The Social Security and Medicare Trustees reports, originally due in April but postponed due to the passage of healthcare reform, were due today. As of noon Central time nothing on their web site about it and no notice from any of the major news organs. I’ve read a few speculations that the report might be available in August. I’m guessing November. After the midterm elections.
There are some posts on “fixing” Social Security floating around here and there. Megan McArdle weighs in on the political difficulty of making Social Security actuarially solvent by lifting FICA max (the highest income on which the social security tax if levied). I think the problem is somewhat different than the manner in which it’s being couched. If incomes in the lowest four income quintiles (all of which are subject to the social security tax in whole) had risen just a little bit faster over the period of the last thirty years, we wouldn’t be talking about problems with the fund now. At this point and with things as they are the problems with Social Security will probably be solved by some combination of raising FICA max without increasing benefits, changing the benefits formula, and raising the social security retirement age. As I’ve said before I think that a third category of Social Security recipients should be created to deal with the differences in ability to work over the age of 60 of, say, college professors and coal miners.
The relatively trivial problems of Social Security shouldn’t even be mentioned in the same breath as the problems of Medicare. I’ve long favored means-testing of Medicare and, possibly, raising the Medicare eligibility age. No one seems to be willing to mention the dirty secret of Medicare: there is no solution to its actuarial mess without reducing the incomes of doctors and hospitals. If you don’t believe me, just look at the numbers and the rates of increase. Eliminating waste, fraud, and abuse won’t do the trick. Too much of it is systemic—based on treatment styles. Reducing excessive consumption won’t do it, either, unless you define excessive consumption as treating anybody over the age of 75.
Medicare continues to serve a legitimate societal good: it keeps the elderly from becoming wards of the state (or from dying in rags in the streets). The security that Medicare and Social Security provide helps retail, too—people spend more than they would without the plans.
Update
There are several nice things about Social Security. First, it’s a long-term problem. The trust fund doesn’t go out of balance for several decades, so we have plenty of time to phase in changes slowly.
That’s like, so 2007. There are good reasons to believe that Social Security outlays have exceeded its revenues this year, a whole five years ahead of schedule. That’s why I’m harping on the trustees’ report. We may not have as much time to deal with the problem as he thinks.
It is a nice thing that we have a long term problem? Is that like saying, Alzheimers is a nice disease? Drum has shown once again why he is such a blundering boob.
That’s like, so 2007. There are good reasons to believe that Social Security outlays have exceeded its revenues this year, a whole five years ahead of schedule.
While I agree with the post, your update (not to mention Steve V.’s response) is just pissy. As Drum himself says immediately afterwards:
In other words, he agrees with you: it’s a relatively trivial problem, but our politics are not up to handling even that.
Being in actuarial imbalance to the tune of $5 to $10 billion is not trivial when you also take into consideration Medicare. That is why Drum, and now you, are blundering boobs. Most people like to say the following,
“We can deal with Social Security. It is Medicare that is the “real” problem.”
Thing is they never offer any solutions for solving Social Security let alone Medicare. Oh sure, they’ll say things like
–Raise the income level that is taxed.
–Raise the qualifying age.
–Means test the benefits.
Problem is these are all DOA. So they’ll say something that means precisely nothing and then remain utterly silent on Medicare.
What is really needed to fix the problem, when you get right down to it, is a President who is willing to
1. Lie about what he intends to do about Medicare and Social Security.
2. Put in the meaningful reforms.
3. Get beaten when up for re-election.
The first one is not hard, politicians lie all the time. Steps 2 and 3 on the other hand will almost surely never happen meaning that the problem wont get fixed. But Drum will sound erudite and kind by spouting off the above suggested fixes.
See Maxwell, Drum writes the following,
Sure, which is precisely why it has been done. Oh wait….nevermind.
Right, 2% of GDP, right now that is looking like most of our anual GDP growth rate for the next few years.
Yeah, trivial.
Whoops, that is $5 to $10 trillion, not billion.
Reminds me of an Yglesias post today:
So I guess the CBO projections are so solid that doing nothing will fix our long-term problems. What wonderful news!
The TL;DR version of Yglesias is raise taxes….substantially.
