Seniors no doubt base this suspicion in large part on their 50+ adult years of watching politicians over-promise and under-deliver. They probably remember back to 1965 when Medicare itself was sold as a cost-saving measure, and today we’re told it’s going to bankrupt the government unless we socialize 15% of the economy. They no doubt wonder how long it will be before Obama’s ideological descendants will tell us that Obama’s miracle plan is a disaster than can only be solved by more socialism.
Seniors have another reason to be nervous. Obama’s plan will put them in direct competition with everyone else for health care spending.
Right now we compartmentalize government health-care spending. We have one program for the poor (Medicaid) and one for the elderly (Medicare). Each is paid for by a separate flat tax on wages. The government doesn’t spend any money on health care for the middle class. This means that if the government spends more money on health care for the poor it doesn’t automatically mean they spend less on the elderly. More importantly, it means that when the government spends more on the poor or elderly it doesn’t directly mean middle-class families have less spent on them. Middle-class families might see their payroll taxes go up but they can compensate by trimming spending in all of their budget areas. Those taxes don’t come directly out of their health-care budgets. With the current system, health-care spending is a nonzero-sum game, i.e., spending more on one compartment does not automatically mean spending less on another compartment.
Right now, medical spending is like baking three separate pies for three siblings. Each sibling gets his or her own pie, so they don’t quarrel over who gets the biggest slice.
With Obamacare, that will change. The walls of the financial compartments will crumble. All medical spending for everyone will come out of one big financial pot. Suddenly, health-care spending will become zero-sum. Spending more on the elderly or the poor will automatically mean spending less on middle-class families and vice versa. Middle-class families won’t be able to accommodate increased spending on the elderly by trimming other parts of the family budget. Even if middle-class people pay more taxes into the entire system, politicians will always have to balance spending those increased taxes on the elderly and poor against the needs of middle-class families.
With Obamacare, medical spending will be like baking one pie for three siblings. If one sibling gets a bigger piece that automatically means the other two siblings get smaller pieces. The one-pie system has a built-in automatic source of conflict.
The elderly consume 70% of all health-care spending.[updated here and here] That means that when it comes to cost control they will bear the brunt of the burden. If we don’t cut spending on the elderly we can’t reduce costs without simply denying care for everyone else. When it comes down to a choice between spending on old people and children, the elderly know full well who we are going to pick. The elderly themselves will choose to spend money on their grandchildren rather than themselves.
Worse, if health care is not supported by its own specialized flat tax, health-care spending on the elderly and poor comes into direct competition with all other government spending, and with all of the groups that disproportionately benefit from that spending or pay the taxes that support it.
We should think long and hard before we set up a political dynamic that pits the interests of the productive and powerful against the interests of the non-productive and powerless. It is unwise to make people choose between care for their own children and care for their parents and poor strangers. The current compartmentalization, flawed at it is, at least protects the most vulnerable people from this fate. We can pay for medical care for the poor and elderly without compromising the level of care for our children or reducing any other government function.
We shouldn’t casually throw that away.
[Update (2009-8-13 8:21pm): CodeMonkey’s Mike makes my argument more succinctly than I did.
The advantage of the compartmentalization is that by creating dedicated pools of money, it can ration care without wholesale denying care to any class. Medicare is a fairer compromise because it caps the liability of the productive to the non-productive in a way that balances the needs of many non-productive who are genuinely in need with the need for restraint on the burden placed on the productive. Obama’s plan will invariably break that balance and pit both classes against each other, and it will be the younger generations that will win the lion’s share of resources.