Health Spending & Prices to Rise Through 2025

Actuaries at the Centers for Medicare & Medicaid Services, a government agency, have just updated their estimate of future health spending:

For 2018 and beyond, both Medicare and Medicaid expenditures are projected to grow faster than in the 2016–17 period, and more rapidly than private health insurance spending, for several reasons. First, growth in the use of Medicare services is expected to increase from its recent historical lows (though still remain below longer-term averages). Second, the Medicaid population mix is projected to trend more toward somewhat older, sicker, and therefore costlier beneficiaries. Third, baby boomers will continue to age into Medicare, with some of them dropping private health insurance as a result. And finally, growth in the demand for health care for those with private coverage is projected to slow as the relative price of health care—the difference between medical prices and economywide prices—is expected to begin gradually increasing in 2018 and as income growth slows in the later years of the projection period.

Before the Affordable Care Act passed in March 2010, President Obama repeatedly promised the typical family’s health premiums would go down by $2,500 after implementing the expansion of health insurance we label Obamacare.

Nothing of the sort has happened, of course. For the last few years, prices and spending have appeared moderate by historical standards. However, that is largely because they are reported in nominal terms, not real (inflation-adjusted) terms. From the Great Recession until very recently, general measures of inflation were about zero. An increase of premiums of eight percent when general measures of inflation are about zero is a lot more than an increase of eight percent when general measures of inflation are about three percent.

The vanity of Obamacare was that more central planning would reduce wasteful use of resources through “value-based” and “accountable” care. In fact, demand for health services by the privately insured will shrink only because prices outpace our ability to pay for them as government weighs down our prosperity.

Comments (62)

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  1. Ron Greiner says:

    John, you write, “Third, baby boomers will continue to age into Medicare, with some of them dropping private health insurance as a result.”

    That is an understatement. 1) 10,000 Baby Boomers a day become eligible for Medicare. 2) I’m sure “some” will stop paying $25,000 a year per couple for health insurance when they qualify for Medicare.

    A 64-year-old couple earning $65,000 a year in Missouri zip code 63555 has one company to choose from on the Obamacare Exchange – surprise – Blue Cross. The premium for the $13,100 deductible is $25,008 per year or $2,084 per month. They earn too much for Obamacare income-based tax credits so they get NOTHING!

    They will stop paying at 65-years-old because they made it.

    • Ron Greiner says:

      MSA MAGIC if this 64-year-old couple puts $1,000 in their tax-free HSA they get $20,124 in Obamacare income-based tax credits!

    • Barry Carol says:

      So Ron, how much do you think the 64 year old couple’s Missouri Blue Cross premium would be if the risk pool consisted of ONLY older and sicker people who can’t pass underwriting?

      The Republican / Tom Price repeal and replace plan doesn’t even come close to adequate funding for high risk pools. They probably don’t want to face up to the issue because they don’t want to take the heat for letting people know what the real cost would be and who would have to pay how much in higher taxes to cover that cost.

      The people need some honesty and transparency on this issue. It can’t just be about helping young healthy people acquire cheap coverage with age-based tax credits.

      • Ron Greiner says:

        Barry, there is only one insurance company in that zip code in Northern Missouri, Blue Cross. In St. Louis Blue Cross has to compete with Cigna and the price really drops for insurance. 10 years ago it was the other way around because St. Louis hospital charges were more than rural hospitals. The charges are still less in rural American hospitals but now with Obamacare there is no competition for in rural America with insurance so their prices are now more.

        Remember, competition is critical in free and open markets to keep prices low and quality high.

        • Jimbino says:

          How can you talk about “free and open markets” when it comes to Amerikan healthcare, where the prices for virtually everything are kept secret?

          Would we have a free and open market in food if you first learned the prices for your items at check-out or for your Amazon stuff only upon delivery?

          Whatever else the GOP puts into Trumpcare, there should be a provision forcing all healthcare providers to publish their drug and procedure prices on the Web.

