Americans will never allow Medicare to be gutted

By Chrystia Freeland
June 3, 2011

The political theater in the United States this week has been all about the “debt ceiling”: Congress voting not to increase it; President Barack Obama and the House Republicans meeting to discuss it; and the Treasury warning that failure to raise it will bring economic apocalypse for the United States and the world.

Elites like to accuse ordinary Americans of a lack of political sophistication, but everyone from Main Street to Wall Street is savvy enough to understand that so far, the fighting over the ceiling is pure Kabuki. As with the budget deal earlier this year, the real negotiating is unlikely to happen until the very last minute.

But everyone also understands that this summer game of brinkmanship matters because it is a proxy war being fought over a very real problem: the growing national debt and deficit. At just under 60 percent of gross domestic product, the U.S. national debt is lower than that of France, Germany and Britain. And the rest of the world still seems delighted to lend the United States money on historically generous terms.

The need to tackle the deficit (although not how to do it) has become a national truth universally acknowledged. What nearly all Americans of all political stripes also understand is that the problem with the budget deficit is health care spending – which is why the most important economic initiative of the Obama administration not directly connected to the financial crisis and its aftermath was health care reform, and why the most important new economic policy proposal from the Republicans is Representative Paul Ryan’s proposal to transform Medicare.

But here is what no one can figure out: what Americans want when it comes to sickness and the state. One of the changes Americans decided to believe in when they elected Obama in 2008 was health care reform, a central plank in his political platform. Yet when he actually acted on his health care pledge, it suddenly seemed as if the issue were anathema to voters.

Obamacare became one of the most effective rallying cries in the 2010 midterm elections, and the Republicans were emboldened to make the opposite of Obamacare – a cut in state support of health care, instead of an extension of coverage – the centrepiece of the most important conservative initiative this year, Ryan’s budget proposal.

But the right’s plan to cut back on state-supported medical coverage seems just as toxic as the left’s effort to extend it. So which is it? Do Americans love state-financed health care or loathe it?

Maybe the confusion comes not from voters but from the way politicians, policy makers and pundits are framing the debate. Everyone who has a national voice in this discussion is a citizen of that lucky slice of America that enjoys Cadillac health care coverage, paid for by someone else, be it the U.S. government, in the case of elected politicians; universities and research organizations, in the case of the policy wonks; or mainstream media companies, in the case of the pundits. For them, the health care debate is an ideological issue; it’s about the thrilling clash of ideas, or the exciting, painstaking effort to build an economic model that works.

But for most of the hard-pressed U.S. middle class – whose median wages have stagnated for the past decade – health care and the taxes that pay for it are two of the four pocketbook issues that determine the fate of their family (the other two are jobs and housing).

They are terrified of anything that further strains their budgets – including higher taxes that don’t directly translate into a personal benefit. If you are a privileged liberal, it is easy to sneer at this unwillingness to pay for state benefits for other people as selfish. But if your family isn’t poor enough to get Medicaid – the health program for low-income people – yet is struggling to get by, it makes perfect sense.

Many, on both left and right, argue that one of the absurdities of Medicare, unlike Medicaid, is that it is universal. Surely, they say, it is madness to provide equal benefits to the elderly rich and poor alike. Yet that universality is the reason Americans will never allow Medicare to be gutted, just as Europeans and Canadians will never give up their universal health care. People will pay for a good-enough system they know they can use, even if only in the final decades of life. And woe betide the politician who tries to take it away. But that does not mean, as Obama discovered, that it is easy to persuade them to pay for benefits that are not a real benefit to their family’s bottom line.

23 comments

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Are conservatives so blindly obedient to the doctrine they are willing to do something that is bad in a Business sense just to serve the mantra of getting rid of Medicare. Any attempt to privatize Medicare will run into the same problem.
To replace Medicare, Ryan uses insurance companies to do the job.

Will these companies be allowed to fail? No.

Will these companies develop their own management schemes? Yes, creating four different sets of forms and procedures increasing paperwork for doctors, hospitals, clinics, and oldfolks homes.

Can these companies make a profit on this without forcing a set of younger individuals into their systems? No.

Will there be incentives to upper management of these companies to perform well? No.

Will these companies be nationwide or regional? Nationwide but tailored to favor those regions where losses will be lower. Moving seniors have a disadvantage.

Will there be open seasons? Yes, requiring publications sent to of each of the individual programs to all of the Medicare recipients as well as phone banks of people to answer questions.

Will the management overhead be higher than the existing Medicare? Yes.

Will the vouchers increase with inflationary pressure and the prices of medical care? No, congress will want to keep them the same or reduce their cost.

