Robbing Medicare to pay Public Option?

In a recent comment to my “Cry wolf” post, commenter Neil Moss says:

As I am retired my ral concern is that the new bill seems to make an effort to rob from medicare to support the new healtcare program. Where does that leave me after all these years, since Johnson, of payinng in?

I had kind of been hearing that but had assumed what was being discussed was the hope that Medicare would cost less once various changes were implemented. I did some checking around and it seems I have assumed incorrectly. Rich Lowry writes about it in discussing a phone conversation he had with Senator Bob Corker (R., TN):

Corker is stunned that the Finance Committee would consider taking hundreds of billions out of Medicare and not apply it to Medicare's own shortfalls. They're "taking Medicare savings and using it to leverage a whole new entitlement . . . It's like a Ponzi scheme."

Read the whole thing; Corker sounds like an interesting guy.

On the topic of Medicare cuts, the Oregonian says:

The health care bill written by House Democrats calls for $500 billion in Medicare cuts over 10 years to help offset the enormous cost of providing care to 45 million uninsured Americans. The Senate is also likely to slice deeply into Medicare to pay for its proposal.

Yet a devastating assessment Thursday by Congress' independent budget office concluded that those cuts aren't deep enough. Another $116 billion in Medicare reductions are needed to pay for expanded coverage, the Congressional Budget Office said.

You should absolutely read the whole article. It’s remarkably clearly written and in addition to the information on Medicare cuts, the article also covers one of the big problems with national health insurance (disparities between States); another of the big problems with national health insurance (it distorts or stifles States’ attempts to find a better way); and the impact on supply (of doctors willing to see Medicare patients) when a monopsony (the Medicare program) lowers the price it will pay.

There is, of course, disagreement about exactly what cuts are being proposed, who will bear them, and what impact they will have. The AP has a more reassuring take on the situation pointing out that the $500 billion over ten years cut would be partially offset by $300 billion provided “mainly to sweeten payments to doctors.” It also points out that the AARP supports the legislation and says that:

Obama and the Democrats say the cuts are needed to curb wasteful spending fattening the budgets of Medicare managed care plans, hospitals and other providers.

Furthermore:

An analysis for the Kaiser Family Foundation found that Medicare Advantage — the part of the program operated through private insurance companies — would bear 32 percent of the overall cuts. Another 37 percent would come from hospitals and other service providers.

It looks to me like the cuts discussed above are probably found in HR3200 (aka the House health care bill, aka TriComm; aka American Affordable Health Choice Act; aka AAHCA) beginning on page 223 in “Title I: Improving Health Care Value”. (You can download a pdf of the bill here). I skimmed through part of this Title and it would take me at least 2 solid days to do all the cross-referencing and back-tracking necessary to figure out what it would do. And that doesn’t include figuring out what all the jargon means. We desperately need a simple explanation of the whole bill, tied to page numbers, Titles, Sections, and so on.

Even worse - as Neil Moss also points out - HR3200 is not the only health care/insurance bill floating around out there. We can be over here wringing our hands about what’s in the House bill only to turn around and find out that it suddenly looks like the Senate HELP Committee bill is the one being voted on. Or the Senate Finance Committee bill. Or Wyden-Bennett (although that seems sadly unlikely).

Congress and the President need to agree on a bill they can get the votes for; put together a plain English summary of it that works through each section and includes the CBO scoring for the section; post both the bill and its summary on the Internet for at least a week - I’d prefer a month; and let everyone take a look at it.

Or they can just do the right thing and put together a simple program that lets everyone who wants health insurance buy it with the government subsidizing those who can’t afford it. A 10-year-old with paper and pencil could come up with a pretty good estimate of how much that would cost and we can then figure out how much we have to tax high fructose corn syrup and artificial sweeteners to pay for it.

When you're up to your ass in alligators...

