We all know that we are still going to have to work on Adam. The basic situation is that he is trying to reconcile being a deficit hawk and not actually wanting cuts in Social Security or Medicare.
I've attached a pdf document with the health care utilization info he requested, as well as a spreadsheet (if you want a copy, pm me) demonstrating why cutting benefits of rich people isn't going to save very much. Bottom line--there just aren't enough rich people to make a difference. I'm sending the info off to Matt Perry and will keep you advised of a response
Health care utilization data requested by Smith
http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2010/Jun/1412_Anderson_measuring_US_hlt_care_sys_intl_ib.pdfFactor US OECD Avg
Physicians/1000 population 2.4 3.3
# Doctor visits/capita 4.0 6.4
Hospital discharges/1000 population 119 162
Hospital beds/1000 population 2.7 3.4
Avg length of stay for acute care 5.6 6.6
Hospital spending per discharge $6867 $17126
CTs/million 33.9 4.8
MRI/million 26.6 7.7
Cardiac catheterization/100K 434 173
Stenting/100K 434 194
Knee replacement/100K 176 115
Dialysis/100K 114 51
In general, other developed countries have higher overall health care utilization rates. The US does have on average more high tech utilization, but there are a number of countries in each case that have much higher utilization of some high tech interventions. In Japan, the government demands that MRIs cost no more than $150, so doctors prevailed upon Toshiba and Hitachi to develop MRI machines that cost $150K instead of $1.5 million. Japan has twice as many per capita as the US, and they have turned out to be huge export earners via sales to underdeveloped countries.
It is true that more rational evidence-based guidelines would reduce costs here—especially with stenting, often done because the patient is cut open anyway and about 90 seconds for inserting a stent gets the hospital an extra $15,000. Britain has a very low dialysis rate because it has one of the world's most aggressive prevention programs.
The economics of health care are like the economics of the fire department. In both cases, small numbers of people account for most of the costs, and therefore most countries have the sense to spread these costs over the entire population. We only do that for fire departments. In every demographic slice, 5% of the population accounts for 50% of all health care costs, and 15% of the population accounts for 85%. Sticking the sick minority with even more cost sharing than they bear now is stupid and cruel, and will only save money if that policy kills more of them than the 44,000/year who already die for lack of money to pay for health care.
Private insurance survives by eliminating as many of the high cost people as they can from their rolls, and if they are forced to take on many more of them they can only continue to profit from sickness if they continue to jack the rates sky high for everyone—which they are doing now, as they have been for the last 30 years. Markets only work for things that people want, and no one wants house fires or heart attacks. One way or another, the only method for controlling health care costs is to put public agencies in charge.
Comments on reducing Social Security benefits for higher income people
See attached spreadsheet
http://www.oecd.org/document/35/0,3343,en_2649_37427_46661795_1_1_1_37427,00.htmlhttp://en.wikipedia.org/wiki/Household_income_in_the_United_StatesData on number of Social Security beneficiaries from
http://www.ssa.gov/policy/docs/statcomps/supplement/2008/supplement08.pdfWe are paying out about $30 billion a year in Social Security for retirees. 9% of recipients are getting $2000/month or more totaling about $4.6 billion, or 15%. $2000/month is $24,000/ year—not a lot of money. If $2000 were the upper limit, we would be paying out $4.3 billion for the top 9%- of the population—very little savings, about 0.9% over current policy $17.9 billion is spent on those getting from $1200-$2000/month, and $9 billion on those with incomes lower than average.
Suppose we limited the 560,011 people getting more than $1700/month to $1700/month. That would cost $11 billion instead of $13 billion, for a savings of only 5.3% over current policy.
Conclusion: cutting benefits for higher income Social Security benefits doesn’t save much money. Still, the very complicated initial benefits formula could be adjusted to benefit those now getting less than the mean monthly income—it just isn’t going to change the outgo by much.
The other end of the financial equation is raising FICA on higher income earners. At the current 7.65%, we collect about $598 billion a year (rough estimate—online data from 2005 gives $771.4 billion collected). Still, looking at comparative numbers should work. With no limit on FICA income, we’d get $997 billion (67% increase). With income taxed up to $250,000, we’d get $763 billion (28% increase). With income taxed up to $200,000, we’d get $716 billion (20% increase). With income taxed up to $150,000, we’d get $617 billion (3% increase).
Emily W’s suggestion of lowering the rate while raising the cap would work only if the cap was raised to $250K and the rate lowered to 6%. Lower rates and lower caps would result in shortfalls—at least until the baby boom pig made it all the way through the python.
Only the lowest level, $150,000, yields a negligible amount of extra money raised. The $250K and $200K levels yield substantial extra income. Still, though only 2% earn more than $200K, this is still not really wealthy. A wealth tax or a financial transaction tax has a number of advantages over this option.
http://en.wikipedia.org/wiki/Wealth_taxhttp://sociology.ucsc.edu/whorulesamerica/power/wealth.htmlhttp://www.cepr.net/documents/publications/financial-transactions-tax-2008-12.pdfOwner-occupied housing is already taxed locally, but the total of cash, bank deposits, money funds, and savings in insurance and pension plans; investment in real estate and unincorporated businesses; and corporate stock, financial securities, and personal trusts could be taxed at a 1% level for totals less than some amount between one and ten million. Even lower rates would still raise substantial income. The Social Security Trust Fund would not have any problems without previous borrowing from it—the people who have benefited from the upward skewing of wealth should be made to replace the borrowed money.
Also, a 0.5% tax on stock and options, 0.01% on bonds, 0.02% on futures and interest rate swaps could raise $100 billion a year. The London Stock Exchange seems to be doing fine with such taxes levied on it in Great Britain.
Why are these options not being considered?
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