Michael Meeropol: What A Decent Society Looks Like
[Between the time this was taped for delivery on March 24 and the writing of this longer version, the Republicans pulled their bill repealing and replacing the Affordable Care Act. The principles enunciated here and the argument that seniors who receive Medicare are receiving the same kind of social insurance subsidies from current taxpayers as are Medicaid recipients remain very important. It is also important that people who struggled to protect the Affordable Care Act from being replaced by Trumpcare remain vigilant. The promise by the Trump Administration that the will do everything in their power to destroy the effectiveness of the Affordable Care Act should be taken very seriously.]
What is the difference between Medicaid and Medicare? The major difference is that Medicare is an earned entitlement while Medicaid is a means-tested entitlement. Working ten years and paying payroll taxes qualify you for Medicare’s hospitalization insurance without having to pay out of pocket premiums. Paying those payroll taxes also entitles seniors to enroll in Medicare Part B which covers physicians’ services and Part D which is the prescription drug plan. These programs are yours regardless of your income, so long as you have paid the payroll tax during ten years of your working career. Billionaires get free hospitalization and access to Medicare Parts B and D along with the rest of us, just by virtue of having paid the payroll tax. Because of this fact, people who receive Medicare (and this applies to Social Security pensions as well) believe they have “paid for it” with their taxes and are not, therefore, receiving “welfare.”
To receive Medicaid you have to prove you need it by having incomes near or below the poverty level. The income cut-off depends on which State you live in but it is usually close to the Federally Defined “poverty line” of $24,250 for a family of 4. States like New York that accepted the Medicaid expansion as part of the Affordable Care Act permit families of 4 with incomes of up to $33,465 to sign up. Anyone with a higher income is ineligible. Medicaid is financed out of general revenues which leads people who pay those taxes to see Medicaid recipients as receiving welfare.
So a false and dangerous belief is spawned --- Medicare is earned – Medicaid is government enforced charity.
This leads too many people to support reductions in Medicaid while at the same time demanding as a famous tea party member once shouted “I want the government to keep its hands off my Medicare.” Well, the Ryan majority in the House of Representatives has figured out how to gain political support for gutting the Affordable Care Act (a.k.a. Obamacare) --- cut back sharply on Medicaid. Many supporters of Donald Trump and opponents of “Obamacare” see Medicaid recipients as undeserving anyway.
However, the idea that people receiving Medicare (and social security pensions) have “paid for it” with their payroll taxes is false. Both of these systems are “pay as you go” systems. When current recipients of Medicare paid payroll taxes over their working lives, that money was not sitting around invested and growing sufficiently to pay medical bills forty years later. Those folks’ payroll taxes financed medical payments for Medicare recipients at the time they were working --- And when workers turn 65, the future working generation will pay their medical expenses. With the escalation of medical costs over the decades, one would have to be an extremely healthy senior not to spend many multiples of the dollars collected over one’s working life in Medicare taxes. Medicaid recipients, of coruse, also rely on taxpayers to finance their health care purchases. Despite the existence of the payroll tax to finance Medicare, both Medicare and Medicaid recipients are subsidized by current taxpayers.
This is as it should be. The concept of social insurance is one where everyone pays – and everyone is entitled to the benefits when they are in need. That is what a decent society looks like.
Let me give a personal example. I am 74 years old and retired in 2014. Over my working career, I have paid payroll taxes that have gone to pay unemployment compensation to the unemployed andbenefits for those on Social Security disability. I have also paid income taxes that have gone to finance medical expenses for those with incomes that qualify the for Medicaid. I am fortunate that so far I have not had to avail myself of these three social insurance benefits. I have not been harmed because I never collected these benefits despite paying taxes for over 40 years. I was glad to be living in a society with a system of social insurance in case I ever needed it. A good system of social insurance has everyone paying in and everyone potentially able to collect should they need it --- whether it be living long enough to collect a social security pension or being poor enough to qualify for Medicaid.
