Tag Archives: privatization

Broad Strokes and Narrow Visions

The ubiquitous “47% discourse” is generating commentary ranging from a focus on short term political tactics to broad exegetic discussions about political theory.   One line of analysis concerns the utility of a distorted perspective defining what constitutes “redistribution” of wealth and for what legitimate purposes that might be done.

How is it possible for any sentient being to hold up a sign in 2010 saying “Keep the Government Out of My Medicare,” or for a presidential candidate to offer this message:  “Mitt Romney has a different idea. He knows that we need to foster growth and create wealth, not redistribute wealth, if our economy is to grow the way it has in the past.” [USAToday]  The paucity of thought is obvious in the first example, not so evident in the second.

Message to the supposedly business oriented Republican Party:  All economic transactions are a transference and redistribution of wealth.

One of the more interesting aspects of the ideological arguments between Republicans and Democrats is the variation in the meaning of the terms of the debate.  For example, the manipulation of the term “Entitlement” has reverts the meaning to a definition held in the late 19th century — i.e. any government activity designed to sustain individuals in poverty, or likely to become poor.  A brief historical review —

The Social Security Example

The argument took flight when the Roosevelt Administration proposed the enactment of legislation to create Social Security in the 1930’s.  The right wing Liberty League, small businesses in the American south, and the National Association of Manufacturers were vehemently opposed to the implementation of the program.  [DB]

“James A. Emery, chief counsel for NAM, articulated the views of the opposition business well when in 1935 he declared: “General recovery depends on our ability to enlarge our production, to employ more people, and to cut down and not raise up the price of goods. Every time we increase the price of goods in a diminishing market, we are diminishing the possibility of employing other men, because we are making it more difficult, not less, to sell goods. Until we can market goods, we cannot employ men.” [Ezine]

The Liberty League, NAM, and their allies argued that transferring government resources to, and the creation of payroll taxes for, the sustenance of Social Security would be such a burden on American business as to forestall any economic recovery.   Conservatives of the time also argued that Social Security reduces individual ownership by redistributing wealth from working people to retired persons, thereby bypassing the “free market.”   The “free market” in this instance is, of course, banks and brokerages which offer retirement savings programs.

Failing to demonstrate that Social Security didn’t work to keep elderly U.S. citizens from abject poverty, the opponents shifted in the 1980’s back to the free market line of attack.  The political verbiage included messages like “Social Security is Going Bankrupt,” and “You’ll Get A Better Return on Private Savings Accounts.”  Both are demonstrably false, not that the Right Wing is particularly interested in the facts of the matter.   This, combined with the “Creeping Socialism” line, is a classic reversion to the rhetoric of the Depression Era, with bit of xenophobia tossed in for good measure:  “Warning us against the dangers of Social Security in 1935, GOP Sen. Daniel Hastings stated, “I fear it may end the progress of a great country and bring its people to the level of the average European.” [CCT]

Packing the transference of wealth argument into the same suitcase as their “creeping Socialism” attack, the Republicans added another element by seeking to reclassify Social Security as an “entitlement” program — changing the definition from meaning that one was entitled to benefits because the person had paid payroll taxes to support the Trust Funds during their working lives to one which conflated it with welfare — a classic conflation dating back to the Liberty League and NAM opposition of the 1930’s.

The bottom line is still the bottom line.  The opponents of Social Security in the 21st century are the ideological descendents of the opponents of Social Security of the 1930’s — both seek to establish a system in which the banks and financial institutions are the means by which wealth is distributed — to their profit; and not one in which a non-profit agency (in this case government) is responsible for the distribution.

Out of Thin Air

Second message to supposedly business oriented Republicans is wealth cannot be created if it is not distributed.  The question is not IF wealth will be distributed but where.  The only thing that generally happens over the long haul to wealth that is not distributed in some way is shrinkage.  Inflation happens.

Those seeking to foster growth and create wealth have no choice but to redistribute it.   Where?  Consider the following illustration of the income level of tax return filers in 2009.

We know that in 2009, the most recent for which complete data is available from the Internal Revenue Service, some 8,461,137 filers reported adjusted gross income of less than $50,000.  6,738,675 households filing income tax returns reported adjusted gross income between $50,000 and $200,000.  That leaves approximately 338,103 homes in which the adjusted gross income over $200,000 annually. [IRS]

How does it make any economic sense whatsoever to argue that promoting (distributing) more accumulation of wealth within a small minority of the total number of households will cause economic growth?

