Avoiding the Extremes on Either Side

 

Not only is Washington politics already hyper-partisan, but both parties are continuing to move to even greater extremes, see here and here.
Here are two examples of extreme positions now being espoused by major elements of one or the other of the two parties:

  • Single payer healthcare. The failure of the GOP effort to repeal the Affordable Care Act this past summer means that (the goal of) universal healthcare is here to stay. The ACA expands access to healthcare but does nothing to control costs. Single payer, Medicare for All, would control costs but then we end up with socialized medicine. The only way to establish a cost efficient free market healthcare system is to remove, or at least limit, the tax exemption for employer provided care and to set up high deductible catastrophic care supplemented by health savings accounts to pay for routine expenses. This would compel everyone to pay close attention to the cost of their own healthcare.
  • Tax cuts instead of tax reform. Tax reform, i.e. lowering both corporate and individual tax rates, paid for by closing loopholes and shrinking deductions, is an excellent way to speed up economic growth and thereby create more and better paying jobs. But it is imperative to do this in a revenue neutral manner, i.e. without increasing our annual deficits. Our debt (the public part on which we pay interest) now stands at 77% of GDP, the highest it has been since the end of WWII, and is predicted by the Congressional Budget Office to keep getting larger without major changes in public policy.

Conclusion. The U.S. badly needs a more cost efficient healthcare system and a simpler and more efficient tax system. But there are right ways and wrong ways to do both of these things.  Single payer healthcare and (unpaid for) tax rate cuts are the wrong way to proceed.  In each case, no action at all is much better than getting it wrong.

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The GOP Congress Needs to Get Back to Fundamentals

 

Granted that it is hard to implement good policy with a populist President like Donald Trump who is most interested in stirring up his base, nevertheless the Republican Congress is making some serious policy mistakes:

  • Healthcare. The GOP should accept the fact that universal healthcare is a desirable societal goal and is here to stay. The Graham-Cassidy bill is bad policy because some states, such as debt-ridden Illinois, can’t possibly handle healthcare on their own. The fact that the ACA needs operational fixes gives the Republicans leverage for insisting on cost lowering changes in a bipartisan bill.
  • Tax Reform. The GOP should focus on the most serious problems in our tax system. The complexity of the tax code is partly responsible for the fact that taxes paid lag true tax liabilities by an estimated 16% or $406 billion per year.  As an example of waste, the IRS has paid out $132 billion in EITC benefits over the last decade to people who were ineligible.
    Our uncompetitive corporate tax rate of 35% encourages multinational companies to leave their profits overseas rather than bringing them back home for reinvestment.  Even so, corporate tax revenue as a share of GDP is less than in most other developed countries.
    Republicans claim to be the party of fiscal responsibility and should therefore be highly uncomfortable with any tax plan which reduces federal revenue and increases our already very large annual deficits.  With a low unemployment rate of 4.4%, any additional artificial (deficit financed) fiscal stimulus is likely to kick off a new round of inflation.

Conclusion. Republicans have a relatively short window of opportunity to enact policy changes beneficial for the country. They need to get serious about what is really important before time runs out.

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Why Is Political Progress So Difficult in the United States?

 

 

 

With Donald Trump expanding the culture wars and the Democrats lining up with the progressive policies of Bernie Sanders, the national political scene seems to be getting more confusing all the time.


And yet there is remarkable consensus on many levels about what the country really needs:

  • Faster economic growth would help provide more jobs and better paying jobs for the blue-collar workers which both parties are trying to appeal to.
  • Tax reform meaning to reduce tax rates, shrink deductions and generally simplify the tax code has widespread bipartisan support, as one way to provide the growth which everyone wants.
  • Shrinking the debt as a percentage of GDP is widely recognized as critical to the future well-being of our country and especially for the poor who are most dependent on social welfare programs.  How to curtail spending sufficiently to get this done is inevitably a highly contentious issue.
  • Healthcare for (almost) all is now the law of the land, given that the GOP has failed to repeal the Affordable Care Act. The emphasis going forward should be to control healthcare costs for both individuals and families as well as for the federal government (the taxpayers).
  • Immigration and DACA. There appears to be strong bipartisan support in Congress for giving the Dreamers legal status in the U.S. With a very low (4.4%), and still dropping, unemployment rate, a huge labor shortage is developing in many states, including Nebraska. What the U.S. needs is an expanded guest worker visa program so that all employers are able to find the (legal) employees they need to conduct business. Perhaps DACA reform will lead to broader immigration reform as well.

Conclusion. The above issues should be largely amenable to bipartisan consensus. Both parties would benefit from putting aside petty differences and working together to solve them.

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A Different Perspective on U.S. Healthcare Reform

 

U.S. healthcare policy is now in limbo. The Affordable Care Act has withstood Congressional attempts to repeal it, but it has many flaws which need to be repaired.  Primarily, the ACA expands access to healthcare in the U.S. (good) but does nothing to control burgeoning costs for both individuals and the federal budget (bad).


