Medicare Saves Money
By PAUL KRUGMAN
Published: June 12, 2011
The title of Paul’s column today is ‘Medicare Saves Money’ and the saddest part is there are people out there who believe it. Granted, they believe it probably because they WANT to believe it, but none the less, I’m sure some left wing smart people will run around today claiming that Medicare actually saves money. I wonder if they’re even aware that they are embarrassing themselves. Paul Krugman clearly isn’t aware.
Paul Krugman is famous for his false premises, but this one takes the cake. Say you go into a restaurant and the price of a burger is $8.99. You order it, the waitress brings it to you, you eat it and it is it’s delicious. When the bill comes you decide that the burger was only worth $5.99 (including tip) so that’s what you pay and you walk out the door. Paul Krugman thinks you’ve “saved” $3.00.
You haven’t saved anything. You just shorted a service provider and now in order to stay in business that provider must pass on the cost to other customers. THAT is Medicare.
Every once in a while a politician comes up with an idea that’s so bad, so wrongheaded, that you’re almost grateful. For really bad ideas can help illustrate the extent to which policy discourse has gone off the rails.
And so it was with Senator Joseph Lieberman’s proposal, released last week, to raise the age for Medicare eligibility from 65 to 67.
Hey, what do you know?! I actually agree with Paul! Sorta.
Raising eligibility ages doesn’t actually improve Medicare or solve the problems Medicare creates. It just kicks the can down the road. It is a gimmick. There are other aspects to Lieberman’s plan but the age aspect is the biggest lightning rod for the professional left.
Like Republicans who want to end Medicare as we know it and replace it with (grossly inadequate) insurance vouchers, By switching to a voucher system costs come down, but Paul can’t seem to grasp this concept Mr. Lieberman describes his proposal as a way to save Medicare. It wouldn’t actually do that. But more to the point, our goal shouldn’t be to “save Medicare,” whatever that means. It should be to ensure that Americans get the health care they need, at a cost the nation can afford.
I think Paul is trying to conflate Paul Ryan’s plan with Lieberman’s proposal. The Lieberman plan isn’t a bold or original. It’s a combination of tax increases (you’d think Krugman would like that) and benefit shifting that doesn’t really address the underlying problem of Medicare being a blank check.
Lieberman is trying to play peacemaker by proposing a temporary answer. We’ve come to expect this from a politician who doesn’t want to rock the boat and thinks the status quo isn’t that bad. It just needs a little tweaking.
And here’s what you need to know: Medicare actually saves money — a lot of money — compared with relying on private insurance companies. And this in turn means that pushing people out of Medicare, in addition to depriving many Americans of needed care, would almost surely end up increasing total health care costs.
“Medicare actually saves money — a lot of money —. “ Pure nonsense. Save’s who money?
It doesn’t “save” anything! It just pays less!
The idea of Medicare as a money-saving program may seem hard to grasp. After all, hasn’t Medicare spending risen dramatically over time? Yes, it has: adjusting for overall inflation, Medicare spending per beneficiary rose more than 400 percent from 1969 to 2009.
But inflation-adjusted premiums on private health insurance rose more than 700 percent over the same period. So while it’s true that Medicare has done an inadequate job of controlling costs, the private sector has done much worse. And if we deny Medicare to 65- and 66-year-olds, we’ll be forcing them to get private insurance — if they can — that will cost much more than it would have cost to provide the same coverage through Medicare.
This is just a sad level of economic analysis coming from Paul Krugman. The reason private health insurance rose more than 700% is BECAUSE Medicare shorts providers. Just like my restaurant example above, Medicare’s slower rise isn’t due to Medicare being more efficient. It is because they just pay less.
I would say “I can’t believe Paul Krugman said this,” but I’ve been doing this website for a while now and this is about par for Paul. Analysis that would get him shown the door if he worked anywhere other than the NY Times.
By the way, we have direct evidence about the higher costs of private insurance via the Medicare Advantage program, which allows Medicare beneficiaries to get their coverage through the private sector. This was supposed to save money; in fact, the program costs taxpayers substantially more per beneficiary than traditional Medicare.
