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The stimulus to which I allude will require no increase in appropriations, no new taxes, no new borrowing, and no creation of money by the FED or by the Treasury.  And that is what is meant by "No Cost".  As to the word "Stimulus" I must admit that it is more than a single injection into the economy like George bush did in 2001 and in 2008.  In that true "stimulus" he borrowed a blob of money and sent it out as checks to all the people of the land.  If such a one time injection is all that can be called a stimulus then the increase in purchasing power of the middle class which I propose may not quality.

But these details will be discussed below the fold.

For the purist it may be that a stimulus must also create greater prosperity in the longer term.  That is part of the actual underpinning of the vaunted "infrastructure spending" mechanism for stimulus.  And much like infrastructure spending  the stimulus I am proposing will increase prosperity of the general economy in the future.  But my stimulus will not increase the quantity of money in the economy nor the amount or quality of physical infrastructure.  What it WILL do is address a "broken window fallacy" thus improving the economy for both the short and long term.   For those who do not understand this Austrian fable I will expand briefly as follows:  A boy throws a rock that smashes a window.  The owner runs out and hugs the boy saying "Thank you young man.  You just created a job for someone".  It is the same sort of fallacy that says hurricanes and other disasters are good because they juice economic activity.  But not for the boy and the rock we can imagine that the window repair man would better spend his labor installing double paned insulating windows or by installing solar panels instead of repairing single pane broken windows.

We will return to this discussion of the word "Stimulus" in the title but for now we need to proceed to the words "Trillion Dollars".  Those words are, like all discussions of deficits and spending, a 10 year assessment.  The Congressional Budget Office and the politicians like the 10 year horizon BECAUSE it creates huge numbers with which to scare the natives.  Some can actually be convinced to throw virgins into volcanoes or have huge prayer sessions through the use of such "scary" sums.  I admit it!  I'm sensationalizing as is the political norm.  The "Trillion" bucks is actually an understatement of what would be realized over the 10 year forecast.  The the year by year figure based on CBO numbers is in excess of $100B.

The "Stimulus" is, quite plainly, the increase in disposable income of the vast middle class should they be ALLOWED to purchase their health care insurance through the Medicare system as opposed to being forced to give their hard earned bucks to the private insurance companies. And though many have proposed "Medicare Buy In", until now there has been no CBO assessment to support it.

Prior to the RyanCare proposal I had done my own research on how much the average middle class person would save with "Medicare Buy In".  I had also raised holy hell about how our supposed representatives should call upon the Congressional Research Service (CRS) and/or the Government Accountability Office (GAO) to examine the figures and produce a report on the subject that would guide policy decisions.  This prior research  was documented in dkosopedia .  And that page is under further construction at present to include much of what is in this diary concerning the report from the CBO in relation to "RyanCare".  The conclusion of the CBO supports my statement that "The American people would save 17.6% on heath care costs (reflected in the cost of insurance) by using the Medicare insurance system as opposed to the private market.  As a matter of fact, the CBO implies that  the 10 year average savings is a minimum of 19.5%.  The entire report is available as a PDF from here. The primary section of interest to us here is the section "Estimates of the Shares of Spending Borne by the Government and Beneficiaries" which begins on page 21 of the PDF.  The figure below was "captured" from that section as were the blockquotes I have inserted after the figure.

A private health insurance plan covering the standardized benefit would, CBO estimates,
be more expensive currently than traditional Medicare. Both administrative
costs (including profits) and payment rates to providers are higher for private plans
than for Medicare.
Those higher costs would be offset partly but not fully by savings
from lower utilization stemming from two sources. First, private health insurers
would probably impose greater utilization management than occurs in Medicare. Second,
private plans might restrict enrollees’ ability to purchase supplemental insurance
plans; enrollees would thus face higher out-of-pocket costs than they do in Medicare,
and that increased cost sharing would encourage lower utilization. On net, for a typical
65-year-old in 2011, CBO estimates that average spending in traditional Medicare
will be 89 percent of (that is, 11 percent less than) the spending that would occur if
that same package of benefits was purchased from a private insurer (see Figure 1).

Moreover, CBO projects that total health care spending for a typical beneficiary covered
by the standardized benefit under the proposal would grow faster than such
spending for the same beneficiary in traditional Medicare under either of CBO’s longterm
scenarios. For the period before 2030, the difference in projected growth rates
occurs primarily because CBO expects that the payments to providers in Medicare
will grow more slowly (especially under the extended-baseline scenario) than those in
the private market.

