Austin Frakt had an NYT Upshot piece complaining that the cost of the Medicare prescription drug plan to taxpayers has been soaring:
“But the stability in the premiums belies much larger growth in the cost for taxpayers. In 2007, Part D cost taxpayers $46 billion. By 2016, the figure reached $79 billion, a 72 percent increase.”
This is a peculiar complaint because the plan is actually costing the government far less than had been projected. The 2004 Medicare Trustees report projected that Part D would cost 1.01 percent of GDP in 2015 and rise to 1.31 percent of GDP in 2020 (Table II.C21). If we interpolate, that means the plan should have cost 1.13 percent of GDP in 2017. That would come to roughly $250 billion.
The 2018 report shows that Part D cost $100 billion in 2017 (Table III.D1), less than half of what had been projected in 2004. The main reason for the lower than projected expenditures is that drug costs have increased far less than had been expected, primarily due to a slowdown in the development and approval of new drugs.
In any case, if there are any surprises with the Medicare drug program it has been the slower the projected growth of costs, not the opposite.
Austin Frakt had an NYT Upshot piece complaining that the cost of the Medicare prescription drug plan to taxpayers has been soaring:
“But the stability in the premiums belies much larger growth in the cost for taxpayers. In 2007, Part D cost taxpayers $46 billion. By 2016, the figure reached $79 billion, a 72 percent increase.”
This is a peculiar complaint because the plan is actually costing the government far less than had been projected. The 2004 Medicare Trustees report projected that Part D would cost 1.01 percent of GDP in 2015 and rise to 1.31 percent of GDP in 2020 (Table II.C21). If we interpolate, that means the plan should have cost 1.13 percent of GDP in 2017. That would come to roughly $250 billion.
The 2018 report shows that Part D cost $100 billion in 2017 (Table III.D1), less than half of what had been projected in 2004. The main reason for the lower than projected expenditures is that drug costs have increased far less than had been expected, primarily due to a slowdown in the development and approval of new drugs.
In any case, if there are any surprises with the Medicare drug program it has been the slower the projected growth of costs, not the opposite.
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I see that Glenn Kessler, the Washington Post fact checker, is being pretty liberal in dishing out the Pinocchios over Democrats’ claim that a study from a right-wing think tank found that a Medicare-for-all system would save $2 trillion over the course of the decade. Kessler’s main complaints are that these savings assume that providers accept a 40 percent reduction in payments and that Democrats’ have ignored the study’s projection that Medicare-for-all would add $32.6 trillion to the federal budget over the decade. For these omissions, Kessler awarded three Pinocchios. This seems excessive to me.
First, Kessler argues that a 40 percent reduction in payments to providers is unrealistic. This is true, based on the historic balance of power in these debates where doctors hospitals, drug companies, and medical equipment suppliers all have very powerful lobbies. But if there was a committed majority in Congress for providing universal Medicare, it is possible that these lobbies could be defeated.
In this context, it would be helpful to point out that providers in other wealthy countries do get 40 percent, and sometimes even 50 percent or 60 percent less than providers in the United States. There is little doubt that providers would scream bloody murder over the prospects of large pay cuts, but what would be their option if there was the political will? Would doctors change careers and become shoe salespeople?
Kessler is, of course, right that the study projected a large increase in government spending under Medicare-for-all, and that was its main point. This does raise important political problems, but the biggest chunk of this increase comes from replacing employer payments for insurance with government payments. Would people really be that upset if the money that their employer sent to an insurance company was instead sent to the government to pay for health care?
It seems to me that the prospect of saving $2 trillion over a decade (roughly $15,000 per household) might be worth having more money go through the government. That is, of course, unless one has an ideological distaste for the government or wants to see insurers, drug companies, doctors, and equipment suppliers have more money.
As an economist and certified numbers geek, I can sympathize with Kessler’s complaint that the Democrats aren’t giving the full story. But is this really a three Pinocchio offense when we have many leading politicians, like the president, who literally just make things up and just deny well-established facts?
