Mandatory Spending & Entitlement Reform in the United States

The American people have decided that we must address the budget deficit (and in long-term address national debt). The "third rail" of American politics is now open game.

Social Security is still sustainable for a few decades, and not an immediate concern.

But because of the rising costs in healthcare and the retirement of the "Baby Boomer" generation, among other things, Medicare (healthcare for senior citizens) and Medicaid (healthcare for the poor) are expected to increase dramatically and overtake the rest of the federal budget, squeezing out most other federal programs. The status quo is not sustainable, and it looks likely that the promises of long-retired and long-dead politicians will not be able to be kept, at least not without drastic changes.

There are also other forms of mandatory spending, from funding for the highways and unemployment benefits to farm subsidies.

It is also worth noting that the Interest the federal government must pay on the national debt is set to substantially grow to catastrophic levels if current trends continue.



Congressman Paul Ryan released a FY 2012 Budget that would turn Medicare into a voucher program (except for those already 55 and older) and would turn Medicaid into block grants to the states.

President Obama is set to release his plan on Wednesday to make cuts to national defense, raise revenue, and... "create savings" in Medicare and Medicaid (in other words, cuts to those programs and/or payroll tax increases).

The Bipartisan Deficit Commission came up with many proposals in December 2010 to cut non-defense and defense spending, and overhaul the tax code, but only barely touched upon Social Security and Medicare/Medicaid.

The "Gang of Six", three Democrats and three Republicans (in the Senate, I believe), are also working on their own long-term debt plan that will be released soon.



Many Republicans are saying they will not raise the debt ceiling unless something "really, really big" (Speaker Boehner's words) is attached to it. An agreement on the debt ceiling must be made in 4-5 weeks (around the middle of May), or else the federal government will be forced to immediately either: cut everything or raise taxes dramatically so that there's no deficit, or default on the national debt and trigger a new worldwide Depression.




What should be done? What can realistically be changed to solve this problem?



The Budget Deficit:
[image=http://upload.wikimedia.org/wikipedia/commons/c/c8/2010_Receipts_%26_Expenditures_Estimates.PNG]

The Federal Budget in 2010 (detailed):
[image=http://upload.wikimedia.org/wikipedia/en/c/ce/Fy2010_spending_by_category.jpg]

The Federal Budget in 2010 (consolidated):
[image=http://upload.wikimedia.org/wikipedia/en/7/7a/U.S._Federal_Spending_-_FY_2007.png]

Projected Growth in Mandatory Spending vs. GDP:
[image=http://upload.wikimedia.org/wikipedia/en/1/13/Growth_Rates_GDP_vs._Entitlements.png]

Government Revenues in 2010:
[image=http://upload.wikimedia.org/wikipedia/en/f/f9/U.S._Federal_Receipts_-_FY_2007.png]

Funding for the rest of government (non-defense, discretionary spending) in 2010:
[image=http://upload.wikimedia.org/wikipedia/en/d/d8/Discretionary_Spending_by_Dpt_-_2010E.png]

 

Average life expectancy in the United States is 78 years and change.

I think step one is to raise the Social Security retirement age to 70, to take effect in ten years, with a bump to 75 years old ten years after that.

As for Medicare, I think a similar raising of the age to 70 across the same timespan, with it climbing to 75 another ten years down the road, would also be reasonable.

If this is done in conjunction with the Ryan roadmap, I think it could help stabilize the situation.

 

Agreed. If this were done in conjunction with repeal of the Bush tax cuts and an addition of tiered higher marginal tax rates for the richest 2, 1, .5%, .1%, .01% (etc.) of Americans along with a downsizing of our armed forces towrad the goal of a 50% reduction in everything but our submarine-based nuclear deterrent, we could rid ourselves of the national debt in half a generation.