  2. Ron Greiner says:

    Barry, you ask, “…people need some honesty and transparency on this issue. It can’t just be about helping young healthy people..” This OLDER couple gets no Obamacare income-based tax credits and Dr. Graham is really rich and he doesn’t pay taxes on his health insurance. Well, Dr. Goodman was earning $500,000 a year at the NCPA and I have no idea how much Dr. Graham or Devon earn.

    Republican age-based tax credits will help this OLDER couple out because they are the oldest they would get the most. What is your problem with this older couple getting some tax relief like you, Devon and Dr. Graham have always enjoyed?

    Remember, that’s why you have switched to voting Republican now Barry? You want to be fair right?

    • Barry Carol says:

      From the start of the ACA, I’ve said numerous times that limiting subsidies to those with income of 400% of the FPL or less is unfair. There shouldn’t be any income ceiling. If the premium for the 2nd lowest cost plan in the market exceeds 9.5% of modified adjusted gross income (MAGI), you should get a subsidy. I think that’s fair.

      I also don’t have a problem with age-based tax credits as long as there are also well subsidized high risk pools that limit out-of-pocket premium cost to 10% of MAGI. I think that’s fair too.

      Will it cost more in subsidies than under the current ACA? Yes it will and taxpayers will have to cover that cost unless we want to just pass the bill on to our kids and grandkids by letting the deficit grow even larger. I don’t want to do that.

      • Allan says:

        Why not offer a government loan at prime interest rate to pay the bill gradually at a rate of 10% MAGI? I am not advocating that position, just asking the question.

        • Barry Carol says:

          Then people can be saddled with paying the loan off for the rest of their lives along with their student loan debt which currently totals more than $1.3 trillion. If the insurance premium is more than 10% of MAGI, lots of people would need a loan to cover the difference every year. I would rather give them a subsidy. If their income is very high, their premium will be less than 10% of MAGI and they won’t need a loan or a subsidy.

          • Allan says:

            If 10% of income is your magic number of affordability, then why not have them pay their bills not exceeding 10%? Their college loans and their bar bills are not everyone else’s concern. Why should you take from another money that might be more important to the one being taxed? Why is there some maximum number of years one should be responsible for their debts? Should a person with a thirty year household loan that suddenly finds the costs are higher than expected be relieved of debt? 10% is not a large percent of one’s income. You would have the person who lost some income move into a smaller home. Why wouldn’t you have the person that owes medical bills that have been reduced to a max of 10% also move to a smaller home?

            • Barry Carol says:

              Most medical bills are not discretionary purchases. That’s the key difference between healthcare and how big a house one lives in or whether someone goes to college or not and where. People consume healthcare because they have to, not because they want to at least for the most part.

              • Allan says:

                I don’t find what you say to be true. Much of healthcare is discretionary. People make choices regarding healthcare all the time and each person’s choice might be different than the choice of someone else.

                I could argue that where and how a person lives has more of an impact on people’s lives than the healthcare they receive and that your obsession with the absolute reduction of healthcare risk is consuming so much money that you are making things worse rather than better.

                In fact based upon your responses elsewhere you have demonstrated that it is not just the person’s health that you are considering rather that you wish to unburden people from the responsibility of paying for care so much so that you might transfer money from a poor family to a millionaire.

                Even using your logic that 10% of one’s income is the max they should ever have to pay out of pocket you are not willing to permit that person to pay (only up to 10% of income) that 10% for more than one year even if that person only incurred costs for that one year never incurring medical costs again.

                This is protectionism and appears based upon an emotional fear that one’s standard of living might be impacted by high medical costs and that no one should have the uncertainty of losing their status, at least where healthcare is concerned, though loss of status happens elsewhere all the time.

