I am a candidate in the May 15 Nebraska Republican Primary for the U.S. Senate because the incumbent, Deb Fischer, is ignoring our enormous and out-of-control national debt. Of course, there are many other important issues addressed by Congress and my last two posts, here, and here, discuss the need for more gun control to reduce the number of mass shootings in the U.S.
Now it’s back to (fiscal) basics.
The Kaiser Foundation has discovered that by far the top issue of concern for voters this year is the high cost of healthcare. Here are some of the many reasons why this should be a very top priority for deliberation in Congress:
The cost of healthcare is the fundamental driver of our debt problem.
Three major corporations: Amazon, Berkshire Hathaway, and JPMorgan Chase are banding together to lower healthcare costs for their own employees. All companies have similar concerns.
A major reason for the high cost of American healthcare is the employer mandate of the ACA which requires companies with 50 or more employees to provide health insurance for all employees.
Huge savings for employees, employers and government could be had by modifying the employer mandate to give employees the option to migrate to personal healthcare insurance, see here and here.
Conclusion. “The federal government’s most urgent domestic challenge is the exploding debt and deficit.” Getting healthcare costs under control is the key to solving our debt problem and reducing a major expense for millions of American families.
My last three posts: here, here, and here, are concerned with the high cost of American healthcare and how this is so closely tied in with our very large and badly out-of-control national debt. In particular, three giant American companies: Amazon, Berkshire Hathaway, and JP Morgan Chase are forming an independent healthcare company to try to hold down healthcare costs for their combined one million employees in the U.S.
Dr. Elizabeth Rosenthal, an MD and editor-in-chief of Kaiser Health News, points out that this new company may help its own members but end up hurting the rest of us:
Previous efforts along the same line by Safeway and Boeing have held down costs for the companies own employees but are too small scale to have had broader impact.
The new company, much larger in size, may be able to negotiate lower prices from labs and hospitals for its own members. But then these same labs and hospitals will charge more for everyone else.
Moreover, in general, employer based healthcare insurance has lots of problems:
It diminishes incentives to reduce costs by insulating workers from the full price of their benefits.
It discourages changes that could displease even a small number of workers, thereby creating incentives to minimize disruption.
The pervasiveness of employer health insurance makes it more difficult for individuals to buy health insurance on their own, thus discouraging entrepreneurship.
Conclusion. Given the inherent flaws in employer provided health insurance, it is unlikely that more innovation by individual companies, or groups of companies, will lead to an overall solution to the exorbitant cost of American healthcare.
The solution lies in a different direction: ending or at least modifying the ACA’s employer mandate. See here for details. More later!
The cost of employer-provided healthcare is going through the roof, now averaging $26,944 for a family of four
Medicare beneficiaries are now spending 44% of their average Social Security income on healthcare spending.
Yesterday we learned that three corporate behemoths: Amazon, Berkshire Hathaway and JPMorgan Chase will form an independent healthcare company to try to hold down healthcare costs for their combined one million employees in the U.S.
And last night, President Donald Trump, in his generally well-received State of the Union Address, failed to mention our nation’s biggest problem by far: our surging national debt.
And moreover, it is precisely the public cost of healthcare which is driving our debt.
Our country could soon be overwhelmed by a trifecta of huge costs:
The cost of healthcare for individual company employees and also for retirees.
The cost of healthcare subsidies paid by the federal government.
Our rapidly growing and badly out-of-control national debt.
Conclusion. Is it not exceedingly clear that our two polarized political parties must stop spending their time bickering about less important problems and come together to address our huge debt problem and the very high cost of healthcare which is driving it?
Just a few days ago I announced my candidacy in the Republican Primary for U.S. Senate against the incumbent Deb Fischer who is doing nothing to reduce our badly out-of-control national debt and, in fact, just voted to increase it by $1 trillion over the next decade.
It is the high cost of government spending for Medicare, Medicaid and the tax exemption for employer-provided care which is the main driver of federal debt.
But healthcare is also getting very, very expensive for American workers and retirees as well. In my last post, I reported that:
A family of four paid $26,944 for healthcare expenses last year which was 44% of median family income of $59,039.
In 2013 a Medicare beneficiaries’ average out-of-pocket healthcare spending was 41% of their average per capita Social Security income. This will rise to 50% in 2030.
Conclusion. American healthcare is expensive for workers, retirees and taxpayers. In other words, it is expensive all the way around, for everybody. There isn’t a lot of slack left to give way. The cost of healthcare will impoverish our whole country if we can’t get it under control. Stay tuned for proposed solution.
