That’s the assessment of AEI resident fellow James Capretta, who indicates that the reckoning will mean big changes for mandatory entitlement programs whose spending has been running on autopilot for years, such as Social Security, Medicare, and Medicaid, which together represent the majority of future federal spending.

Spending, Capretta argues, will become even more difficult to sustain because of the mountain of debt the U.S. government has been accumulating to fund economic relief from the coronavirus pandemic and related government policies responses.

... forecasts of rising debt over the long run can effect economic performance even before the problem is on the doorstep. The U.S. is still viewed internationally as having the strongest economy, and the dollar is the world’s reserve currency. But perceptions can change, and will, if the U.S. remains on course to run up debt in excess of 200 percent of GDP, which is now a real possibility. Countries get into trouble when they struggle to extract sufficient revenue from their citizens to cover current obligations and service accumulated debt. The U.S. is not at that point, but could be soon. CBO estimates debt at 150 percent of GDP would necessitate net interest payments equal to 7.2 percent of GDP in 2050. These payments would come at the expense of the immediate needs of voters, and would benefit many foreign holders of Treasury debt instruments.

Capretta lists five steps that the U.S. government could take to close its wide budget gap, steps he believes could be phased in gently to put entitlement spending on a more sustainable path without greatly disrupting the lives of Americans who depend on these programs.

1. Automatically index the age for Americans to receive full Social Security retirement benefits, to stabilize the ratio of retirees to workers.
2. Progressively adjust Social Security benefits, by increasing the amount Americans with the lowest lifetime incomes receive and reducing the amount Americans with the highest lifetime incomes receive.
3. Establish personal retirement accounts for Social Security beneficiaries, to improve the solvency of the program by partially offsetting the amount of money that would otherwise have to be paid to retirees from taxes paid by working Americans.
4. Index the amount of Medicare premium support to the average cost of all competitive Medicare plan options, which the program’s beneficiaries can then use to pay toward the full cost of the coverage they choose each year.
5. Enroll Americans who are eligible for both the Medicare and Medicaid programs into a mandatory managed care program.

The last item is especially attractive because a disproportionate share of Americans killed by COVID-19 contracted the coronavirus in nursing homes, which house millions of Americans who qualify for both Medicare and Medicaid. Capretta argues that an effective managed care program would minimize the need for the expensive nursing home stays.

If that reform had been in place before 2020, these programs would be more fiscally sustainable and dually eligible Medicaid and Medicare beneficiaries would be getting better care. Moreover, fewer Americans would have been at put at risk of dying from COVID-19 because they wouldn’t have required longer stays in nursing homes.

Done right, reforms such as Capretta’s can both save lives and repair the U.S. government’s deteriorating fiscal situation.

The post Five Steps for Taming the Federal Spending Beast appeared first on The Beacon.

“In this world nothing can be said to be certain, except death and taxes.”

Alas, there is now a third thing of which we can now be certain of in this world, which has become apparent only because the first two things have joined together to reveal it: government waste.

Writing in Forbes, OpenTheBooks’ Andrew Andrzewjewski has added up all the taxpayer dollars the U.S. government has improperly paid out as benefits to dead Americans last year and found the number is not small.

Dead people received $1 billion in benefits. Medicare, Medicaid, social security payments and also the federal retirement annuity payouts (pensions) kept flowing to dead recipients.

That $1 billion of taxpayer dollars distributed to deceased Americans represents a “little expense” in a larger bucket of government waste, where improper payments like these are far more common and have been going on far longer than you might believe. Andrzewjewski describes those numbers and explains why they matter.

Since 2004, twenty large federal agencies admit paying out an astonishing $1.2 trillion in improper payments. That amounts to more than one-quarter of President Trump’s proposed $4.7 trillion budget for 2020. Last year, these improper payments totaled $140 billion – that’s about $12 billion per month.

But what exactly is an improper payment? Federal law defines the term as “payments made by the government to the wrong person, in the wrong amount, or for the wrong reason.”

