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Thread: U.S. Senate Budget Plan Seeks to Lower Deficits

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    U.S. Senate Budget Plan Seeks to Lower Deficits

    From CNBC:

    The tax and spending blueprint proposed by Senate Budget Committee Chairman Kent Conrad calls for reducing the federal deficit to 3 percent of the overall economy in 2015 from 9.8 percent this year...

    Conrad's plan would freeze all non-security discretionary spending for three years and provides for tax relief of $780 billion over five years.
    News Headlines

    IMO, although this plan is somewhat more aggressive than the White House Plan, as it proposes to reduce the U.S. budget deficit to 3% of GDP by 2015 vs. the White House's goal of 3.9% of GDP, it falls short of a credible fiscal consolidation effort. It relies largely on a temporary non-defense discretionary spending freeze. It fails to address Medicare, Medicaid, and Social Security. As a result, what fiscal gains it would make would amount to little more than the fleeting battlefield gains made by Germany ala the Battle of Bulge toward the close of WW II. As entitlement spending remains on an unsustainable trajectory, and the health care system's fundamental excess cost problem has not been addressed, increases in entitlement spending would wipe out the possible modest progress achieved from temporarily freezing non-defense discretionary spending.

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    Re: U.S. Senate Budget Plan Seeks to Lower Deficits

    Quote Originally Posted by donsutherland1 View Post
    From CNBC:



    News Headlines

    IMO, although this plan is somewhat more aggressive than the White House Plan, as it proposes to reduce the U.S. budget deficit to 3% of GDP by 2015 vs. the White House's goal of 3.9% of GDP, it falls short of a credible fiscal consolidation effort. It relies largely on a temporary non-defense discretionary spending freeze. It fails to address Medicare, Medicaid, and Social Security. As a result, what fiscal gains it would make would amount to little more than the fleeting battlefield gains made by Germany ala the Battle of Bulge toward the close of WW II. As entitlement spending remains on an unsustainable trajectory, and the health care system's fundamental excess cost problem has not been addressed, increases in entitlement spending would wipe out the possible modest progress achieved from temporarily freezing non-defense discretionary spending.
    Unfortunately this is the case for almost every western nation. Health Care is gobbling up alot of the Canadian provincial budgets here in Canada and it's only gonna get worse as the cost of health care soars across the globe. Not as much in the United States because of higher immigration but for a lot of other countries especially Canada, Britain and Japan, will be crippled by its incredible aging populations, for the first time in human history there will be countries with more older people then younger ones. It's a kiss of death for our nations budgets and recourses.

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    Re: U.S. Senate Budget Plan Seeks to Lower Deficits

    Until they take on entitlement spending, this is all but a show.
    Jackboots always come in matched pairs, a left boot and a right boot.

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    Re: U.S. Senate Budget Plan Seeks to Lower Deficits

    Freezing non-security discretionary spending is a decent start, but it does nothing to reform non-security discretionary spending. There are probably a lot of programs that don't need funding or don't need the funding they have. There are government programs building Google map layers of political boundaries and doing KML layers of pollution and population density. Does government really need to be paying for that?

    Beyond non-security discretionary spending, how would they/should they take on entitlement reform? Specifically Medicare and Medicaid.

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    Re: U.S. Senate Budget Plan Seeks to Lower Deficits

    Quote Originally Posted by reefedjib View Post
    Beyond non-security discretionary spending, how would they/should they take on entitlement reform? Specifically Medicare and Medicaid.
    Addressing Medicare's and Medicaid's imbalances will require both a restructuring of the benefits formulas and fundamental health care reform. Some measures that could help:

    1. Eliminating competitive barriers that distort the health care sector, determining what licensure requirements are necessary and eliminating the others that serve mainly to limit intra-industry competition, changing the tax code so that technology purchases at the beginning of the "J curve" when benefits are least and costs are highest are discouraged, eliminating legal protection of pharmaceutical price disparities, opening the entire health care sector to foreign competition, implementing robust productivity measures for assessing the health industry and its sectors, among other changes.

    Annual national health expenditures cannot continue to rise at a multiple of GDP growth indefinitely. The economic burden would become too great, it would undermine economic competitiveness, and it is highly unlikely that foreigners would continue to subsize the U.S. health care system indefinitely via their financing the U.S. government's deficits. Far-reaching health care industry restructuring will likely be required to address the excess cost issue.

    Political gimmicks such a single-payer approach would do little to address the issues at the heart of that problem, a problem that deals with basic practices/industry structure not the number of payers. In addition, a single-payer system would contain all the defects of monopolies.