The caveat I think is that the national obesity/diabetes/heart disease epidemic is less than a generation old and has not yet seen its full effect on our life expectancy. We're going to lose an entire generation of Americans capable of working productively into their late 60s. Eventually, rising food prices worldwide will cure the epidemic, but there is a short term life-expectancy/health care crisis looming.

 

The best way to get he rich to pay more - both in absolute dollars and as a percentage of the total taxes is to lower the rates and get economic growth. The debt will be more sustainable if the economy grows. My counteroffer is the Ryan plan - including tax reform that simplifies the tax code, and leads to significant reform of the mandatory spending. In conjunction with jumps in the retirement programs and resulting economic growth, the national debt could be cut. A similar economic plan - the Coolidge/Mellon plan, slashed the debt by a THIRD in the 1920s. So if Ryan's tax structure could be committed to for a couple of decades, we could accomplish the same elimination of the debt without gutting the military.

 

Hey, if people start dying sooner because of the health crisis, isn't that sort of a good thing? Will reduce the social security payments we have to deal with.

 

Yes, on the "upside" I think a lot of people will die before they can collect social security as a direct result of the obesity epidemic. On the downside, the end-of-life care costs for 2-3 generations of morbidly obese will be enormous.

Jedismuggler, we'll be a stronger, more competitive nation when less of our economy is tied up in defense. Two decades out, the U.S. has yet to pay itself the peace dividend for winning the cold war.

In the case of "gutting" the military, I would opt for a slow, decade-long phase out of our international military presence and a downsizing of our forces so that we can mitigate the negative effect on employment. The U.S. economy can't extricate itself from its own military-industrial complex overnight, but that should become a national strategic project. The U.S. needs to refocus the military for border defense and nuclear deterrence. That's all we need for a secure and financially stable future.

 

You're just trying to give him an aneurysm at this point.

This is murder.

 

I agree with this.

 

I just have one comment to make on the Medicare/Medicaid issue and that is that Medicare has decided that it will pay the $93,000 tab for a new treatment for anyone on Medicare who has terminal prostate cancer because private insurance pays for it.

Please note two things: 1) the treatment only gives the patient 2 more weeks of life; and, 2) my dad died of prostate cancer. He was in terrible pain the last two weeks of his life and spent them in the hospital. He was 87 years old. I don't think he would have opted for another two weeks of severe pain and I certainly would not have wanted him to suffer just for another two weeks of having him here with me.

I think the government really needs to look at the cost/benefit ratio of such horrifically expensive treatments. If it were a total cure for prostate cancer, I'd say go with it, but for two more weeks of life...I don't think so.

And let's not get sidetracked by complaining about paying for expensive treatments that are cures, 'cause I'm not against those, but I'm sure there are other treatments that are expensive that have lousy cure rates/outcomes that could save Medicare money.

 

As noted, you can't fix a $14 trillion debt without looking at defense, social security, and Medicaid and Medicare. And yes, raising taxes. (Or, more specifically, removing existing tax loopholes.)

Spending money on things the military doesn't want doesn't make sense. And there is no Soviet Union anymore; assymetric warfare is not the same as axial competition.

 

To everyone who's saying we must scale back on military expenses and raise more revenue, I agree, but simply cutting military programs and raising income taxes on the rich would do nothing to make Medicare, Medicaid, Social Security, and the other "mandatory" entitlement programs more sustainable.

I agree with raising the eligibility age for Medicare and Social Security to 70.

I think raising it to 75 would be asking for too much at once, but maybe we could come up with a formula so the eligibility age automatically adjusts in relation to life expectancy?

I don't agree with many elements of Ryan's roadmap, it's a bit too radical, but I agree it is the best starting point we have. Unless Obama and the Gang of Six can come up with something better.

I heard about that, and agree it's ridiculous. Government shouldn't be paying for something that will only barely extend a person's life by a few weeks, which would probably be a horrible quality of life anyways. I'm not sure how we get around this problem without sounding like Sarah Palin's "death panels" though.

