I, the California budget, am bigger than ever right now—more than $267 billion, according to Governor Newsom’s recent revision of me. And please don’t think I don’t appreciate being more swole than Schwarzenegger—I remember how lean and gaunt I got in the Great Recession. When the pandemic first hit, everyone, including me, thought I’d be much smaller by now.

Instead, I’m projected to have a $38 billion surplus. You might think that this would make me feel all safe and proud, since I’m able to fund a bunch of new programs, from small business incentives to transitional kindergarten, and Medi-Cal coverage for more undocumented Californians.

But actually, I’m worried. And you should be too.

The phony conventional wisdom, oft repeated by politicians and the media, is that if I’m doing well, the state is doing well. Just look at the victory lap around California that Newsom, who is facing a recall, is taking to tout all the new things he put in me. But the reality is that focusing on me, when I appear to be in good shape, is a way to cover up our state’s failures to fix our many broken systems.

Right now, money is being poured into me to fund a number of programs that aren’t being properly managed. Look at the state’s unemployment system, and its failures to prevent fraud and deliver services. Or consider all the money that the latest revision of me spreads among homelessness programs that, as a recent audit found, don’t work well by themselves, or together. Or scrutinize the billions being added to housing funds and programs that produce very little affordable housing.

You could also take note of the billions being thrown in to cover pension debt—without any accompanying effort to bring pension and other retirement benefits under control. Or take a gander at the record amounts of money going to schools, which are not yet fully reopened, and which have yet to assess fully all the academic and social-emotional damage done to students by more than a year of closures.

Of course, managing California and its programs is hard. By comparison, I’m easy to handle—I’m just a spending plan. And my numbers are based on predictions about state revenues that are almost always wrong. Why? Because state budget officials make me by guessing how the stock market and the incomes of the wealthy will look in the following year.

Indeed, my dependence on capital gains makes me so volatile that even Kanye probably thinks I’m nuts. And all the formulas that govern me—many of them imposed via ballot initiative by those crazy people known as California voters—make me extremely complicated and even antiquated.

This year, the big reason why the governor is cutting taxes and giving schools extra bucks is because of a little-known 42-year-old, voter-approved formula that limits spending growth, based on population and personal income. That’s right—how California budgets out of the pandemic is being determined not by the needs of today’s Californians but by a ballot measure written in 1979 by an anti-tax activist named Paul Gann, who died in 1989.

Even though I’m governed by the dead, I do include some good new proposals this year, like my new payments to low-income and middle-income Californians, with $500 additional checks to families with children. Harvard economists have shown that such payments worked wonders in California this past year, with poorer counties like Imperial having higher levels of consumer spending during the pandemic than before it. For Fresno and some other parts of the Central Valley, COVID proved to be an economic stimulus.

But beyond such ideas, I wonder if I’m growing too big too fast. Making the new me—the 2021-22 budget—such a giant historic document could bring risks, especially if the stock market and economy turn, and my revenue picture goes upside down again.

While the conventional wisdom is that a big budget is good for the state and the governor, history says that it is at times when I’m most flush that California makes its dumbest mistakes. State voters passed Prop 13 and its tax-cutting formulas when I had a surplus so big it was dubbed “The Obscene Surplus.” The state gave unsustainable boosts to its pensioners when it was running big surpluses in the late 1990s tech bubble.

So, let me suggest making me less bulky. Let’s put aside most of this giant windfall of tax revenues into a reserve, and focus on improving management and developing smarter pandemic recovery plans right now.

Let’s make sure transitional kindergarten works better before enrolling all 4-year-olds in it. Let’s not throw money into pensions and retirements without reforming that system, too.

Then, in the years to come, we can devote this extra money to building up these better systems for the state, so that as I get bigger, I have a longer-lasting impact.

The post I, the California Budget, Am Worried I Might Be Too Big appeared first on Zócalo Public Square.

Seniors might start by learning a word: “prosumer.” This means we are not just producers or not just consumers, but rather both. Seniors increasingly serve as both caregivers and care receivers at the same time. This new reality is taking shape right in front of our eyes—and faster in Hawai‘i than elsewhere.

We—yes, I am a senior citizen too—are bombarded by advice and scattered information from drug companies, internet providers, and more web pages than we have time to search. There is too much advice to be helpful, and few guides. In spite of well-intentioned efforts of government and nonprofits, we are too often confused and disoriented. If you are in a family crisis, there is no time to sort it all out.

This situation, my situation, will only get more difficult. In this decade alone, the percentage of Hawai‘i residents who are 65 and older has jumped more than three points, from 14 percent in 2010 to more than 17 percent today.

Since the government outsources so much, the unstructured and competitive world of small business and nonprofits will primarily drive aging-related service delivery. This change, in turn, will redefine our idea of the aging system into one that is less like a hierarchy and more like a horizontal web. Government is becoming less of a policymaker and more of a partner.

