A Cease-Fire on Social Security Demagoguery?

Senator Lindsey Graham (R-SC) and Representatives Charlie Stenholm (D-TX) and Jim Kolbe (R-AZ) have drafted a letter urging a halt to political attacks that mischaracterize Social Security reform proposals.

That is a worthy goal, because Social Security reform is essential to keeping the budget under control, not now, but in 20 or 30 or 40 years when the baby boom generation has retired.

But the goal will be hard to achieve until two political preconditions are met.

First, Democrats must give up their stale and unpersuasive rhetoric that entitlements can somehow be “saved” by rescinding tax cuts and allocating the savings to the programs’ “trust funds.” Yes, reducing the federal debt (or slowing its growth, the way things stand now) would put the government in a better position to borrow when the entitlement bills come due. But no, it’s simply not enough. Even if we balanced the budget today, the future budget crunch would only be delayed a little, not avoided.

Second, Republicans must cease their endless tax cut demagoguery. Yes, tax cuts can be important to stimulate a sluggish economy, and some tax cuts might even spur long-term efficiencies under the right conditions. But no, tax cuts do not pay for themselves, now or in the future.

Continued tax cuts are incompatible with entitlement reform. Properly reforming Social Security will require hundreds of billions, even trillions of dollars in transition costs. The tax cuts of the last 3 years haven’t starved the government’s spending appetite, as many conservatives had hoped. Instead, they have starved the possibility of real Social Security reform.

Social Security reform generally involves three things: (1) leave current retirees alone, (2) create and fund personal accounts for working people, and (3) reduce promised benefits for current workers. Therefore, most current workers (except those with very low incomes) would get a lower payment from Social Security’s traditional benefit when they retire, but they would be able to offset that reduction from funds in their personal accounts.

The result is higher government spending now, when we can afford it (at least demographically), and lower government spending later, when we can’t.

However, the deal works only if the government has the funds to create people's accounts in the first place.

Ending the demagoguery and the dumb (but no doubt effective) political attacks is an important first step. But to truly reform Social Security, Democrats will have to stop claiming that the do-nothing approach is a feasible alternative, and Republicans must stop pretending they can reform the program without spending any money.

Links:
Graham/Stenholm/Kolbe "Cease Fire" Letter
Centrists.Org No-BS 30-Year Budget Baseline

New Legislative Resources: Senate Transitional Coverage Proposal and Bilirakis-Towns Health "Certificate" Act

Centrists.Org has posted a new policy analysis called Two Promising Approaches To Expanding Health Coverage, and Centrist Policy Network has posted the legislative text of the Senate's possible Transitional Coverage proposal and the House Bilirakis-Towns Health Certificate Act.

Medicare Needs FEHB-Style “High Option” Health Plans

To create a message for future campaign commercials, Senator Mark Dayton (D-MN) amended the Senate Medicare bill so that Senators’ drug benefits under the Federal Employees Health Benefits (FEHB) program would be lowered to match the drug benefits proposed for seniors.

FEHB coverage is indeed generous. Federal employees do not need “gap” or supplemental coverage like that purchased by many Medicare beneficiaries.

However, the extra coverage comes with extra responsibility. Federal employees pay roughly 25-30 percent of the premium for their coverage. Moreover, federal employees may see their premium share rise if the plan they select fails to restrain its costs -- enrollees in plans with above-average premiums pay more. By contrast, Medicare premiums run about 10 percent for standard Medicare coverage.

Therefore, the Dayton amendment should be reversed. Not repealed necessarily, but switched around 180 degrees.

Instead of lowering Senators’ benefits, Medicare benefits should be raised to match those in FEHB, under two conditions. First, Medicare coverage would be provided by competing, comprehensive health plans like FEHB plans, either private or government-run. Second, seniors would pay more for plans with generous benefits, just like members of Congress. However, seniors would be allowed to pocket the savings if they chose inexpensive plans with more basic (but still comprehensive) benefits.

Comprehensive Chronic Care. “High Option” Medicare coverage was first recommended by the National Bipartisan Commission on Medicare in 1998 and 1999, and subsequently proposed in legislation by Senators John Breaux (D-LA) and Bill Frist (R-TN).