Back when Lawrence Summers name was being bandied about as an Obama economic advisor there was a fair amount of unhappiness in some quarters because of his remarks about women and math. I took a look at that controversy and the other Summers dustups and concluded - sadly - that there was not enough to them to warrant my attacking Summers. Having come to that conclusion, I nonetheless cautioned:

On the other hand, he does seem to have a talent for rubbing people the wrong way and that may be a bad thing under the current circumstances.

You can now count me among the people who are being rubbed the wrong way. My disillusionment is occasioned by a March 13 talk Summers, now Director of the White House National Economic Council, gave to the Brookings Institution. (The video of the event is here and a full transcript is available at the same site in pdf form. The transcript contains both the prepared text of Summers remarks and the Question and Answer period that followed. Page numbers in the discussion below refer to the pdf transcript.) I have two minor complaints and one major one.

One minor complaint has to do with an exchange during the Q&A session. Martin Baily asked the first question (p. 22). He began with:

The two concerns that I hear most are, number one, that restoring the financial sector needs to be the number one priority, and people are not kind of reassured yet that it is. Now you spoke to that, but you also talked about health care and climate and so on. [snip]

To which Summers replied:

Look, I think the first thing to say is at a crucial moment during the campaign it was proposed that one of the presidential debates be cancelled because there were a set of congressional debates regarding the TARP, and President Obama took the position that part of being President is being able to deal with more than one issue at a time.

I have two problems with that answer. First, barely over a week ago we were reading that “Mr Obama and his staff have been ‘overwhelmed’ by the economic meltdown” and that Obama was “[surprised] at the sheer volume of business that crosses his desk.” And even if that story was pure baloney, there’s no question that the Treasury Department is understaffed, to put it mildly. (For example, see a number of posts by Megan McArdle including her latest on the matter and this from The Washington Post.) When you’re in the middle of a crisis, possibly unable to handle what’s on your plate now, and certainly short of help, should you really be looking for more projects?

Second, Baily’s concern was that “restoring the financial sector needs to be the number one priority”. Summers saying Obama can deal with more than one issue at a time is explicitly saying that there isn’t a number one priority. That’s going to make it tough for people to ever be “kind of reassured” that there is. (It also seems to me that Summers’ answer here sort of undercuts his claim throughout the rest of his speech that radically transforming health care, education, and energy policy are an integral part of “restoring the financial sector” but I may be nitpicking.)

My other minor complaint stems from the rest of the Q&A between Baily and Summers. Baily asked:

... what are the specific steps that are going to be taken to deal with the financial crisis? There seems to be, you mentioned that, that [Treasury Secretary Timothy Geithner] is going to lay out those, but there seems to be a bit of hesitation there, and one wonders is this because the price tag is so big. Nobody wants to own it. Or, is it just a matter of time? Are we being impatient?

This is where Summers defended Geithner and I have to say his defense was less than reassuring. You can read Conor Clarke at The Atlantic for some thoughts on this but what jumped out at me were the following lines (emphasis mine):

... I think that Secretary Geithner has handled this in a difficult and courageous way. The easy thing to do would be ... to lay out a nine-point plan with the illusion of specificity and the sense of certainty about what the future would bring. [snip]

Secretary Geithner has taken ... an approach that lays out a framework that, unlike so much of the commentary, actually recognizes the enormous complexity of the problem [snip]

So my suggestion is that we let this stress-testing continue. We allow the process of supporting and reactivating the capital markets to be carried out, and we evaluate what the results have been some time from now, and I think the wisdom of Secretary Geithner’s approach will be much clearer at that time

.

Hmm, let’s see. No specificity, no certainty, enormously complex but we’ll see in the future that Geithner’s approach is wise. Sounds like a faith-based initiative to me.