Navigating such a web will be harder; the network of nonprofits serving aging people must answer to small boards of directors and must be creative to raise funds from multiple sources to sustain operations. Often payments to providers are delayed, and they are always at the mercy of the latest legislative appropriation. For providers of services to the aging, public information, education, empowerment, collaboration, and volunteerism are overlapping concentric circles of daily reality.

At the same time, the people who work in institutions for the aging, and those institutions themselves, will have to reinvent themselves to survive over time. Those dependent on the fickle changes in government appropriation, grants, and hot topics are forced to accept “mission drift” to chase the money.

Ultimately, my generation of aging people will have to take more ownership over the institutions that serve us. I can already see this at work on the islands, where there are different groups on Maui, the Big Island, Kauai, Oahu’s windward side, and in other small communities that are affiliated with a small local health clinic or senior center.

Working in this way will ask more of people, but there are advantages. Groups that are tied closely to community may be better equipped to speak to individual needs.

Much of what I’ve said to this point is true of many places. But Hawai‘i has its own micro-trends that will complicate the transition to a new era of aging.

Hawai‘i has a high cost of living and is far from easy access to neighboring states or services. We import all of our food and everything else. Housing costs intensify the income gaps. New generations often leave for greener opportunities. Too many families are one minor crisis away from homelessness.

Already, families and their networks are stressed. In Hawai‘i, there are over 150,000 caregivers helping family members. This sort of arrangement may not be sustainable. Increasingly, extended families don’t live in the same house, or even on the same island. And after attending college on the U.S. mainland, many set down roots elsewhere, and are thus unable to respond to an emergency. The ability of the family to help with the health and well-being of elders is disappearing.

The cost of housing limits our ability to safely and affordably house aging, vulnerable, and frail elders. Widows live in isolation in condos, with no one to check on their welfare. Many are too rich for Medicaid and too poor to afford high-end senior residential facilities—where “buying in” may cost hundreds of thousands of dollars for peace of mind as one grows frailer.

What Hawai‘i needs, then, is a middle zone that meets the needs of elders within a fraying system. Where will the income come from to support such an infrastructure? In the future, a growing percentage of retirees will not even have retirement benefits.

The ability of government to provide safety nets is on shaky ground. American culture, ideology, and politics may make it harder to guarantee existing benefits such as Social Security, Medicare, and Medicaid. Long-term care insurance for the middle class is not on the health care agenda. The role of the federal government is diminishing, with political polarization creating a narrative that views every essential service as an unnecessary and undeserved entitlement. Each state is on its own.

At the same time, a trend towards decentralization is overtaking many of our services and quickly exceeding the ability of government to regulate them.

Everywhere in Hawai‘i, we see this decentralization of organizations as former employees are becoming self-employed. Employed and licensed cab drivers are becoming Uber contractors. Taxed hotels are becoming untaxed bed-and-breakfasts hidden within a larger house or even an apartment. Care homes that were once regulated, inspected, and licensed are becoming alternative living arrangements beyond the reach of government oversight

Consider a new trend in Hawai‘i, so-called Aging in Place (AIP) facilities. Traditionally, a state-regulated care home was clearly defined by the law. The operator of such a care home could receive both private pay and public Medicaid residents, and would provide health benefits, social services, meals, and other assistance for people who had difficulty with activities of daily living. In addition, a small number of unrelated residents might share a home, which was inspected for compliance with basic safety features, like larger doors and ramps for wheelchairs.

Now enter the new, unlicensed, private-pay AIP entrepreneurs—claiming to be only landlords providing bed and board under a rental agreement (often for $6,000 or more a month!). They say each “renter” has his or her own arrangement with support systems provided by independent home health or home care agencies. They say the state has no right to knock on the door and inspect the facility or its residents.

Because this does not fit the government’s previous definitions of care facilities—indeed the AIP was invented precisely because it could evade them—these facilities are poorly regulated. Government has been slow and unable to change its industrial-style consumer protection and quality-control approach to this new world, where innovative legal and financial arrangements appear outside the scope of regulation.

There’s a tendency to think that this time of confusion—for aging individuals, for government regulators, and for society at large—will soon pass and we’ll be back to some kind of predictable normal. I do not see it that way at all. The most consequential social change of our times has been the shift from the industrial culture and society to the information age. This is the Third Wave, as futurist Alvin Toffler titled it in a book suggesting that human history could be understood as three major waves of change.

The First Wave of change—the agricultural revolution—took thousands of years to play itself out. The Second Wave—the rise of industrial civilization—took a mere three hundred years. Today, in the Third Wave, history is moving even faster, making most factory assembly lines obsolete; fragmenting families; and radically changing governments and corporations.

For aging and specialized communities, the Second Wave gave us large hospitals, mental health institutions, public health and sanitation, orphanages, large homes for the disabled—all tightly controlled and isolated from the general public. But the Third Wave pulls apart and decentralizes everything we do. The consumer has more choices—and more difficult responsibilities and decisions.

When those choices involve aging, as they so often do in Hawai‘i, this change should make you think of small, flexible nonprofits serving seniors in their homes rather than government-run facilities. Or think of nonunion workers rather than civil servants with pensions. Or think of government funding through contracts to Meals on Wheels, home hospice care, home chore services, or adult day care.