High option plans within an FEHB-style system would merge the promise of better Medicare benefits with the potential for cost control. A stable system of competing health plans -- with incentives for seniors to choose carefully -- could help slow the growth of Medicare spending. It would be an alternative to tax increases or draconian benefit cuts after 2010, when the huge baby boom generation begins to retire and strain the federal budget for entitlements.

The FEHB-style system would also allow Medicare benefits to evolve and improve without Congressional micromanagement. And it would force the traditional, government-run Medicare program to adopt new, flexible payment systems more in tune with modern medicine.

When Medicare was designed in the 1960s, health insurance was mainly intended to shield people from ruinous hospital bills. Both health care and health insurance were “after the fact.” They kicked in only after an acute health crisis -- such as a heart attack or stroke -- had already occurred.

Today, medicine is gradually switching from acute care to chronic care, with an emphasis on early diagnosis and continuity of monitoring and treatment of chronic illnesses.

Chronic care takes place between hospitalizations, and even between doctor visits. Ideally, it helps patients and their families prevent sudden health crises altogether, using self-monitoring, remote consultation with doctors and nurses, and home- or community-based care.

Because Medicare covers seniors and workers with long-term disabilities -- precisely the people most likely to have chronic or ongoing health problems -- Medicare beneficiaries have the most to gain from continuity of care and comprehensive, coordinated care management systems.

Some private health plans are learning how to arrange chronic care, and thereby keep their enrollees out of the hospital. Chronic care tools can range from simple educational programs to specialized programs tailored to help people manage a particular disease, such as diabetes, to comprehensive case management systems for patients with multiple chronic conditions.

But Medicare has not adapted to chronic care. Its fragmented payment systems and regulations can actually work against coordinated, patient-focused care.

Medicare Bills Miss the Mark. Only comprehensive health plans have a sufficient incentive to invest in chronic care. Investments in one area of chronic health care, such as proper patient monitoring or medication, will pay off only if the plan would save money in other areas, such as reduced hospitalizations.

To be fair, the Medicare bills passed by the Senate and House contain small provisions to nudge Medicare toward chronic care. Moreover, both bills would attempt to expand seniors’ options for comprehensive coverage, through HMOs and Preferred Provider Organizations (PPOs), like most Blue Cross plans.

However, the fundamental structure of the proposed drug benefit -- a stand-alone drug program available to seniors for an extra premium -- would further fragment Medicare’s benefits and would create further disincentives for coordinated chronic care.

Under the House and Senate bills, many seniors would have hospital coverage from Part A of Medicare, physician and outpatient coverage from Part B (a wholly different system with separate payment systems), a barebones drug benefit from the new Part D of Medicare (yet another separate plan), and supplemental and “wrap-around” coverage from a private Medigap or employer-based retiree plan.

Needless to say, these separate insurance companies and government agencies could never get together to create a coordinated care plan -- including specialty hospital services, physician care, diagnostic and monitoring tests, nursing assistance, medicines, and home-based services -- for a senior with multiple chronic conditions.

Medicare has the ability to oversee a system of fair competition between all-in-one, high option plans capable of providing much improved chronic care for seniors. It can pre-approve plans based on the quality of their chronic care initiatives. It can adjust payments to give plans reasonable assurance of fair compensation if their enrollees are less healthy than average, and need extra care.

The biggest bottleneck has been the Congressional Budget Office (CBO), which has steadfastly refused to estimate the costs and savings associated with switching Medicare toward competing high option plans. Without a CBO analysis, legislative efforts are dead in the water.

And when the analytic agencies fail to inform, the legislature is fair game for schemers and “message” amendments.

Rather than being constructive, Senator Dayton set out to make a point. He didn’t have to go to the trouble. Many major newspapers have duly reported that seniors are worried the new drug benefit will be insufficient.

What the newspapers didn’t report, because CBO and the other Congressional analytic agencies didn’t explain it to them, is that federal employees not only have better benefits than Medicare beneficiaries, they also have a more coherent health insurance system, a system that is structurally compatible with improved chronic care.

Federal employees, including Senators, are glad to have FEHB coverage instead of Medicare. Sure they pay more, and they must risk additional premium increases if the plans they choose are less efficient than average.

But the extra cost and risk are worth it. Medicare beneficiaries should have choices so good.