As a result, total health care spending for a typical 65-year-old in Medicare under the
extended-baseline scenario in 2022 would be 66 percent of total spending with a private
plan with the standardized benefit;
 in 2030, the figure would be 60 percent of
that benchmark. Total health care spending in Medicare under the alternative fiscal
scenario would be a larger share of total spending with a private plan—72 percent in
2022 and 71 percent in 2030—because payments to providers in Medicare are
assumed to grow at a faster rate than under the extended-baseline scenario.

The first thing that needs to be understood about these numbers is that the savings to Medicare participants will happen regardless of whether we are speaking of a 65 year old person or a 60 year old person.  That is so because the savings percentage is CAUSED BY "administrative costs (including profits) and payment rates to providers" being lower for those in the Medicare pool than for those in the private market".  These savings will thus apply for all persons included in the Medicare system regardless of age.  If we allow people who are 64 and 60 and 55 to be part of the Medicare union/group/system then both of these costs reductions will apply just as they do for those in the seniors part of the system.

The report details an immediate 11% savings that rises to 28% by the end of the 10 year period (in the "alternative  baseline scenario" -- the LESS advantageous projection).  For the "extended fiscal scenario" we see an increase in savings rising to 34%.  So the worst case we see an average savings over the term at 19.5% ((11 + 28) / 2  -- the average)

Now we must convert this percentage of savings into actual dollars so as to arrive at the "Trillion Dollar" stimulus number. I will do that by averaging several sources for total cost of health care in the USA and the share of that cost currently addressed in the private insurance market.  Some sources say that only 35% of the total is outside of the current public assistance arena formed by Medicare, Veterans Benefits, and Medicaid.  The average estimated aggregate is 2.8 trillion per year.  2.8 trillion  X .35 X .195 = is 186 billion per year.  If we assume that 50% 0f the general public is bat-shit crazy enough to vote for Republicans then we can see that only the sane 50% will opt for the Medicare insurance policies.  The remainder will continue to pay the "protection racket" its pound of flesh.  So the "stimulus" in that case would by only .93 trillion (over ten years) as opposed to the full 1.86 trillion.  I do not believe the "Trillion Dollar" claim to be overstated.  That 19.5% of health insurance cost cures a lot of idiotology.

A word must be inserted here concerning PPACA.  Because it is PPACA that accomplishes the subsidies for the old and young not yet on traditional Medicare where it is NEEDED.  PPACA operates by taxing the wealthy so as to provide a subsidy to the lower income people (including early retirees).  If we actually read the wikipedia article describing PPACA we find that it is funded primarily by NEW Medicare taxes on the rich and on those with "Cadillac" medical insurance (another version of "the rich").  This is a better approach than is the taxation of the younger wage earning people so as to support the older and the poor.  Early retirees who live in modest accommodations, drive modest gas saving vehicles, and eat regular food cooked at home will be subsidized by PPACA based on their low income status.  Such individuals also receive partial tax abatements on their homes.  There is no reason why people cannot plan their retirement around home ownership and Medicare Buy In.  Until the Republican/Clinton tax cut for the rich in 1997 the vast majority of Americans saw home ownership as a retirement vehicle as opposed to a stack poker chips.  The point is that PPACA   is a better way to manage subsidies than is a straight "Medicare For All" or "Single Payer" system if PPACA is coupled with "Medicare Buy In".

 While it is true that within the current seniors program all ages pay and receive benefits equally, this would not be the case for the younger participants in "Medicare Buy In". Persons who are 64 years of age would pay more than those who are 60 simply because the real cost of medical care varies with age.  The tax subsidy for seniors that exists in the current Medicare system is politically popular.  That is to say that people not yet 65 years of age are willing to provide a subsidy to the retirees.  That may not be so (and seems not to be so) in regard to those older Americans still short of retirement.   The young and the healthy are not generally inclined to agree to pay even more than they are already paying for the heath care of older (yet not yet retired and infirm) people or for  "the poor".  The actual personal cost of medical care rises with age.  That is a fact.  An insurance system spreads the cost across a set of people having similar aggregate and per capital statistical costs.  There is no "free lunch".  "Shit happens". And an insurance system is nothing more than a system in which "grown up" people pay for "shit" as they go as opposed the when it "happens".   It will not be possible to create a single rate for those 60 through 64 and those 55 through 59 because in each group, the private sector will siphon off the younger ages and all that is left in each "band" is the older, more expensive people.  The idea of "Medicare Buy In" is to reduce the cost of medical care by allowing the participants to form a large "consumers union" in which savings are realized because "administrative costs (including profits) and payment rates to providers" being lower for those in the Medicare pool than for those in the private market".  This is very similar to a labor union in that each individual in the union is an individual with different earning capacity based on competence.  In the "Medicare Union" people share common goals and common savings but each individual must pay according to age.  Collective bargaining still applies.