    2. Raising Medicare premiums to better reflect costs and revising benefits so that they are not unlimited e.g., budgeting, performance assessments, and controls would be required. That does not necessarily mean rationing care via budget (although rationing is pervasive in the U.S. health care industry today via price), but that revenue triggers would be in place to address budget problems. Whether or not Medicare should become means-tested is something that would have to be addressed to see if it makes sense.

    3. Medicaid would have to be confined to those who are in or near poverty. Expansion of Medicaid to increase U.S. coverage was really a means to expand coverage by trying to circumvent the difficult political choices tied to addressing the excess cost issue. The excess cost issue is an important driver of coverage trends, among other shortcomings in the health sector.

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    Re: U.S. Senate Budget Plan Seeks to Lower Deficits

    quality thread, thanks

    a little too should be instead of what is, however, for my taste

    long term (2016) entitlement armageddon's, also, sadly, are only part of the problem

    IMF Survey: Government Borrowing Is Rising Risk to World Financial System

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    Re: U.S. Senate Budget Plan Seeks to Lower Deficits

    Quote Originally Posted by donsutherland1 View Post
    Addressing Medicare's and Medicaid's imbalances will require both a restructuring of the benefits formulas and fundamental health care reform. Some measures that could help:
    You mention measures addressing each of you targets: restructuring of the benefits formulas and fundamental health care reform. I have my personal take on restructuring of the benefits formulas which actually adds cost, due to expanding the number of people covered. Your points on fundamental health care reform I have not really heard before, I don't believe, during all of the previous year debate on healthcare. They really missed an opportunity. Bringing fundamental health care reform will address both public benefits, like Medicare and Medicaid, and private health care costs, which continue to rise - excess costs. I always figured it was the result of new technology, whether drugs or procedures and equipment.

    1. Eliminating competitive barriers that distort the health care sector, determining what licensure requirements are necessary and eliminating the others that serve mainly to limit intra-industry competition, changing the tax code so that technology purchases at the beginning of the "J curve" when benefits are least and costs are highest are discouraged, eliminating legal protection of pharmaceutical price disparities, opening the entire health care sector to foreign competition, implementing robust productivity measures for assessing the health industry and its sectors, among other changes.

    Annual national health expenditures cannot continue to rise at a multiple of GDP growth indefinitely. The economic burden would become too great, it would undermine economic competitiveness, and it is highly unlikely that foreigners would continue to subsize the U.S. health care system indefinitely via their financing the U.S. government's deficits. Far-reaching health care industry restructuring will likely be required to address the excess cost issue.

    Political gimmicks such a single-payer approach would do little to address the issues at the heart of that problem, a problem that deals with basic practices/industry structure not the number of payers. In addition, a single-payer system would contain all the defects of monopolies.
    Here were your points. I'd like a deeper understanding of each if you have the time.
    1. Eliminating competitive barriers that distort the health care sector...
      What are some examples of barriers? Would the limits on inter-state insurance be one? I think that is due to different regulatory requirements on insurance coverage. What are some others?
    2. ...determining what licensure requirements are necessary and eliminating the others that serve mainly to limit intra-industry competition...
      Do they have to "buy" licenses to play?
    3. ...changing the tax code so that technology purchases at the beginning of the "J curve" when benefits are least and costs are highest are discouraged...
      This is the first I have heard of a "J curve". I imagine the price is highest at first introduction of a new technology, and drop as use expands. Is this correct? What do you mean by benefits being least?
    4. ...eliminating legal protection of pharmaceutical price disparities...
      What is this?
    5. ...opening the entire health care sector to foreign competition...
      Are foreign drug companies restricted? What other industries?
    6. ...implementing robust productivity measures for assessing the health industry and its sectors.
      Do you have some examples of what this would entail?


    2. Raising Medicare premiums to better reflect costs and revising benefits so that they are not unlimited e.g., budgeting, performance assessments, and controls would be required. That does not necessarily mean rationing care via budget (although rationing is pervasive in the U.S. health care industry today via price), but that revenue triggers would be in place to address budget problems. Whether or not Medicare should become means-tested is something that would have to be addressed to see if it makes sense.