Links:
Centrist Policy Network 2003 Medicare Drug Resource Page

New Medicare Drug Resource Page

The 2003 debate on Medicare and prescription drugs has been sort of surreal.

First, few experts believe the stand-alone, high-premium drug benefits passed by both the House and Senate will work as intended -- it is likely Congress will have to greatly inflate the stated $400 billion cost over the next 10 years to smooth over workability and political problems.

Second, the long-run cost of the benefit as the baby boom generation retires and enters the Medicare program has been left completely out of the debate.

Third, the sheer magnitude of the Congressional micromangement inherent in the House- and Senate-passed bills is staggering. Medicare reform was supposed to be an exchange: Seniors get more options of health plans from which to choose (and the responsibility to choose wisely), and Congress gets out of the micromanagement business and focuses instead on oversight and making sure Medicare's basic processes are sound. However, the bills represent a new high (or low perhaps) in Congressional micromanagement of every minute sector of Medicare's operations.

Links:
Centrist Policy Network 2003 Medicare Drug Resource Page
S.1 Senate-Passed Medicare Drug bill's Table of Contents graphically illustrates continued Congressional micromanagement, not reform.

Time for A Tax and Budget Reform Commission

Memo

To: White House

From: Centrist Policy Network

Subject: Bipartisan Tax and Budget Reform Commission

Date: 7/9/2003

Let us recommend the following structure for a National Bipartisan Commission on Tax Reform and Long-Term Fiscal Responsibility:

Co-Chairs:
One Republican, one Democrat, each on either House Ways and Means Committee or Senate Finance Committee. These co-chairs should be well-respected leaders on tax, entitlement, and budgetary matters, with a history of being able to work effectively in a bipartisan manner.

Four Additional Senators, appointed by Republican and Democratic Leaders.
(We recommend the chair and ranking members of the Finance and Budget Committees.)

Four Additional Representatives, appointed by Speaker and Minority Leader.
(We recommend the chair and ranking members of the Ways and Means and Budget Committees.)

Three Presidential Appointees:
Office of Management and Budget (OMB) Director
Treasury Secretary
Council of Economic Advisors (CEA) Chairman

Three Non-Voting, Non-Partisan Congressional Staffers:
Congressional Budget Office (CBO) Director
Joint Committee on Taxation (JCT) Director
Comptroller General (General Accounting Office GAO Director)

The Commission’s objective would be to develop a detailed budget and tax reform plan for the next 10 years (2005-2015), and a general plan for the following 10 years (2015-2025). That plan would include the following:

1. Personal income tax simplification
2. Corporate income tax overhaul
3. Balanced federal budget in 10 years under plausible political assumptions
4. Spending reduction recommendations
5. Entitlement reform recommendations
6. Recommendations for changes in budget process and long-term budgeting rules

The Commission would have an expert staff (in addition to assistance from CBO, JCT, and GAO) and would be required to report to the President and Congress within 10 months.

This Commission would be excellent political cover for President Bush on his most vulnerable issue: continued poor economic performance. The President could say: “Most of my attention on the economy has been devoted to preventing recession and spurring economic growth. However, now I am confident the economy is poised for a lasting recovery, and it is time to turn our attention to broader and longer-range measures to streamline and simplify the tax code, eliminate distortions that limit our economic potential, and set America on a firm economic foundation for the future.”

The public lacks confidence in President Bush’s current economic advisors and strategy. However, most people recognize tax cuts can help a struggling economy, and they continue to give the President the benefit of the doubt. As long as the economic situation is an emergency, and voters perceive that the President is taking emergency measures, the administration is fine.

Paradoxically, voters’ dissatisfaction with the President’s economic policies may rise if the economy continues to avoid recession, and the sense of economic emergency eases. If sluggish growth and economic uncertainty are as good as it gets -- if job growth and business opportunities and stock market gains are unsatisfactory in spite of economic recovery -- voters may reject Bush’s economic leadership and look for alternatives.

On the other hand, creating this Commission would show balanced leadership, deep concern for the future, and a desire for sound, long-term policymaking.

We encourage the administration to work with Congress to get this Commission launched this fall, and set-up for high-profile deliberations next winter and spring.

Links:
Text of Voinovich Fundamental Tax Reform Commission Proposal