Summing it up: Too Big To Fail Insurance Companies, with out freedom to manage, with no incentive to perform well, without identical coverage, with decreasing financial input from the government, increasing by more than four fold the paperwork burden, and unable to make a profit.

Posted by bluetiger | Report as abusive

I’ve never understood why extending government medical coverage to Americans under 65 could be unpopular or claimed to be economically bad, while providing it to those 65 and over is supposed to be “the third rail of politics; touch it and die!”

Posted by S_van_Norden | Report as abusive

It is obvious that our writer is ignoring the elephant in the room …defense spending….the US should be able to afford health care like any other western nation…perhaps they wont have the brains to do it until they have the guts to write about it.

Posted by maltadefender | Report as abusive

Good piece, but a little short. Some additional points need to be mentioned. First, the shift after President Obama’s election was due to the most massive and expensive disinformation and propaganda campaign ever seen in the US. The constant lies about “death panels” etc. had a significant effect. The Medicare program is designed to take care of the elderly only. Clearly the government gets much less bang for the buck than it would if it were to take care of younger people. This makes the program extremely expensive, but also extremely profitable for the many folks who profiteer from the medical system in the US. The recent Republican voucher system on the other hand would be not a reform but a complete abandonment of the elderly sick. The vouchers would be worthless for the vast majority of people who by 65 have some “preexisting condition” that would make it impossible to get any sort of insurance from US insurance companies.

Posted by QuietThinker | Report as abusive

The author is conjecturing much about the will of the American People’s choices in 2010. Would the 2010 healtcare bill have been labelled an issue if unemployment at election time had been 7.5%?

Posted by SanPa | Report as abusive

The problem isn’t with entitlement programs but rather with the private sector and its opposition to public sector involvement in governing the administration of health care. There is SO much waste and inefficiency in the private system we have in this country today. Doctors who don’t care about patients, health insurance companies who screw those they are supposed to care for, lawyers who thrive on medical litigation… these are the things ruining health care and driving up costs in our country!

Posted by abkisa | Report as abusive

Paul Ryan wants to solve both S.S. and medicare by doing away with senior Health Care (why do you think medicare was invented seniors were dying by the boat load before medicare). See that way when you get old enough that employers will fire you to save on their health costs and payroll by hiring a younger cheaper worker for minimum wage or just take your job to China even you will not have health care when you are old and you will die before you collect S.S.

This is perfect for the Republicans as they would love to have people who would vote against them just die off instead of living and voting for people who will be able to help them.

The problem is not the old sick people it’s the executives in the insurance companies and hospitals that pay themselves $250,000,000 a year who are the problem with the high cost of medical care today.

Ryan should be making bills to get rid of those people who suck the money out of medicare for personal gain.

Posted by JEYF | Report as abusive

Just health care spending is the problem?? ALL federal spending is the problem.

Posted by 123456951 | Report as abusive

Medicare works fine. The records end of it needs fixed. The doctors and hospitals need to get their act together and get competitive, and people need to be allowed to die in peace. Everyone cannot have every procedure they can dream up, unless they want to cover the cost themselves. Let companies buy into the system to cover their people.

Posted by fred5407 | Report as abusive

“What nearly all Americans know is that the problem with the budget deficit is health care spending”

Really?

Not the two wars, expanded non-military spending, Medicare Part D, expansions of government TSA/ICE et al?

Not the reduction in income taxes to the lowest level in modern history?

Posted by NobleKin | Report as abusive

I can only draw from your closing remark that you regard Americans as selfish and self centered. I think you got that right.

Perhaps if we first eliminated all of the Cadillac health care that the elites, pundits and politicians enjoy and leveled the playing field we would have level headed thought and discussion on how to fix the system. Ryan does not fix the system, he merely tries to buy off the electorate with a voucher that is inadequate to pay for private coverage. If the private for profit system is broken and is not containing costs or covering everyone, then why would Ryan propose to fuel it even further. Perhaps his motives are not so pure but merely an effort to further line the pockets of the for profit health care industry. Regardless, we should move to eliminate the taxpayer paid health plan for all members of Congress and give them all a voucher.

Posted by seattlesh | Report as abusive

All Americans must focus on the “out of pocket” figure for the combined tab they are currently paying and compare that against other industrialized nations.

The bottom line is the metric that matters most: how much we are paying for all of our healthcare ‘coverage’ and care. To include private insurance, co-pay, co-insurance and uncovered amounts…and also taxes for medicaid/medicare for individuals the private insurance industry does not want to manage (because there is no money in it for them).

When you add it all up, Americans are being financially raped.

We pay nearly twice as much as other industrialized nations and get far less.