    3. Medicaid would have to be confined to those who are in or near poverty. Expansion of Medicaid to increase U.S. coverage was really a means to expand coverage by trying to circumvent the difficult political choices tied to addressing the excess cost issue. The excess cost issue is an important driver of coverage trends, among other shortcomings in the health sector.
    Ok, so my approach is to do the following:
    • Make all healthcare related entitlements, state plans. No collecting of taxes at the federal level to pay for entitlements. This will force a balanced budget requirement.
    • Combine Medicare and Medicaid into a new state-level healthcare entitlement
    • Make the state-level healthcare entitlement serviced by a co-op. This removes a lot of government from managing healthcare
    • The new healthcare co-op collects funding from the state
    • The new healthcare co-op services 3 types of patients: the poor (Medicaid replacement), the old (Medicare replacement), and the sick (pre-existing conditions). These represent the uninsurables and they get public care
    • The healthcare co-op will charge a premium to pay for coverage of the risk pool they are covering. This will be a pricey premium, due to the sick and the old
    • The poor will have assistance to pay for the premium
    • The old will start paying a premium as we phase out Medicare promises
    • The healthcare co-op can hire its own staff (admin, nurses, doctors) and obtain its own facilities (clinics, hospitals). This will reduce costs.
    Last edited by reefedjib; 04-21-10 at 11:09 AM.

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    Re: U.S. Senate Budget Plan Seeks to Lower Deficits

    Let's not kid ourselves. In our government, good ideas go in and halfassed or completely retarded legislation comes out. Why is that? Could it be due to the influence of Special Interests? Didn't seeing the Health Insurance Reform process open anyone's eyes?

    The healthcare debate took up much of the oxygen in Washington last year. So not surprisingly, the pharmaceutical and health products industry spent a record amount last year close to $266.8 million on federal lobbying.

    That is the biggest lobbying expenditure ever by a single industry in one year, according to the report.

    Lobbyist spending jumps 5 percent last year despite nation's recession woes - TheHill.com
    How much did you personally spend lobbying your government on your behalf?

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    Re: U.S. Senate Budget Plan Seeks to Lower Deficits

    Quote Originally Posted by reefedjib View Post
    • Eliminating competitive barriers that distort the health care sector...
      What are some examples of barriers? Would the limits on inter-state insurance be one? I think that is due to different regulatory requirements on insurance coverage. What are some others?
    • ...determining what licensure requirements are necessary and eliminating the others that serve mainly to limit intra-industry competition...
      Do they have to "buy" licenses to play?
    • ...changing the tax code so that technology purchases at the beginning of the "J curve" when benefits are least and costs are highest are discouraged...
      This is the first I have heard of a "J curve". I imagine the price is highest at first introduction of a new technology, and drop as use expands. Is this correct? What do you mean by benefits being least?
    • ...eliminating legal protection of pharmaceutical price disparities...
      What is this?
    • ...opening the entire health care sector to foreign competition...
      Are foreign drug companies restricted? What other industries?
    • ...implementing robust productivity measures for assessing the health industry and its sectors.
      Do you have some examples of what this would entail?
    Some quick responses:

    1. Competitive barriers: Allowing for full interstate competition is just one example. Differing tax treatment (individual purchasers vs. employer purchases) is another. Rules that preclude multistate pools, along with other restrictions on pooling is another.

    2. The findings of empirical research should be applied to determine whether licenses in various medical professions actually add value or restrict supply (number of practitioners). My guess is that there is a mixed situation there. Some licenses make sense e.g., physicians. Others don't.

    3. Empirical literature on disruptive technologies has shown that at the very early stage, the cost of such technologies is high and the benefits vis-a-vis existing technologies are small, even somewhat negative. Medical technology is just one subset. Accelerated depreciation rules for tax purposes create an incentive for firms to providers to be the first to deploy new technologies (at the least efficient/effective end of the curve: least value added per dollar of cost). Payment practices may also contribute to such an outcome. Health services, like any other service, is confined by constraints. Tax code and payment practices should be adjusted to consider the full macroeconomic picture involved with technology purchases and other practices. Indeed, were robust productivity measures required and regularly reported, one would get a much better understanding where value is added and where it is not. For now, the BLS has no such measures so a large part of the health system operates in the "dark" with respect to understanding productivity. In that context, the existence of cost issues is not at all surprising.

    4. Basically, consumers are not permitted to reimport pharmaceutical products. That amounts to legal protection of price arbitrage situations. For example, if gold were selling for $1,130 per ounce in London and $1,140 per ounce in New York, investors would buy gold in London (pushing up the price there) and sell it in New York (pushing the price down in NY) and the price disparity would be eliminated. Barring drug reimportation perpetuates a situation where American consumers cannot eliminate price premiums that might exist for some medical products. As a result, it builds in a degree of extra expenditures on such products that might not exist in a competitive market.