              • Lee Benham says:

                My wife and neighbor both had the same choices with breast cancer.
                Lumpectomy, mastectomy and double mastectomy. Both Mastectomy option also would include reconstructive surgery. All three treatments came with the same prognoses.

                My wife chose a Lumpectomy where is my neighbor shoes a double mastectomy. My neighbors costs far outweighed my wife’s. Why didn’t I get paid a percentage of the difference in cost of care?
                My wife saved the insurance carriers tens of thousands of dollars because of her choice.

                • Allan says:

                  Lee, according to Barry what you say is not true, but I believe you. Barry is looking to protect the incomes and wealth of the country club crowd. 🙂 I say let them give up country club membership even if it is for a few years.

        • Do you mean like student loans for university? How has that worked out? Driven up tuition!

  3. Bob Hertz says:

    Allen, your idea of loans to pay premiums is interesting, and I have considered government loans in various parts of health care in my writing.

    However, I have always concluded that it is better for government to just assess a tax and pay the freight, rather than have people take out loans for seemingly worthwhile purposes.

    The loans hang around forever in many cases, and of course the ultimate cost with interest is much greater than just paying the bill upfront.

    The grants that some college students received when I was an undergrad (1970) have been wildly better for society than the student loans which my own kids have received. That is just one example.

    Senior citizens are wildly better off because Medicare pays most of their health costs. The number of seniors who need loans for health care is tiny.

    Of course, one can make the argument that if Uncle Sam just pays the bill for a social good, but does not raise taxes to do so, then the entire next generation is saddled with a huge bill.

    I do not know the answer on this last item. Is it better for a government to be debt-riddled but its individual citizens to be debt-free?
    Am I asking an intelligent question even?

    • Allan says:

      “I have always concluded that it is better for government to just assess a tax and pay the freight, rather than have people take out loans for seemingly worthwhile purposes.”

      In otherwords you want someone else to pay that person’s bills. Let’s say a person has a child with a severe learning disability. In real life there are a few schools and I know of one that perform so well that the child’s life will be greatly impacted in a positive fashion for 70 plus years while making that child a productive citizen. In real life and this is a real life case the family paid for the schooling that was extraordinarily expensive. There may have been a loan to pay back for thirty years, but I don’t hear anyone saying that the family should be relieved of their duty to pay. This schooling added more positive health to a child than most of medical care provides to the individuals of our nation.

      It appears that you guys don’t understand trade offs. I feel bad for the sick person, but for every sick person in need there are thousands that are collecting such payments making costs climb and become less affordable to those in need. It also removes money from citizens that might have a better use for it.

      You are upset with even the lowest interest rate. I used the prime rate as the interest rate (how would you respond to no interest at all?) which is not that much greater than inflation so the interest collected is not really the problem. The student loan comparison is ludicrous. You are taking all the mistakes made government and saying since they made so many mistakes why should we attempt to do things properly. Should the brain surgeon use that excuse for mucking up your brain?

      One last point. When government is debt-riddled all its people are debt riddled and no one cares until the bill has to be paid.

      • John Fembup says:

        I think it’s relevant that while advocating Medicare-for-All, Bob Hertz never quite gets around to acknowledging

        a) that the combined effect of the deductibles, copays, coinsurance, and coverage holes in Original Medicare (A and B) mean that Original Medicare reimburses roughly 50% of overall medical expenses incurred by seniors. At that level of coverage Original Medicare does not meet Obamacare coverage adequacy requirements, and could not be offered to the U65 population. To gain adequate coverage, seniors must purchase a Supplemental plan, or a Medicare Advantage plan – at their own expense.

        b) or that Bob Hertz does not really believe Original Medicare is adequate coverage – he himself is enrolled in Medicare Advantage.

        My opinion? Medicare-for-All is no more a cure for inadequate insurance than Obamacare is. And besides, inadequate medical insurance coupled with high medical insurance costs are not fundamental problems – they are symptoms. The more fundamental problem is high cost of modern medical delivery.

