Sequester, What?

The sequester is confusing.

Reasons include:

a) The sequester is not sexy enough for the media.

b) It’s about the federal budget, not a polarizing moral issue.

c) It doesn’t make sense.

John Green, award-winning novelist, Internet entrepreneur and one half of the vlogbrothers on Youtube, describes the sequester in under six minutes here.

REACTIONS–

Social Security is crucial for people who have been disproportionately impacted by discrimination throughout their lives, such as women and racial/ethnic minorities who have fewer resources and opportunities with which to save for the expenses of later life. For these people, Social Security is sometimes their only source of income. John has a funny bit about Social Security being used by older adults to use computers, but I hope people don’t take that funny anecdote and use it as an argument against a program that lifts people above the federal poverty line (which as Bernie Sanders points out is inadequate for older adults due to the high cost of health expenses).

John is also right about the sequester being like throwing a dart at a dartboard. Unfortunately, the sequester results in across-the-board cuts for all federal programs, except programs that require mandatory spending. This is far less sensible than a proposal to cut inefficient and unnecessary cuts, or to make reforms for costly programs, or to reallocate funds from certain parts of the budget. However, despite the finger pointing that is going on, members of both parties in Congress agreed on the sequester, and it is an unwillingness to compromise in both parties in Congress that has led us to the sequester.

To conclude that Medicare, Medicaid and Social Security need to be eliminated or experience indiscriminate across-the-board cuts is to succumb to the same unreasonable haste that led us to the sequester. John rightly points out that Medicare and Medicaid (not spelled Medicaide) and Social Security represent the majority of federal spending, yet they are mandatory programs exempt from the cuts. This might lead some to believe that we need to attack these entitlement programs or else our economy will die. It is true that these programs will continue to grow through the years, especially as the baby boomers grow older, retire and require medical treatment. It is also true that Medicaid spending will result in a 16% increase in national spending because of the Affordable Care Act.  However, closer examination of the components of Medicare and Medicaid, and the outcomes of Medicare, Medicaid and Social Security will reveal that a complete attack on Medicare, Medicaid and Social Security is not necessary, and may even run counter to the goals of cost-efficiency and higher quality care.

THINGS TO KNOW–

Medicare and Medicaid reduce costs for unnecessary emergency care, while encouraging preventive treatment and primary care. Medicare and Medicaid provide health insurance for the most vulnerable populations: older adults and people with disabilities, and people with low-incomes, respectively. These programs increase their ability to access health services and the likelihood that they will pursue preventive treatment and purchase necessary medication, all of which reduce unnecessary and expensive emergency room visits, as well as medical debt and out-of-pocket costs for vulnerable and low-income individuals.

Medicare and Medicaid provides health coverage in a more cost-efficient manner than private insurance. Considering health status, Medicaid has lower per capita spending than private insurance, and costs for Medicaid have risen more slowly than medical care inflation and private insurance premiums.

Because of their role in financing treatment, research and education, Medicare and Medicaid are actually great drivers in the economy, and cutting funding for these programs actually removes cash flow into the economy. While some may suggest that pulling these programs would be better for the economy, the healthcare industry violates a lot of free market principles, so removing Medicare and Medicaid would actually weaken the economy, without providing the expected benefits of cost efficiency (for providers and beneficiaries alike) that they already provide.

Medicare is not free health care. It is financed partly by payroll taxes. In fact, compared to previous years, we are much more solvent. As John Green mentions, the problem arises in projected debt. However, only Medicare Part A is the problem, as revenues decrease (fewer people paying into Medicare) and costs increase (baby boomers retiring and needing more medical attention).

The concerns over Medicare, Medicaid and Social Security do not represent a financial problem: they represent a demographic shift. We are only concerned about Medicare, Medicaid and Social Security because we see that in projections, there is not enough revenue to cover costs. This is not an indication that these programs are inefficient or unnecessary. This is an indication that our population is changing. If people weren’t so excited to have babies after World War II, we would not be in the same fiscal situation that we are in now– once we pass this current baby boom bump, our healthcare deficit spending will decrease dramatically. We have this idea that older adults as a monolithic group are dragging our federal budget down into the red. But those who examine the situation more closely will find that older adults are not all the same, and that neither are the federal programs that serve them.

For instance, only five percent of Medicaid beneficiaries account for over half of Medicaid spending, and they have the greatest need because they have chronic illnesses or are disabled. It is insensible to cut funding for all of Medicare when the majority of the costs come from recipients who need it the most. Instead, we need to be smart about how we reallocate funds and shift program design in order to meet the health care needs of older adults in a cost-efficient and effective manner. The movement toward patient-centered managed care models, the development of medical homes and incentives for reducing hospital readmission rates all represent cost-cutting steps toward addressing our demographic shift.

We are confused by the sequester, not because we are dumb, but because cooperating on sensible steps is rarely as sexy as fighting over sensational doomsday rhetoric.

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