 

If we're going to force people to have to support Medicare, then I think there is absolutely no justification for denying coverage that extends life. (Incidentally, if it's extension vs cure, then why do we extend the lives of people with AIDS, as that has no cure?) I think it's blatantly immoral to force someone to pay into a system and then, when they need it to pay out, say that we don't consider that procedure to be worth it. My personal health insurance specifies what it will and won't cover, but it was my choice to be paying that company with those restrictions. Medicare money is taken by law.
Beyond that, I think paying for such treatments may be good as it pushes the development of those treatments, which may well lead to better options.

 

On the other hand, look at some state programs like Oregon's (which may have been amended in the latter few years).

It "prioritizes" treatment and funds down the list until there's no more money.

Yes, that means many things are not paid. Yes, it would be tough to prioritize different illnesses/treatments/etc. But if you can't pay for everything, decide what you can and should.

 

Well, Oregon also developed a reputation for sending people letters saying "we won't pay for cancer treatment, but we'll help you find a doctor that aids with euthanasia"

 

And how, then, would those doing the deciding not be a death panel in terms of rejecting certain treatments?

 

You mean kind of like the insurance companies people who decide what they will and will not cover? We already have death panels.

 

The best path may be for health insurance companies to require everyone to write a living will, to state under which circumstances (if any) they'd like to be taken off life support or be refused medical treatment, and for that living will to be reviewed and perhaps revised periodically (say, every 5 years).

Some points at which people may decide "enough is enough" are: if they've gotten to a point where they would only have a few weeks/months left with no cure and they'd be very painful, or if their mind or memory would be gone, or if they'd be so drugged up on painkillers they're not themselves anymore, etc. Or they can just have in writing that they'd like to live no matter what, even if they become a human vegetable.

I've heard of many cases where the family has kept a parent/grandparent alive, and gone bankrupt, just because they can't let go of someone, even when that person had clearly said in life that they would never want to be kept alive beyond the point they were kept alive.





EDIT:


Obama is set to make his speech at George Washington University in a little over an hour, at 1:35 Eastern time.

I just hope it's specific enough and big enough to actually make a difference, and that he takes a strong and commanding stance on this.

It's still brave he's even directly dealing with this issue. As Chuck Todd puts it:

Outside of campaigns for high office, nothing in American politics brings more passion, argument, and risk than tackling entitlements and taxes. "Hands off my Social Security!" one side will say. "Don't even think about raising my taxes!" the other will reply. And if you talk about cutting military spending, watch out. Stepping into this fray, in fact, is the equivalent of walking into a biker bar and punching someone in the face, no matter how much that person deserved it. It's nothing but trouble. Yet just two months after President Obama -- who's up for re-election next year -- declined to address entitlements in his FY 2012 budget, he's stepping into this fray with a speech at George Washington University at 1:35 pm ET.

If it's nothing but trouble, then why is he doing it? Is it to blast Paul Ryan and Republicans who want to phase out Medicare (as many Democrats seem to want)? Is it to appeal to independents as a sensible reformer, even if nothing gets done (which his campaign strategists would like)? Or is it to truly lay out an actual plan that could pass and become law (which Erskine Bowles, Alan Simpson, and Andrew Sullivan are crossing their fingers for)? From our reporting and hunches, it?s more of the first two. Expect the president to use Ryan?s budget as a foil. Heading into next year?s election, if the two plans are Ryan?s and Obama?s, that?s a fight the White House thinks it can win. (Democratic operatives are probably licking their chops at the opportunity to go after the ?Ryan-Romney plan? or ?Ryan-Pawlenty plan? in states like Florida, Ohio and Iowa.) Moreover, Obama seems to be delivering this speech to placate arm-chair pundits and independents, who want to at least hear the president?s plans for tackling the debt.