        I also say (and the Obamacare experience should have opened peoples’ eyes) that no insurance scheme can bend the medical cost curve. Americans badly want to believe otherwise. I’m starting to think “Repeal and Replace” will be politically impossible and the whole idea will dissolve into “Rinse and Repeat”.

        What then? Americans will continue to ignore the problem of high medical cost. Americans will continue to believe an insurance plan can be comprehensive and “affordable” at the same time. Meanwhile medical care costs will continue to grow, and so will medical insurance costs. Americans will blame insurance companies and believe nostrums and snake oil like Medicare-for-All can save the day.

        I can barely contain my enthusiasm.

  4. Barry Carol says:

    John –To most Americans, affordable health insurance means someone else — taxpayers or an employer (nominally) pays most or all of the premium.

    My wife and I have regular FFS Medicare. The cost for our United Healthcare / AARP Supplemental policy this for 2017: $5,168 for the two of us. It will increase 3% per year for age rating alone until we are 75.

  5. Bob Hertz says:

    John, my point about grants vs. loans was not intended as an endorsement of Medicare for all.
    It was intended to assert that if government intends to pay for an activity, it should pay for it on-budget and with clearly defined taxes.
    When it comes to social programs (vs infrastructure, for example), government should not pay with public loans nor should it expect citizens to pay with private loans.

    A conservative columnist named John Cochrane in The Grumpy Economist points out that the US government constantly uses schemes to keep health expenses off budget. The EMTALA legislation for emergency care never had a nickel of budget dollars….hospitals were supposed to pay for it by overcharging people with insurance. The ACA had employer mandates. The ACA also overcharges healthy people to keep from direct government funding for the uninsurables.

    Starting in the 1980’s roughly, many states wanted to control their spending on colleges….so that loans were encouraged, again to keep the cost off public budgets.

    My point was to target these unfunded mandates.

    • John Fembup says:

      “not intended as an endorsement of Medicare for all.”

      So Bob, you’re saying you do not advocate Medicare-for-All?

  6. Bob Hertz says:

    I advocate a Medicare buy-in for persons over 55 or with major health issues who have no access to employer coverage. Having labored in the insurance industry, I do not think that private carriers can provide reliable, guaranteed issue coverage for this group.

    This is not because insurance companies are evil. Heck, our industry cannot provide level premium coverage for long-term care needs either, even with full underwriting. Some things are just very hard to insure.

    Anyways, I do not want to mandate Medicare for all other ages. In fact I have written pretty critical letters to Gerald Friedman, the professor who wrote the Sanders platform, telling him that his calculations on cost and revenue were unrealistic.

    • John Fembup says:

      “I advocate a Medicare buy-in for persons over 55 or with major health issues who have no access to employer coverage.”

      In other words, Medicare-for-All, camouflaged in voluntary enrollment and featuring adverse selection all around.

      Good thing Medicare is immortal as long as it’s supported by the federal power to tax.

  7. Barry Carol says:

    Bob – For those who reach age 65 with fewer than 30 quarters of Social Security credits, they have to pay for Medicare Part A. The current cost is $450 per month. If they have 30-39 quarters, they get a 50% discount and pay $225 per month. If they have 40 or more quarters, they get it for free. So, the actuarial value of Part A is $450 per month or $5,400 per year. Based on the current Tier 4 IRMAA cost for Medicare Part B of $428.80 per month, the implied actuarial value of Part B is $536 per month ($428.8 / 0.8) or $6,432 per year. The actuarial value of Part D is roughly $95 per month or $1,140 per year. That brings the value of the total Medicare package to $1,081 per month or $12,972 per year. How much do you think people should have to pay to buy into Medicare especially if they are already too sick to pass underwriting even with a rate-up?