If the Second Wave was a mass society, with mass media, and mass production, the Third Wave is a fragmented society—multimedia internet rather than three big networks, small musical groups versus orchestras.

The future of Hawai‘i’s seniors depends on our ability to craft appropriate, affordable support and oversight systems for such smaller operations, and for the new realities and the special challenges of the Aloha State.

The post Why It’s So Tough to Grow Old in Hawai‘i appeared first on Zócalo Public Square.

For them, just going to the hospital could result in bills that would take a decade to pay off. The old then squeaked by on getting special rates from doctors and hospitals who knew they had limited resources. Many relied upon their families to help them pay. There was no safety net whatsoever: One 1963 survey found that nine out of 10 couples, and eight out of 10 elderly individuals, paid for their own care without help from government or private sources.

Since 1946 through 1952, when Harry Truman was president, liberals had argued that the United States lagged behind other countries by failing to guarantee health care to all of its citizens. But in the ensuing decades, health care reform had been a losing issue for Democrats. Taking on the health care issue was a top liberal issue, but it wasn’t easy. The U.S. had a well-developed system of private health care, which meant that when liberals pushed for their policy, those with a vested interest in the existing system—including doctors—would have reason to say no. The process of crafting Medicare and Medicaid, building a federal program on top of a well established private system, left scars on the legislation itself so that these unresolved arguments from half a century ago still haunt American health care today.

In 1949, the American Medical Association and congressional conservatives had defeated President Truman’s plan to provide national health insurance for all Americans by branding the proposal as “socialized medicine” and warning that patients would lose their relationship to their doctors. During the mid-1950s, liberals narrowed their focus by proposing a federal health care program for the elderly, paying for the cost of hospital insurance through Social Security taxes. President Kennedy picked up on the idea and pushed for “Medicare” in 1962 and 1963.

But congressional conservatives and the AMA blocked the proposal. California Governor Ronald Reagan produced a record that the wives of doctors in the AMA played during coffee klatches in which he warned: “One of the traditional methods of imposing statism or socialism on a people has been by way of medicine.” The AMA distributed posters that doctors hung in their offices, warning patients that should Congress pass Medicare, bureaucrats would make their next medical decisions. “The doctors in Florida agreed that the first three minutes of every consultation with every patient,” said Florida Senator Claude Pepper, “would be devoted to attacking socialized medicine. …”

But the politics changed in the spring of 1965. Lyndon Johnson won a landslide reelection against Arizona Senator Barry Goldwater, a right-wing Republican who spent much of his campaign blasting Medicare proposals. With Goldwater’s defeat, many Republicans believed that they would have to move to the center and work with the administration to survive. The election produced huge Democratic majorities in the House and Senate, with many of the new members having entered into Congress determined to pass the languishing health care proposal.

Johnson, sensing that he might be victorious, told one of his top advisors, Wilbur Cohen, to find a bill that would please Wilbur Mills, the conservative chairman of the House Ways and Means Committee. “You get him something, though … if labor will buy, that he can call a Mills bill, that’s what it amounts to …” Johnson understood that his time was limited, and urged everyone to move as fast as possible. “For God sakes, don’t let dead cats stand on your porch,” he said about the Medicare bill—explaining that if a bill sat around to long, like a carcass, it would begin to “stink.”

Republicans, eager to distinguish themselves from Goldwater, proposed their own alternatives to Medicare. One proposal provided insurance to cover the cost of physicians, paid for through general tax revenue and a contribution from participants. Another program would provide health care to the poor, those who were “medically indigent” and couldn’t afford care on their own.

When the House Ways and Means Committee met to discuss the three plans in early March, administration officials were worried that their plan would not be able to garner enough support to pass the committee. But Chairman Mills, who decided that it was no longer possible to hold back the tide on the legislation, given that so many of the new members elected in 1964 had promised to deliver on Medicare, shocked everyone in a closed committee hearing. He turned to Wilbur Cohen and said, “Maybe it would be a good idea if we put all three of these bills together. You go back and work this out overnight and see what there is to this.”

In that moment Mills transformed himself from the top opponent to the main architect of the new program. The rest was history. The bill moved through the Ways and Means Committee, the House, and finally the Senate. Johnson was happy to give Mills all the credit in exchange for a bill, though the president was taken aback at just how expansive the revised program would be.

Johnson traveled to Independence, Missouri to sign the Social Security Amendments of 1965 into law on July 30, 1965 with Harry Truman standing by his side. The final legislation, officially called the Social Security Amendments of 1965, contained three parts. The first, Part A, provided hospital insurance to elderly Americans covered by Social Security paid for through the payroll tax. Part B was a voluntary program that covered doctor’s bills, paid for through a combination of general tax revenue and premium contributions from recipients. Finally, Part C, which we now call Medicaid, provided health care coverage for poor Americans who were “medically indigent.” The final part was much more like a welfare program, administered by the states and paid for through a combination of federal and state money.