A single payer system would cut out the shareholders and vast sums lost to CEO compensation, bonuses, commissions, and salaries to employees who contribute nothing to the actual healtcare chain.

It is ironic the amount of red-tape and waste in what is supposed to be a free-market enterprise. Private health insurance, a socialized endeavor that shares our collective risk but hands vast profits to shareholders is one of the most financially innefficient models for actual healthcare on the planet.

The total amount of out of pocket dollars that could be saved is staggering.

You want a better economy? You want more dollars in your wallet? Eliminate the private insurance sector.

Posted by NobleKin | Report as abusive

Really?
Silly me. Here I thought the problem with the deficit was unemployment, unsubstainable debt and the Pentagon budget. Guess I’m just a iggorant yokel.

Yeah, I do know that health care costs are a big issue, but not necessarily THE issue.

Posted by ptiffany | Report as abusive

Chrystia,

“At just under 60 percent of gross domestic product, the U.S. national debt is lower than that of France, Germany and Britain.”

I’m afraid GDP is just over 14 trillion
National debt is also just over 14 trillion

Just Over 14 Trillion Debt / Just Over 14 trillion GDP = closer to 100% Debt to GDP

Posted by markceraldi | Report as abusive

Chrystia, I always look forward to hearing what you have to say. You have a wonderful way of enlightening me about behaviors that have me scratching my head. And now I know what I’m called, “a privileged liberal”! If it fits wear it. So I’ll wear it until my self righteous stance bores even me.

Posted by Sue4 | Report as abusive

The articles opening statement “What nearly all Americans of all political stripes also understand is that the problem with the budget deficit is health care spending …” is presumptuous and shows the writers bias.
The budget deficit is primarily due to the Bush era tax cuts.

Posted by rwhintexas | Report as abusive

Your article certainly expresses well how the problem of US debt is being framed here in Washington. To bad this framing is simply not true.
It is war, more war and then some more war, plus the destruction of the progressive income tax that is responsible for the dismal picture of US finances.
Reuters is above all else a financial news service and the other factor that always should be kept in mind by anyone in this business is the very questionable status of official statistics here. Our GDP may be smaller than officially stated; thus our debt to GDP ratio may not be quite as good as you say.

Posted by ChrisHerz | Report as abusive

“What nearly all Americans of all political stripes also understand is that the problem with the budget deficit is health care spending” If nearly all Americans understand health care spending is the major cause of the budget deficit, it is beacause they are swallowing the garbage fed to them by right wing politicians and media. The real problem is that America is spending 40% of its budget on defense. With only 5% of the world’s population it funds 50% of the world’s total defense budget. Healthcare accounts for only about 22% of America’s domestic budget. Given that we are not officially fighting any war, or have any distant prospect of doing so, why do we need to spend more on defense than having a healthy America.

Posted by jackjeff | Report as abusive

“All Americans of all political stripes also understand is that the problem with the budget deficit is health care spending.”

No, the Economist would have us believe that is true, but everyone the Pentagon is the great American monetary sewer.

Accordingly, Pentagon spending, for a country with no undeserved enemies, is a taboo topic across all mainstream media. No exaggeration, especially here in Toad Hall.

Some people are uncomfortable with that.

Posted by Humanismws | Report as abusive

Medicaid isn’t just for the poor. It also covers people who can’t pay $70,000 a year for nursing home care. Sixty percent of nursing home residents in the U.S. are Medicaid patients—many of them people who strategically gave their houses to their children in advance, in order to be poor enough to qualify for Medicaid long term care.

Posted by BoycottIsrael | Report as abusive

The problem is that government (Congress, Senate, and the President) keeps trying to put new laws in place over a broken set of old laws. Kind of a band-aid on a lost limb.

What is needed is that they write a whole replacement for both the health and income tax laws.

Both should be under 5 pages, and written so that a high school graduate can understand them. Cut out the special rules, the caveats, the exclusions. Then make the law apply to 100% of the people – regardless of legal status, employment (government or otherwise, etc.).

When people see that the law makers are serious and are willing to live by what they create then people will start regaining trust in their government again.

Posted by Eric.Klein | Report as abusive

America can afford to pay for medical care, pharmaceuticals and education for everyone of it’s citizens. The issue is prioritization. We designate full medical care and education for all then tell Congress they can spend what is left on what is best for the country. Defense and Foreign Aid comes after the welfare of the Country and it’s citizens.

Posted by gourdon | Report as abusive

Blah blah blah. We hold uninformed discussions, then permit manipulation by the monied “stakeholders,” followed by political fights, and finally some arbitrary decision is arrived at more or less randomly.

The whole process would work just as well (or just as badly) if we settled these disputes by a mandatory coin flip.

Posted by Ralphooo | Report as abusive