    I’m not suggesting it’s a bad or unreasonable idea. I am suggesting that it would probably have to be pretty heavily subsidized. If the individual or family contribution toward the premium were capped at 10% of income, an older couple making $65K per year would only have to pay $541 per month for an insurance package worth $2,162 per month which means they would pay 25% of their premium cost and 75% would be subsidized by taxpayers. For those who make less than that, the individual contribution would be proportionately less and those who make more would pay more. The implication of this is that the cost of adequately funded high risk pools would be quite high but, of course, we already knew that. The question is who will pay for them and how?

  8. Bob Hertz says:

    Barry, I have absolutely no problem with subsidizing the buyers of Medicare so that their cash outlay is capped at ten per cent of their income.

    I have been in favor of doing the same thing with the ACA –
    i.e. even someone with an income over 400 per cent of poverty should get a subsidy.

    If the consequence is that a 60 year old pays about 25% of the real cost of his Medicare, I am fine with that too. The 50 million plus persons over 65 on Medicare also pay only 25% of the real cost. Nothing magic to me about the 65th birthday.

    Incidentally, my numbers for the cost of Medicare for under age 65 would be a little lower than yours. If health care costs go up several per cent a year as people age, then they would go down several per cent at lower ages. People age 60 would cost slightly less than the actuarial equivalents that you quote.

    • Allan says:

      Bob, when there is selection there can be extremely high costs. When age is the selection utilized and 65 is the age used there are many people that are healthy and seldom if ever see a physician. The sudden entry of sick persons causes a financial drain on resources.

      Additionally many older folk that you wish to place on Medicare might have lost their jobs. Add that to the limit of 10% and the replacement value paid by these below 65 Medicare recipients likely will impose large new costs. The costs of Medicare are already too high so Medicare has cut (with a blunt knife) many of their services causing harm to seniors over 65. You are trading one person’s life for another.

      • Where is the evidence current cuts are harmful?

        • Allan says:

          Firstly, the cuts I was talking about involved cuts that haven’t occurred and likely won’t occur in that fashion.

          I’m not sure what type of evidence you want for current cuts so I will have to wait for futher clarification. However, I can say that over the years as Medicare has reduced its budget it has negatively impacted patients medical care. I can list a few of those areas if you wish.

          My comments do not mean that I don’t support Medicare legislation that reduces costs to the taxpayer. I do.

  9. Bob Hertz says:

    Note to John:

    You are correct that a Medicare buy in would have adverse selection….

    but Medicare is designed to absorb risk. Medicare takes in every single 65 year old without a single medical question.
    In fact Med Advantage carriers take out multi-million dollar ads on TV to advertise Medicare to absolutely anyone, including any 90 years who might be watching.

    My point is that a social insurance system does not care about adverse selection. If a social insurance system gets a higher percent of sick persons, it raises taxes. It does not close its doors and go home, which is what a responsible private carrier does.

    • John Fembup says:

      “but Medicare is designed to absorb risk. Medicare takes in every single 65 year old without a single medical question”

      Bob, Medicare does not “absorb” risk. Medicare IGNORES risk “without a single medical question”. You point this out – but still somehow miss the meaning. The predictable result is carelessness leading to unnecessarily high Medicare cost.

      Because Medicare loses money from ignoring risk. A cynic might suspect that’s by design because don’t politicians love government spending? Whatever, Medicare succeeds admirably both in spending and losing very large amounts of money on a current, or cash basis, before even getting into the weeds of unfunded liabilities.

      In stark contrast to your assertion, it is insurance companies that are designed to absorb risk. They not only absorb risk, they profit by doing so.

      “My point is that a social insurance system does not care about adverse selection”

      You really aren’t seeing this clearly. Insurance programs definitely care about adverse selection. It’s welfare programs that do not care about adverse selection. Medicare does not care about adverse selection because it’s not an insurance program. It’s a welfare program that politicians call “insurance.”

      Old story: Abraham Lincoln once asked “How many legs does a dog have, if you call his tail a leg?” The answer is 4. No matter what you call the dog’s tail, it’s still a tail – it’s not a leg.