Yet even at a moment when liberalism was strong, Medicare proponents still had to make a number of consequential compromises because of America’s resistance toward strong government. The most important was that Medicare and Medicaid provided this insurance within the existing health care system. As the sociologist Paul Starr has argued, the system layered the federal insurance on top of the existing system, thereby leaving many of the dysfunctional elements of American health care fully in place.

Medicare and Medicaid also stuck to the American political tradition of distinguishing between “deserving” and “undeserving” recipients of government help. This was a central feature of political discourse about government assistance since the start of the Republic, as the historian Michael Katz has written. In this case, the government provided benefits based on status rather than as a right.

With Medicare and Medicaid, you had to be old or you had to be poor to receive this help. You couldn’t just be an American.

The result was that even in a moment of victory, liberals legitimated a narrower vision of public policy than existed in other comparable systems in Europe. The fact that Medicare depended on a Social Security tax, which was sold as a way of showing this was an “earned benefit” likewise confirmed a limited vision of the obligations of government.

And then there was the problem of cost control. During the final weeks of negotiation over the bill, Ways and Means Chairman Wilbur Mills pushed back against efforts to include stronger regulatory mechanisms to control health care costs in the legislation. The final law allowed hospitals to determine what a “reasonable fee” would be, with a guarantee that the government would pay it. The result was skyrocketing costs over the next few decades. Although Congress did impose tighter cost controls during the 1980s, the overall strength of the federal government remained limited and health care providers came to rely on high charges.

All of these compromises, which made Medicare and Medicaid possible in 1965, would have long-lasting effects. By providing health insurance to the elderly the program made a huge difference. In 1963, one of every five Americans who lived below the poverty line never had been examined by a doctor, and poor people used medical facilities less than others. By 1970 that proportion had fallen to about 8 percent. Most elderly Americans had access to hospitals and doctors. Medicaid vastly expanded over the next few decades to include pregnant women, kids, and other categories of Americans who have limited access to care. By 2011, close to one-third of all Americans, not just the elderly, were covered by Medicare and Medicaid.

Hospital administrators, doctors and other people in the health care system now depended on these federal dollars. State governments counted on Medicaid dollars in their health care budgets. The programs became so ingrained in the national political consciousness that when conservatives rallied to oppose President Obama’s Affordable Care Act in 2009—which achieved some cost savings through cuts in Medicare—they held up signs saying “Get Your Government Hands Off My Medicare.” The signs were ironic and funny, but also the best evidence of success, namely that even the right wing accepted these plans as part of the status quo.

The post How Medicare Both Salved and Scarred American Health Care appeared first on Zócalo Public Square.

Q: What is the most important finding of the study?

A: With every year of public health funding, more than 200,000 people in California will improve their general health status, and of these people, more than 29,000 will not die. These are causal effects. The value of one year of improved health has been estimated to be equivalent to receiving $42,000 in additional income for the person whose health is improved. The value of a life saved has been determined by the federal government to be worth almost $10 million dollars. Therefore, I conservatively estimated that every dollar invested in the California county public health system returns $67 in improved health. To put that in perspective, every dollar invested by Medicare in programs to treat heart attacks, type 2 diabetes, stroke and breast cancer returned from $1.10 to $4.80 of improved health, depending on the condition.

Q: Were you surprised by what you found? If so, why?

A: I was quite surprised. I did not expect county public health programs to have such a large impact on population health. But I think that is simply a function of how difficult it is to see the effects of public health activities. Public health activities primarily prevent bad health outcomes from happening and this effect cannot be easily seen without careful investigation.

Q: What was your objective in undertaking this study?

A: I wanted to determine the return on dollars invested in the county public health system. That is, how valuable is the entire county public health system in terms of the health that it produces? The impact or effectiveness of the county public health system is difficult to see, since unlike medical care, public health interventions are usually aimed at preventing illness in populations rather than curing sick individuals.

For example, the effectiveness of a medical intervention to cure food poisoning would be easy to evaluate because we would start with a clearly identifiable group of individuals with food poisoning. We could then determine how many of these individuals quickly recovered from food poisoning due to our medical intervention. In contrast, an analogous public health intervention would be designed to prevent food poisoning. One such public health intervention is the inspection of food service establishments. In this case there is no easily identifiable group of individuals who may have been poisoned if the inspection had not taken place. In other words, it is easier to count how many individuals with food poisoning recovered because of a medical intervention than to count how many individuals never experienced food poisoning in the first place because of a public health intervention. The latter can be done; it is simply much more difficult.

Q: Can you briefly describe how the study works?

A: We estimate the causal relationship between the amount of money spent by California county departments of public health and deaths from any cause. We also estimate the causal relationship between the amount of money spent by California county departments of public health and changes in the general health status of individuals.

When examining mortality, we are able to obtain an accurate count of all the individuals who died during a given year in each county, since mortality is carefully recorded by the state. When examining changes in general health status, we analyzed a carefully collected representative survey of individuals in each county, which gave us an accurate description of the percentage of individuals in each of five different general states of health (poor, fair, good, very good, excellent). This simple self-reported measure of health is actually very predictive of actual health.