In other words, there’s a lack of basic in-house financial controls within the largest federal agencies. When people or companies receive money they don’t deserve, it erodes our trust in government, our economy and government’s ability to finance everything from defense to health care.

Speaking of which, Benjamin Franklin also had something to say about little expenses that directly applies to how the U.S. government manages taxpayer money today:

“Beware of little expenses. A small leak will sink a great ship.”

There’s a reason why Franklin’s image is on the $100 bill! If only politicians would think more about the wisdom he offered before parting with the notes that bear his picture, we might not now be associating government waste with death and taxes as a certainty of life.

The post Death, Taxes, and Government Waste appeared first on The Beacon.

• Average new patient physician appointment wait times have increased significantly. The average wait time for a physician appointment for the 15 large metro markets surveyed is 24.1 days, up 30% from 2014
• Appointment wait times are longer in mid-sized metro markets than in large metro markets. The average wait time for a new patient physician appointment in all 15 mid-sized markets is 32 days, 32.8% higher than the average for large metro markets.

Of the 15 major markets surveyed, Boston has the longest waiting time (52.4 days) while Dallas has the shortest (14.8 days). This is not surprising, because queuing is a symptom of a system where resources are allocated by central planners exercising government privilege. Massachusetts has long been at the forefront of efforts to guarantee universal access to care through government planning, whereas Texas has no interest in such a program.

Of the 15 major markets surveyed, slightly more than half of the physicians (53.0 percent) reported they accept patients on Medicaid, the joint state-federal welfare program for low-income residents. This is an “improvement,” of sorts, from 2004, when only 49.9 percent of physicians accepted Medicaid patients.

However, 84.5 percent of physicians accepted patients on Medicare, the federal program for seniors, an increase from 77.0 percent in 2014. It is not clear why this changed. Although, given the dramatic increase in waiting times, it is not clear the increased rate of Medicare acceptance signifies overall improvement.

Obamacare significantly increased federal control of patients’ access to medical care, and it appears to be having the impact we would expect from more central planning.

* * *

For the pivotal alternative to Obamacare, see Priceless: Curing the Healthcare Crisis and A Better Choice: Healthcare Solutions for America, by John C. Goodman, published by Independent Institute.

The post Average Wait Time to See a Doctor up 30 Percent in Three Years appeared first on The Beacon.

Healthy Louisiana’s Dashboard shows that 402,557 adults became dependent on Medicaid as a result of Obamacare’s expansion. The Department notes benefits for some sick people. For example, screening resulted in 74 people being diagnosed with breast cancer and 64 diagnosed with colon cancer.

The Dashboard stops there, not telling us how those newly diagnosed were treated. (Medicaid patients often receive treatment later than privately insured.)

However, there is another, likely bigger problem. Of these almost half million newly dependent, only 62,742 received “preventive healthcare or new patient services.” As David Anderson of the Duke-Margolis explained to me on Twitter, this number excludes those who became dependent on Medicaid but who were already being treated or did not get any treatment. That is, the Medicaid enrollment resulted in zero change in access to health care for 339,815 of the newly dependent. That amounts to 84 percent of the population.

Why did these people enroll in Medicaid when they were already receiving care or did not want to receive care? Well, the Medicaid expansion involved a lot of promotion, including enrollment “fairs” in high-traffic areas, so why not sign up and get a balloon or lapel pin or whatever?

More seriously: Those receiving care either paid for it or received it as charity. If they paid for it themselves, we need better understanding of whether or not this drove them into financial distress. If they received charity care, taxpayer funding is unnecessary.

Of course, most of the privately insured population at any given time is healthy. However, they are paying for “insurance” and cannot just get it whenever they want. People who get Medicaid do not need to enroll in open season: They can sign up when they get sick.

So, measuring health reform’s success by the number of people covered by Medicaid expansion is a very, very poor way to estimate increased access to health care.

