Thursday, December 13, 2012

Medicare Reform After the Election 

Over at e21 I have a column on the Medicare reforms that Republicans should pursue during the fiscal cliff negotiations, given the unwillingness of the Obama administration to consider any kind of premium support model.

But if premium support can’t be secured in this round of negotiation because of Democratic opposition, are there other reforms that are still worth fighting for?

The answer is yes, but to determine what they are requires a proper understanding of what is driving the cost problem in Medicare in the first place.

The most pressing problem in Medicare is the dominant and poorly designed fee-for-service (FFS) insurance model. Seventy-five percent of the beneficiaries are enrolled in FFS, with the other 25 percent enrolled in private plans (called Medicare Advantage). The FFS program is essentially a claims-paying machine. If a licensed provider renders a medical service to a beneficiary, the Medicare FFS program generally pays for the service, no questions asked. In that sense, it’s an FFS program modeled on the private insurance plans prevalent in 1965, when Medicare was created.

For those interested in reading more, you can find the rest of the article here.

posted by James C. Capretta | 1:20 pm
Tags: Medicare reform. fiscal cliff
File As: Health Care

Tuesday, December 11, 2012

More on the Fiscal Cliff 

This morning Isabel Sawhill from the Brookings Institution and I debated the merits of domestic spending cuts for dealing with the fiscal cliff on C-SPAN’s Washington Journal. For those who are interested, you can watch the video (about 45 minutes) on the C-SPAN website here.

posted by James C. Capretta | 1:31 pm
Tags: fiscal cliff
File As: Politics, U.S.

Thursday, December 6, 2012

Raising Medicare Eligibility a First Step Towards Deficit Reduction 

I have a post today on the U.S. News and World Report’s Debate Club where I argue that the Medicare eligibility age should, like the Social Security retirement age, be raised by two years to help bring the entitlement program’s long-term costs under control.

The best idea is to bring the cost discipline of a functioning healthcare marketplace to Medicare. Under this model, beneficiaries would choose from among competing health plan offerings. Beneficiaries selecting less-expensive options would reduce both their own costs as well as the government's. This model has worked well to control costs in the Medicare drug benefit.

But pursuing more competition in Medicare does not preclude adopting other reforms too. Among the ideas now being discussed in budget talks between congressional leaders and the president is a rise in the Medicare eligibility age. Social Security's normal retirement age is already moving up from age 65 to 67 over about a two-decade phase-in period, but Medicare's eligibility remains at 65 (where it has been since the program was enacted in 1965).

For those interested, you can read and vote on the post at the Debate Club website here.

posted by James C. Capretta | 12:22 pm
Tags: Medicare
File As: Health Care

Tuesday, December 4, 2012

Talking Fiscal Cliff 

This morning, I was interviewed by WNYC (public radio in New York City) on the fiscal cliff negotiations, focusing especially on the latest Republican offer.  For those who might be interested, the full interview (about 20 minutes) can be heard here.

posted by James C. Capretta | 5:08 pm
Tags: fiscal cliff
File As: Politics, U.S.

Tuesday, December 4, 2012

The GOP’s Payroll Tax Opportunity 

My EPPC colleague Yuval Levin and I have a piece in The Weekly Standard on how congressional Republicans can appeal to middle class voters by taking a stand against increasing Social Security and Medicare payroll taxes.

For households squarely in the middle class, income taxes are less of a burden today than payroll taxes, because a variety of deductions, credits, and exclusions either exempt most of these households from any income tax liability at all, or leave them paying very little.

Not so with the Social Security and Medicare payroll taxes. Prior to 2011, the combined Social Security and Medicare payroll tax was 15.3 percent for households with incomes up to about $100,000, with half paid by the employer and half paid by the worker. For a family making $50,000 per year, that’s a tax liability of $7,650. According to the Tax Policy Center, households in the middle quintile of the income distribution pay an effective payroll-tax rate that is, on average, nearly three times what they pay in income taxes.

For these households, the 2 percent increase in the payroll tax that would result from a failure to renew today’s rates would be significant—a worker earning the median income would see his tax bill rise by $1,000 a year, which would be more than enough to make him take notice. The message for the GOP should be obvious: The party of low taxation must apply that broad principle not just to income taxes but to payroll taxes too.

You can read the rest of the article here.

posted by James C. Capretta | 3:22 pm
Tags: payroll tax, fiscal cliff
File As: Health Care

Tuesday, November 27, 2012

How to Approach the ‘Fiscal Cliff’  

Today at National Review Online I have a column on how congressional Republicans should negotiate with the White House over the impending fiscal cliff, and why reforming entitlements, including Obamacare, needs to be high on their agenda.

The hardest part of these negotiations will be the battle over entitlement reform. The bottom line for the GOP should be this: There should be no deal on long-term taxes without far-reaching reforms to health-entitlement programs. And what’s far-reaching? For starters, the entirety of Obamacare should be on the table for revision and retrenchment. The law sets in motion the largest entitlement expansion in a generation. It’s far better to scale the program back now before it gets started than to wait and hope it can be scaled back later.

