U.S. Media Loves “Fiscal Cliff” Metaphor; The Economist Recognizes that It’s An Imaginary Line in the Sand

In the U.S., pundits cannot resist the fiscal cliff metaphor: it’s colorful, punchy and easy to understand. It’s just two words long. What’s not to like?

It’s not true.

The metaphor assumes that if Republicans and Democrats fail to reach an agreement on the budget by the end of the year, the U.S. economy falls over a cliff,  crashes, and burns.  The “cliff “metaphor complements the equally imaginative “iceberg metaphor” that some fear-mongers use to portray the deficit. (Think Titanic) 

It’s all a bit more complicated than the metaphors suggest.

What few conservatives mention is that the deficit has already begun to dissolve:  since 2009 the deficit has fallen from 10% of GDP to 7% in the fiscal year that ended on September 30th.  By historic standards this is still enormous, and must be addressed. But  the numbers demonstrate that, over time, we can reduce the deficit without renting the nation’s safety nets.

As for the cliff, there is no precipice—just an imaginary line, drawn in the sand, as Republicans and Democrats play “chicken.”

The Economist understands all of this. The lead story in the most recent issue focuses on the “cliff” and points out that “worries” about what will happen if we go over that precipice are “understandable”  but “overblown.” The “risk of economic catastrophe is minimal.” Any damage would be short-term. 

I don’t always agree with the Economist: the UK publication has its own sometimes eccentric slant on things. But on the whole, it is a thoughtful publication—well-researched and fact-checked.  Moreover, in this case, distance may give the Economist a perspective on the problem that some in the U.S. lack.

                                   Exaggerating the Threat to the Middle-Class      

Yesterday’s New York Times suggests that if we cross that line in the sand, an already beleaguered the middle-class will suffer great hardship, and this “Complicates Democrats’ Stance in Talks.” 

The analysis suggests that Democrats don’t dare just stand back and let Bush’s tax cuts expire– as they will if party leaders don’t reach a settlement by year-end: “Only a small handful of policy voices on the left are making the case for the tax cuts to fully expire. In part, that is because the economy is still growing slowly, and tax increases have the potential to weaken it.” But it is also because “If the two parties fail to come to a deal by Jan. 1, taxes on the average middle-income family would rise about $2,000 over the next year. That would follow a 12-year period in which median inflation-adjusted income dropped 8.9 percent, from $54,932 in 1999 to $50,054 in 2011.”

This assumes that once we miss the January 1 deadline, tax hikes for the middle-class would become permanent—which, of course, is not true. Talk about how much more a family would pay over the course of 2013 falls somewhere between hyperbole and hysteria, ignoring what everyone knows:

If the Bush tax cuts expire, Democrats will presumably simply propose to restore them in January for those [families] earning less than $250,000,” the Economist observes, “daring Republicans to block them.” 
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Health Care Reform: Stage Two

Last week, my editorsat  the Health Insurance Resource Center (Healthinsurance.org) challenged me to write a letter to President Obama and suggest what he should do next to advance reform. They were looking for a “new, big idea.”

After thinking about it, I concluded that we don’t need another big idea.  The Affordable Care Act (ACA) contains a great many ideas. Now we need to implement them.

Critics of Obamacare have suggested that as we approach 2014, Washington needs to turn its attention to containing healthcare costs. In particular, they suggest that Medicare is too expensive.

But the fact is that if you read the legislation (and I have, more than once) , you’ll find that it already cuts Medicare spending by some $716 billion. And it does this without cutting medical benefits and without slashing Medicare’s reimbursements to doctors.

In addition, the ACA includes many carrots and sticks designed to encourage hospitals and doctors to provide more efficient, less costly, safer care. In the future they won’t be paid for doing More;  they’ll be paid for doing it Better–for Less. Only health care providers have the power to truly reform our wasteful health care system. Already we’ve seen some evidence that they are responding to the incentives: Medicare spending has slowed.

Finally, and most importantly, President Obama should reject any attempts to re-negotiate the ACA during budget talks. The ACA is not on the table. It is now the law of the land. The American people do not want to listen to politicians continue to debate healthcare. (They want their elected leaders to focus their attention on just one Big Idea: Jobs)

The election gave the president the green light to go ahead with reform.. Now, the administration needs to implement the legislation to so that we can see what works and what doesn’t. This will take time–but only then will we be in a position to revise, refine and improve on reform legislation. .

I hope you’ll read the entire post--and come back here to comment.