I see that Glenn Kessler, the Washington Post fact checker, is being pretty liberal in dishing out the Pinocchios over Democrats’ claim that a study from a right-wing think tank found that a Medicare-for-all system would save $2 trillion over the course of the decade. Kessler’s main complaints are that these savings assume that providers accept a 40 percent reduction in payments and that Democrats’ have ignored the study’s projection that Medicare-for-all would add $32.6 trillion to the federal budget over the decade. For these omissions, Kessler awarded three Pinocchios. This seems excessive to me.
First, Kessler argues that a 40 percent reduction in payments to providers is unrealistic. This is true, based on the historic balance of power in these debates where doctors hospitals, drug companies, and medical equipment suppliers all have very powerful lobbies. But if there was a committed majority in Congress for providing universal Medicare, it is possible that these lobbies could be defeated.
In this context, it would be helpful to point out that providers in other wealthy countries do get 40 percent, and sometimes even 50 percent or 60 percent less than providers in the United States. There is little doubt that providers would scream bloody murder over the prospects of large pay cuts, but what would be their option if there was the political will? Would doctors change careers and become shoe salespeople?
Kessler is, of course, right that the study projected a large increase in government spending under Medicare-for-all, and that was its main point. This does raise important political problems, but the biggest chunk of this increase comes from replacing employer payments for insurance with government payments. Would people really be that upset if the money that their employer sent to an insurance company was instead sent to the government to pay for health care?
It seems to me that the prospect of saving $2 trillion over a decade (roughly $15,000 per household) might be worth having more money go through the government. That is, of course, unless one has an ideological distaste for the government or wants to see insurers, drug companies, doctors, and equipment suppliers have more money.
As an economist and certified numbers geek, I can sympathize with Kessler’s complaint that the Democrats aren’t giving the full story. But is this really a three Pinocchio offense when we have many leading politicians, like the president, who literally just make things up and just deny well-established facts?
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I am not in the habit of defending Democrats (it’s not part of my job description), but come on folks. The central graph in this piece shows little change in the views of Democrats on the economy pre- and post-2016. It shows the percentage of Republicans who rate the economy good or excellent jumping from around 20 percent to 77 percent in the most recent reading.
This is a story of Republican attitudes reflecting who is in the White House. It shows the exact opposite for Democrats. We know this is the era of Trump, but please let’s have reporting reflect the facts that are in front of our faces.
I am not in the habit of defending Democrats (it’s not part of my job description), but come on folks. The central graph in this piece shows little change in the views of Democrats on the economy pre- and post-2016. It shows the percentage of Republicans who rate the economy good or excellent jumping from around 20 percent to 77 percent in the most recent reading.
This is a story of Republican attitudes reflecting who is in the White House. It shows the exact opposite for Democrats. We know this is the era of Trump, but please let’s have reporting reflect the facts that are in front of our faces.
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We all know how hard it is to get help these days. Companies are shelling out $15 or $20 million a year for CEOs who can’t seem to figure out how to tie their own shoes. Marketplace radio ran a piece on how companies are turning to older workers, people with prison records, and people who failed drug tests to find workers. While this is great news, since these people are now getting opportunities as a result of the low unemployment rate, companies seem to be ignoring the most obvious place to find workers: their competitors.
For some reason, the possibility of pulling workers away from competitors never seems to occur to employers. We have been treated to endless pieces about how trucking companies can’t find workers, or how manufacturing workers can’t get people with the right skills.
These people are out there in large numbers, they just happen to be working elsewhere. But there is a way to get workers to change employers: offer them higher pay. We do see this process in action sometimes. When a baseball team wants to get a great pitcher, they offer them really high pay. Universities will do this to attract star academics. And, this is ostensibly how CEO pay got pushed up into the eight-figure range.