Here is an older Op-Ed by Laurence Kotlikoff,
http://www.kotlikoff.net/content/how-fix-us-healthcare
One of the underlying problem isn’t Social Security or Medicare, but health care costs. Drum noted at the end of his post that even though Social Security has an easy solution we haven’t done it yet (which I’d say indicates his “easy fix” is not so easy), which doesn’t bode well for global climate change and rising health care costs. Gee, is that finally a wee bit of reality starting to get through to him?
I hate to comment again, but this requires a response.
Thing is they never offer any solutions for solving Social Security let alone Medicare. Oh sure, they’ll say things like
–Raise the income level that is taxed.
–Raise the qualifying age.
–Means test the benefits.
Problem is these are all DOA. So they’ll say something that means precisely nothing and then remain utterly silent on Medicare.
The first issue is hardly dead on arrival for Social Security. For one thing, the maximum level that gets taxed is indexed to inflation, so it increases anyway. A slight change to the indexing scheme would not be hard to implement to increase the levels beyond inflation.
The second issue is also far from dead on arrival. In fact the qualifying age has been raised in the past. If it worked in 1983 with a populace that expected to get SSI, it should certainly be easy to pass with the Gen Xers and Gen Yers who don’t expect to ever see a penny of SSI ever.
There would certainly be a lot of political blather about these changes, but it is easy to imagine that in the near future both parties will have painted themselves into political corners, making a compromise inevitable.
The third point may be untouchable, and perhaps it should be. What does one test, income, assets, or both? If both income and assets were included, for example, my mother could lose a chunk of her SSI. If that lost chunk were large enough it wouldn’t take long before she had to sell her house. And then she’s on the path to being destitute. HOW one does means testing, and how much benefits can be reduced, are the main issues, and I find it impossible to imagine that the idiots and evil bastards running Washington DC would manage to do it in a fair and equitable manner.
As for addressing Medicare – I will do so just to spite you. The truth of the matter is that Medicare cannot be fixed. Forcing doctors and hospitals to take less money will insure shortages of coverage. No one will accept that. And failing to reduce costs will simply bankrupt the country. Obama and Co. are attempting another path, which is to destroy the whole goddamned US medical system. They’ll probably succeed. After all, if EVERYONE is getting crappy rationed medical care, then those old people can’t complain when we don’t give them anything.
Medicare won’t be fixed. It WILL go bankrupt, and soon. What happens after that wreck? Who knows? Personally I suspect that the effort to keep it afloat will end up destroying a large chunk of the American economy and will definitely destroy the last vestiges of the republic, slight as those vestiges are.
…
Mr. Schuler, how do you propose to means test Medicare? Most people don’t have retirement medical benefits, and those that do have such benefits are usually predicated on Medicare absorbing 80% of the costs. Removing that subsidy would bankrupt the private plans right quick.
Even those with good incomes would have trouble affording decent medical insurance. What is the fair actuarial cost for medical insurance covering an 82 year-old with a history of bladder cancer, osteoperosis, and many other issues? That’s really damned steep. You’re either going to exclude almost no one, thus gaining almost no benefit, or you will be exluding people solely with the intent of making them paupers. And that will not fly, politically.
(There are aspects of Medicare currently which do this as well. No one likes to talk about THAT topic much either, and most have no idea such things can even occur until it happens to a family member.)
Even someone with a lot of assets could be bankrupted rather quickly given any ONE medical crisis without insurance. And one such crisis will likely cause one to lose insurance coverage for good. And the kind of cascading issues that happen with the elderly? Forget it
Worst of all, most people near or past retirement age have planned on Medicare picking up the tab. Changing the game on those folks will be impossible, unless it is done by trickery. (See above regarding the point of universal healthcare.)
Income, not assets. You may be right. It might not include a large number of people.
I think I’ve been pretty consistent on this site: I think we need both supply and demand side reforms in our healthcare system. Will reducing compensation reduce the supply? Maybe. Maybe not. Since the supply is already constricted it might have no effect whatever.
Dear Mr. Verdon,
It appears from your comment above that you are unfamiliar with my good friend, the word Relatively. So allow me to make a quick introduction.
While Relatively is new to you, I’m sure you’re familiar with his root, Relative. When we talk about words, a “root” is kind of like a parent – a Dad, if you will. And as it happens, when used as a noun the word “relative” can actually mean someone close to you – just like a Dad, or even a cousin! How cool is that?
