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MAKING CENTS OUT OF THE NEWS
Blog #38
(October 8th, 2009)
Another Third Rail?
By Tom McAllister, CFP®
“The program is going broke!” “Changes are needed to save benefits for our children and grandchildren!” “They’re trying to take Social Security away from our elderly!” For decades, the debate about Social Security has continued to rage. One party raises issues and proposes reforms, then the other uses scare tactics to kill any further discussion. The courageous souls who brought the matter to the forefront find themselves in trouble with their constituencies back home. Like the electric power rail in a subway system, which can kill anyone touching it, touching the retirement system “third rail” brings political death.
Since summer, we’ve been witness to a new “third rail,” this one related to healthcare reform. “Universal health care will be paid for taking away Medicare benefits from our elderly citizens!”
“You don’t want big government deciding what treatments and medications your physician may prescribe.” “Death panels will save money by ending lives.”
To the bewilderment of the Obama administration, many elderly citizens have taken umbrage at its proposals and very strongly objected to healthcare system changes. Our President and his supporters, in my belief, have badly underestimated this widespread opposition to healthcare change. Objectors are not limited to a few radical, far-right Obama haters. Rather, concerns are being voiced by independents and even Democrats in the middle of the political spectrum, in addition to Republicans and others on the right. Should the administration continue to misjudge this “third rail” backlash, it will, as the polls already suggest, suffer at the polls in 2010.
Just as Social Security needs fixing, so too does our health care system. Social Security needs to extend the date for full retirement from 67 to 70. This change can be phased in during coming years to reflect our much longer life expectation. Another Social Security change which would avoid bankrupting the system would be to peg cost of living adjustments to increases to a cost of living index vs. the current linkage to the more rapidly growing wage index.
In similar fashion, improvements can be made to our health care system without necessitating a government takeover. First, a federal law should be passed allowing insurance companies to sell health care policies nationwide. Along with this an “insurance exchange” can be created making it possible for consumers to find and purchase appropriate policies via the Internet or through agents. U.S. citizens too poor to afford health insurance can be covered through existing insurance providers at an approximate cost of $30 billion per year. (As an aside, this population consists of seven to twelve million individuals, not the much-touted 47 million. The latter number includes illegal immigrants and those between jobs.) All insurance companies would be required to cover preexisting conditions and would be allowed in increase premiums to reflect these increased liabilities. If all must do it, it can be done. For those who rant about insurance company profits, the fact is those profits represent only one to three percent of the cost of health care in the United States!
Nowhere is the “third rail” mentality more in evidence than in the current Congress; for that reason, true “tort reform” is probably a Mission Impossible for now. Setting politics aside, however, caps on malpractice awards for are not only feasible, but would prove enormously beneficial. Physicians would have less need to practice expensive, test-and-preventive-procedure-heavy “defensive medicine” out of legitimate fear of lawsuits. Setting up model programs in several small states is not necessary. Tort award-limiting legislation has been functioning successfully here in Indiana for 35 years and has worked well.
Lastly, if the administration can find $200 billion in fraud and inefficiencies in our Medicare system to pay for national health care, I say, “Go for it now!” The administration should immediately institute whatever programs and practices are necessary to achieve these savings. We don’t need new laws to become more efficient using the ones we have. Why wait?
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