So much for the minor stuff. What really, really irritated me were these statements:

An equally important engine of recovery can be investment in reducing our energy vulnerability and our contribution to climate change. [p. 18]

Sooner or later we'll have to reduce our dependence on foreign energy and contain our carbon emissions. [p.18]

I can’t imagine that it would be rationale ... not, at a time when there are millions of people unemployed, to be thinking about the sector like energy and the environment where new jobs can be created. . [p. 23]

I think this conflation is dishonest. The environment is a separate issue from energy dependence and energy jobs. It’s only the Administration's own policies that insure the two issues must be treated as one. Obama has blocked offshore drilling and drilling in Utah. The Interior Department has halted oil shale development (although they may restart it under different guidelines). Obama’s budget has ruled out the use of Yucca Mountain as a nuclear waste depository site which kills any increased reliance on nuclear power. Regardless of whether you think these decisions are correct for environmental reasons, they have greatly constrained our ability to reduce our energy vulnerability, reduce our dependence on foreign energy, and create new jobs in the energy sector. In fact, these decisions mean that the only way to achieve those goals is through green technology.

Summers bland linking of energy issues and the environment conceals the fact that a choice has already been made: go the green route rather than take the path of more domestic oil and gas development and more use of nuclear power. This concealment allows Summers to avoid mentioning that this choice has significant economic costs. Instead, he can completely ignore those costs and speak only of the jobs and investment that can be created through alternate energy sources.

It may be that in the long run green technology will be viable without government support and will be a dynamic engine of growth. In the short run, however, the policies Obama is pursuing will definitely result in higher energy costs due to his restrictions on domestic production and - if implemented - his cap and trade program. I don’t think any economist will argue that higher energy prices drive economic recovery in the near term. Furthermore green technologies are a long way from being implemented on a large scale. Therefore in the interim between giving up on domestic carbon and nuclear energy and achieving widespread green energy we remain vulnerable to whatever price hikes our foreign suppliers may impose on us. If such price hikes occur they will further delay or depress the recovery. If our foreign suppliers decide to cut our ration, the consequences will be even more dire.

This is how Summers expands on his remarks (p, 18):

Let's be realistic. Sooner or later we'll have to reduce our dependence on foreign energy and contain our carbon emissions. Thinking about this issue, I was reminded of Ben Bernanke's doctoral thesis written about 30 years ago. The basic argument of Bernanke's doctoral thesis was that if you think energy prices will be low, you will buy one kind of boiler. If you think energy prices will be high, you will buy a different kind of boiler. If you don't know what will happen to energy prices and you think you'll find out soon, you don't buy any boiler and you don't invest at all. There's a message here about the importance of certainty and the importance of resolving the cap-and-trade issue in a rapid way. There's another benefit as well. As many enlightened business leaders have recognized, the confident expectation that pricing policy will discourage carbon use in the future will spur a whole range of green investments in the present when our economy can benefit from all the investment it can get, and in the long run we believe this can create jobs on a substantial scale. We can choose to lead these industries with all the commensurate economic, political and environmental benefits or we can choose to lose out on these jobs and opportunities.

Although Summers refers to “a whole range of green investments in the present when our economy can benefit from all the investment it can get” he also says (emphasis mine), “in the long run we believe this can create jobs on a substantial scale.” Unfortunately the economic crisis is occurring now.

Beyond that, I think the whole “certainty” idea is a gamble. Even if the Administration keeps the lid on oil and gas exploration, never gets around to oil shale development, and kills the nuclear power industry, I don’t see how even “enlightened business leaders” will ever achieve “the confident expectation that pricing policy will discourage carbon use in the future”. As long as there is viable political opposition to those policies there will always be uncertainty about carbon pricing policy in the future.

Bottom line, I’m not convinced that risking economic hardship by refusing to develop domestic carbon and nuclear based energy will result in the thriving private sector development of alternative energy sources. If it doesn’t then either the government is going to have to continue to really, really sweeten the pot for alternative energy or alternative energy development will lag badly in which case we will have turned our backs on using our own carbon and nuclear and have nothing to show for it any time soon.