On January 24 I announced my candidacy in the Republican Primary for U.S. Senate against the incumbent Deb Fischer who is doing nothing to reduce our badly out-of-control national debt and, in fact, just voted to increase it by $1 trillion over the next decade.
It is the high cost of government healthcare spending for Medicare, Medicaid and the tax exemption for employer-provided care which is the main driver of federal debt.
But now look at a recent report from Bloomberg Markets on the outrageously high cost of employer-provided health insurance for American workers:
The average worker paid $5,714 in 2017 out of a total cost of $18,764 for a family plan. Deductibles last year averaged $5,950 per individual and double that per family.
In the past five years insurance premiums increased by 19% while worker pay increased by 12% and inflation increased by just 6%.
A family of four paid $26,944 for healthcare expenses (including out-of-pocket) last year which was 44% of median household income of $59,039.
Health insurance premiums are up 11% in 2018.
Conclusion. I have been predicting a fiscal crisis in the relatively near future over federal debt. But we actually have an immediate crisis on our hands over the horrendous cost of employer-provided healthcare.
In 2012 I was a candidate in the Republican Primary for U.S. Congress, Nebraska District 2. My platform at that time was to “Eliminate the Deficit.” Today I am about to enter the 2018 Nebraska Republican Primary for the U.S. Senate. My platform will be to “Fix the Debt.” (http://www.fixthedebt.org/)
Our current debt ($15 trillion for the public part on which we pay interest) is now 77% of GDP, the highest since right after WWII, and steadily getting worse. At the present time it is essentially “free” money because interest rates are so low. But that is already starting to change. Every 1% increase in interest rates will increase interest payments by $150 billion per year. A huge upsurge in inflation (which can happen at any time), followed by a corresponding rise in interest rates, will become a huge drain on the federal budget and likely lead to a new crisis much worse than the Financial Crisis of 2008.
With healthcare spending, both public and private, now almost 18% of GDP, and growing rapidly, there is really only one practical way of getting our national debt under control: stabilize the cost of healthcare in the U.S.
Consider the following data:
Our national health expenditure grew 4.3% (much faster than inflation) to $3.3 trillion in 2016, $10,348 per person, and accounted for $17.9% of GDP.
National health spending is projected to grow at an average rate of 5.6% for 2016 – 2015, and reach 19.9% of GDP by 2025.
FederalMedicare Outlays were $588 billion in 2016 or 15% of federal outlays.
Federal Medicaid outlays were about $390 billion in 2016 or 10% of federal outlays.
The federal tax exclusion for employer provided health insurance was $250 billion in 2016.
Summary: the federal government spent almost $1.23 trillion on healthcare in 2016, over 30% of all federal spending of $3.9 trillion.
Conclusion. The only practical way to get our nation’s debt under control is to limit the growth of healthcare spending. Right now federal spending on healthcare is defined benefit (i.e. open ended). We simply must move to a defined contribution system where all of us as healthcare consumers assume responsibility for our own healthcare spending. Detailed proposal forthcoming!
Now that the Republicans have failed to replace the Affordable Care Act with a poor substitute, it is likely that a bipartisan plan will emerge. Both sides want changes in the existing structure of the ACA. The Democrats want to hold down the rapidly growing costs for individuals who purchase insurance through the exchanges. The Republicans want to hold down the overall cost of American healthcare which now exceeds 18% of GDP.
There should be plenty of room for compromise:
Medicaid. The Centers for Medicare and Medicaid Services project that under the House bill, which caps federal spending growth for Medicaid and saves hundreds of billions of dollars, total Medicaid enrollment will stay roughly constant above 70 million for the next decade, compared to 55 million before the ACA was enacted.
A Bipartisan Problem Solvers Caucus would fund cost-sharing payments to insurers, proposes curtailing the mandate on employers to provide health insurance to their workers, advances states’ ability to band together into regional compacts for selling insurance across state lines, and expands the opportunity for states to experiment with different ways of providing coverage.
Medicare. Just letting Medicare negotiate for drug prices and reducing the variation in the costs for post-acute care would provide huge savings, without even addressing inefficiencies in Medicare’s basic design.
Conclusion. The above plan holds down the cost of insurance purchased by individuals on the exchanges as well as taking significant steps to control the costs of both Medicare and Medicaid. It doesn’t address the huge inefficiency of employer provided care but nevertheless represents a big step forward towards implementing cost control in healthcare.