But like most Dads, Relative also has job he goes to during the day, and while at work he actually does some things other than be a family member. For instance, one of Relative’s tasks at work is to introduce parts of a sentence that qualify other parts of that sentence by indicating a relationship.
So instead of saying “The Earth is kind of small” – a statement that can be true or false depending on one’s perspective – you can say “Relative to the Sun, the Earth is kind of small,” which is objectively true.
In other words, Relative introduces Relationships – who happens to be another member of that happy family. Isn’t that neat?
Now Relatively, well he’s a real chip off the old block. Just like his Dad, his job is to introduce Relationships within a statement. But unlike Relative, Relatively is an adverb, which means he can modify lots of words his old man can’t. This makes Relatively very useful to writers, especially those who want to save time by using less words.
What I mean is that, when you use Relative for comparisons, you always have to specify the other party in the relationship – “relative to” this or that. In the example above, this party is the Sun. But with Relatively, you can often skip that annoying “to” and let your reader figure it out the other party in the relationship for themselves.
Now I can imagine you saying “how would they ever do that?†And you’re right, it can be kind of tricky sometimes. But writers have a way of including context clues that can help you figure out the relationship that Relatively is referring to. For instance, in Mr. Schuler’s post he writes:
“The relatively trivial problems of Social Security shouldn’t even be mentioned in the same breath as the problems of Medicare.”
Now it may not be immediately apparent how Relatively is limiting the “trivial†problem of Social Security in this sentence. But if you read it very carefully and think about it, I’m sure you can figure it out!
The first step to fixing Medicare is to tell the truth. Medicare is a system that is scarily unsustainable. We need to radically make our medical care more affordable (which is possible by reducing overhead) and the key to that is to stop lying to people.
The second step to fixing Medicare is for patients, not doctors, to file the paperwork. Patient pays the doctor, then patient gets their money back from Medicare. The wave of anger and pain aimed at Congress by high voting rate seniors will ensure quick reforms.
The third step to fixing Medicare is to privilege cheaper treatments over more expensive ones. In the third world we send mothers on their way with rehydration salt packets if their children are dehydrated. The treatment costs under $5. In the US we put them in the hospital and give them IV fluids at a cost of thousands of dollars. The survival rates are not notably different but we prefer the most expensive treatment. This is folly.
TL;DR Maxwell James: I got nuthin’.
Nice wall of text though.
See that is all cut to ribbons by the repeated claims that fixing Social Security is “easy” and would be “imperceptible”, but that the problem continues to exist. The view of Drum, you, et. al. is complete nonsense. Why? Well if the fix is indeed imperceptible, but the perception is that it is a serious problem, why shouldn’t a politician fix it and be The Great Hero?
Either that or just admit your initial take on Drum was a bit too fawning.
Icepick,
Only in nominal terms, in real terms no. Appealing to nominal increases happening as to how easy it will be to make real increases isn’t particularly persuasive.
Then why isn’t it done? If it is this easy, then why not propose it and be “The Great Savior of Social Security”?
I agree, but I don’t think we’ll really fix Social Security either. There seems to be almost no will to impose economic pain on the voters, and no will for the voters to accept economic pain, even something that might be a few years out.
Drum is the worst, IMO. People will say, we have a problem with Social Security that needs to be fixed, he’ll say, “No there isn’t.” Later on he’ll admit there is problem but the fixes are easy peasy. Now, the story is, “Oh, yeah that we haven’t done them is a bit disconcerting…but there’s a pony in there somewhere!” The guy is a hack.
Agreed again. Like I said, we need a President willing to fall on his sword for the good of the nation, but we keep on electing venal cowards. They truly are a contemptible lot. The pedastal we’ve put them on makes the voters even worse.
I’d also add, that improving the fiscal outlook for Social Security might help put off the day of reckoning for Medicare for a bit as well. But again, no politician seems to want to do it. My suggestion is that since no politician is willing to do it suggests it is not nearly as easy as many seem to think.
I’ve got the mother of all colds, I’m feeling pretty ornery and I probably need a good stiff bourbon after reading this thread…..
So a key theme here is that SS is “easily fixable,” and said fix would include tax increases and means testing. Sweet analysis there. I’ve never seen a financially untenable program that couldn’t be “fixed” by more funding. That’s sort of the way arithmetic works. But the program has never been “fixed” through increased tax increases, the problem has just been kicked down the road as part of political expediency. And then we had this gem: “In other words, he agrees with you: it’s a relatively trivial problem, but our politics are not up to handling even that.”
