Both political parties are getting their talking points in order for the fall campaign. I'm still looking for the courageous politician willing to admit that last year's tax cuts can't remain in place if we're going to pay for the baby boomers' retirement.
Since average citizens have seen little benefit from the tax cuts and unemployment was already low when President Donald Trump took office, the GOP's best hope for maintaining control of Congress is to stir up the base by running against impeachment.
Democratic candidates in blue states will appeal to the energized party base by attacking the administration's incompetence, divisiveness and its flouting of the rule of law. In purple and red states, centrists will emphasize more traditional Democratic programs like education, job training and defense of the Affordable Care Act, whose popularity proved surprisingly durable during last year's repeal-and-replace debate.
Political campaigns are not known for nuanced discussions or long-term thinking. This year will be worse than most.
That's why, during this year's campaign, someone, somewhere needs to start talking about the long-term implications of the tax law, which will reduce the federal tax take by $1.6 trillion over the next 10 years, according to the Congressional Budget Office.
Forget populist railing against lining the pockets of the wealthy and corporations. The real issue is much simpler and far more frightening. How can the federal government meet its Medicare obligations to retirees—half of whom have no personal savings or pensions—when it continually reduces taxes?
The tax cut law will reduce the federal tax take to just 16.6% of GDP. That's a full percentage point below 2007, the last business-cycle peak; and 3 percentage points below the late 1990s. It's simply not realistic in an aging society.
Last week, former HHS Secretary Dr. Tom Price, when asked that question in a healthcare forum, replied that Medicare could cut its way to solvency. Trump's first HHS pick pointed to value-based payment changes and suggested that tort reform and elimination of defensive medicine alone could cut $600 billion in annual healthcare spending.
That's wishful thinking. Recent studies estimate defensive medicine accounts for just 2% to 3% of health spending. If we could eliminate it all, it would provide a nice one-time ratcheting down of spending, but the long-term upward arc of the cost curve would remain unbent.
Payment reforms that push providers toward value-based reimbursement hold more potential for cutting costs. Indeed, in this decade Medicare spending has come in a half-trillion dollars below what had been projected before the ACA. During the 2000s, healthcare spending rose from 13.8% to 17.4% of GDP. In this decade, it has gone up less than a percentage point—the longest sustained slowdown in spending since the advent of Medicare and Medicaid.
Is there more waste and inefficiency to be squeezed from the system? Of course. But as CMS actuaries reported earlier this year, two-thirds of the increase in spending over the next decade will be due to rising prices and the aging of society, not greater use of services.
We can't do much about aging. And when it comes to high prices, as a recent study in JAMA showed, the main culprits are high physician salaries, high drug prices and excessive overhead, which is the inevitable byproduct of our fragmented insurance system.
Effective cost control must focus on those issues. Alas, progress will be slow given the power of entrenched special interests.
Meanwhile, the uninsured rate is rising again due to the administration's deliberate policy of undermining the ACA. When access goes down, illness and outcomes get worse, and uncompensated care goes up. Cost control becomes exponentially more difficult in that environment.
It would be nice to hear just one pro-tax cut politician admit the implication of that vote. To keep those tax cuts, we have to make seniors pay more for healthcare and let the price mechanism and individual seniors' personal finances ration care.