We then used sophisticated statistical techniques to mimic what would happen to mortality and general health status in a randomized controlled trial in which counties were randomly given increases in their public health budgets. We expect those counties with higher public health spending to have lower mortality and higher general health status. We do not actually perform this randomized controlled trial for ethical reasons, but are able to mimic it statistically using data on what actually happened.

Q: What are the responsibilities of a county public health department? When we give them more funding, what are we getting in return?

A: Many people do not have a clear understanding of the broad array of activities that their county department of public health engages in. The 10 essential services of public health include 1) monitoring population health status to identify problems; 2) investigating health problems and hazards; 3) educating people about health issues; 4) mobilizing community partnerships to identify and solve health problems; 5) developing policies and plans that support individual and community health; 6) enforcing health-related laws and regulations; 7) linking people to needed personal health services and assure the provision of health care when otherwise unavailable; 8) assuring a competent health care workforce; 9) evaluating the effectiveness, accessibility, and quality of personal and population-based health services; and 10) researching for innovative solutions to health problem.

Most of the services provided by county departments of public health benefit the average person, without their even being aware of it. The average person may not get sick during flu season because other people received flu shots provided by the public health department thus reducing the possibility of being exposed to the virus. The average person may not get food poisoning because the restaurant they like to eat in was brought up to code by a conscientious health department inspector. The average person may not become ill from long-term exposure to second-hand cigarette smoke due to public health efforts to establish non-smoking policies. The average person may start to eat more fruits and vegetables due to the influence of a friend who was involved with a public health nutrition program. The average person may not contract a sexually-transmitted disease because of public health programs to reduce sexually-transmitted diseases that someone else participated in. The list goes on and on.

Q: Do county departments of public health save money for counties?

A: I think that is the wrong question to ask. Many public services exist not to cut local government costs, but to improve the quality of life in the county. Examples of public services that are provided primarily to improve quality of life rather than to cut local government costs include public libraries, public parks, bike lanes, the enforcement of building codes, and fire services. These services make an area a nicer place to live in, which indirectly improves property values, allows local businesses to thrive, and over the long term, increases county tax revenues. Many counties are known as desirable areas whose residents have excellent health as can be seen on websites like http://www.countyhealthrankings.org/. Well-funded county departments of public health are an important reason why some counties have better health than other counties.

The post How Being in Good Health Can Save Californians Money appeared first on Zócalo Public Square.

I say this both as a health-policy wonk, with my own health policy consulting firm, and as a husband and father. My wife and I live in Sacramento, California, and we have a five-year-old son. My wife also happens to have a pre-existing health condition. It’s nothing life-threatening but it’s just serious enough that she has been turned down for regular health insurance coverage. Up to a third of Americans face a similar issue, according to the Government Accountability Office.

Finding affordable, high-quality health coverage for my family has been, even for me, an “expert” in the area of health insurance, very complicated and frustrating. So I work with a health insurance broker to understand my options.

Currently, we have “COBRA” coverage for my wife, a type of health insurance you can get for 18 months after you’ve left employer-sponsored health coverage and that is available regardless of health history. It is expensive, though, costing us $655 per month. Then, since I don’t have an employer to provide coverage, I buy a separate policy in the so-called “individual market” to cover my son and myself. That costs $482 per month.

So before we get to any out-of-pocket medical expenses, we’re shelling out $13,644 per year in health insurance premiums. That’s actually quite a bit less than the average premium cost of $18,430 for people with employer-sponsored insurance (as calculated in the Milliman Medical Index of 2013), but the difference is that people with employer-sponsored insurance don’t have to take out their checkbook and pay the entire bill, since their company covers part of it and takes the rest out of their pay.

Our coverage is good for what we pay, but not extraordinarily so. It’s a pair of similar PPO (Preferred Provider Organization) products through Blue Shield of California that have a fairly broad network of doctors and hospitals.

Will my life get less complicated and frustrating on January 1, 2014, the day that health reform coverage starts? I believe it will.

One major improvement is that my premium payments for covering my family will drop. In California, a “silver” level Blue Shield PPO plan in the Sacramento region will cost us $997 per month, about $140 per month less than we now pay for roughly the same level of coverage. I came up with these numbers by looking at the plans that will be available on the website of Covered California, my state’s marketplace. (Every state will have its own, and the costs are similar.)

I can now purchase one health insurance policy for my three-person family instead of worrying about what to do when my wife’s COBRA coverage runs out. If one of us has a medical issue, our premiums won’t go up. And if one of us has a serious hospitalization, the medical bills won’t bankrupt my family. One major benefit of the Affordable Care Act is that it largely does away with the problem of giant hospital bills. It caps total out-of-pocket, annual spending on medical care at $6,400 for an individual and $12,800 for a family. These numbers will be even lower for working-class families.

