Thursday, January 14, 2010

A sane discussion of debt

from the Center for Budget and Policy Priorities. The short term expanded debt was and probably is needed to keep us from having the second depression/actually have a recovery. But, the long term deficit (how much more we are spending and most importantly, are scheduled to spend as compared to revenues) on a routine basis over the next couple of decades under current policy is disastrous.

If you are worried about the long term deficit/debt of the US you are worried about health care as Medicare and Medicaid inflation are the primary long term drivers of it.

There are three main reasons that Medicare, especially drives the deficit problem:
(1) The baby boomers had fewer children than their parents. There were 4 workers per Medicare beneficiary in 2000; there will be 2.4/beneficiary in 2030.
(2) Everyone dies and most people are sick before doing so. And 83% of all deaths in the U.S. occur among Medicare beneficiaries. Whomever insurers older persons will face this issue.
(3) Cost inflation in health care is so much higher than general inflation, and wages.

#3 is the only thing that can be addressed. The other two are inevitable. No ideology or interpretation whatsoever involved, just math.

This will be hard. They note that if the 2001 and 2003 tax cuts are allowed to expire, that will close 2/5ths of what is needed for a sustainable budget. That is alot, but that means 3/5ths still must be found, either from reducing the outs (what gov't pays out) or increasing the ins (what gov't takes in). To do this will require changes in Medicare, Medicaid and Social Security (or some combination).

The health reform bill is a step towards us having a chance to do this reasonably. I wish the reform bill would do more on cost control. I wish we would cap the tax exclusion at the national mean....I hope the excise tax survies in some form, as it will signal at least a de facto capping of the tax exclusion. And I hope we end up with a real Medicare advisory Commission that will begin to systematically look at what, when, how and how much Medicare pays for care. We will never have a chance to get a handle on cost inflation so long as there are so many uninsured persons who still get some care, this moves us toward a much smaller group of persons who are uninsured. And the passage of a bill this year will make tweakings inevitable, perhaps there will even emerge ways to address cost inflation that politicians of all ilks can support, if we can take this first step.

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