it cannot be a weakness of vouchers.