One tradeoff for the lower premium and the added security of my family’s new health plan is that we’ll have access to a narrower group of doctors and hospitals than we do currently. But I have checked, and the doctors and hospital facilities that we are using currently are available in the plan’s network. So the numbers work out well for us. Better still, I’ll be paying this money into a health insurance marketplace that is simpler and more humane.

My wife and I make enough money that we will not receive any financial assistance from the federal government for purchasing health insurance. But healthcare reform was not passed solely to help the poor or unfortunate. The law is designed to make sure that even those of us who are relatively well off, like my wife and me, don’t end up vulnerable when we switch jobs or choose, as I do, to be entrepreneurs.

Things will be even better for people who receive subsidies to purchase private insurance. These are people making up to 400 percent of the federal poverty level—that’s about $90,000 in pre-tax income for a family of four.

Take a family of four buying the exact same policy—at $997 per month or $11,964 per year—that I will be buying in Sacramento. Let’s assume that their household income is $60,000 per year, placing them squarely in the middle class. The amount they will pay toward their premium is capped at 8.2 percent of their income on a sliding scale. So they will pay $4,913 per year, or $409 per month.  The federal government provides a subsidy of $7,051 to cover the rest of the premium. If that family were to choose the most affordable policy available in the region, an Anthem Blue Cross PPO at the “bronze” level, it would cost them only $162 per month.

These calculations can get complicated, but, luckily, consumers won’t have to run the numbers themselves. A website or a professional assister will take care of that. And remember that the law controls spending growth in the Medicare program and raises revenue to cover the cost of these subsidies, so Obamacare is not projected to increase the national debt significantly, if at all.

None of this means free healthcare is on the way. On the contrary, everyone with insurance will pay a significant amount in out-of-pocket costs if they access care, and everyone is required to have health coverage. There’s a very good reason for this. If people do not have adequate coverage, or any coverage, these costs are passed along to the rest of society.

And some people—in particular younger, more affluent men—will pay significantly more per month. But most people are not wealthy enough to fall into the groups that will pay significantly more in premiums, and many will pay much less.

A lot of us may fail to notice the benefits of Obamacare, just as we fail to appreciate most problems that are averted. If you leave a hospital and have “only” a $6,400 medical bill instead of a $40,000 medical bill, will you be happy—or upset that you have a $6,400 bill? Will people even notice if their health insurance covers a particular benefit now—or did they just assume that the benefits were covered? Because of health reform, millions of terrible moments—of frustration, of panic, even of bankruptcy—that would have happened will not happen. But it’s unlikely that people will understand the pain they were spared, if they never experience it.

Certainly, the Affordable Care Act has flaws. It awkwardly combines a Republican blueprint—the “individual mandate”—with Democratic engineering. So some of the nuts are screwed onto the wrong bolts. And if we don’t continue to service and repair the vehicle conscientiously, the whole thing is going to fly apart with us in it, Democrat and Republican alike.

Like many people, I’ve got my own views about what kind of a health reform law I might prefer in the abstract. I would take a page from John McCain and do away with the tax benefit for employer-sponsored insurance. But I’ve chosen to put that aside. We’re two months from the opening of the new marketplaces where people can buy health coverage. At work, I’ve been trying to help set up these new systems so they function well. At home, I’m getting ready to buy our new plan. I think it will benefit our family—and many others.

The post My Family’s Obamacare appeared first on Zócalo Public Square.

Everyone knows Medicare needs to be set on a sustainable course, but partisan exchanges about how to achieve that have become increasingly sharp. This election season, Republicans have accused President Obama of cutting Medicare, while Democrats have accused Republicans of intending to end Medicare altogether. The rhetoric heated up further when Republican presidential aspirant Mitt Romney chose Congressman Paul Ryan as his running mate. Ryan is known to favor Medicare “vouchers,” with which he contends seniors could shop around for private insurance, as a remedy for Medicare’s presumed unaffordability. Democratic figures charged that vouchers would “end Medicare as we know it,” and New York Times columnist Paul Krugman has dubbed Ryan’s ideas “Vouchercare.” So what’s the truth of the matter? Is Medicare really unsustainably expensive—and are vouchers a viable means of addressing its fiscal challenges?

Before diving into the fray, let’s first briefly lay out how Medicare works. Medicare has four “parts”: A, B, C, and D. Part A provides hospital insurance, using social insurance methods to finance the program—i.e. taxes on wages and salaries. Part B provides physician insurance, drawing on federal taxes and premiums paid by seniors, the disabled, and those requiring kidney dialysis. Part C, introduced in 1997, allows Medicare beneficiaries to receive their benefits through private insurance plans. Under Part C, beneficiaries can enroll in “Advantage” programs, which initially were set up for group practices that combined the financing and delivery of care in one organization. Part D, enacted in 2003, covers the costs of some prescription drugs.

Since 1966, Medicare has expanded in enrollment, complexity, and costs. Medicare’s overall outlays will only increase, but for two quite different reasons. The first is demographics. The proportion of the US population over 65 is expected to rise by 50 percent between 2010 and 2030, and the proportion of those under 65 will necessarily shrink. An even higher percentage of Americans will therefore shift from private insurance to Medicare, which prompts dark warnings from those who oppose any growth of government. For defenders of Medicare, the fact that the country will have more seniors to cover simply requires increases in Medicare’s revenues and expenditures balanced by lower expenditures elsewhere for healthcare coverage.