Uh, er, SS policy is the mother of all political processes, so acknowledging that but then calling it a trivial problem is, well, bizarre. That’s the whole point. We put a pension system in the hands of government, its subject to politics, and its AFU – the shining light program of left thinkers. Who’d a thunk it?
I have a more fundamental issue than just actuarial calculations or political process. The system has been set up for years on a notion that you pay taxes, records are kept, calculations made, and then at the end of the day you get some benefit. (I get a statement every year.) That’s how its been sold to the public, and how the voting considerations have been communicated to the public.
And now, when the inevitable and many times predicted problems arrive to even suggest the biggest fraud imaginable, a total bait and switch, means testing, is a morally acceptable avenue?! Are you kidding me? Business executives, Bernie Madoff, are in jail for similar transgressions.
Can you imagine if you signed a contract to purchase a house. You made financing arrangements; you sold your old house; perhaps you’ve even bought furniture for the new one. In other words, you made material financial arrangements based upon your faith in the bargain you had made. But then, at closing, people you have never seen come into the room. “We’ve been looking at your income, and we’ve decided you really should pay $100K more for the house. Actually, its more complicated, we’ve decided you don’t need this house, but here’s a smaller one. And you have no choice. Sorry.” As the lawyers say, people are owed the “benefit of their bargain.”
Such a scenario seems absurd. And in fact, in a private setting it is absurd. The lawyers would have a field day. But somehow, when viwed through the lens of politics and government, left and right, such morally outrageous notions gain traction. Crazy, man. Crazy.
BTW – TMLutas for President.
Then why isn’t it done? If it is this easy, then why not propose it and be “The Great Savior of Social Security�
There are some political costs to these fixes. And the situation is NOT critical for Social Security. As in 1983, those in charge will wait until there is enough of a crisis so that all political actors will have cover. THAT’S why it doesn’t get fixed: It isn’t really in deep shit yet.
Like I said, we need a President willing to fall on his sword for the good of the nation….
That will do no good. The President isn’t in charge of this, Congress is. And as presently constituted, there is no hope for a Congress that would tackle Medicare in a meaningful way. That’s because the voters don’t want Congress to impose a true fix. The pols are venal cowards because that’s what the people want. If you don’t believe that, look at the primaries this election cycle – how many incumbents are being ousted by their own party? Almost none. So much for voter anger. (Dave Schuler has made this point repeatedly.)
I’ll try again. The SS fix IS easy – it just isn’t palatable. This isn’t the giant shit sandwich that was TARP, of which everyone had to take a bite. This is a bowl-full of peanut-sized pieces of shit and everyone needs to eat one. Much easier than the bite, chew and swallow of the first, but no one wants to do it any sooner than necessary. After all, one might get un-elected before the moment of reckoning arrives.
Additionally, there is growing public awareness that Medicare also needs fixing, and the issues have become coupled. Behind them both is the annual budget deficit that gets funded (in part) by the surpluses that Medicare and SS have run up until the recent past. The three issues are all reaching critical levels at roughly the same time. One IS easily fixed, but the other two are FUBAR.
I’ve never seen a financially untenable program that couldn’t be “fixed†by more funding.
So let me see if I understand. You don’t think raising taxes will work, or that reducing benefit levels (either by means testing or raising the retirement age) will either. You don’t think they are politically palatable. And you think the program is completely untenable. So why are you upset with those that believe a fix is possible? Clearly you think the whole thing is designed to fail, and the only thing left to do is stock up on canned goods and ammunition. Why are you wasting time here instead of stocking your log cabin in the back country?
“I’ll try again. The SS fix IS easy – it just isn’t palatable.”
Let me rephrase that for you: “I’ll try again. The SS fix IS easy – it just isn’t ‘politically’ palatable.” And since it IS a political program and process, and not ‘politically’ palatable, the notion that the fix IS easy is rendered inoperative. Capiche?
“So let me see if I understand. You don’t think raising taxes will work, or that reducing benefit levels (either by means testing or raising the retirement age) will either. You don’t think they are politically palatable. And you think the program is completely untenable. So why are you upset with those that believe a fix is possible? Clearly you think the whole thing is designed to fail, and the only thing left to do is stock up on canned goods and ammunition. Why are you wasting time here instead of stocking your log cabin in the back country?”
