The Tea Party's Next Challenge

Yuval Levin and Peter Wehner wrote a useful editorial in Friday's edition of the Wall Street Journal entitled The Tea Party's Achilles' Heel.

They argue, correctly, I believe, that the Tea Party movement will have shown itself to be a one-hit wonder if its constituents don't follow their focus on current federal spending with equally serious attention to reforming and reducing the immense promised, but unaffordable social program benefits in Social Security, Medicare and Medicaid.

The authors note how quickly Michele Bachmann backpedaled on Paul Ryan's sensible budget which included entitlement reforms. That her fellow GOP presidential candidates have also remained largely silent on details of entitlement cuts.

Theirs is, I believe, the only really insightful critique of the Tea Party movement which I've read. Ironically, it comes from the right, not the left, and suggests that movement might not go far enough, instead of branding it a domestically-based group of fiscal terrorists, as the administration and some Democratic Congress members have done.

Dick Armey On Gingrich's Gaffe

I was pleasantly surprised to read and hear Dick Armey's response to his old House leadership colleague Newt Gingrich's enormous campaign gaffe regarding Medicare.

Both in a Wall Street Journal editorial last week, then, again, this morning on CNBC, the former House Majority Leader displayed high contrast with his old Speaker colleague by calling for GOP presidential candidates who are not "timid" on Medicare and general entitlement reforms.

Rather than blast Newt by name, or get into any personal confrontations, Armey simply reminded his readers and viewers of the Tea Party's and independents' desires for fiscal rectitude and sensible entitlement reforms.

For Armey, this means embracing significant reforms, and eschewing hot-button terms like radical or social engineering.

When I consider my own thoughts on electoral dynamics, I find myself in agreement with Dick Armey in that Republicans need to explicitly consider which positions will appeal to the large block of independent voters who will effectively choose the next president.

Timidity and acceptance of the current status quo isn't going to do that. Right now, that means, by virtue of his openining campaign remarks on Paul Ryan's ideas, Gingrich doesn't fit that bill.

Armey went further on CNBC to rather pointedly back Tim Pawlenty, thanks to his gubernatorial record, basic positions and weaknesses of the rest of the field, with Mitch Daniels' decision not to run in 2012.

Irrational Expectations Concerning Medicare

Since Paul Ryan's budget was released, liberal Democrats have been howling that it will impoverish seniors while giving more tax breaks to the wealthy.

I cannot help but see this as a case in which liberals have chosen to ignore something which is quite obvious, i.e., since the 1930s, Congress has enacted three similarly- and badly-designed social welfare programs- Social Security, Medicare and Medicaid- which have largely accounted for the large, uncontrollable federal spending increases which have resulted in unsustainable, unaffordable federal deficits and net externally-held debt.

Over the past week, I've heard various liberal pundits, journalists and Congress members bemoan how Ryan's plan 'will make seniors pay more for health care,' without acknowledging that the promises which have been made via the various welfare programs were always unaffordable in the long term.

For example, Social Security was intended as a safety net program for the few seniors left without private savings to fund their old age. However, once people knew of the existence of the program- surprise- they began to save less, substituting consumption for savings. Thus, a safety net was turned into an entitlement on which most seniors began to depend for old age pension income, rather than saving for it themselves.

Eighty-some years on, America has finally come to the end of the road in terms of continuing to borrow from the rest of the world to fund its social program spending.

In the meantime, I have just viewed, for the second time in a year, a 2009 program detailing the corroding infrastructure of the US. People in the program ask, rhetorically, how and why the US has let its roads, bridges, water and sewer systems become so decrepit.

That's easy.

Social Security. Medicare. Medicaid.

The fall off in large-scale civil engineering projects, except for the interstate highway system, dates, more or less, from after WWII. By the end of the 1960s, the federal government had expanded its scope, staff and spending to encompass ever more social programs, while tangible infrastructure became less important.

It's my contention that our nation has, in effect, whether explicitly or implicitly, chosen to consume its early-mid-twentieth century infrastructure, by not re-investing in it, while using the money not spent on that to fund lavish retirement and health care programs.