For some reason, these same CEOs just can’t figure out how to raise wages when it comes to attracting ordinary workers. According to data from the Bureau of Labor Statistics, the average hourly wage for production and non-supervisory workers in both trucking and manufacturing have risen 2.7 percent over the last year, just even with the rate of inflation. This means that real wages are not rising at all in these sectors, in spite of employers alleged difficulty in finding workers.
We all know how hard it is to get help these days. Companies are shelling out $15 or $20 million a year for CEOs who can’t seem to figure out how to tie their own shoes. Marketplace radio ran a piece on how companies are turning to older workers, people with prison records, and people who failed drug tests to find workers. While this is great news, since these people are now getting opportunities as a result of the low unemployment rate, companies seem to be ignoring the most obvious place to find workers: their competitors.
For some reason, the possibility of pulling workers away from competitors never seems to occur to employers. We have been treated to endless pieces about how trucking companies can’t find workers, or how manufacturing workers can’t get people with the right skills.
These people are out there in large numbers, they just happen to be working elsewhere. But there is a way to get workers to change employers: offer them higher pay. We do see this process in action sometimes. When a baseball team wants to get a great pitcher, they offer them really high pay. Universities will do this to attract star academics. And, this is ostensibly how CEO pay got pushed up into the eight-figure range.
For some reason, these same CEOs just can’t figure out how to raise wages when it comes to attracting ordinary workers. According to data from the Bureau of Labor Statistics, the average hourly wage for production and non-supervisory workers in both trucking and manufacturing have risen 2.7 percent over the last year, just even with the rate of inflation. This means that real wages are not rising at all in these sectors, in spite of employers alleged difficulty in finding workers.
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The NYT had a front page piece on how two major steel companies with close ties to the Trump administration are having enormous say on which companies are granted exemptions to his steel tariffs. While there is nothing in principle wrong with the affected companies giving their input on whether exemptions should be granted, given the lack of transparency and financial disclosure by top officials in the Trump administration, it is difficult to have confidence that these decisions are being made on the merits alone.
This issue has been noted earlier by the NYT. Tariffs and exemptions to them provide enormous opportunities for the Trump administration to practice crony capitalism. That is not necessarily an argument against all tariffs, but such favoritism is an inevitable problem associated with tariffs or other forms of protectionism (like patents and copyrights). This does show the need for having a transparent process in which the individuals making decisions do not have a financial interest in the outcome.
The NYT had a front page piece on how two major steel companies with close ties to the Trump administration are having enormous say on which companies are granted exemptions to his steel tariffs. While there is nothing in principle wrong with the affected companies giving their input on whether exemptions should be granted, given the lack of transparency and financial disclosure by top officials in the Trump administration, it is difficult to have confidence that these decisions are being made on the merits alone.
This issue has been noted earlier by the NYT. Tariffs and exemptions to them provide enormous opportunities for the Trump administration to practice crony capitalism. That is not necessarily an argument against all tariffs, but such favoritism is an inevitable problem associated with tariffs or other forms of protectionism (like patents and copyrights). This does show the need for having a transparent process in which the individuals making decisions do not have a financial interest in the outcome.
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Last week I noted the Trump administration’s professed concern that higher mileage standards would lead to more traffic deaths because fuel efficient cars make it cheaper to drive, therefore people will drive more. As I pointed out at the time, if Trump wants to discourage people from driving then shifting to pay by the mile insurance policies would have create much more disincentive than having them drive fuel inefficient cars.
I gave some links to the relevent literature in that blog post, but here are some newer ones.
I’m sure the Trump administration will soon be leading the charge on this issue.
Thanks to Mark Brucker for the references.
Last week I noted the Trump administration’s professed concern that higher mileage standards would lead to more traffic deaths because fuel efficient cars make it cheaper to drive, therefore people will drive more. As I pointed out at the time, if Trump wants to discourage people from driving then shifting to pay by the mile insurance policies would have create much more disincentive than having them drive fuel inefficient cars.
I gave some links to the relevent literature in that blog post, but here are some newer ones.
I’m sure the Trump administration will soon be leading the charge on this issue.
Thanks to Mark Brucker for the references.
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