Liberals reject any cuts to Medicare, Medicaid, or Social Security, even though entitlements like Medicare are long-term drivers of U.S. deficits. "President Obama: If you cut Medicare and Medicaid benefits ? don't ask for a penny of my money or an hour of my time in 2012,? the Progressive Change Campaign Committee said in a pledge it?s circulating to its members. So when you add it all up -- the lack of political will, a lack of public demand -- you see why this is usually more talk than action.

So how did we get from a budget surplus at the beginning of George W. Bush?s presidency to deficits and debt as far as the eye can see? Here?s a quick timeline: the Bush tax cuts (2001), 9/11 and the Afghanistan war (2001), the Iraq war (2003), more tax cuts, the unpaid-for Medicare prescription-drug benefit (2003), the financial collapse and economic downturn (2008), the Obama stimulus (2009), and the two-year extension of th

 

Fine then, they're death panels. But you know what? There's a good reason for having "death panels", because Valairy is right and there simply are treatments that cost a whole lot and aren't effective at all. I call that saving as many lives as possible. If you want to spin that in the most negative way possible and call them death panels, fine....but you're being a dishonest Fox News partisan.

 

Lowbacca,

Comparing the very expensive treatments for AIDS which extend a person's life for years and not just two weeks, reduces the person's viral load to virtually zero and improves the quality of life for that person is not the same as a very expensive treatment that's not a cure, only extends life for a couple of weeks and may or may not improve the quality of life for that person. This is like comparing apples and oranges. This is the scenario (treating a disease with a reasonable possibility of a cure) that I posited last in my post. I think spending $$ to keep a person with AIDS alive is money well spent as that person can continue to contribute to society. And AIDS may have a permanent cure eventually.

And I agree that people should have living wills/advance health care directives that specify under what conditions they wish to be kept alive so the doctors know what to do and when to do it.

 

How many more times do you want to rise it after that? Why not fix the way Social Security works. Why not give out more info to people about 401ks and IRAs? Why just rise the retirement age? I mean really ever ten years we might was well just rise the retirement age.

 

I'm reminded of Office Space.

Bob Slydell: Milton Waddams.
Dom Portwood: Who's he?
Bob Porter: You know, squirrely looking guy, mumbles a lot.
Dom Portwood: Oh, yeah.
Bob Slydell: Yeah, we can't actually find a record of him being a current employee here.
Bob Porter: I looked into it more deeply and I found that apparently what happened is that he was laid off five years ago and no one ever told him about it; but through some kind of glitch in the payroll department, he still gets a paycheck.
Bob Slydell: So we just went ahead and fixed the glitch.
Bill Lumbergh: Great.
Dom Portwood: So, uh, Milton has been let go?
Bob Slydell: Well, just a second there, professor. We, uh, we fixed the glitch. So he won't be receiving a paycheck anymore, so it'll just work itself out naturally.
Bob Porter: We always like to avoid confrontation, whenever possible. Problem is solved from your end.

That's the beauty of having a private health care system. There's no one that says "we can save this person" if the money isn't there to cover the costs of saving them. No need for a doctor to make a DEATH PANEL decision. Instead, it all just works itself out naturally.

 

Private health insurance prioritizes on affordibility and access - i.e. money as it now stands.

I'm all for treatment that helps someone; not necessarily for treatment that prolongs dying just a few days or week. No, I don't want to be the one to make that decision. But I'm not sure $$ is the best way to prioritize.

 

Private health insurance capitalizes on a risk/return model. Not simply money as it now stands, but how to minimize money outflow while maximizing inflow. This leads to replacement of MDs/DOs with PAs and CRNPs, RNs with LPNs, etc., which objectively impact patient care in non-routine procedures. It also encourages an adversarial model of payment for services, contributing to the ballooning cost of care as well as increased bureaucracy (1/3 of current expenditure is on bureaucracy, and both clinical staff and physicians are seeing more of their time occupied with paperwork rather than patient care). Objectively, private health insurance has had a deleterious impact on actual health care delivery, both at a systemic level (in terms of sacrificing large-scale quality of care) as well as compromising individual health care (e.g., the death panels that decided both what not to cover *as well as* when not to cover conditions that they originally said they would cover).