Let me help you, you poor dear.
“You don’t think raising taxes will work,”
In fact, it hasn’t, its an empirical fact. Here we are, needing yet another tax increase to “fix” SS. In my businesses managers who come to me year after year with requests for additional funding because of cost overruns in ill conceived and poorly managed programs are fired, because in a private setting we can’t raise revenues willy, nilly. In government, people can get away with such incompetency – its called tax increases. But the program has never, and isn’t, nor will it be, “fixed” by a tax increase. This is a convenient fiction.
“or that reducing benefit levels (either by means testing or raising the retirement age) will either.”
Ah, ah, ah! Careful. No intellectual dishonesty, please. To promise a benefit and take it away decades later (in the heat of populist political battle no less) is just despicable. And those who advocate it are despicable. But raising the retirement age? That’s a different matter totally. Back to “the benefit of your bargain.”
Retirees, based upon the wonder of increasing longevity, shouldn’t expect that an increasing mismatch between their lifetime contributions and their lifetime benefits should be financed by others, especially since that mismatch is probably also financed by others (health care). I would have been indexing the retirement age decades ago. But now we are back to the political will argument, and the day 1 fault of making pensions a government/political activity. Doomed to poor policy making. Right out of the gate.
“So why are you upset with those that believe a fix is possible?”
Read the paragraphs above.
“Clearly you think the whole thing is designed to fail, and the only thing left to do is stock up on canned goods and ammunition. Why are you wasting time here instead of stocking your log cabin in the back country?””
This is just inane gibberish.
Carry on.
“Why are you wasting time here instead of stocking your log cabin in the back country?—
Should you pursue this option, the 911 should go in favor of a Cayenne.
“As for addressing Medicare – I will do so just to spite you. The truth of the matter is that Medicare cannot be fixed. Forcing doctors and hospitals to take less money will insure shortages of coverage.
I agree, but I don’t think we’ll really fix Social Security either. There seems to be almost no will to impose economic pain on the voters, and no will for the voters to accept economic pain, even something that might be a few years out.”
I think you are both wrong here. Tell me how you reduce Medicare costs w/o eventually reducing doc and/or hospital payments? Why am I more or less likely to work because my fees have been reduced by the government or the free market? I am concerned about what I take home, not how I got there.
Nearly every other sector in the US has sen stagnation or a drop in wages. Why should medicine be different?
Steve
“Should you pursue this option, the 911 should go in favor of a Cayenne.”
;-> Thank god somebody gets it.
What Drew said. The “theory”, the Sunday morning talk show BS fix is “easy”, but politically it isn’t, thus all the talk and theorizing is just so much flatulence.
Again, what Drew said. The last “fix” was merely kicking the can down the road. As you put it True Fixes simply wont happen, with Social Security or Medicare.
In fact, here is an idea, if they get to the point where it is a serious crisis and they “fix” it, my guess is they’ll take all that “savings” and spend it, putting us right back in the fix. Its what we did with health care reform.
I guess it depends on how you means test it. If you do it such that people who are retired or nearly to retirement don’t get means tested then not so bad. If everyone else has reasonable time to adjust their retirement savings….in theory I could see it. My guess though is that this “theorizing” wont do much good. Social Security isn’t in trouble because my son is going to retire in 53+ years, but because millions of baby boomers have been retiring and will keep doing so putting tremendous pressure on Social Security now. These people wont have time to adjust their retirement savings strategy in a meaningful way and you are in a sense asking one of the largest voting demographics out there to take a hair cut on how they are going to spend the rest of their lives.
That is just it, that is the only way to do it, in the end. All the proposals regarding Medicare are just snake oil, IMO. Oh well pay on quality vs. quantity. Got bad news for you, for the large scale measuring quality is alot harder than quantity and Medicare and the government are very large scale. How do you tell if something is good quality vs. bad and should be in the quantity colum unless you review each and every claim? Remember that low administrative cost everyone blubbers on about regarding Medicare well kiss that one good bye if you go this route, and uh-oh…what about your savings then? Will monitoring costs cancel it out?
Interesting, has it been growing or is it like most other cases where the real wage has declined, but total compensation has gone up?