That is NOT evidence! That is specious reasoning. Medicare advantage’s costs went up because the number of people in the program expanded dramatically, not because Medicare is more efficient than private insurance.
Does anyone really believe that?
And then there’s the international evidence. The United States has the most privatized health care system in the advanced world; it also has, by far, the most expensive care, without gaining any clear advantage in quality for all that spending. That must be why heads of State from other countries (like Canada’s Premier) come to the U.S. for specialized treatment, because we have no advantage in quality. That’s sarcasm in case you couldn’t tell. Health is one area in which the public sector consistently does a better job than the private sector at controlling costs.
I guess it depends how you think of “controlling costs.” If controlling costs means you don’t pay the full cost of a service and the provider is just left hanging, well, sure the government is pretty good at that.
Indeed, as the economist (and former Reagan adviser) Bruce Bartlett points out, high U.S. private spending on health care, compared with spending in other advanced countries, just about wipes out any benefit we might receive from our relatively low tax burden. So where’s the gain from pushing seniors out of an admittedly expensive system, Medicare, into even more expensive private health insurance?
The gain is those with half a brain know that private health insurance is subsidizing the public plan BECAUSE the public plan is too expensive. It really isn’t the opposite as Paul Krugman suggests.
Wait, it gets worse. Not every 65- or 66-year-old denied Medicare would be able to get private coverage — in fact, many would find themselves uninsured. So what would these seniors do?
How is that even possible if Obamacare says you can’t deny people coverage?
Well, as the health economists Austin Frakt and Aaron Carroll document, right now Americans in their early 60s without health insurance routinely delay needed care, only to become very expensive Medicare recipients once they reach 65. This pattern would be even stronger and more destructive if Medicare eligibility were delayed. As a result, Mr. Frakt and Mr. Carroll suggest, Medicare spending might actually go up, not down, under Mr. Lieberman’s proposal.
Or if Paul Ryan’s plan were enacted, costs would come down and then we would actually be able to cover our seniors. Otherwise Medicare costs will continue to rise.
O.K., the obvious question: If Medicare is so much better than private insurance, why didn’t the Affordable Care Act simply extend Medicare to cover everyone? The answer, of course, was interest-group politics: realistically, given the insurance industry’s power, Medicare for all wasn’t going to pass, so advocates of universal coverage, myself included, were willing to settle for half a loaf. But the fact that it seemed politically necessary to accept a second-best solution for younger Americans is no reason to start dismantling the superior system we already have for those 65 and over.
Medicare is a blank check from a beneficiary standpoint. Due to this, Medicare drives the costs to private insurers and we all pay even more. Our private insurance plans subsidize Medicare because it is so grossly inefficient and leaves providers “holding the bag.”
Medicare is bankrupting us and it must be reformed. Senator Lieberman’s proposal to raise the beneficiary age doesn’t solve anything and is just shifting the cost burden around again. We need REAL healthcare reform and to remove the blank check system of Medicare.
If true costs (not price controls) come down through competition you’ll see both higher quality and expanded coverage.
Now, none of what I have said should be taken as a reason to be complacent about rising health care costs. Both Medicare and private insurance will be unsustainable unless there are major cost-control Cost control is not cost reduction. From Paul’s perspective it is simply price controls and service reduction. How’s that sound? efforts — the kinds of efforts that are actually in the Affordable Care Act, and which Republicans demagogued with cries of “death panels.” Well those cost control efforts do result in “death panels.” An independent payment advisory board decides who gets what medical procedure. And if you die as a result of their decision, it’s the panel’s call.
The point, however, is that privatizing health insurance for seniors, which is what Mr. Lieberman is in effect proposing — and which is the essence of the G.O.P. plan — hurts rather than helps the cause of cost control. If we really want to hold down costs, we should be seeking to offer Medicare-type programs to as many Americans as possible.
Wow, Paul can’t even get THAT right. Moving the beneficiary age up by 2 years isn’t privatizing Medicare and neither is the G.O.P. plan. Look folks, as long as progressive liberals like Paul offer up no solutions other than higher taxes and more government they will continue to demonize ANY plan that actually changes Medicare for the better. Paul Krugman will be leading the charge.