 

The average lifespan after being diagnosed with AIDS is 4 years. More to the point, it's not apples and oranges. You're extending the lifespan somewhat, but you're not curing it. The claim of "well, the quality of life isn't preferable" is a decision that should be up to the person whose life it is. They may well prefer the decreased quality of life to death. My whole point is that this is a sliding scale of "well, that's not a cure so why bother" can move along rather a lot.
The issue as it was brought up was that it's not a cure, so it's not worth the cost. I disagree with the idea that people should be mandated to pay into a system that if they're in a situation where they need the MOST help, that's when we decide to say they're on their own.

 

The main excerpt of what the President proposed today (the whole thing is pretty good, and he talks about how we got into this mess):

Today, I?m proposing a more balanced approach to achieve $4 trillion in deficit reduction
over twelve years. It?s an approach that borrows from the recommendations of the
bipartisan Fiscal Commission I appointed last year, and builds on the roughly $1 trillion
in deficit reduction I already proposed in my 2012 budget. It?s an approach that puts
every kind of spending on the table, but one that protects the middle-class, our promise
to seniors, and our investments in the future.

The first step in our approach is to keep annual domestic spending low by building on
the savings that both parties agreed to last week ? a step that will save us about $750
billion over twelve years. We will make the tough cuts necessary to achieve these
savings, including in programs I care about, but I will not sacrifice the core investments
we need to grow and create jobs. We?ll invest in medical research and clean energy
technology. We?ll invest in new roads and airports and broadband access. We will
invest in education and job training. We will do what we need to compete and we will
win the future.

The second step in our approach is to find additional savings in our defense budget.
As Commander-in-Chief, I have no greater responsibility than protecting our national
security, and I will never accept cuts that compromise our ability to defend our
homeland or America?s interests around the world. But as the Chairman of the Joint
Chiefs, Admiral Mullen, has said, the greatest long-term threat to America?s national
security is America?s debt.

Just as we must find more savings in domestic programs, we must do the same in
defense. Over the last two years, Secretary Gates has courageously taken on wasteful
spending, saving $400 billion in current and future spending. I believe we can do that
again. We need to not only eliminate waste and improve efficiency and effectiveness,
but conduct a fundamental review of America?s missions, capabilities, and our role in
a changing world. I intend to work with Secretary Gates and the Joint Chiefs on this
review, and I will make specific decisions about spending after it?s complete.

The third step in our approach is to further reduce health care spending in our budget.
Here, the difference with the House Republican plan could not be clearer: their plan
lowers the government?s health care bills by asking seniors and poor families to pay
them instead. Our approach lowers the government?s health care bills by reducing the
cost of health care itself.

Already, the reforms we passed in the health care law will reduce our deficit by $1
trillion. My approach would build on these reforms. We will reduce wasteful subsidies
and erroneous payments. We will cut spending on prescription drugs by using
Medicare?s purchasing power to drive greater efficiency and speed generic brands
of medicine onto the market. We will work with governors of both parties to demand
more efficiency and accountability from Medicaid. We will change the way we pay for
health care ? not by procedure or the number of days spent in a hospital, but with new
incentives for doctors and hospitals to prevent injuries and improve results. And we
will slow the growth of Medicare costs by strengthening an independent commission of
doctors, nurses, medical experts and consumers who will look at all the evidence and
recommend the best ways to reduce unnecessary spending while protecting access to
the services seniors need.

Now, we believe the reforms we?ve proposed to strengthen Medicare and Medicaid will
enable us to keep these commitments to our citizens while saving us $500 billion by
2023, and an additional one trillion dollars in the decade after that. And if we?re wrong,
and Medicare costs rise faster than we expect, this approach will give the independent
commission the authority to make additional savings by further impro