Recently, Paul Krugman took issue with the Obama campaign's stated position that Social Security is in a crisis meriting immediate rectification. He quotes the Congressional Budget Office (CBO) Director,
The long-term fiscal condition of the United States has been largely misdiagnosed. Despite all the attention paid to demographic challenges, such as the coming retirement of the baby-boom generation, our country’s financial health will in fact be determined primarily by the growth rate of per capita health care costs.
The New England Journal of Medicine, which published the article from which this quote is taken, embargoes its on line access, even on paid databases commonly available through public libraries, so the precise context is unavailable. There is, however, a recent communication from the CBO (PDF) to a Congressperson that makes this point and gives the underlying rationale for the assertion.
While recognizing the extreme difficulty of projecting the costs of government health care costs (primarily Medicare and Medicaid) into the future, the communication estimates that the costs of Medicare and Medicaid will increase from 4.5% of GDP today to between 9% and 12% of GDP by 2030. The estimate for Social Security's portion of the GDP is an increase from 4.3% today to 6.2% in 2030.
Both increases are problematic. But it does appear that the most pressing crisis is health care spending, especially when one considers that these estimates apply only to Medicare and Medicaid spending, represent the most pressing difficulty.
Yet no Democratic candidate, except Kucinich, addresses the problems of paying for the care of the elderly and the poor. Each candidate has proposed a plan for providing health insurance to non-poor people under age 65, but none of them addresses the coming crisis in Medicare and the, arguably, existing crisis in Medicaid.
So, why do politicians so frequently discuss Social Security and remain silent on Medicare and Medicaid? As I described in September, these two programs have become a highly efficient means of transferring the risk of insuring elderly people, disabled people and poor people, those with the highest health care costs in the nation, from private insurers to the taxpayers. The only times the private insurance industry wants to spread the "free market" to these groups of people is when they are guaranteed large public subsidies to insulate them from risk. In Medicaid, many states pay private insurance companies to "manage" the care of poor beneficiaries. Thus avoiding all risk of loss, the companies sell themselves to the public as "efficient, competitive, private enterprises".
Similarly, private insurance companies become interested in Medicare beneficiaries only when they, on average, are paid significantly more per covered person than the average cost per person of traditional fee-for-service Medicare, as they have been since 2006 under provisions of the Medicare Modernization Act (MMA). In fact Humana, one of the three companies that insures most Medicare Advantage beneficiaries collected $3.72 billion in revenues from MA in the third quarter of 2007, compared with $1.61 billion from its non-governmental, commercial products.
Thus "free market" enterprises have no interest in changing a program that is doing a very efficient job of funneling public money to their private coffers. Moreover, sad to say, it is not at all surprising that the centerpiece of most Democratic health care reforms is private insurance for those under 65 not covered by Medicare and Medicaid subsidized in part by government funds. (As stated above, I know Kucinich proposes single payer.)
Social Security, in contrast, has built up a trust fund with accounting assets in excess of $2 trillion. (I am aware that these have been spent on other government activities; that requires a discussion other than this.) This enormous pool of capital is not available to the wizards of Wall Street for investment in whatever scheme is fashionable at any given time. Nor can they collect fees for "managing" that pool. Moreover, "investing" such an enormous amount in the markets would almost certainly levitate them to new heights. It is not at all surprising that there is concern about the condition of Social Security right now.
It is not hard to imagine why we hear so much about Social Security, the stronger program, while we hear very little about Medicare, the program rapidly approaching a crisis.