* * *

For the pivotal alternative to Obamacare, see Priceless: Curing the Healthcare Crisis and A Better Choice: Healthcare Solutions for America, by John C. Goodman, published by Independent Institute.

The post Why Health Coverage Does Not Equal Healthcare Access appeared first on The Beacon.

Nothing of the sort has happened, of course. For the past few years, prices and spending have appeared moderate by historical standards. However, that is largely because they are reported in nominal terms, not real (inflation-adjusted) terms. From the Great Recession until very recently, general measures of inflation were about zero. An increase of premiums of eight percent when general measures of inflation are about zero is a lot more than an increase of eight percent when general measures of inflation are about three percent.

Actuaries at the Centers for Medicare & Medicaid Services, a government agency, have just updated their estimate of future health spending:

For 2018 and beyond, both Medicare and Medicaid expenditures are projected to grow faster than in the 2016–17 period, and more rapidly than private health insurance spending, for several reasons. First, growth in the use of Medicare services is expected to increase from its recent historical lows (though still remain below longer-term averages). Second, the Medicaid population mix is projected to trend more toward somewhat older, sicker, and therefore costlier beneficiaries. Third, baby boomers will continue to age into Medicare, with some of them dropping private health insurance as a result. And finally, growth in the demand for health care for those with private coverage is projected to slow as the relative price of health care—the difference between medical prices and economywide prices—is expected to begin gradually increasing in 2018 and as income growth slows in the later years of the projection period.

The vanity of Obamacare was that more central planning would reduce wasteful use of resources through “value-based” and “accountable” care. In fact, demand for health services by the privately insured will shrink only because prices outpace our ability to pay for them as government weighs down our prosperity.

* * *

For the pivotal alternative to Obamacare, see Priceless: Curing the Healthcare Crisis and A Better Choice: Healthcare Solutions for America, by John C. Goodman, published by Independent Institute.

The post Health Spending and Prices to Rise, 2018 through 2025 appeared first on The Beacon.

Healthcare programs feature high on the list. Medicare, the entitlement program for seniors, and Medicaid, the joint state-federal welfare program for low-income households, are longstanding members of the list; and the GAO notes that legislation will be required to fix them:

We designated Medicare as a high-risk program in 1990 due to its size, complexity, and susceptibility to mismanagement and improper payments.

We designated Medicaid as a high-risk program in 2003 due to its size, growth, diversity of programs, and concerns about the adequacy of fiscal oversight.

So, that would be 27 years for Medicare and 14 years for Medicaid. Seen any progress?

This is the second time the Veterans Health Administration has made the list of high-risk programs:

Since designating Department of Veterans Affairs (VA) health care as a high-risk area in 2015, we continue to be concerned about VA’s ability to ensure its resources are being used cost-effectively and efficiently to improve veterans’ timely access to health care, and to ensure the quality and safety of that care.

Although VA’s budget and the total number of medical appointments provided have substantially increased for at least a decade, there have been numerous reports in this same period of time—by us, VA’s Office of the Inspector General, and others—of VA facilities failing to provide timely health care. In some cases, the delays in care or VA’s failure to provide care at all reportedly have resulted in harm to veterans.

As I noted in a recent op-ed that was widely syndicated, this problem cannot be fixed by the federal government and the system should be privatized.

It should also be noted that “Ensuring the Security of Federal Information Systems and Cyber Critical Infrastructure and Protecting the Privacy of Personally Identifiable Information” has been on the GAO’s high-risk list since 1997. Recent breaches of federal databases have brought the issue to the public’s attention.

Despite its failure to secure its own data, the federal government has had the temerity to try to impose a standard Electronic Health Record onto all the nation’s hospitals and doctors’ offices.

The post Medicare, Medicaid and VA at High Risk for Waste, Fraud and Abuse, Says GAO appeared first on The Beacon.

Currently, state spending on Medicaid is out of control because Medicaid’s traditional funding formula incentivizes the political class to overspend. For every dollar a state politician spends on Medicaid, the federal government pitches in at least one dollar via the Federal Medical Assistance Percentage (FMAP).

