Generational Inequity


Senator Tries to Allay Fears on Health Overhaul
New York Times, 2009-09-24

[I am only including this article
because of the remarks in its second and third paragraphs shown below.]



[Senator Bill Nelson, the Democratic senator from Florida], has a big problem.
The bill taken up this week by the [Senate Finance Committee]
would cut Medicare payments
to insurance companies that care for more than 10 million older Americans,
including nearly one million in Florida.
The program, known as Medicare Advantage,
is popular because it offers extra benefits,
including vision and dental care and even, in some cases,
membership in health clubs or fitness centers.

[As my late grandfather, a veteran of World War I, would say,
“Isn’t that rich!”
Today’s old folks have such gold-plated benefits
that they even pay for health clubs and fitness center in some cases.]

“It would be intolerable to ask senior citizens
to give up substantial health benefits they are enjoying under Medicare,”
said Mr. Nelson,
who has been deluged with calls and complaints from constituents.
“I am offering an amendment to shield seniors from those benefit cuts.”

[On the contrary, it is intolerable to keep paying those excessive benefits.
A major part of the reason why American products
are so uncompetitive in the American market, not to mention the world market,
the grossly excessive spending Americans have demanded,
through their political system,
on health care and retirement benefits.

A Path to Downward Mobility
By Robert J. Samuelson
Washington Post, 2009-10-12

Every generation of Americans should live better than its predecessor.
That’s Americans’ core definition of economic “progress.”

But for today’s young, it may be a mirage.
[I would change “it may be” to “it’s”.]
Higher health spending, increasing energy prices
and stretched governments at all levels
may squeeze future disposable incomes -- what people have to spend --
and public services.
Are we condemning our children to downward mobility?

Good question.
Considering how health spending could threaten future living standards,
it ought to be center stage in the “reform” debate.
Instead, it’s ignored.

Downward mobility is possible.
Expanding health spending would
raise taxes (to pay for government insurance),
lower take-home pay (to pay for employer-provided insurance)
or increase out-of-pocket medical costs.
Other drains also loom:
higher energy prices to combat global warming;
higher taxes to pay for underfunded state and local government pensions
and repair aging infrastructure;
higher federal taxes to cover deficits and payments to retirees
(much of which reflect health spending).
The pressures will undermine private living standards
and other public services (schools, police, defense).

The young’s future has been heavily mortgaged….

The road to downward mobility is paved with good intentions.
The health debate has focused on insuring the uninsured
and de-emphasized controlling runaway spending, much of which is ineffective.
The priorities should have been reversed.
The chance to reorder the medical-industrial complex
to restrain costs and improve care
has been mostly squandered.
Some call this “reform”; no one should call it progress.

Making the young pay for health reform
By Michael Gerson
Washington Post Op-Ed, 2009-11-04

As I was talking recently with the founder of a large American corporation,
the conversation turned (inevitably) to health-care reform.
His employees in their 20s, on average,
cost the company about $1,500 a year in health bills.
Those in their 50s cost at least 10 times more.
The effect of proposed health-care reform --
which limits the ability of insurers to charge higher premiums for older adults --
would be, he said,
a large shift of America’s health-care burden to the younger generation.

This is not an unintended consequence of reform;
it is the whole purpose.
It is not a side effect;
it is the main funding mechanism.

Precisely because younger people have lower health costs,
reformers want to draft them into the broader health insurance system
so their premiums can subsidize
the health expenses of older, sicker consumers.
Thus, in every version of reform,
the young are required to purchase coverage.

This mandate explains the political coalition behind health-care reform.
Insurance companies are willing to accept
tighter government regulation on matters such as
the coverage of preexisting conditions --
but only if they are given guaranteed access to
millions of younger, healthier premium payers.
Congress gets
additional resources from the young to expand insurance coverage,
with less need to raise taxes overtly.
Advocates for the elderly welcome an intergenerational subsidy
that reduces premiums for older Americans.

Amazingly -- out of idealism, ignorance or both --
people in their 20s remain the strongest supporters of health-care reform.
They are also
the group most likely to wake up the day after passage of Obamacare
with a health-reform hangover --
forced to buy coverage at higher premiums
to reduce the cost of someone else’s health insurance.

