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Wednesday, November 30, 2016

Privatizing Medicare will be a Global Catastrophe

Back in 2004, many of us saw President Bush's reelection as a potential global catastrophe. We saw through the lies about the WMDs in Iraq and knew we were in uncharted territory being involved in two concurrent overseas wars.  But somehow everyone is getting the feeling that this is worse.

Guess what -- it's more than a feeling.

We can select from a whole host of issues being dredged up from feudal times and point to any of them as being wrong for this country, but to prevent a real global catastrophe, we need to point to the one thing that holds us together -- compassion.

There's no coincidence that former President Bush used the word hundreds of times during his 2000 campaign.  And while we can argue the merits of No Child Left Behind and his Medicare expansions as paydays for for-profit educational executives and investors, and Big Pharma, respectively, there's no question the average American household saw some benefit, either through expanded publicly funded tutoring or through the expanded prescription drug coverage from Medicare Part D.

Enter January 2017. Things will be different from Day One. One of the first things that the Republican Congress will pass (probably through reconciliation) is a revocation of any aspect of Obamacare that involves spending. The Republican plan would take advantage of reconciliation, a budget-related mechanism to circumvent the 60-vote threshold in the Senate and prevent Democrats from being able to block legislation on their own. From Bloomberg Politics:
The Republican plan would take advantage of reconciliation, a budget-related mechanism to circumvent the 60-vote threshold in the Senate and prevent Democrats from being able to block legislation on their own. By striking early, the GOP could set itself up to invoke the same procedure again later in the year on a broader range of targets, including tax cuts.
The quick-strike bill, like one vetoed earlier this year by President Barack Obama, H.R. 3762, would likely set what amounts to an expiration date for the law’s financial underpinnings, leaving Congress to act at a later date on any replacement plan. That’s because more than six years after the law’s passage, Republicans still don’t have a consensus on how to replace Obamacare. 
Subsidies will disappear, penalty conditions will be stripped, etc. Basically, they are going to gut the program. All signs point to the same thing happening to Medicare and Medicaid shortly thereafter. The remnants left behind will be a tax-credit based voucher program which people can use to subsidize purchases on the ObamaCare TrumpCare exchanges.

But what happens when people cannot afford to pay the difference between the voucher and the cost of being insured? If insurance companies are still mandated to cover preexisting conditions but can now use price discrimination to charge more for those individuals you can imagine that a lot of people over the age of 55 will be in dire straits.

And guess who foots the bill when people cannot pay? Through bankruptcy reform (which will be one of the next agenda items), we'll have companies like Accretive Health popping up to enforce payment before health services will be granted and/or collection agencies coming after family members.  So what then? Josh Marshall points out:
Remember the other things Medicare significantly guard against. If parents have insupportable medical bills or have no way to pay for care, they go to children. In the absence of any other options, that's how it should be. But that money comes out of other things: buying homes, putting kids through college. The social insurance model of Medicare has positive effects well beyond direct beneficiaries.
As an economist, I'd like to break this down numerically through the following scenario: In a typical American household, the Federal Reserve reports average household income is around $56,500. After taxes, that falls to around $43,000.  According to the BLS's consumer expenditures survey, $4,342 is spent on healthcare.

What happens when healthcare begins to eat up more than 10% because now each household will also be responsible for a portion of the healthcare of another household (or two or three)?  The problem is that healthcare is a necessity. And when needs take the place of wants in a household budget, that household no longer can afford to purchase as many manufactured goods because in this scenario, disposable income dissipates.  First, savings, already frighteningly meager, will dry up.  Then consumption will be hit.  That means American manufacturers will be adversely affected. That also means foreign countries like China will be adversely affected.  The inevitable result will be a global recession -- but potentially one that we cannot spend our way out of.

This is the one issue that is worth dying on a hill over. Call your Senators. Especially the GOP Senators. Tell them that healthcare should be untouchable. Tell them that a reconciliation vote to dismantle Medicare would be catastrophic. And then call your best prospects to challenge those Republicans in upcoming elections. They need to hear that their constituents are against privatization so they will be willing to challenge incumbent Republicans. Call family members and tell them what's  coming. But whatever you do, don't sit on this one.