Medicare was never sustainable nor affordable as designed. It's a false choice to suggest that Ryan's replacement of the current open-ended, general-fund-based defined benefit approach by a defined contribution, insurance payment subsidy approach, represents an unfair or unnecessary cut in benefits to the affected.

The choice, as Ryan contends, and his Democratic collaborator, Alice Rivlin, agrees, is between this change, and the end of the program within a decade or so.

To continue to complain that Republicans are cutting benefits for seniors, the ill or poor, misses the point.

Having legislated and then promised citizens levels of social spending which were never sustainable forever, it's not realistic for liberals to voice this complaint.

To return to our Framers' views, what these three programs have done is what Jefferson believed to be the worst thing a generation could do to a following one- bequeath it a debt for money spent. In this case, it wasn't spent on infrastructure, but intangible, fleeting lifestyle expenses for several generations of Americans. Money which can't be recouped and will leave no lasting tangible trace.

Paul Ryan & Alice Rivlin's Defined Contribution Fix for Medicare

I have read a few references recently to Paul Ryan's and Alice Rivlin's new Medicare idea which is quite close to my own beliefs, expressed in earlier posts, that the program should never have been anything but a defined-contribution voucher approach. This National Review piece sheds more light on Ryan's and Rivlin's proposal. It reads, in part,

"Rep. Ryan has written an explanation of his approach for the Economix blog that you can find here:



In order to make good on Medicare’s promise, I’ve put forward reforms that offer future seniors the same health coverage options I enjoy as a member of Congress. My reform plan makes no changes for those 55 and older, as efforts to save this program ought not disrupt benefits for those in and near retirement. For those now under the age of 55, Medicare would provide seniors with a payment, a list of Medicare-approved coverage options and the ability to choose a plan that works best for them. The Medicare payment would be adjusted so that the wealthy receive a lower subsidy, the sick would receive a higher payment if their conditions worsen, and lower-income seniors would receive additional assistance to cover out-of-pocket costs.



It is possible that Rivlin-Ryan will prove so inadequate to providing decent coverage for Medicare beneficiaries that political pressure to make the benefit more generous will prove overwhelming, a charge that has been levied against the payment reductions under PPACA. It is also possible that a fixed subsidy and voucher-like structure will improve the cost-effectiveness of medical care. The real debate we’re having is over which approach is more likely to yield greater cost-effectiveness over time: a centralized, IPAB-driven approach or a decentralized discovery process.



I fear that Alice Rivlin and Rep. Paul Ryan are in for a bumpy ride. They are taking on deeply entrenched ideas and deeply entrenched constituencies. I’ve been told that some version of Rivlin-Ryan may become a central part of a Republican budget proposal. If that really is true, congressional conservatives will have proven those of us who’ve at various points doubted their seriousness and sincerity about reforming the welfare state wrong. We’ll see."


At issue, it seems, are two points.

One is that, left to decide how to spend scarce, defined contribution dollars from the government on their health care, people may actually choose to forgo things they'd otherwise consume if unconstrained financially.

Wow, is that a surprise?

The second is that we may just have to learn to live with overall national constraints on what government can afford to pay in subsidies to people for medical care. Not every person will be able to get the government to pay for fixing every ailment.

Which would be why it's wise to let people have control over the allocation of scarce resources for medical care provided by the government.

If people can't figure this out, then we're toast. A nation can't remain competitive when it's largest expenditures are transfer payments from younger, working taxpayers to older, retired, non-value-adding seniors.

Sorry, but that's just common sense. There's no way we can afford this notion, as I explained in this post, that the aged or retired are somehow above sharing economic sacrifices with the rest of the nation.

About That "Fairness" Thing

Liberals, especially Wonderboy, make much of "fairness." To hear them, it's not fair if one person in America is poorly-off while anyone else is wealthy from the sweat of their own brow.

But let's consider another type of fairness for a moment.

What about fixed-, defined-benefit social transfer payment programs? How are they fair?

Sure, most well-intended Americans want to help the less well-off. But  consider what has happened since our idiotic Congress, in 1932 or thereabouts, enacted Social Security.

Between that program, and its descendants, Medicare and Medicaid, the US Congress bestowed upon society fixed-promise payment schemes, regardless of the means of the country to afford them.