      Just so, Medicare is still welfare regardless what politicians or anyone else may call it.

      “If a social insurance system gets a higher percent of sick persons, it raises taxes.”

      Yeah: raising taxes expresses exactly the laziness, lack of accountability and absence of creativity that characterizes social welfare systems.

      How do insurance companies make money on Medicare Advantage drawing from the same population Medicare itself is losing oceans of money on? I think there are several reasons. One of the most important is that Medicare does not pay private insurers enough for them to apply the same standards of investigation, payment, and third-party recoveries that they apply on their own insured business. Medicare’s strategy is to “pay and pursue” except, of course, they don’t often get around to the “pursue” part. One might think that is reason is a small factor; one would be wrong. Penny-wise, pound foolish. A second reason is that insurance companies actually try not to lose money. That different incentive drives different behaviors. Big example, insurance companies work with physicians to manage medical treatments in more efficient ways.; Medicare pays much less attention to this than private insurance programs.

      My opinion? If enough Americans want a medical welfare system, that’s what we’ll eventually have – even if our politicians have to fool us into voting for it by telling us it’s “insurance”.

      • Allan says:

        “Medicare does not “absorb” risk. Medicare IGNORES risk “

        “it is insurance companies that are designed to absorb risk. They not only absorb risk, they profit by doing so.”


  10. Bob Hertz says:

    If Medicare is losing money on a cash basis, that is because
    Congress does not have the courage to raise taxes as expenditures grow.
    Let’s say that Medicare Part A collects $180 billion from its 2.9% payroll tax, but it spends $220 billion. (I believe these numbers are not too far off from reality, maybe from 2014 or so as these totals are often published late.)

    Anyways, the responsible action would be to enact a slight increase in the payroll tax. Germany has done this numerous times.

    It could be that America is just too comfortable with running deficits, and it makes us a less than ideal place to have a huge social insurance program.

    My underlying point is that I see nothing wrong with taxpayers deciding to tax themselves to fund health care costs, and keep the burden of those costs off of individuals at least to some extent. That is not the worst expenditure that a wealthy society can undertake.

    • Allan says:

      Bob, money and thus wealth (and growth) are reduced when taxes are increased and used for non wealth producing expenditures. What that means is lower growth and less taxes available for the future. I hope you have noted how our economic growth has been anemic and how it has been accompanied with static wages under Obama’s tax and spend policies. Your suggested increase in the tax rate is more of that failed policy. Additionally a lower standard of living can negatively impact the health of our citizens more than the taxes you suggest can improve their health.

      Moreover, your tax does nothing to alter the cost curve, so spending continues to rise and taxes have to be continuously increased. In essence nothing has been accomplished except to assure a larger problem down the road where less capital is available to solve the problems created.

      The responsible action is not increasing taxes. We have to attack the problem from a different direction. That is where Milton Friedman’s “Free to Choose” comes in. Simplicity is an art great men and woman use to get their point across. Perhaps you should read his book which is written so that relatively young children can understand in a matter of just a few hours. Each chapter is another major argument all of which have been used on this blog over and over again.

      If you don’t want to spend the money send me your address and I will buy a used one from Amazon and ship it to you.

    • John Fembup says:

      “the responsible action would be to enact a slight increase in the payroll tax”

      Bob, you advocate an immediate Medicare tax increase of more than 22%. (220 / 180). That is not “slight”. Seems to me the responsible action would be to correctly represent what you advocate.

      That would mean using the appropriate denominator when calculating the percentage Medicare tax increase needed to cover the Medicare spending you cite.

      Otherwise, one might be fooled into believing the tax increase is actually “slight” – when of course it is not.

  11. Bart I says:

    Tax credits that serve no purpose will not help hold down healthcare costs.