Why am I more or less likely to work because my fees have been reduced by the government or the free market?
Will you continue to work if you have to pay for the privilege? Costs aren’t JUST rising because the doctors like to charge more. Alternately we could solve the whole problem by charging doctors minimum wage.
Drew, you are completely incoherent. You don’t think we can OR SHOULD raise taxes. You don’t think we can OR SHOULD increase eligibility ages. You don’t think we can OR SHOULD reduce benefits. But you aren’t offering any other solutions, you just bitch and moan that no one else is offering solutions.
On a side note, please don’t call me dishonest because I disagree with you. I may be inane, but you have no cause to call me dishonest. You, on the other hand, are an asshole for assuming that those who disagree with you on any issue is a liar. Even Reynolds isn’t that bad.
Nearly every other sector in the US has sen stagnation or a drop in wages. Why should medicine be different?
Have you had anyone in your family that has dealt with serious health issues in recent decades? Recently I have had several family members and several friends who have become stuck in our medical system. Many of them have had treatments that didn’t exist 20 years ago, in several cases using technology that either didn’t exist 20 years ago or was not widespread then.
I am NOT talking about men looking for a pill to restore their potency. I am tlaking about people with cancers, or cardiovascular issues, or life-threatening diseases. All of the new tech and new science cost money. Doctors, hosptials and the other legal entities working in medicine are not going to work for free, nor are they going to pay for the privilege of treating patients. Or has everyone here forgotton how poorly controls worked in the 1070s?
Price controls aren’t a fix, they’re just another way to crash the system.
Or has everyone here forgotton how poorly controls worked in the 1970s?
Steve V.- Stats on doc incomes are surprisingly difficult to ferret out. They vary a lot. The link below is a bookmark I keep with a chart for the ten years 1998-2008 and seems fairly accurate when I looked back at the BLS numbers. Wages are staying about even with inflation. The most expensive part about a physician is what they order or do.
Icepick- I am a physician at a trauma center. I do mostly high risk cases. On the consumer side, we have had several family members die recently, including one who was unable to obtain insurance because of his pre-existing conditions after he lost his job. So, I am aware of all of this. The point remains, if costs continue to accelerate at their current rate, the system breaks. One way or another, costs need to go down. I would love to think that can happen without some reduction in physician salaries or hospital payments, but I see no way to make that happen.
” Got bad news for you, for the large scale measuring quality is alot harder than quantity and Medicare and the government are very large scale.”
Fair point. I think if we try to micromeasure it fails abysmally. I would think we would go to somewhat reduced payments with incentives for meeting goals.
Steve
The solution for SS is simple, and will not happen short of collapse of the system. The solution is simple, because the problem statement is simple: Ponzi schemes always, eventually, run out of new investors. If your benefits are paid to previous investors based on new investment, you are running a Ponzi scheme. Social Security pays retirees based on current workers, not on the value they produced when they were workers (the money is spent, not saved), and thus it must eventually collapse. Until that systemic quality is changed, until SS is more like a 401K or an IRA in other words, nothing else we do is more than postponing the inevitable.
It should be noted that fixes that are simple in concept are often the hardest to implement, politically, because they do not provide enough shelter for the politicians who would have to implement them, and would thus have to face the personally-directed wrath of those disadvantaged by the change. This is why, by the way, political programs tend to be large, “universal” solutions rather than small, incremental fixes: more opportunity for graft and cowardice. Um, helping constituents and showing leadership. Whatever.
Medicare is much, much worse than SS, because it is not only a Ponzi scheme, it is one where people’s lives are literally on the line. This makes any political approach to solving it that much worse.
In a political sense, I don’t see how we get out of this short of systemic collapse, and that frankly frightens me.
Of course, you have the option of increasing fertility rates dramatically, say to an average somewhat above 4.0, at which point you just have to tide us over until those people enter the work force. Then your problems change somewhat dramatically.
As for controlling medical costs, a while back Maxwell linked at Ambiance to an excellent New Yorker article by Atul Gawande about local cultures of medicine, and whether they are competitive and profit-centered or collaborative and patient-centered. The models exist for controlling costs. Mayo is one such model.
And here’s Gawande’s follow-up about the feedback he received on the article — “The depth of response the piece received has been orders of magnitude greater than I anticipated.”