None of this sounds like Obama believes “that restoring the financial sector needs to be the number one priority”. Rather he believes that cutting CO2 emissions and avoiding the risks of nuclear power are more important than doing absolutely everything possible to fix the financial system quickly. Since Obama was duly elected, that’s his prerogative. I just wish Summers would be upfront about that rather than trying to obscure the fact that focusing on green technology will interfere with cleaning up the financial mess as quickly as possible.

Or to put it another way, I wish the Administration would just admit that their primary objective is not, in fact, to drain the swamp.

*****

Reading:

Healthcare and Competitiveness - Greg Mankiw explains why Summers’ is incorrect when he claims that relieving companies of providing health care policies will make them more competitive.

When should the taxpayers "allow" high executive compensation? - TigerHawk asks an interesting question about government support for education.

Deception at Core of Obama Plans - Charles Krauthammer, um, disagrees that shortcomings in health care, education, and energy policy are the cause of - and their correction the cure for - “our current economic difficulties”: Read the whole thing but my favorite part is:

... the list of causes of the collapse of the financial system does not include the absence of universal health care, let alone of computerized medical records. Nor the absence of an industry-killing cap-and-trade carbon levy. Nor the lack of college graduates. Indeed, one could perversely make the case that, if anything, the proliferation of overeducated, Gucci-wearing, smart-ass MBAs inventing ever more sophisticated and opaque mathematical models and debt instruments helped get us into this credit catastrophe in the first place.

The No-Cost Stimulus - A proposal to open up oil and natural gas exploration to create 2 million jobs.

Qualmish

Every so often during the past endless year of campaiging, I have felt vaguely queasy about Barack Obama. His policies worry me and his misogyny enrages me but I was having a hard time tracking down the source of that low-level nausea. I felt it again a couple of days ago and I’ve now got a pretty good idea what’s bothering me.

Greg Mankiw has up a post which includes the following quote from the “America Serves” section of Obama’s Change.gov presidential transition Website (emphasis Mankiw’s):

Obama will call on citizens of all ages to serve America, by developing a plan to require 50 hours of community service in middle school and high school and 100 hours of community service in college every year.

I highly recommend Mankiw’s post for content but my roiled stomach was caused by his update:

Update: The presidential transition website to which I linked above no longer uses the word "require." The passage quoted above was copied and pasted from that website (with bolding added by me). But within a few hours after I posted it here, the wording changed to "setting a goal."

I am delighted to see this blog having so much influence on the policies of the new administration. That's change I can believe in!

He is correct. Obama’s Change.gov Website now says (emphasis mine):

Obama will call on citizens of all ages to serve America, by setting a goal that all middle school and high school students do 50 hours of community service a year and by developing a plan so that all college students who conduct 100 hours of community service receive a universal and fully refundable tax credit ensuring that the first $4,000 of their college education is completely free.

I realize changing positions is not new for Obama but this really creeps me out. It feels less like Obama’s famous flip-flops on telecom immunity in FISA, public campaign financing, and NAFTA and more like the Universal Mortgage Credit modification, another small issue that made me feel a little green around the gills.

Why does this make me queasy?

First, the language was changed after it was publicly criticized. (Mankiw wasn’t the only person writing about this.) This feels less like correcting a misstatement that someone has spotted and more like shifting ground to avoid being held accountable. As Holtz-Eakin put it when talking about the Universal Mortgage Credit changes, trying to pin Obama down is like “trying to pin Jello to the wall.”

Second, Obama’s previous statements on community service for students have been ambiguous enough to support either version. In a July 2 speech Obama described his plans to integrate service into learning:

I will set a goal for all American middle and high school students to perform 50 hours of service a year, and for all college students to perform 100 hours of service a year. This means that by the time you graduate college, you'll have done 17 weeks of service.

We'll reach this goal in several ways. At the middle and high school level, we'll make federal assistance conditional on school districts developing service programs, and give schools resources to offer new service opportunities. At the community level, we'll develop public-private partnerships so students can serve more outside the classroom.