Legislators, perhaps fearing that future anger,
seek to soften the blow in a couple of ways.
The Senate Finance Committee bill would allow insurance companies
to charge older adults a maximum of four times more than young people --
reducing premium increases for the young
by making the elderly carry more of their own weight.
The House bill would set
the maximum premium difference between old and young at two to one.
This provision, supported by AARP,
is likely to increase premiums for the young dramatically.

Both the House and Senate bills also provide
subsidies for those with low incomes
to make health insurance more affordable.
Many of the young would qualify. Many would not.
Offsetting the whole cost to the young through subsidies
would make health reform fiscally unsustainable --
requiring new taxes on other groups.
There are arguments for
mandating the purchase of higher-priced insurance by the young.
It would, on the bright side,
leave less disposable income for nose rings and tattoos.
[But this is a new burden on today's young,
one today's elderly, the beneficiaries of this burden,
did not bear in their youth.
And while no doubt some of today’s young
spend their money in ways the elderly might not approve of,
was that not also true of all previous generations?]

And perhaps the ownership of health insurance, in an ideal world,
should be a social expectation, like the ownership of auto insurance.
[That analogy is critiqued here.]

But this burden on the young comes in a series.
The most consequential element of the New Deal -- Social Security --
has been a large transfer of resources from young to old.
The same is true of the Great Society’s Medicare program,
which has channeled massive spending toward health care for seniors.
Two-thirds of Medicaid spending goes to nursing homes.
In 1965, there were four workers paying for the benefits of each retiree.
Soon, there will be only two.

In our history, public programs helping the young --
say, the Civilian Conservation Corps or the GI Bill --
tend to be discretionary and temporary.
Entitlements benefiting the elderly are eternal.
And health insurance reform adds to the list.

America’s 60-year, cross-generational transfer of wealth
counts moral achievements.
In the 1960s, 30 percent of the elderly lived in poverty.
In 2008, that figure was less than 10 percent.
And the compassionate treatment of the elderly serves our future interests.
The young grow old, with a little luck and patience.

But limited resources require the interests of young and old
to somehow be balanced.
And a society that consistently shifts burdens from old to young
at some point becomes selfish.
We are proud to sacrifice for the sake of our parents and grandparents.
We are less proud of imposing burdens on our children and grandchildren
that diminish their opportunity.

This is the inescapable shame of overwhelming budget deficits.
But it applies to health care as well.
A nation that views the young as ripe for burdens instead of benefits
has itself become old.

Health ‘reform’ that burdens our young
By Robert J. Samuelson
Washington Post, 2009-11-23

One of our long-running political stories is
the economic assault on the young by the old.
We have become a society that invests [sic] in its past and disfavors the future.
This makes no sense for the nation, but as politics it makes complete sense.
The elderly and near elderly are better organized,
focus obsessively on their government benefits
and seem deserving.
Grandmas and Grandpas command sympathy.

Everyone knows that
the resulting “entitlements” dominate government spending
and squeeze education, research, defense and almost everything else.
In fiscal 2008 -- the last “normal” year before the economic crisis --
Social Security, Medicare and Medicaid
(programs wholly or primarily dedicated to the elderly)
totaled $1.3 trillion,
43 percent of federal spending and more than twice military spending.
Because workers, not retirees, are the primary taxpayers,
this spending involves huge transfers to the old.

[Remember, prior to 1965 there was no Medicare or Medicaid.
And the nation got along just fine.]

Now comes the House-passed health-care “reform” bill
that, amazingly, would extract more subsidies from the young.
It mandates that
health insurance premiums for older Americans
be no more than
twice the level of that for younger Americans.
That’s much less than the actual health spending gap between young and old.
Spending for those age 60 to 64 is four to five times greater than
those 18 to 24.
So, the young would overpay for insurance
that -- under the House bill -- people must buy:
Twenty- and thirtysomethings
would subsidize premiums for fifty-and sixtysomethings.
(Those 65 and over receive Medicare.)


Not surprisingly,
the 40-million-member AARP
[the American Association of Ripoff Professionals.],
the major lobby for Americans over 50,
was a big force behind this provision.
AARP’s cynicism is breathtaking.
On one hand, it sponsors a high-minded campaign called “Divided We Fail”
and runs sentimental TV ads featuring children pleading for a better tomorrow.
“Join us in championing your future and the future of every generation,”
ended one ad.