The Trump plan tries to cynically takes advantage of the belief that people on Medicaid are un-deserving while seniors who only Medicare and Social Security paid for it. It’s more complicated. Seniors receiving social security pension checks and enrolled in Medicare “paid for” the right to receive it by paying for current recipients while they were working. Now these seniors are being subsidized by today’s workers --- exactly like Medicaid recipients.
Trump’s plan promises to replace the guarantees of Medicaid with a block grant. The point of this has been made crystal clear by Paul Ryan and his Republican cohorts --- even if Trump doesn’t seem to understand it. The whole point is to reduce spending on Medicaid. All the garbage about giving people “access” to health insurance because suddenly the magic of the market will reduce premiums cannot mask the fact that if the federal government sends less Medicaid money to the states, the states will be faced with a Hobson’s choice --- either they will kick people off of Medicaid or they will cut back the services they provide for Medicaid recipients. This will increase the number of uninsured. Lest the rest of us say “what has that got to do with me?” remember that the uninsured get care anyway! They just don’t pay for it leaving hospitals to scramble for the money from other sources --- which raises premiums for the rest of us.
Another aspect of the long term plan for replacing Obamacare is to end guaranteed health insurance and, instead, give people a tax credit with which they can purchase a plan that allegedly fits their needs better than the plans mandated by Obamacare. Here comes another myth – that with increased competition among insurance companies, health insurance will be cheaper and more attuned to the needs of consumers. In fact what it will do is it will permit insurance companies to issue junk plans at low cost that young healthy people will buy. This will work fine until those young healthy people really need to spend money on health care – when they will find their plans are, indeed, junk plans. That danger was one of the things the Affordable Care Act got rid of --- but ending Obamacare will open the door once again to insurance companies getting away with selling shoddy products. And of course, the tax credits proposed in the law are much lower than the subsidies provided under the Affordable Care Act.
The Congressional Budget Office made it clear that if Trumpcare passes Congress, 24 million people will lose health insurance or voluntarily refuse to enroll, leaving those insured with rapidly escalating premiums. The total number of uninsured will be higher than before the enactment of the Affordable Care Act.
( For details see See Dean Baker “Republicans Look to Top 50 Million Uninsured” March 7 2017 at http://cepr.net/blogs/beat-the-press/republicans-look-to-top-50-million-uninsured)
[As I write the final version of this on the morning of March 24, the Republicans are trying desperately to cut out even more of the Affordable Care Act from their bill in order to satisfy the right-wing ideology of about 29 members of what is absurdly called the “House Freedom Caucus,” the group that just does not believe that it is the government’s job to guarantee health care for all citizens. If they could, these folks would repeal Medicare and Social Security but virtually none of them admit it. They are showing their true colors by asserting that the Ryan-Trump bill is “Obamacare Lite” and keeps too much government involvement in the medical marketplace. The problem for Ryan and Trump is that every time they make the bill more to the liking of these “Freedom Caucus” ideologues, they frighten many Republican members of Congress who know their constituents are liable to punish them in 2018 for cutting the heart out of Obamacare. Before giving up on the bill in the middle of the day on Friday the 24th, Ryan proposed “sweeteners” for the right wingers – no longer requiring insurance companies to cover things like mental health treatment. The list of things they would no longer require were very important elements of any decent health insurance policy. Not requiring insurance companies to do this means they would be permitted to charge extra for all of them.]
Our country dodged a bullet (for now). The Ryan-Trump plan would have abandoned people who in the past three years have finally gotten access to health insurance. This would have been, without a doubt, a dangerous rupture of the solidarity that is the hallmark of a decent civilized society. Resistance has succeeded for now. But as I noted above, they will try to destroy the Affordable Care Act with administrative rule-making by the Secretary of Health and Human Services and other sleight of hand. We must remain vigilant.
Michael Meeropol is professor emeritus of Economics at Western New England University. He is the author (with Howard Sherman) of Principles of Macroeconomics: Activist vs. Austerity Policies.
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