    5. Currently, it is very difficult for foreign doctors to practice medicine in the U.S. The H-1 visa rules should allow for a much larger number to enter the U.S. Unless there is statistically significant empirical data that requires additional licensing for such doctors (who are licensed elsewhere e.g., in the EU) to practice in the U.S., those professional entry barriers should be eliminated. That is just one example of barriers that make it difficult for foreign providers to aggressively expand in the U.S. One has to recall that in many countries, the costs of foreign medical staff are less than those of their American counterparts, sometimes quite substantially. Hence, again one finds a de facto protection of wage premiums that might otherwise disappear in a competitive market. In the long-term, growth in consumption of medical services is projected to exceed growth in providers. An aggressive push to increase the supply of providers would alleviate the cost premiums attributed to a demand imbalance.

    6. The Bureau of Labor Statistics would need to work with the health industry to construct such indexes and their components. Research would be needed so as to ensure that the measures are representative and reliable. There is no intellectual reason why such measures are not possible for the health industry. The task would involve identifying outcomes, matching them with costs, addressing any cyclicality that might exist (probably modest relative to most industries), and standardizing reporting. Under such a framework, BLS would report a variety of productivity measures for the health sector (hospitals, physicians, medical products, etc., essentially the same categories that are used with respect to the CPI). The providers would be required to publicly disclose their productivity data (productivity number and constituent components).

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    Re: U.S. Senate Budget Plan Seeks to Lower Deficits

    Quote Originally Posted by donsutherland1 View Post
    Some quick responses:

    1. Competitive barriers: Allowing for full interstate competition is just one example. Differing tax treatment (individual purchasers vs. employer purchases) is another. Rules that preclude multistate pools, along with other restrictions on pooling is another.

    2. The findings of empirical research should be applied to determine whether licenses in various medical professions actually add value or restrict supply (number of practitioners). My guess is that there is a mixed situation there. Some licenses make sense e.g., physicians. Others don't.

    3. Empirical literature on disruptive technologies has shown that at the very early stage, the cost of such technologies is high and the benefits vis-a-vis existing technologies are small, even somewhat negative. Medical technology is just one subset. Accelerated depreciation rules for tax purposes create an incentive for firms to providers to be the first to deploy new technologies (at the least efficient/effective end of the curve: least value added per dollar of cost). Payment practices may also contribute to such an outcome. Health services, like any other service, is confined by constraints. Tax code and payment practices should be adjusted to consider the full macroeconomic picture involved with technology purchases and other practices. Indeed, were robust productivity measures required and regularly reported, one would get a much better understanding where value is added and where it is not. For now, the BLS has no such measures so a large part of the health system operates in the "dark" with respect to understanding productivity. In that context, the existence of cost issues is not at all surprising.

    4. Basically, consumers are not permitted to reimport pharmaceutical products. That amounts to legal protection of price arbitrage situations. For example, if gold were selling for $1,130 per ounce in London and $1,140 per ounce in New York, investors would buy gold in London (pushing up the price there) and sell it in New York (pushing the price down in NY) and the price disparity would be eliminated. Barring drug reimportation perpetuates a situation where American consumers cannot eliminate price premiums that might exist for some medical products. As a result, it builds in a degree of extra expenditures on such products that might not exist in a competitive market.

    5. Currently, it is very difficult for foreign doctors to practice medicine in the U.S. The H-1 visa rules should allow for a much larger number to enter the U.S. Unless there is statistically significant empirical data that requires additional licensing for such doctors (who are licensed elsewhere e.g., in the EU) to practice in the U.S., those professional entry barriers should be eliminated. That is just one example of barriers that make it difficult for foreign providers to aggressively expand in the U.S. One has to recall that in many countries, the costs of foreign medical staff are less than those of their American counterparts, sometimes quite substantially. Hence, again one finds a de facto protection of wage premiums that might otherwise disappear in a competitive market. In the long-term, growth in consumption of medical services is projected to exceed growth in providers. An aggressive push to increase the supply of providers would alleviate the cost premiums attributed to a demand imbalance.

    6. The Bureau of Labor Statistics would need to work with the health industry to construct such indexes and their components. Research would be needed so as to ensure that the measures are representative and reliable. There is no intellectual reason why such measures are not possible for the health industry. The task would involve identifying outcomes, matching them with costs, addressing any cyclicality that might exist (probably modest relative to most industries), and standardizing reporting. Under such a framework, BLS would report a variety of productivity measures for the health sector (hospitals, physicians, medical products, etc., essentially the same categories that are used with respect to the CPI). The providers would be required to publicly disclose their productivity data (productivity number and constituent components).
    Thanks for the descriptions. Now I will try for a summary list of reform targets, based on what you said:

    1. eliminate competitive barriers
    2. eliminate professional entry barriers and support increases in providers
    3. eliminate premature adoption of technology: cost/benefit is out of whack
    4. eliminate price arbitrage situations: expensive here, cheap elsewhere
    5. encourage foreign doctors to practice here: licensing, visas
    6. measure productivity

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