Meanwhile, AARP lobbyists scramble to
shift their members’ costs onto younger generations.
For example, the House health legislation improves Medicare’s drug benefit.
That would help the half of AARP members who are over 65.
The other half, those between 50 and 64,
could benefit from the skewed insurance premiums.

Although premium changes would apply mainly to
people using insurance “exchanges,”
the differences would be substantial.
A single person 55 to 64 might save $3,490,
estimates an Urban Institute study.
By contrast, single people in their 20s and early 30s
might pay about $600 to $1,100 more.
For the young, the extra cost might be larger, says economist Diana Furchtgott-Roth of the Hudson Institute,
because the House bill
would require them to purchase fairly generous insurance plans
rather than
cheaper catastrophic coverage that might better suit their needs.

Whatever the added burden,
it would darken the young’s already poor economic prospects.
Unemployment among 16- to 24-year-olds is 19 percent.
Peter Orszag, director of the Office of Management and Budget,
notes on his blog that high joblessness depresses young workers’ wages
and that the adverse effect -- though diminishing --
“is still statistically significant 15 years later.”
Lost wages over 20 years could total $100,000.
Orszag doesn’t mention that health-care “reform” might compound the loss.

AARP justifies the cost-shifting as preventing age discrimination.
Premiums based on age should be no more acceptable than
premiums based on medical expenses reflecting race, gender or preexisting health conditions,
it says.
The House legislation bans those, so it should also ban age-based rates.
AARP dislikes even the 2-to-1 limit.
It thinks premiums for someone 22 and someone 62 should be identical.
(In insurance jargon, that would be full “community rating.”)

This is unconvincing.
All insurance aims to protect against risk --
but within groups facing similar risks.
Put differently, most insurance is risk-adjusted.
Auto insurance premiums vary by age;
younger drivers pay higher rates because they have more accidents.
Homeowners’ policies for similar houses cost more in high-crime areas.
This is not “discrimination”;
it’s a reflection of risk and cost differences.
Insurers that ignored these differences would soon vanish
because they’d suffer heavy losses and lose customers.

On health insurance, we may choose to override some risk adjustments
(say, for preexisting medical conditions)
for public policy reasons.
But the case for making age one of these exceptions is weak.
Working Americans -- the young and middle-aged --
already pay a huge part of the health costs of the elderly
through Medicare and Medicaid.
These will grow with an aging population and surging health spending.
Either taxes will rise or other public services will fall.
Already, all governments spend
2.4 times as much per capita on the elderly as on children,
reports Julia Isaacs of the Brookings Institution.
Why increase the imbalance?

It’s true that premiums for older people would be higher.
But this might have a silver lining:
Facing their true health costs,
older Americans might become more eager to control spending.

[Perhaps by reducing the number of pills they pop.]


Battle Looms Over Huge Costs of Public Pensions
New York Times, 2010-08-07


Sharing the burden seems to be the obvious solution
so we don’t continue to kick the problem into the future.
“We have to take this on,
if there is any way of bringing fiscal sanity to our children,”
said former Gov. Richard Lamm of Colorado, a Democrat.
“The New Deal is demographically obsolete.
You can’t fund the dream of the 1960s on the economy of 2010.”


Why are we in this debt fix? It’s the elderly, stupid.
By Robert J. Samuelson
Washington Post Opinion, 2011-07-28

Why our children’s future no longer looks so bright
by Robert J. Samuelson
Washington Post Opinion, 2011-10-17

“A decade of health care cost growth
has wiped out real income gains for an average U.S. family,”

report two Rand Corp. researchers in the journal Health Affairs.
From 1999 to 2009,
total compensation of a typical four-member family with employer-paid health insurance
rose by $23,000.
About 95 percent of this (almost $22,000) went to inflation and health care,

including employer costs, family premiums, out-of-pocket payments and taxes.
For most families, higher costs didn’t deliver parallel benefits.
The reason:
Health spending is concentrated;
the sickest 5 percent account for half the total.


Generational gains tempered individual setbacks.
We may now lose this comforting cushion.
Our leaders might try to avoid that by boosting economic growth,
controlling health spending and trimming benefits for the elderly.
But we aren’t sure how to do the first
and lack the political will to do the second and third.
The future is never entirely predictable,
but downward mobility is not just a scary sound bite.
It’s a real possibility.

Budget battle is not all about me
By: David Walker and Lisa Borders
Washington Examiner Op-Ed, 2011-11-07