Budget deficits and the national debt no longer seem to concern GOP lawmakers in the Capital. It was really important to them when Obama was president and wanted to increase the fiscal stimulus to fight unemployment. But under Trump it suddenly doesn’t matter. There is an unwillingness to face economic reality and agree to measures that will put the nation back on a sound financial footing.
In fact, the agreement by the House, Senate, and President Trump to raise the debt ceiling and cut taxes by a trillion and a half dollars made the budget deficits and national debt much worse. The can for repayment was kicked down the road. Trump came into office promising citizens he would cut the budget deficits and national debt, though so far he has gone in the opposite direction. Republican presidents and lawmakers seem prone to these actions, notwithstanding what they tell voters when campaigning. Under Ronald Reagan, the national debt tripled, from $712 billion in 1980, to $2.052 trillion when he left office eight years later. George W. Bush doubled the national debt from $5.8 trillion when was inaugurated. This should not have been surprising given his tax cuts while conducting two wars and the passage of Medicare Part D. Democrat Barack Obama increased the national debt 68 percent, though it was the largest dollar amount at $7.9 trillion. Of course, he inherited a desperate economy and the necessity for government stimuli.
Though entitlement programs are major drivers of the national debt, cutting taxes for the most affluent Americans and corporations was not the way to attack budget deficits or the debt. The GOP does not want to deal with the accelerating costs of the entitlement programs, Medicare, Medicaid and Social Security, as that would antagonize too many voters. But spending on these programs must be constrained or their soaring costs will at some point bankrupt the country. The recent tax cuts and rising national debt may give the president and Republicans in Congress an excuse to cut these vital entitlements. Of course, it would be much easier to raise the tax rates again, but that would upset the moneyed interests who are the big donors to the GOP.
Growing Medicare and Medicaid expenditures need to be dealt with as a part of overall health care reform. Currently, over 18% of the nation’s GDP goes for health care, more than $3.5 trillion annually, or $9200 per capita. This is two to three times what other developed nations devote to health care. Government spending on Medicare in 2017 was estimated to be $710 billion, with Medicaid at over $375 billion, according to the Centers for Medicare and Medicaid Services. By 2025, the total cost of health care in the US is estimated to exceed $4.6 trillion, or 20 percent of GDP. And spending for health care will continue to escalate in a similar fashion afterwards. These numbers are clearly unsustainable for the economy as a whole and for the federal government.
The Congressional Budget Office has reported that approximately 30% of health care expenditures pays for unnecessary care. Studies have also estimated that 15% to 25% of health care spending goes for administration and overhead. Thus, we have trillions allocated for health care that is not utilized for necessary patient care. And as health care spending increases over the next decade, so will the amount required for administration, overhead and unnecessary care. To bring health care costs under control, unnecessary care, administration and overhead must be cut dramatically.
Administrative costs and overhead for Medicare are estimated to run in the single digits, with some analysts believing they are as low as 2%. Even at 5% or 6%, they are still a lot better than private insurance companies. Therefore, changing to a single payer universal Medicare system to cover the entire population would save hundreds of billions of dollars in costs annually.
To reduce unnecessary care, fee-for-service medicine needs to be ended. This method of reimbursement produces perverse incentives for physicians to increase tests and procedures, which is responsible for most unnecessary care. (Defensive medicine driven by fear of malpractice suits plays a lesser role, as does duplication of tests when they are not available to ordering physicians.) The easiest way to reduce unnecessary care would be to have physicians on salary. Over 30% already are, working for HMOs, hospitals and other organizations that deliver patient care with no financial incentives to order tests or procedures. A significant reduction in unnecessary care would save Medicare, Medicaid and the overall health care system many hundreds of billions of dollars, pruning the government’s budget deficits and the national debt. Curbing unnecessary care would also benefit patients, lessening deaths and injuries from unwarranted procedures.
Social Security could be fixed by raising the future retirement age, increasing the amount of income subject to the Social Security tax, means testing for Social Security recipients and changing the formula for cost of living increases. In all likelihood, a combination of these actions will be required for long term stabilization of the program. Members of the House and Senate are aware of the path that must be taken to lower the nation’s budget deficits and national debt by modifying entitlement programs and raising taxes. Whether it will be done is another story.
Resurrecting Democracy
www.robertlevinebooks.com
Political junkie, Vietnam vet, neurologist- three books on aging and dementia. Book on health care reform in 2009- Shock Therapy for the American Health Care System. Book on the need for a centrist third party- Resurrecting Democracy- A Citizen’s Call for a Centrist Third Party published in 2011. Aging Wisely, published in August 2014 by Rowman and Littlefield. Latest book- The Uninformed Voter published May 2020