It's Time to "Fix" Health Spending And Social Security (William Chirolas)

  It is time to end the wasting of our health system dollars on unneeded senior management of insurance companies and on the cost of giving stockholder returns on a risk that need not exist.

  William Chirolas -- World News Trust

  Feb. 26, 2007 -- I've discussed the Social Security trustee's reports on the Democratic Underground and World News Trust web sites, and indeed -- by mail and email -- to the late Senator Moynihan, ever since he began his writings on a Social Security payroll tax-related personal account. I doubt my attempt at communications had much, if any, influence on Moynihan and Clinton getting it right (after a task force got it wrong) in 1999's Universal Savings Account (USA) proposal.

  Clinton did not embrace the carve-out personal account approach presented to him and which is now Bush's only Social Security proposal. Instead he went with an add-on to Social Security that would have used 12 percent of the projected surplus over the next 15 years -- $540 billion -- to give 98 million adults an automatic government contribution to their Universal Savings Account every year, and, in addition to the automatic contribution, give a government match, dollar for dollar, any voluntary contributions to the "USA" accounts by low and moderate income workers. Eligible workers with higher incomes would have had a match rate of at least 50 percent. Families would have had new funds that could be invested -- and thereby qualified for a match -- via an annual $600/$700 federal tax credit (refundable tax credit).

  The refusal to pass the Clinton add on Universal Savings Accounts by the GOP-controlled Congress was justified by the GOP at the time by saying it would do nothing to save Social Security.

  Clinton even had the vision to see the need for the accounts to invest in large pools of funds administered by an independent government agency. This was a major slap in the face to the GOP very right wing and their spokesperson, Federal Reserve Board Chairman Alan Greenspan, who had covered up the theft of the Social Security surplus theft to fund lower rates for the rich, and was trying to preserve that SS surplus funding for tax cuts by giving warnings about the risk of political interference if Social Security funds were not invested in the government bonds that were needed to be sold to cover the cost of the tax cuts for the rich.

  When Bush tried to sell the Moynihan original carve out accounts -- only this time with the carve out sized to make the destruction of Social Security (as a usually above the poverty line minimum retirement benefit) certain -- rather than using mail/email, I posted the data that showed nothing need be done -- ever -- based on the Social Security Trustees report.

  But that does not mean a better and fairer Social Security System is not possible -- even one that has a TAX CUT -- as in lower tax rates. First, it seems obvious that as we live and work longer, Social Security should be revamped to automatically recognize the improved mortality.

  My suggestion in this area is to increase the full benefits retirement age to 70 from the current Reagan passed age 67, retaining the current first early retirement at reduced benefits age of 62, via a transition beginning in 2030 and concluding in 2066, with a month added to that full benefit age whenever the actuaries at SSA determine there is enough improvement in mortality to justify that increase.

  We also should base a government retirement program's benefits on all income -- not just capped wages. The wage cap removal plus the tax rate applying to investment income and that investment piece of the tax collected via the current IRS Social Security tax adjustment area on your tax return area, while giving SS benefits calculated based on total income -- would permit A MAJOR CUT in the Social Security tax rate. As a minimum change in the current tax structure, if taxing investment income and all wages is too terrible for the rich to allow to pass, the Congress should set the SS wage cap at the same level as the ERISA wage cap -- $225,000 in 2007 -- each year.

  On Health, the GOP and "moderates" are only discussing cost shifting -- which does nothing to end the health cost crisis. The only way to have savings is to take a cost out of the system. Currently 45 percent of all health care is paid by tax dollars -- we have single payer national health now, but the GOP will not admit it. We need to remove the insurance company "risk taking cost" from the remaining health care spending so as to get a 15-20 percent reduction in the nation's health spending, with most of the current health insurance workers continuing in their jobs -- doing the same claims processing they do now -- but charged to the government on an administrative services cost only basis -- the same way Medicare Part B is handled now.

  And we need to adopt an Oregon Medicaid cost savings approach (similar approaches are used in Utah, New Jersey and Michigan) of having a published "limited list of procedures covered" -- and just saying no to paying for anything not on the list. This approach toward implementing Oregon Senate Bill 27 (1989 legislature), which extended Medicaid coverage to nearly all Oregonians with incomes below the federal poverty level and stipulated guidelines for determining Medicaid provider reimbursement amounts, was initially rejected by the Federal government in 1992, but is in the states now. If we are to hold down health costs under the single payer national health plan, restructuring the "Prioritized List" of permitted reimbursements for what can be paid for, and at what age, should be in that national health care plan. Health insurance could be sold to the wealthy if they feel the need to cover with insurance possible procedures not on the national health care plan list.

  Health Insurers would become administrative service providers only (as they are in Medicare Part B). As in our current Medicare Part B, the "health insurance companies" would bid for each state's multi-year servicing contracts given out by the single payer national health system we'll call Medicare. That bidding should result in an even larger reduced cost to the government.

  When there is no longer any "insurance risk that needs capital," the cost of the system is reduced by our not paying for the cost of that capital. While this saving may amount to about the 15 percent of the current health cost (about 2 percent of GDP saved), there maybe another 5 percent savings from the release of paperwork staff working for doctors and hospitals, and from the release of some paperwork employees of the insurance companies. There will still be paperwork -- Medicare has doctors and hospitals filling out forms, and Medicare directly or in the case of Doctors and Part B, via administrative costs only contracts with insurance companies, has the processing cost of those forms. The vast majority of workers in the paperwork side of health care system would barely notice the change to single payer national health -- at least at the job level.

  But the forms used now to avoid paying -- called claims underwriting to insure a current year profit to the insurance companies -- would end. And that and other efficiencies means that while the vast majority of current health insurance workers would simply remain in their current job -- just moving from being insurance employees to being claims servicing workers under contract -- there will be health system savings with a decrease in the number of jobs, and that will be disruptive. But I am told that creative destruction is the miracle and wisdom of the capitalist system -- and that real work is available for those displaced workers in the service industry outside of health.

  It is time to end the wasting of our health system dollars on unneeded senior management of insurance companies and on the cost of giving stockholder returns on a risk that need not exist. We can not let the insurance companies sell the idea that small steps are the way to go. The proposal being pushed by insurance companies of "paperwork reduction" does not solve the long term problem.

***

  William Chirolas brings 40 years of real-world business experience in local, state, national, and international tax, pensions, and finance to the world of blogging. A graduate of MIT, he calls the Boston area home, except when visiting kids and grandkids. He can be reached at: \n This email address is being protected from spambots. You need JavaScript enabled to view it.