 

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A Centrist Perspective: Makers and Takers, Obamacare, and the Path Forward

Below, a guest post from Stephen Reid, Managing Partner at Pharmspective, a market research firm that provides advisory services to healthcare and pharmaceutical companies on strategic issues including the Affordable Care Act. (ACA)

I don’t  agree with Reid on every point. (For example, if Republicans take both the White House and the Senate, I believe that they could and would eliminate both the premium subsidies that will make insurance affordable for middle-class Americans and the mandate.) Nevertheless, when he sent his Op-ed to me I was impressed by how well he understands the legislation. A great many moderates have been confused by the arguments coming at them both from the left and from the right.  A combination of misinformation, half-truths and fear-mongering has created so much “noise” that it has become extremely difficult to separate fact from fiction.

By contrast, Reid does a very good  job of explaining the reasoning behind the Affordable Care Act, and how its “checks and balances” work. I agree with him that the legislation is far from perfect, but it represents a good beginning.

 There is just one major aspect of reform that I think Reid doesn’t understand: the rationale for expanding Medicaid. See my note at the end of his post.

                   A Centrist Perspective: Makers, Takers and Obamacare

by Stephen Reid

With a few days left before we elect a president, the prevailing belief is that an Obama win would propel the Affordable Care Act (ACA) forward with little delay and a Romney win would kill it. Both parties have gone to great lengths to characterize healthcare reform; the Democrats tout the legislation as essential to addressing a broken healthcare system that results in the U.S. spending twice as much as most developed countries on healthcare while leaving 50 million people without coverage; the Republicans cite the ACA as an example of hopeless dependency on government and contrary to free-market principles and individual rights.

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Complaints about Medicare Advantage Mount…While Congress Contemplates Slashing Fees Traditional Medicare Pays Docs

Recently I argued that eliminating the private insurance industry would not suddenly make health care affordable. But this is no reason to gratuitously overpay private insurers to provide health care to Medicare patients—while simultaneously planning to slash the fees that Medicare pays physicians.

Begin with the insurers. When Congress created Medicare Advantage, the program that allows private insurers to offer Medicare to seniors, it agreed to pay for-profit insurers about 12 percent more per patient than traditional Medicare would spend if it were covering those patients directly.  Add up those extra payments and they amount to a $16-billion-a-year subsidy for the health insurance industry.

Why the sweetener?  Lobbyists argued that the government would have to pay more to persuade for-profit insurers to join the Advantage program.  Moreover, they promised that the insurers would use the $16 billion to offer patients extra benefits like acupuncture and eye exams that they would not receive under traditional Medicare.  And Congress agreed. Now, think about this for a minute: legislators agreed to use our tax dollars to help for-profit insurers draw customers away from a government program that most people liked—and that cost taxpayers less.  This is not about saving money by transferring Medicare to the supposedly more efficient private sector. This is about the conservative agenda: some politicians are determined to try to outsource government to for-profit corporations.

Predictably, private insurers structured their plans to siphon off the healthiest seniors.  In New York City, for example, Oxford included free memberships to some pretty posh gyms as part of the package. They called it the “Silver Sneakers” program. Unfortunately, a year after seniors signed up they discovered that the number of gyms involved in the program had suddenly shrunk. The options that remained weren’t nearly as tony, and most were no longer located in upper-middle-class residential neighborhoods. Is this “bait-and-switch”? You decide.

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The Unhappy Legacy of Medicaid

In September, the non-profit organization Public Citizen (PC) issued a report comparing Medicaid and Medicare payments to doctors in 10 states and Washington D.C. The results underline the fact that Medicaid has been designed, from day one, to give states an easy  cop-out when it comes to health care for the poor.

The study highlights cases where the disparities between what different states pay a doctor to care for a Medicaid patient are greatest: “In New York, doctors are paid $20 for an hour-long consultation with a Medicaid patient, while in higher-paying states, doctors receive an average of $157.92 for the same service – a difference of greater than sevenfold. The difference within a state between what Medicaid pays [a physician to treat a patient who is poor enough to qualify for Medicaid] and what Medicare [pays a doctor to care for an elderly patient] is just as dramatic. For this hour-long consultation, a physician in New York could earn $196.47 from Medicare, almost 10 times more than from Medicaid.”

Last month the AMA posted a chart of these and other disparities on its medical news website, and seen side-by-side, the comparisons are startling: a physician in New Jersey or Pennsylvania gets, on average, about one quarter as much for seeing a Medicaid patient as a Medicare patient; in New York and Rhode Island, less than a third; and in the nation’s capital less than half as much. Other states lie at the other end of the spectrum. Alaska, Wyoming, Delaware, and North Carolina all pay more for Medicaid than Medicare.

Is there any rhyme or reason to how states reimburse Medicaid care? Looking at Alaska (which pays more for Medicaid, relative to Medicare, than any other state) and New Jersey (which pays the least) it initially seems that poverty rates may factor into disparities. Alaska’s poverty rate is the 7th highest in the nation, so it would make sense that it would want to encourage health care for the poor. New Jersey, on the other hand, is almost last in the nation when it comes to poverty rates (no. 47 on the list) so the state may not feel as strongly about the need to ensure care for the poor.

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