My source for the "2.8 trillion" aggregate cost of health care is an average of the following assessments:
US Healthcare Costs Approach $3T

US healthcare costs in 2009 totaled about $2.8 trillion, according to [pdf] a new study from Deloitte
. - Health Policy Explained

Expenditures in the United States on health care surpassed $2.3 trillion in 2008, more than three times the $714 billion spent in 1990, and over eight times the $253 billion spent in 1980.

Your family's health care costs: $19,393

Health care costs for a family of four rose again in 2011, with employees paying a much larger share of the rising expenses, according to a new industry report Wednesday.

Originally posted to TruthMerchant on Tue Sep 13, 2011 at 08:59 PM PDT.

Also republished by Money and Public Purpose.

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Comment Preferences

  •  And Older Retirees Earn More Money Than (1+ / 0-)
    Recommended by:
    Roger Fox

    young employees so they indeed have the ability to pay more.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Tue Sep 13, 2011 at 09:05:11 PM PDT

  •  Tipped and Rec'd on the first quick read. (1+ / 0-)
    Recommended by:
    Roger Fox

    I couldn't find a flaw.

    I'm going to go read again....

  •  Truth Merchant - provider payments (0+ / 0-)

    My primary care physician, and many others in my community, will not take new Medicare patients. Fortunately for me he will keep long term patients who turn 65. We have a very open dialogue not only about my health but about new medical technologies and the economics of his practice. I believe him when he tells me that, even on a marginal cost basis, he loses money providing care to his patients with Medicare. If any single payer program paid at the Medicare rate he would retire rather than go broke trying to continue to be a physician. How have you calculated into your model that private insurance, for all its faults, is supporting Medicare by providing higher reimbursement rates for physicians like my primary care doctor?

    "let's talk about that"

    by VClib on Wed Sep 14, 2011 at 07:13:36 AM PDT

    •  The private system is _NOT_ "supporting" Medicare (0+ / 0-)

      Your particular situation is not unique.  There are many physicians and many corporations that will be asked to accept  lower fees.  But the proposal I have put forth is "Medicare Buy In" and not a single payer system in any way.  No physician or insurance customer are being forced to do anything at all.  People will accept different but competent care from physicians that will accept lower rates of remuneration.  That will be true on the physician side  because the number of NON MEDICARE patients will fall significantly.  The smaller number of NON MEDICARE patients cannot support the life style of the rich and famous American physician.  Some physicians MAY retire.  But the H1B visa system, education, and  immigration can and WILL resolve the problem .  There are a shit load of competent physicians in Canada a Europe who will come here and practice for reasonable fees.  And if the reward to competence is lacking then the fees will be raised.  This is not a difficult nut to crack once you get past the "personal" level and start using the REAL statistics to adjust the system.

  •  Consider Also (0+ / 0-)

    Beowulf's innovative suggestion in the comments

    1. Raise Medicare payroll taxes sufficiently to cover everyone with an improved benefits package (no premiums, minimal copays, etc). The numbers I've seen estimate bumping Medicare FICA from 2.9% to 14%, so a total SS/Medicare FICA of 24.4% (approx. $70B a point the last time I looked into it).
    2. Buy FICA rate down by uncapping SS FICA and with Pigovian taxes on financial transactions and carbon emissions, reducing combined FICA to somwhere between 20% and current 15.3%.
    3. Adjust new FICA rate monthly based on unemployment rate. So every month when BLS reports current U3 rate, multiply that by, say, 10 to derive tax holiday (9.0% U3 would mean a 90% reduction from base FICA rate). Even using a multiplier of 5 would give a 45% tax cut, and universal health care.

    Further down he says

    "Why do we need to "pay for" health care by manipulating taxes and all that jazz?"

    Because it kills several birds with one stone. 1. provides universal healthcare (which would reduce costs in every state govt, business and household, 2.redistributes tax burden off of work and onto Wall Street and carbon (throw in Pigiovian taxes on traffic congestion, imports and/or cannabis too if you wish) 3. Provides an immediate tax cut. 4. On an ongoing basis, provides a rule-based formula to automatically adjust fiscal policy based on on quite current economic numbers (monthly U3 rate). 5. The rigmarole is necessary for the same reason lion tamers carry chairs.

    The animal is biologically programmed to focus on one thing and then attack it. When the lion tamer holds up a chair, the big cat sees four things and all of a sudden, he has four points of interest-the four legs of the chair-and doesn't know which one to focus its anger. The lion has a one-track mind. He loses his original train of thought and gets completely distracted, which dissipates the rage.

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