In 2011 there were 2,966,133 automobiles manufactured in the United States of America.  [WrldMtr]  Those reporting income above $200,000 per year would have had to purchase about 9 cars apiece in one year to clear the sales lots.   What makes more sense in terms of economic growth — having the top 2% accumulate more wealth, or pursuing policies which leave more discretionary income in the hands of those reporting less than $200,000 annual income?

All the lamentations of the arch conservatives clutching the economic elitism of a bygone era notwithstanding, in the simplest possible terms — the U.S. economy will not see significant growth if we “Double Down on Trickle Down.”

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Filed under 2012 election, Economy, Politics, Romney, Social Security

Suppressed Laughter: Muddling the Medicare Issue

There are those who find the Democratic charge that the Republicans would end Medicare as we now know it risible, but there are some very practical reasons for stifling the guffaw.

Let’s start with the proposition that the current Medicare program is a very popular single-payer system for providing health insurance coverage to individuals in the United States who are over 65 years of age.   Let’s also accept that a single payer system like Medicare has helped reduce the financial strain on our elderly.  [CMS pdf]

Additionally we can find historical data indicating that those elderly citizens who have annual incomes of $40,000 or less spend a higher percentage of their income on health care than those more affluent: [CMS pdf]

We also know that the elderly have moved from a demographic group less likely to have health insurance coverage to the one in 2000 most likely to be covered:

“Prior to Medicare’s enactment, about half of America s seniors did not have hospital insurance. By contrast, 75 percent of adults under 65 had such coverage, primarily through their employer. For the uninsured, needing hospital services could mean going without health care or turning to family, friends and charity to cover medical bills. More than one in four elderly were estimated to have gone without medical care due to cost concerns (Harris, 1966). Today, Medicare covers nearly all of the elderly (approximately 97 percent), making them the population group most likely to have health insurance coverage.”  [CMS pdf]

At this point it ought to be reasonable clear that if (1) we want elderly Americans to have affordable health care insurance, and (2)  especially want those at the lower end of the income scale to secure affordable health care insurance, then by those standards the current program is successful.

If It Ain’t Broke Why Fix It?

Across the philosophical divide:   One important facet of current conservative thinking holds that any government program which offers services to individuals  in the form of a social safety net “creates dependency.”   The proponents of this argument rely on philosophic arguments almost as arcane as the extensions of Anselm of Canterbury’s Scholasticism before Abelard arrived to rescue the scholars.

Theoreticians are invited to weigh in on discussions bounded by such definitional perimeters as the following from the libertarian Cato Institute:

“The central idea behind the theory is that government officeholders, as individuals, have strong incentives to alter important political transaction costs facing the public and facing others in government in order to secure more of what they want with less resistance. As economists use the term, transaction costs are costs to individuals of negotiating and enforcing market exchange agreements, including information costs, negotiation costs, enforcement costs, and the like.”

One is pretty much left to imagine what “and the like” might mean.  However, the message is clear – government office holders have an incentive to promote their programs and to minimize the resistance to those projects.  This assumes that people are naturally resistant to efforts by their own government to assist them, and that all government services must be resisted.  In other words, in order for this argument to work in general terms we’d have to assume that everyone is naturally a radical libertarian.

We’d also have to assume that the populace doesn’t want the government to “alter important transaction costs” on its behalf.   This is a hard point to sustain given that most citizens don’t appear to be enthusiastic supporters of personally negotiating defense contracts — which if we were to extrapolate the localism of the initial argument to its illogical extreme would be required to reduce “Constitutional level political transaction costs.”

Culturing Dependency:   The current arguments from the radical Right, framed philosophically as described above, march to the next milepost — that citizens are naturally “free” (individualistic) and any government programs which provide services to the elderly (or indeed anyone else) create a dependency on government action at the expense of individual “freedom.”

All we have to do to subscribe to this position is to completely ignore the preface to Robert’s Rules of Order:   “Where there is no law, but every man does what is right in his own eyes, there is the least of real Liberty.” (Henry M. Robert)

There are also some uncomfortable questions raised by this proposition.  Does hiring a local police force create a dependency on my part for the protection of my life and property?  Does having a local fire department make me dependent on government for fire suppression, rescue, and EMT services?  Does having a Department of State make me dependent upon government for the implementation of foreign policy?   Does having a Department of Commerce make me dependent upon government for statistical reports on my economic environment?

Splitting Differences:  If the answers to the questions above are equivocal, then it’s probably because there are some definitions of “legitimate” and “illegitimate” government services involved.  If a person defines government as only responsible (legitimate) for national defense and foreign policy, then only government programs in those realms are legitimate.  If, however, we see government as formulated for We The People, life gets a bit more complicated:

 “…of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

Now we add “establish Justice, insure domestic Tranquility, … promote the general Welfare…” to the list of legitimate concerns of our government.  It’s time to come back around to the main argument.  If Medicare is a popular single payer system for promoting the availability of health insurance coverage to elderly individuals, and if it is successful in that regard, then why argue that it’s illegitimate?