Yet, ironically, even paradoxically, those working Americans who pay taxes to fund these programs are exposed to all sorts of income risks. Being America, few of us are guaranteed jobs, or lush unemployment benefits if we lose a job.

So we have the bizarre situation, which, in my opinion, only Congresses full of mediocre civil servants who couldn't make a living the honest way- working in the private sector- have designed welfare programs which require fixed payouts from taxpayers who assume all the risk.

Any sensible person would have designed the three programs differently. Ideally, they'd have been individual-account, defined contribution schemes from the start. Further, and this is the really important part which I've never seen elsewhere, annual payout levels would be contingent upon the relative health of the US economy, in real terms.

By this I mean some benchmark year, with a benchmark GDP/person, GDP growth rate, and price level, would be used from which to calculate a standard real dollar benefit/person for each program. Thereafter, the effects of the three measures would attenuate how much money each payee received each year.

This way, we wouldn't have the current fiasco, whereby the country's infrastructure and defense spending, to name two important governmental tasks, are subject to cuts due to budget deficits, but social welfare spending is seen as fixed, sacrosanct, and on auto-pilot.

Why shouldn't the country's poor bear as much burden as the taxpayers funding their generous stipends via Social Security, Medicare and Medicaid?

It seems only right that all society's members bear the pain of recessions and inflation. That nothing in the federal budget is fixed and off-limits during periods of financial pain.

Doesn't that seem truly fair?

A Detailed View of Medicare's Destruction of US Medical Care

Yesterday's Wall Street Journal included an eye-opening editorial by Richard Hannon, a Blue Cross Blue Shield (of Arizona) SVP, concerning how Medicare contributed to the destruction of US medical care.

Hannon's father-in-law was a doctor. The type of doctor whom Hannon describes as 'a Marcus Welby, M.D.' type who made house calls and treated the poor sick either for free, or for payment in kind. He writes,

"I remember my father-in-law, a real-life Dr. Welby, telling me the exciting news that the federal government was going to start paying him to see seniors- patients who before he had seen for the proverbial chicken (or nothing at all). That fabulous deal was Medicare."

Right at this point, I thought about prior posts I've written on this or my other blog concerning how Medicare was a rather stupidly-designed knock-off, for medicine, of the 1930s Social Security program. They both share direct federal government intrusion into otherwise-private behaviors, and a 'common pot' approach to social services provision. That is, social security has a single general fund out of which payments are made, without any limits on individual payments or an ability to assign individual ownership of assets.

In the case of Medicare, just from Hannon's example, it's easy to see how wrong things went from the very start. Rather than have government, as a third party, pay the doctor, why didn't Washington's political hacks simply means-test Americans for vouchers to be used either to buy health insurance or to fund a health savings account, out of which to pay for medical care?

Hannon continues by describing how Medicare's costs ballooned so exorbitantly that, in 1966, Congress estimated the program's 1990 cost would be $12B, which was laughably under the actual 1990 cost of $107B!

Then came cost controls. But Hannon provides details that simply defy reason and logic,

"To fix the cost problem, Medicare in 1992 began using the "resource based relative value system" (RBRVS), a way of evaluating doctors based on factors such as education, effort and specialized training. But the system didn't consider factors such as outcomes, quality of service, severity or demand.

Today most insurance companies use the Medicare RBRVS because it is perceived as objective. As a result of RBRVS, specialists- especially those who perform a lot of procedures- do extremely well. Primary-care doctors do not."

It makes you want to cry, doesn't it? Most sensible people wouldn't design such a stupid system. And they'd certainly include outcomes and relative demand or incidence of condition and disease when creating algorithms to price medical care.

Hannon goes on to trace the decline of the GP, or, as they are now called, primary-care doctor, under this pricing system. And to lay the demise of good, preventative primary care at the feet of Medicare's centrally planned system, replete with formulas, data, and abstracted views of medicine.

His editorial is engaging for its combination of a personal anecdote which captures so well the innocent hopes even doctors initially held for the centrally-operated federal government medical juggernaut which would ultimately warp, then destroy the simpler, less-expensive world of medical care that I knew in my youth.