This funding match actually rewards states for making more residents dependent on Medicaid. Before Obamacare, FMAPs ranged from 50 percent (which means the federal government adds one dollar to every state dollar) to 74.63 percent (which means the federal government adds $2.94 to every state dollar). Obamacare expanded Medicaid eligibility to higher-income residents, at an FMAP originally set at 100 percent, now at 95 percent and dropping to 90 percent in 2020. So, for every dollar the state spends on the higher-income residents made eligible through the Obamacare expansion, the federal government adds $19 this year!

This creates a horrible prisoner’s dilemma for states. They pretty much cannot stop themselves from increasing Medicaid spending. According to the Kaiser Family Foundation, Medicaid accounted for over 28 percent of total state spending for all items in the state budget, but under 19 percent of all state general fund spending in 2015. Medicaid is the largest single source of federal funds for states, accounting for almost 57 percent of all federal transfers.

There is no way to get this spending under control without removing states’ incentives to ratchet up federal handouts. There have been a number of proposals in Congress to fix federal Medicaid funding by some measurement of a fair allocation to each state, either by the size of the state or the number of Medicaid beneficiaries in each state. What they have in common is that the amount would be fixed by Congress, and state politicians could not increase it.

Avalere’s consultants examined what Medicaid spending would have been under these proposals going back to 2001, and extended the results through the next decade. They conclude that savings to taxpayers would amount to 3 percent to 5 percent of federal Medicaid spending. However, the benefits are far greater than that. Accountability and efficiency would surely increase dramatically.

* * *

For the pivotal alternative to Obamacare, see Priceless: Curing the Healthcare Crisis and A Better Choice: Healthcare Solutions for America, by John C. Goodman, published by Independent Institute.

The post Capping Federal Medicaid Funding Would Save $110 Billion to $150 Billion in 5 Years appeared first on The Beacon.

Writing in The Week

Stewart is 29 years old, and was pursuing his Ph.D in American history at Texas Christian University until ill health forced him to withdraw. He lives in Ft. Worth, Texas, with his wife of six years, who is a junior high school teacher in a low-income district. They own their home. Before he came down with complications from cirrhosis caused by autoimmune hepatitis, he says he led a scrupulously healthy lifestyle—he does not drink or do any other non-medical drugs, he says, and was a devoted hiker before disaster struck. And he was insured—indeed, he had a gold plan from the ObamaCare exchanges, the second-best level of plan that you can get.

But now he faces imminent bankruptcy and possibly death.

(Ryan Cooper, “This is How American Health Care Kills People,” The Week, January 14, 2017.)

This is exactly the type of catastrophic illness for which insurance should pay. Why does it not? Liver failure is not usually associated with people who live healthy lifestyles – quite the opposite. However, other than a small variation in premium for tobacco use, insurers are forbidden from “discriminating” against those who abuse drugs or alcohol in favor of those who are struck with liver disease for other reasons. (Although not described in the article, this may be a genetic predisposition.)

So, insurers do the best they can to limit benefits for liver disease, despite legal and regulatory attempts to prevent them from doing so. Why are laws and regulations not very effective at addressing this perverse outcome?

The proportion of people in circumstances like Stewart’s is very small, not really a powerful political constituency. Instead of allowing a market for health insurance that indemnifies beneficiaries from financially catastrophic costs, politicians prefer to promise citizens “free” benefits which most citizens expect to use relatively constantly. Instead of hard data on health outcomes for expensive and deadly diseases, research produced in support of the health benefits of Medicaid tends to report increased access to dentists and vaccinations, which is self-reported by dependents in telephone surveys.

As long as we allow politicians to design health insurance, the sickest patients will suffer most.

* * *

For the pivotal alternative to Obamacare, see Priceless: Curing the Healthcare Crisis and A Better Choice: Healthcare Solutions for America, by John C. Goodman, published by Independent Institute.

The post American Health Insurance Is Upside Down appeared first on The Beacon.