The second reason Medicare’s outlays can be expected to increase is that per-capita costs of medical care in the United States have vastly outpaced inflation. The U.S. spent 7 percent of national income on medical care in 1970; today it spends roughly 18 percent of a much larger national income. Overall medical care inflation, reflected in increasing per person costs, is an indisputable national problem, crowding out all other spending, public or private.

This is where Paul Ryan and vouchers come in. Vouchers are fixed sums of money that can be spent only for a specified, limited purpose. Ryan’s idea is to give Medicare beneficiaries vouchers with which to buy health insurance on the private market. Instead of serving as a direct insurance provider, the federal government would provide each Medicare beneficiary with some fixed dollar amount—say, $10,000 a year—that he or she could use to shop around for different health plans.

Supporters of this idea see several advantages to it. The first is that the federal government would have a limited annual budget instead of an open-ended commitment to pay for as much care as its beneficiaries receive. Medicare’s budget would become a matter of much simpler arithmetic: the average voucher amount, set by Congress, times the number of beneficiaries. The second benefit, supporters say, is that vouchers would help contain medical inflation, because the government wouldn’t write blank checks to healthcare providers but instead allocate fixed sums that would cover health-insurance premiums paid to private insurers. The resulting competition among insurers would not only restrain healthcare inflation but also, thanks to lower federal outlays, help to reduce the federal deficit.

To see how Ryan’s plan might look in an ideal world, imagine Fred, age 70, who has $10,000 with which to purchase health insurance. He can choose a plan from Aetna or Kaiser or Cigna, each plan with different benefits and limits. His choices would, in short, be much like those most people under 65 have today. While healthcare costs would be substantially covered, there would be no blank check. All of Medicare’s beneficiaries—people like Fred—would be active consumers, using their vouchers to select the firms that respond to their demands. Because insurance firms would compete for customers on price and quality, the rate of medical inflation would go down.

But that’s in an ideal world. For all the superficial attractiveness of medical vouchers, they come with many problems. For one thing, Fred might be in poor health. Maybe he has diabetes and prostate cancer, and he needs extensive medical attention. No insurance firm in the free market would want to cover Fred, when it could instead take on Bill, age 66, fit and healthy and still playing tennis. To prevent such discrimination, insurers would have to be subject to regulations that would set minimum standards for care and ban discrimination against unhealthy customers. Or else Medicare would have to adjust the voucher sum to the risks of different patients, a task that would be hugely costly and administratively complex. Another problem is that if medical inflation were to increase faster than the value of the voucher in the years to come, Joe’s voucher would buy less and less health coverage and his out-of-pocket costs would increase.

If vouchers would provide enough money to purchase basic Medicare coverage for everyone, there would be nothing objectionable to them in principle. Indeed, beneficiaries enrolled in Medicare Part C, the Medicare Advantage program, already enjoy an analogous arrangement, with Medicare sending payment directly to the beneficiary’s insurance provider. But the history of Part C doesn’t offer much encouragement when it comes to cost savings. Average expenses for those in the Medicare Advantage program have been 10 to 15 percent higher than those for comparable seniors in traditional Medicare. Competition for customers seems to have inflated rather than reduced costs.

Supporters of vouchers also point out that some European countries employ a voucher system, notably Holland (since 2006) and Switzerland (since 1996). Both countries introduced universal health insurance mandates under the banner of “managed competition,” and Dutch and Swiss citizens could use the equivalent of a voucher to select insurance plans. However, while the control of medical inflation was the announced goal, the experiment did not work out that way. Medical inflation increased in both countries.

In sum, the voucher system, as closer examination reveals, would not control medical inflation, simplify administrative complexity, or secure uninterrupted and stable economic protection. That raises the question of why it has become so central to reform efforts by Paul Ryan and his allies. I suspect that the dispute is fundamentally philosophical rather than actuarial. If your view of the proper role of government is far more limited than that of Roosevelt’s New Deal, Truman’s Fair Deal, or Johnson’s Great Society, then you look wherever possible to cede leadership to the marketplace. In short, we are back to the struggles that divided Franklin Roosevelt from Herbert Hoover; Harry Truman from Thomas Dewey; Lyndon Johnson from Barry Goldwater.

A telling example of the divide emerged last spring with a proposal by Senators Tom Coburn (R-OK) and Joe Lieberman (I-CT) to raise the age of Medicare eligibility from 65 to 67. As the Kaiser Foundation pointed out, that would trim expected annual federal expenses by $7 billion per year, but it would also increase total actual annual outlays for those over 65 by $10 billion dollars. In short, the “reform” just shifts costs to the elderly and their private insurance and does nothing to stem medical inflation.