    Several days ago I asked what was the purpose of the proposed tax credits. Only Devon offered an answer, one that pertained to tax expenditures in general:

    A tax credit or a tax exclusion are both an attempt by government to 1) draw political support and 2) encourage a behavior beneficial to society.

    I can think of two more:

    3) To fulfill a social welfare requirement, for example to subsidize poor or sick people.
    4) To reimburse individuals for absorbing some socially-imposed cost, such as being overcharged for a service in order to allow others to be undercharged.

    My question was specifically about the tax deductions and credits in the various GOP (and NCPA) proposals. Looking at the above justifications:

    2) What beneficial behavior are we encouraging? Purchasing individually-underwritten health insurance is not especially beneficial to society as a whole. Un-reimbursed ER care is mostly for people who couldn’t afford individual insurance; it makes no difference whether you give them free care or a free policy.

    Purchasing community-rated insurance could be considered beneficial. But it’s not even clear to me what the GOP proposals do with regard to underwriting. NCPA is opposed to community rating, so this justification doesn’t work for an NCPA tax credit (unless a very small one).

    3) A universal tax credit would go mostly to people who don’t need it. It might cover 100+ percent of a healthy persons insurance costs, and only a small fraction of a sick person’s. And most of the people collecting it would have income. So as a social safety net it seems very inefficient.

    4) If not tied to community-rated coverage, a tax credit might still reimburse individuals for some social costs, such as the cost of unreimbursed ER care, as well as for cost shifting from Medicare and Medicaid. But the reimbursement required for these is small compared to that of a community-rated premium. This might justify a small tax credit, but a better solution for these cost shift problems would be for government to pay the bill directly and disperse the cost properly to taxpayers.

    This leaves 1). Is it intended to draw political support for the idea of repealing ACA? For dismantling ESI (provided you can get anyone to admit that this is what an unrestricted tax credit is likely to do)? For the politicians in general?

    Say what you want about the employer tax exclusion, but at least it performs all of the above, albeit inefficiently. But gasoline engines are only about 20 percent efficient and they’ve been rather successful.

    • Bart I says:

      Drat, I forgot the “/”

    • Allan says:

      Gasoline engines are gradually being replaced as should our socialized portions of our healthcare system. I see the tax credit as a way of mimicking the government subsidies offered by ESI, the ACA, welfare programs, etc. If the tax credits are able to replace what we have now they are worth it as we would have rid ourselelves of major problems. I think they will not be sufficient and will require a bit of welfare.

      The legislation seems to increase the benefits forever. I think it would make more sense (as I have said earlier) to permit increases for a short time and then stop them permitting inflation to work its magic. That will require a type of dead man’s switch. The important thing is to push towards a free or freer market-based system. That will dramatically cause costs to fall.

      With or without welfare in the future, Medicaid must be reformed to become what it was intended to be, a safety net, not a permanent home for able bodied people. There should be a way to easily buy in and buy out of this program so that it is integrated with private insurance. The tide should be in the direction of buying out of Medicaid. That should be the aim for Medicare as well, but first things first. We have become a welfare nation instead of a charitable one. Charity begins at the home, not at the highest levels of government. The home includes one’s family and friends extending outwards to community and onwards.

      Presently we have some vocal supporters that do not believe in charity closest to home which can mean limited government action. They forget that this nation prospored before socialism took hold and now that socialism is strangling us. They fool themselves with rhetoric that makes them believe they are supporting capitalism rather than socialism.

      • Bart I says:

        The key word being “gradually”, and only as usable replacements become available. No one is banning gas engines as a means of somehow forcing society to choose an alternative, although some idealists would like to.

        • Allan says:

          I think if we move towards tax credits it will be “gradually”, but the marketplace might speed the process up. Except for large corporations that self-insure I think ESI is mostly a failed model.

    • There would also have to be risk adjustment, as currently executed in Medicare Advantage and Obamacare exchanges.