The Affordable Care Act was passed by a Democratic Congress in 2010 with no Republican support. It expands access to healthcare but does nothing to control costs which have now reached 18% of GDP and climbing.
The current Republican Senate bill to replace the ACA does attempt to control costs but is unable to attract enough support to pass.
The problem is to achieve both broad access and much lower costs at the same time. In general, Democrats prefer a single payer system while Republicans want to retain a free market approach. So compromise will be required.
The tax exemption for employer provided health insurance should be replaced by a universal (and refundable) tax credit for all limited to the cost of catastrophic health insurance (with a high deductible). This will preserve expanded access as well as requiring everyone to pay attention to costs.
Tax preferred health savings accounts for routine healthcare expenses should be authorized and further subsidized for low-income families through the ACA exchanges.
Medicaid (for poverty-level families) should be put on a fixed federal budget to control runaway costs. States should be given much greater flexibility to direct resources to those with the greatest needs.
Redesign of Medicare. Medicare is currently being subsidized by the federal government (after FICA taxes and premiums paid) at over $400 billion per year. Introducing a defined contribution element into this single payer program will help to hold down costs.
Pre-existing Conditions can be covered with suitable enrollment windows and state-run high-risk pools.
Conclusion. The ACA has achieved nearly universal access to healthcare in the U.S. But costs continue to rise sharply. A universal tax credit combined with health savings accounts for the private market combined with a defined contribution single payer Medicare system has a good chance of getting overall healthcare costs under much better control.
The Affordable Care Act, established in 2010, greatly expanded access to healthcare in the U.S. However, in spite of its name, it has done nothing to control the rapidly increasing cost of healthcare which is the core of our debt problem.
The new Senate plan, struggling to gain enough support to pass, puts Medicaid on a budget but doesn’t even attempt to address wider aspects of the healthcare cost problem.
A wider approach is the best way to proceed and perhaps now it is the only way to succeed in getting something done. Mr. Peter Suderman, who writes for Reason magazine, proposes several principles for a new approach:
Work for broader coverage but not necessarily universal coverage. This allows focusing on other important features such as:
Unification, not fragmentation, is what should be emphasized. Medicare and Medicaid are paid for directly by the government. Employer provided coverage, subsidized through the tax code and costing $250 billion per year, is the biggest problem in the U.S. healthcare system. It incentivizes employers to provide ever more generous insurance while insulating individuals from the true cost of care. It discourages job switching and entrepreneurship. Medicare ends up paying out far more than individuals have paid in.
Health insurance coverage is not the same as healthcare. For non-catastrophic, non-emergency expenses, affordability should be emphasized, rather than subsidies. Health savings accounts are a good way to accomplish this.
Focus on government assistance for the poorest and sickest. This means upgrading Medicaid, and coverage for pre-existing conditions, at the same time as putting Medicaid, Medicare and employer provided care all on a fixed, but reasonable, budget.
Conclusion. The cost of American healthcare is a huge problem. Hopefully the Senate will begin to address this fundamental problem as it struggles to pass a healthcare reform bill.
I know that I repeat myself a lot. I am a fiscal conservative and social moderate. This puts me in the middle of the political spectrum from left to right. I support social welfare programs if they are legitimately helping the less fortunate among us. I am especially supportive of programs for African-Americans because of the racial bias they experience.
Unfortunately our national leaders have collectively lost a sense of fiscal responsibility in recent years. Looking at the standard debt chart (above) produced by the Congressional Budget Office, it is clear that indifference to debt commenced under President Reagan and has waxed and waned ever since. The debt has been growing especially fast ever since the Great Recession in 2008 and now stands at 77% of GDP, the highest since the end of WWII. Shrinking the debt (as a percentage of GDP) is now America’s most urgent problem.
As I have discussed before, it is the entitlement programs of Social Security, Medicare and Medicaid, as well as interest payments on our increasing debt which will continue to worsen the debt problem in the coming years without strong corrective action.
All entitlement programs need to be reformed to impose cost control. Right now the two healthcare bills in Congress propose that the funding mechanism for Medicaid be changed so that it will be on a fixed (federal) budget from now on, rather than be continued in its current open-ended form.
Medicare is an even more expensive program than Medicaid. It would be better to fix both of these programs at the same time, but it is better to fix Medicaid alone than to do nothing at all.
It would be even better to replace our employer provided healthcare system with a uniform, but limited, health insurance tax credit for all (including for the self-employed) and to make all of these major changes at the same time. This would be the fairest way to proceed.
Conclusion. The current GOP plan to curtail healthcare costs could be much improved. It is only a small step in the right direction.