A more defensible proposal for reforming Medicare would begin by reasserting its fundamental social insurance aims: protecting elderly Americans and their families from the costs of medical care, financing healthcare from reliable sources, and providing a common benefit that treats seniors with similar ailments similarly. The pressure of an increased number of senior citizens means that more of our collective funding must be spent on their coverage, but this need not be a crisis. Between 1980 and 2000, the countries of northern Europe—Norway, Sweden, Germany—experienced an increase in their elderly populations comparable to what the United States will face between 2010 and 2030. None of these nations had to transform their national health systems to cope with the demographic changes. What all of them did have to do was hold their medical care systems to a budget, with annual negotiations to adjust agreements and keep healthcare affordable. That’s simple to say and hard to do. But the sooner we start doing it, the better.

Ted Marmor is professor emeritus of politics and public policy at Yale. His most recent book, with Rudolf Klein, is Politics, Health and Health Care.

*Photo courtesy of Gage Skidmore.

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“With an aging population and rising healthcare costs, we are spending too fast to sustain the program,” the President told a joint session of Congress in September. He already has set in motion or proposed cuts to reimbursement rates for doctors and hospitals that are so steep that future seniors will be lucky to find providers who still take Medicare patients.

Meanwhile, all but six Republicans in the House of Representatives have voted to turn Medicare into a voucher program–a vision endorsed by all but one of the GOP’s presidential candidates as well. This proposal would, according to the Congressional Budget Office, leave the next generation of seniors paying nearly 70 percent of their healthcare expenses out of their own pockets while having to wait until age 67 to receive any federal benefit from Medicare at all.

Why have both parties declared war on Medicare? While all politicians fear the wrath of the AARP and the growing number of hard-pressed seniors, Medicare’s relentless squeeze on the budget seems to give party leaders no choice but to attack the program’s spending regardless of the political cost. Medicare’s ever-expanding claims on the Treasury threaten to crowd out Democratic priorities (bullet trains and decent public schools) and Republican ones (avoiding future tax increases and fighting draconian cuts to the military).

Yet both parties are ignoring a relatively painless and proven fix that offers the upside of vastly improving the quality of U.S. healthcare. If every Medicare provider were required to follow best practices in healthcare, Medicare costs would be easily manageable, most of the federal government’s long-term deficit would melt away, and patients would receive better care.

For evidence of this claim, consider Intermountain Healthcare, a healthcare system in Utah that requires the use of best practices. Dartmouth researchers John Wennberg and Elliot Fischer have estimated that, if all providers could achieve the same level of efficiency for inpatient care as Intermountain, Medicare hospital spending would fall by 43 percent–mostly by eliminating unnecessary surgery, redundant testing, and other forms of wasteful and often harmful treatment. Other examples of healthcare delivery systems combining high quality and cost effectiveness include the Mayo Clinic and the government’s own veterans healthcare system (VA), which, after a remarkable turnaround, is vastly outperforming most for-profit healthcare systems.

What these examples have in common is organization. Their doctors are all on salary, which means they have no incentive to engage in overtreatment. This is no small matter, since it is now widely accepted that about a third of all healthcare spending in the U.S. goes for treatments that benefit no one except the doctors and specialists billing for unnecessary services.

These are also large, integrated systems in which various specialists work together with primary care doctors as a team using electronic medical records, so patients don’t wind up being prescribed harmful combinations of drugs. This is also no small matter, since medical errors in U.S. hospitals kill upwards of 100,000 Americans a year.

Finally, these systems operate under fixed budgets. They don’t get paid for performing services without regard to outcome. Instead, they are paid a fixed amount per patient and make ends meet by keeping their patients well, thereby giving them a business case for investing in prevention, primary care, and effective management of chronic conditions such as diabetes and heart disease.

What are healthcare providers who combine these features called? Well, don’t scream, but technically they are Health Maintenance Organizations. But not just any HMOs. They are all non-profit institutions. And as such, they are not under pressure from Wall Street to produce short-term profits, and don’t face the perverse incentives that led many profit-driven HMOs in the past to deny beneficial treatment to patients.

They are also large institutions that hold onto a significant portion of their customers year after year. The money they spend up front to help patients quit smoking, lose weight, or manage their diabetes comes back to these institutions in the form of lower healthcare costs for these same patients down the line.

These examples pose a choice: either we “save” Medicare by cutting back eligibility and/or compensation to doctors, as both parties propose, or we go for a true solution: get Medicare out of the business of paying for wasteful medicine and into the business of paying for best practices in medicine.

Practically, that means setting a date certain when all Medicare providers will have to be organized like Intermountain Health–as integrated, non-profit HMOs.

Will that mean less choice of doctors? Yes, it will. But except for current Medicare beneficiaries, few Americans today have unconstrained choices of doctors. And for most younger Americans, receiving Medicare in a quality HMO would be a far better outcome than any other proposal would produce.

Phillip Longman is a senior fellow at the New America Foundation and the author of Best Care Anywhere: Why VA healthcare would be better for everyone (Third edition, Berrett-Koehler, 2012).

*Photo courtesy of jodimarr.

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