Writing recently at the Economix blog of the New York Times, Bruce Bartlett brought a dose of clarity to the country’s budget dilemma. He noted that if Americans matched the British in the share of the overall economy spent on health care, they would reap savings equal to the revenue raised by the payroll tax.
That’s right. We could wipe out the tax all workers pay up to $113,700 in wages and salaries.
The money could be directed elsewhere — toward priorities such as education and research, or into the pockets of taxpayers or to putting the country’s finances in order.
A former senior adviser in the White Houses of Ronald Reagan and George H.W. Bush, Bartlett offered a different frame for viewing a problem usually described as entitlement spending (Medicare and Medicaid, in particular) consuming an ever larger share of the federal pie, diminishing, even erasing key public investments.
Aren’t the British ill served by their health-care system? Bartlett cited a study last year in the American Journal of Epidemiology that found the British have better health over a lifetime than Americans — all at a fraction of the cost, 8.9 percent of their overall economy as opposed to 17.4 percent here.
A most persuasive argument holds that this isn’t the time for spending reductions, or abandoning the temporary cut in the payroll tax. The recovery is weak, demand slow, unemployment frustratingly high. Borrowing is cheap, and public works require updating and improvement.
Yet the conversation isn’t so much about spurring the economy. It has been dominated by calls for deficit reduction, the country headed soon for another showdown over the debt-ceiling, Republicans looking to gain deeper spending cuts.
Thus, Democrats, as the architects and defenders of Medicare, Medicaid and Social Security, have an obligation to take the lead in the discussion we are having. They have been right to emphasize the virtues of a balanced approach to fiscal discipline, tax increases an indispensable part of the remedy. Now President Obama and others must address more effectively the other element, shaping better ways to curb spending, knowing the current track cannot be sustained, alert to what Bartlett highlighted, the value in redeploying resources.
In an important way, they already have gotten started. The Affordable Care Act includes a wide range of experiments in slowing health-care spending, leveraging the clout of Medicare in the marketplace. For instance, the act encourages through incentives and penalties lower infection rates and readmission rates in hospitals. It advances alternatives to the costly fee-for-service model.
Yet when Republicans champion an increase in the eligibility age for Medicare from 65 to 67, or call for “premium support,” providing a lump sum for seniors to buy health coverage in the private market, Democrats must do better than seize on the flaws. Raising the eligibility age would cost the health-care system more than the federal government would save. There is little evidence premium support would make health care more efficient.
What might Democrats recommend to reduce Medicare spending?
The options are many, including items already put forward. Drug companies provide rebates on prescriptions for low-income Medicaid recipients. Why not do the same for Medicare? Or allow Medicare to negotiate directly with drugmakers on prices, at an estimated savings of $156 billion over 10 years?
Look at the projections for Medicare spending, and the need for further means-testing is plain, narrowing benefits for those who are better off. An intriguing argument has been made for using Medicare Advantage, the private component of the program, as a platform for testing whether premium support would work.
Social Security hardly represents the same fiscal threat as Medicare and the rest of health care. Yet options exist for savings, starting with the mechanism for adjusting benefits to inflation, an idea that surfaced and then disappeared in the “fiscal cliff” negotiations. It can be done to spare those with lower incomes.
Or raise the limit on wages and salaries subject to the payroll tax. As Dylan Matthews of the Washington Post recently explained, the cap long covered 90 percent of all wages and salaries. Today, the share is around 85 percent. Return to the higher percentage, and the Congressional Budget Office projects generating roughly $500 billion over 10 years.
Fail to engage fully in the discussion of slowing such entitlement spending, and Democrats cede command to Republicans. They appear unwilling to confront constructively what is obvious.
A party with such a stake in seeing these programs endure must put up sound alternatives. More, its credibility would be enhanced, in challenging recklessness in the debt-ceiling debate, in advocating more stimulus, in opening wider the discussion of spending cuts. A panel of retired military officers, officials and experts recently concluded the Pentagon could swallow $550 billion in spending cuts during the next decade without risking national security.
Douglas is the Beacon Journal editorial page editor. He can be reached at 330-996-3514, or emailed at email@example.com.