  12. Bart I says:

    I see the tax credit as a way of mimicking the government subsidies offered by ESI, the ACA, welfare programs, etc.

    A tax credit can only mimic ESI if restricted to the same kind of health policy. To mimic ACA and welfare, it would have to be means tested.

    • Allan says:

      I didn’t say what you thought I said. I said “I see the tax credit as a way of mimicking the government subsidies”

    • Bart I says:

      A tax credit can only mimic ESI tax preferences if restricted to the same kind of health policy. To mimic ACA subsidies and welfare, it would have to be means tested.

      • Allan says:

        I’m talking about mimicking subsidies not any specific program.

        • Bart I says:

          I was talking about the subsidies as well from the programs you mention.

          My point was it doesn’t really mimic anything.

          • Allan says:

            Sure it does, admittedly not perfectly. They are all methods of taking tax dollars and distributing them elsewhere to aid in the purchase of health insurance. Do you really want to quibble over this issue?

  13. Bob Hertz says:

    Bart, I wonder if you are over-analyzing the tax credits. I see the credits as a way to equalize the economic status of those who get benefits at work, and those who do not.

    A person who gets benefits might receive $5,000 tax free, and this to some extent sets the price of health insurance. The person without benefits is immediately behind.

    After the demise of Clinton Care, we are not going to force all employers to provide benefits. So, tax credits are proposed to essentially do what certain employers are not doing.

    On a separate subject, I appreciated reading Allan’s comments on charity begins at home. Allan, you do not have to read the following, but it takes a different view….

    The theme of this article is that charity is a kind of lottery. If you find donors or an academic hospital with the right specialist, you get great care. Otherwise you basically stay home in pain.

    • Bart I says:

      Bob, a tax credit only equalizes status if everyone is forced to buy community-rated insurance. Short of that, the best way to equalize status is some sort of large, heavily subsidized risk pool program.

      • Bart I says:

        Or of course we could simply end the employer exclusion with no new tax credits. This would also equalize status between people with and without work benefits.

        • Barry Carol says:

          Politically impossible mainly because of the power of the unions, especially the public sector unions. I would love to end the ESI tax preference but I just don’t see it happening even as part of broad based tax reform.

          • Allan says:

            If the Republicans pass a satisfactory tax credit program that is freely competitive with ESI, ESI will likely be left with little or none of the marketplace.

        • Bart I says:

          No argument there, but political impossibility doesn’t seem to be at issue in some circles.

          Anyway I thought I had gotten some acknowledgement for the idea that ESI tax benefits flow mainly to the high-cost employees, but apparently not everyone agrees.

    • Allan says:

      Bob, almost everything is a type of lottery even your genes. The question is does charity make things better or worse? It makes things better. Did the ACA make things better? No. It made things worse.

      The best way to improve one’s odds is to think.

  14. Barry Carol says:

    Conservative / libertarian / free market folks all tell us that private charity can take care of the less fortunate. We don’t need government and the taxes that come with it to do that. The fact is that, especially as it relates to healthcare, private charity is nowhere near up to the job even without debate over the deserving poor vs. the non-deserving poor or sympathetic vs. non-sympathetic patients. It’s an inconvenient truth that they choose to ignore because it conflicts with their philosophy and world view.

    • Allan says:

      Charity might not completely end all problems, no one solution generally does when dealing with problems of this nature, but it will make a big dent. Your solution, the ACA, only made a big dent in our pocketbooks and will quickly explode if nothing is done. Some people’s last step is to rely upon government, but it seems that is your starting place.

  15. Bob Hertz says:

    My blessed uncle was a wonderful doctor who gave charitable care for many years. It was moving and amazing how many persons came forward at his funeral to give thanks for what he did for them.

    He died in 1975. He was giving charitable primary care — he was not giving $85,000 AIDS cures and $10,000 a month in hemophilia drugs or $350,000 heart transplants.

    I wonder if charity has been limited by today’s prices.