For college students, I have proposed an annual American Opportunity Tax Credit of $4,000. To receive this credit, we'll require 100 hours of public service.

In this formulation the community service for middle and high school students sounds like it’s going to be required: if Federal funding is contingent on “service programs” then schools will require service. Unless, of course, the schools are only required to “offer ... service opportunities” and will get their Federal money regardless of how many students avail themselves of those opportunities.

The college community service sounds totally voluntary, just a nice way to offset some of the costs of higher education.

Meanwhile the Obama campaign Website says:

Obama and Biden will set a goal that all middle and high school students do 50 hours of community service a year. They will develop national guidelines for service-learning and will give schools better tools both to develop programs and to document student experience. [snip]

Require 100 Hours of Service in College: Obama and Biden will establish a new American Opportunity Tax Credit that is worth $4,000 a year in exchange for 100 hours of public service a year.

In this formulation the middle and high school service sounds more voluntary - there is no mention of tying Federal funds to community service - although the “set” part of “set a goal” is pretty ambiguous. Meanwhile the description of the American Opportunity Tax Credit here is virtually identical to the description from the speech but the heading before the description clearly says “Require 100 Hours of Service in College”.

A third source, the campaign National Service Plan Fact Sheet, says (pages 3-4):

That plan [school funding] conditions that assistance on school districts developing programs to engage students in service opportunities. Obama and Biden believe that middle and high school students should be expected to engage in community service for 50 hours annually during the school year or summer months. [snip]

Require 100 Hours of Service in College: Barack Obama and Joe Biden will make college affordable for all Americans by creating a new American Opportunity Tax Credit. This fully refundable credit will ensure that the first $4,000 of a college education is completely free for most Americans, and will cover two-thirds the cost of tuition at the average public college or university. Recipients of this credit will be required to conduct 100 hours of public service a year, either during the school year or over the summer months.

At the middle and high school level, we’re back to Federal funding being contingent on schools “developing ... service opportunies” while student community service is now “expected” - whatever that means. Meanwhile the college community service still sounds voluntary - you only do it if you want the Tax Credit - but the label still says “Require”

The upshot of all this is that Obama’s campaign positions on integrating service into education can be cited to support both the original “required” policy on the Change.gov Website and the new gentler version that has replaced it. Which brings me to:

Third, the new gentler version doesn’t actually mean the original “required” version isn’t accurate. The new version doesn’t say anywhere that community service won’t be required. It just no longer says that it will. In other words, it reintroduces the ambiguity that we’ve seen on this issue throughout the campaign.

So why does this kind of maneuvering make me queasy? Because it does away with accountability both in campaigning - which is irrelevant now but will be important in four years - and in governing. In campaigning, an opponent cannot make a charge against Obama stick. If that opponent says, “Obama is going to require community service,” Obama can reply, “You are misrepresenting my position. I simply want to encourage students to participate.” On the other hand, if that opponent says, “Obama is going to give schools money to develop community service programs but the schools can simply take the money and do nothing,” Obama can say, “A typical Republican smear. I make it perfectly clear community service is expected from schools in return for Federal funding.” (No wonder Obama was afraid of those ten town-hall meetings. The more time he spends talking without a script the harder it is for him to get away with this sort of “nuance”. An answer he gives in Dayton in July can be used against him if attempts the opposite answer in Pittsburgh in August.)

More crucially, such maneuvering will make it almost impossible to hold President Obama accountable for what candidate Obama promised. If four years from now eleven-year olds are still playing video games rather than picking up trash in parks, Obama can tell voters who are disappointed that he only promised to encourage community service and it’s not his fault that American children didn’t answer his call. On the other hand, if Obama marches fifth graders off to help with ACORN voter registration drives he can tell those who object that he said he was going to do just that before he was elected.

No wonder everyone who supports Obama can see exactly what they need to see when they look at him. And no wonder I feel queasy from time to time.