One option for both further expansion of access as well as cost control is Bernie Sanders’ single-payer “Medicare for All” plan.  A different option is universal catastrophic care for all Americans not already covered by Medicare or Medicaid (including those receiving employer provided health insurance).


A different perspective is provided by an editorial in the New England Journal of Medicine.  According to the authors, Eric Schneider and David Squires, the U.S. also faces (in addition to the challenge of much better cost control) several performance challenges such as:

  • Lack of access to affordable and comprehensive insurance coverage for too many people.
  • Relative underinvestment in primary care. Other developed countries have a higher percentage of their professional workforces dedicated to primary rather than specialty care and deliver a wider range of services at first contact.
  • Administrative inefficiency of the U.S. healthcare system. The solution here is to change our reimbursement systems to use global payments, fee schedules, formularies and defined benefits.
  • Disparities in the delivery of care. People with low incomes, low educational attainment, and other social and economic challenges face greater health risks and thus need even greater access to primary healthcare.

Conclusion. The U.S. compares poorly with other advanced countries in both the quality and cost efficiency of its healthcare system. Healthcare costs in the U.S, are a huge drain on the economy and will ultimately cause huge fiscal problems if not brought under much greater control.

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Moving Forward on Healthcare Reform: Single payer?

 

It is frequently stated that the current Republican Congress is ineffective in getting anything done. That is not entirely true.  A big issue was decided this past summer.  The failure of Congress to repeal and/or replace the Affordable Care Act means that the goal of universal healthcare for all Americans is here to stay.


The question now is the best way to implement universal healthcare.  Senator Bernie Sanders (D, VT) has just introduced a single payer universal plan, “Medicare for All.”  Here are some of the problems associated with such a plan:

  • At least three states, Vermont, Colorado and California have recently rejected state-wide single-payer plans because of the huge costs involved.
  • The Urban Institute estimates that Medicare for All would increase federal spending by $32 trillion for the first ten years (compared to a very high current total national debt of $20 trillion).
  • Medicare is an inefficient hidebound system with over 140,000 procedure codes where private sector cost-saving measures, like competitive bidding for routine services, are rarely used.
  • There are now 155 million Americans who receive and like their employer provided health insurance and who will resist moving to a Medicare for All plan especially at the cost of a huge tax increase.

On the other hand the cost of healthcare in the U.S., public and private, now eats up 18% of GDP, almost twice as much as for any other developed country, and major changes need to be made to give individuals more direct responsibility for the cost of their own healthcare.
One attractive alternative is to limit the tax deduction for employer provided care to the cost of catastrophic coverage, at a cost of about $3000 per person per year.  It could be made progressive by tying deductibles to income.

Conclusion. Healthcare spending in the U.S. is way too high and something major needs to be done. Universal catastrophic care for all Americans not already covered by Medicare and Medicaid is an attractive alternative to single-payer Medicare for All.

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Why Can’t Democrats and Republicans Work Together?

 

I am a non-ideological fiscal conservative and social moderate. I agree with Republicans on some issues and Democrats on others.  It seems to me that there is a lot of common ground between the two national parties and plenty of opportunity for working together.


For example:

  • The economy. Donald Trump was elected President with the support of blue-collar workers. He wants to help them out by speeding up economic growth.  But the Democrats also want to give a boost to the working class.  Why not lower the corporate tax rate to encourage multi-national companies to bring their profits back to the U.S.? Why not exempt small community banks from Dodd-Frank so they can lend more money to main street businesses?
  • Sustainable healthcare. After failing to repeal and replace the ACA, Republicans now have to accept that universal health insurance is here to stay even though it needs much better cost control. The popularity of employer provided health insurance makes single payer healthcare unacceptable to many. Two major changes are needed to lower healthcare costs.  The ACA Cadillac tax should be replaced by an upper limit on the tax exemption for employer provided insurance. The Medicare Part B premium covers only 25% of the cost of that program and should be increased on a means adjusted basis.
  • Immigration policy. With the unemployment rate now 4.4% and dropping, a huge labor shortage is beginning to develop which will retard economic growth. We now need more skilled and unskilled immigrants alike.  An expanded guest-worker program to meet the needs of employers should be created. Enhanced border security can be part of the mix.
  • Military spending. In a dangerous world we need a strong military defense. But there is a lot of waste in the Pentagon budget. Do we really need 800 foreign bases in over 70 different countries?  Nebraska’s own Chuck Hagel identified $25 billion a year in military waste while he was Secretary of Defense.

Conclusion. Here are just a few ways that the two parties can work together to address some of our biggest national problems. Faster economic growth and fiscal restraint just make common sense.

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Moving Forward on Healthcare Reform: Emphasize Cost Control

 

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.

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