The Magic Market:  The “market” in whatever form it may take is supposed to be the ultimate form of human transaction — the most efficient, the most efficacious, the most Free.  Except when it isn’t.   We’ve had an unpleasant taste of what happens in unregulated, or poorly regulated, financial markets.  Unfortunately, the after-taste is still lingering.  We are now told by the radical Right that an unregulated health insurance market will meet the needs of elderly Americans for their health insurance coverage.  Probably not.

The first point to acknowledge is that the Romney/Ryan plan for Medicare essentially changes the Medicare program from a single payer system to a voucher plan which “incentivizes health insurance corporations to provide coverage for elderly people.”    This is not “Medicare as we know it,” it is Medicare as the Insurance Corporations would like to have it.

The insurance corporation argument is underpinned by the notion that medical care is a commodity which can be purchased by a consumer from a provider, and this is true up to a point, but it’s a point that is very quickly reached.   The problem, as Professor Krugman points out, is that medical care isn’t bought and sold like a loaf of bread.   A person making up a list of groceries may include bread, but if the price of a loaf is too high then it’s logical to skip the purchase or substitute another commodity.  The market works.  However, if a quintuple  by-pass is needed then price is not the determinant of the “purchase.”  The result of “gee, I don’t think I can afford that right now” is poor health or even death.  The Magic Market doesn’t work in this instance.

The second problem with the Magic Market solution is that no one is shopping in the ambulance.   The victim of a motor vehicle accident or a heart attack, even if fully conscious, isn’t saying “Get me to the cheapest Emergency Room,” he’s saying, “Get me to the nearest Emergency Room.”

The third problem with the Magic Market solution is that the health insurance corporations themselves aren’t subject to it.  Under the terms of the McCarran-Ferguson Act of 1945 health insurance corporations are exempt from anti-trust laws.  This is both good and bad news; the bad news is  they may collude to limit access to their products or divvy up regions as sales territories.   The good news is that they are able to share information which might serve in some cases to reduce premium costs.  [KaiserNews]  Either way, the policy purchaser is dealing with a provider which is not subject to the same “free market” forces as the consumer.

The fourth problem inherent in the current privatization of the Medicare program is that it hasn’t worked.  Medicare Advantage was supposed to be the insurance industry version of the original Medicare program, and IF the free market worked the way the ideologues on the Right predicted, then we’d expect massive consumer shifts to the privatized version.  Hasn’t happened.  Altogether too many Medicare Advantage policy holders are there because their employers, many in the public sector, have been pressured into adopting Medicare Advantage plans.  [HealthBeat]*   If the Free Market worked as predicted, then the pressure would not be necessary.

Finally, the “free market” Medicare Advantage plans can hardly be called “private” when the companies offering them are getting an $8.9 billion subsidy from the Medicare program.  [TP]  Further, if the private market-driven plans can produce lower health care costs, then why haven’t they? [Incidental Economist]

Stop Laughing

If the current Republican calls to eventually replace the original Medicare program with a “market-driven” plan are (1) philosophically dubious, (2) politically questionable, (3) grounded in doubtful Constitutional theory, (4)  and premised upon illogical and indemonstrable market behavior; then why would challenging the practicality of such a plan be laughable?

Arguing that Medicare will still be existent even if privatized into a program run by insurance corporations is roughly analogous to contending that an orange is still an orange after it has been reduced to juice and pulp.   The result may be many things — but it’s not an orange.   Nor, would our original Medicare program be the same Medicare which now serves half of our elderly citizens who live on $21,000 per year or less.  [AARP]  Still suppressing that guffaw?

References: “Medicare – A Profile, 35 years of Medicare,” HCFA, July 2000. (pdf)  Charlotte Twight, “Medicare’s Origin,” Cato Journal, Volume 16, No. 3.   Kenneth J. Arrow, “Uncertainty and the Welfare Economics of Medical Care, American Economic Review, December 1963 (pdf).  Paul Krugman, “Why Markets can’t cure healthcare,” New York Times, July 25, 2009.  *Desert Beacon, “Medicare Disadvantage,” August 22, 2012.  AARP Fact Sheet: Who Relies on Medicare – Profile of the Medicare Population (pdf).

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Filed under Health Care, health insurance, Medicare, Politics, Republicans