Republican governors have substantial leverage in these negotiations because they can opt out of the Medicaid expansion in Obamacare, thanks to the Supreme Court. If 25 or so Republican governors refuse to put more people into an unreformed Medicaid program, it will put tremendous pressure on the Obama administration, which is desperate to see the Medicaid expansion occur during the president’s second term.

You can read the rest of the article here.

posted by James C. Capretta | 2:45 pm
File As: Health Care

Monday, November 19, 2012

Why Obamacare Is Still No Sure Thing 

My Ethics and Public Policy Center colleague Yuval Levin and I co-authored an op-ed for the Wall Street Journal this weekend on what state governments can do to resist the implementation of Obamacare.

Talk of the law's inevitability is intended to pressure these governors into implementing it on the administration's behalf. But states still have two key choices to make that together will put them in the driver's seat: whether to create state health-insurance exchanges, and whether to expand Medicaid. They should say "no" to both.

At its core, ObamaCare is a massive entitlement expansion. Between vastly increased Medicaid eligibility and new premium subsidies, it is expected to bring 30 million more people onto the federal government's entitlement rolls. The law anticipates that the states will take on the burden of implementing the expansions, but states can opt out of both.

You can read the rest of the column online here.

posted by James C. Capretta | 11:17 am
Tags: Obamacare, Yuval Levin, exchanges
File As: Health Care

Friday, November 9, 2012

Health Policy After The Election 

I have a post on the Health Affairs blog today about what the results of the election will mean for the policy debates over American health care.

No one should underestimate the difficulty of bridging the deep divide between the parties on health care, which is mainly a disagreement over how best to slow the pace of rising costs.  One side favors empowering the federal government to impose more cost controls, while the other side wants to put consumers in functioning marketplaces in the driver’s seat.  In deliberations over restraining projected federal budget deficits, these different visions are sure to collide.

This does not mean that bipartisan agreement is beyond reach.  It isn’t.  Indeed, if ever there were a moment for bipartisan accord, this is certainly it.  There are big problems that must be confronted — problems that are difficult if not impossible for one party to ever fix by itself.  The president, with re-election behind him, will have every reason to make 2013 a highly productive legislative year because his power will only diminish with time.  And House Republicans want to demonstrate to voters that they are as interested in governing as in checking the excesses of the administration.  So it would not at all be surprising to see both sides show more flexibility in the coming year than they have shown in the past.

The rest of the column is online at the Health Affairs blog.

posted by James C. Capretta | 6:40 pm
Tags: 2012 election
File As: Health Care

Friday, November 2, 2012

The Turnaround Washington Needs 

Michael D. Scott and I co-authored a column in e21 today on how important it will be for the next administration to face up to the challenge of fixing our federal government’s broken finances, and why Mitt Romney is the man for the job.

Job one for the next president must be to fix the U.S. government’s broken financial model. If a private business had such cash losses and accruing liabilities, the turnaround team would seek immediately to cut costs and renegotiate the contracts creating the problems. The same must be done with our general budget, Social Security, Medicare, Medicaid, and federal employee commitments. Current retirees and those near retirement can be protected. But benefit promises to future entrants must grow no faster than the revenue collected to pay for them. One option could include moving from today’s defined benefit commitments to defined contribution obligations, much like the shift from formula-driven pension payments to 401k’s in the private sector. This is especially important in Medicare, as defined contributions can foster the market discipline necessary to slow the pace of rising health care costs.

Beyond the entitlement programs, the federal government is in desperate need of a top-to-bottom review and reform. Unproductive programs must be shut down. Activities more appropriately handled by the states or by the private sector should be transferred or terminated. Duplicative federal activities must be consolidated. And federal agencies must be forced to deliver better value at less cost, just as every business must do to stay competitive.

The U.S. government is the most systemically important and inter-connected entity in the world; its financial solvency is critical for our citizens, businesses, and other governments. Because of its outsized importance to the global economy, the federal government cannot afford to sow seeds of doubt about its ongoing financial viability.

You can read the rest of our column here.

posted by James C. Capretta | 11:07 am
Tags: 2012 election

Friday, October 19, 2012

Obamacare’s Heavy Toll on Middle Class Americans  

My AEI colleague Tom Miller and I have an article at e21 today on how Obamacare will lead to a massive redistribution of wealth away from the middle class.

In broad terms, the amount of redistribution is easily ascertained form the aggregate expenditures and taxes contained in ObamaCare. According to the Congressional Budget Office (CBO), in 2020, ObamaCare will spend $229 billion on a Medicaid expansion and a new subsidy program for health insurance. These expenditures will primarily benefit 29 million people newly enrolled in Medicaid and the insurance subsidy program. That works out to nearly $8,000 for every newly insured American, or about $21,000 per newly insured household.

Much of the rest of the legislation is devoted to extracting these resources from everyone else in the country — about 290 million people — who won’t benefit from the new spending programs, and doing so in way that obscures what’s taking place. For these Americans who already have insurance, the law contains nothing but new financial burdens, in the form of higher taxes, higher premiums for their existing plans, and lower benefits, particularly for those on Medicare.

Read more here.

posted by James C. Capretta | 10:23 am
Tags: Obamacare, taxes
File As: Health Care