Hospitals are deploying their political power to protect their bottom lines in the battle to control healthcare costs.
The point of contention: For decades, Medicare has paid hospitals — including hospital-owned physician practices that may not be physically located in a hospital building — about double the rates it pays other doctors and facilities for the same services, such as mammograms, colonoscopies, and blood tests.
The rationale has been that hospitals have higher fixed costs, such as 24/7 emergency rooms and uncompensated care for uninsured people.
I can understand why federally funded Medicare would pay moreto organizations with higher fixed costs, but why would they pay lessto organizations with lower fixed costs?
I know. That sounds like double talk. If you pay more to one group, you pay less to another. But there is a point to be made.
Colleen DeGuzman
Medicare is an agency of the Monetarily Sovereign federal government. Contrary to popular wisdom, Medicare is not funded by FICA taxes.
All federal tax dollars, including FICA, are destroyed upon receiptby the U.S. Treasury.
The dollars begin in the M2 money supply measure, but when they reach the Treasury, they cease to be part of any money supply measure.
Effectively, they are destroyed. There cannot be a money supply measure for an entity with the limitless ability to create dollars by clicking computer keys.
Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.”
All federal agencies — Congress, the White House, SCOTUS, the military, etc. are funded the same way: By federal new money creation. That includes Medicare and Social Security.
Since the federal government can create dollars, why should it try to save dollars? It shouldn’t.
When there is a question about how much the federal government should pay for anything, the wise course is to err on the side of paying more. That would add growth dollars to the economy at no cost to anyone.
Suppose the goal is to pay hospitals the same rate as other doctors and facilities for the same services. In that case, the federal government shouldn’t cut hospital pay but rather increase the pay to other doctors and facilities.
Insurers, doctors, and consumer advocates have long complained it’s an unequal and unfair arrangement that results in higher costs for patients and taxpayers.
It may or may not be “unfair,” but why would hospital pay be considered too high? No one has demonstrated that hospitals should receive less money. So why is reducing hospital pay the cure for “unfairness”?
It’s also a profit incentive for hospitals to buy up physician practices, which health economists say can lead to hospital consolidation and higher prices.
It would seem that the real profit incentive is not with the hospitals to buy physician practices. Instead, there would be an incentive for doctors to sell their practices, depending on how Medicare dollars are split between doctors and hospitals.
In December, the House passed a bill that included a provision requiring Medicare to pay the same rates for medical infusions, like chemotherapy and many treatments for autoimmune conditions, regardless of whether they’re done in a doctor’s office or clinic owned by a hospital or by a different entity.
The policy, known as site-neutral payment, has sparked a ferocious lobbying battle in the Senate, not the first of its kind, with hospitals determined to kill such legislation.
There would be no need for “ferocious lobbying” if doctors’ pay were increased rather than hospitals’ pay decreased.
According to the Congressional Budget Office, the House legislation would save Medicare an estimated $3.7 billion over a decade.
To put this in perspective, the program is projected to pay hospitals upward of $2 trillion during that same period. But hospitals have long argued that adopting site-neutral payments would force them to cut jobs or services or close facilities altogether — particularly in rural areas. And senators are listening.
“Saving Medicare $3.7 billion is identical to saying, “cost the economy 3.7 billion it otherwise would have received.”
“The Senate is very much attuned to rural concerns,” Sen. Ron Wyden (D-Ore.), who chairs the Finance Committee, told KFF Health News. His panel has jurisdiction over Medicare, the health program for seniors and people with disabilities.
“I have heard many questions about how these proposals would affect rural communities and rural facilities,” he said. “So we’re taking a look at it.”
Outpatient departments at rural hospitals can have outsize importance to their communities. Taking any funding away from stand-alone rural hospitals is seen as risky. Scores have closed in the past decade due to financial problems.
With fewer patients, rural hospitals often struggle to attract doctors and update technology amid rising costs.
Taking money from rural hospitals impoverishes them while doing nothing for doctors or for the federal government, which has infinite money. This is how economics ignorance hurts everyone.
Sen. Bill Cassidy, R-La., a physician serving on the Finance Committee, indicated he was apprehensive about the legislation.
“In some cases,” he said, higher Medicare hospital payments are “justified.”
“In some cases, it doesn’t seem to be,” he said. He told KFF Health News he was planning to introduce legislation on the issue but didn’t provide details, and his office didn’t respond to inquiries.
As the two senators show, the issue doesn’t break cleanly along partisan lines. In December, the House quickly passed the Lower Costs, More Transparency Act, the broader bill that included this Medicare payment change, with 166 Republicans and 154 Democrats voting.
Whenever Congress votes for “lower costs for the federal government,” it means “Fewer growth dollars for the economy, i.e., the private sector.” Lower costs for the federal government means taking money from you.
In short, you pay for all federal savings.
“It’s more about how close different members are to the hospital industry,” said Matthew Fiedler, a former White House health economist under President Obama and now a senior fellow at the Brookings Institution.
Barack Obama was notoriously ignorant about federal finances. He famously claimed the federal government had to “live within its means.”
The federal government always lives with its means because its “means” are infinite. It never can run short of dollars.
Obama also signed the Budget Control Act to cut annual government spending by about $1 trillion over the next 10 years. Additionally, the act charged the Joint Select Committee on Deficit Reduction with finding an additional $1.5 trillion in savings.
Translation: The Budget Control Act aimed to reduce the economy’s supply of growth dollars by $1 trillion and charged the Joint Select Committee on Economic Growth Reduction with taking another $1.5 trillion from the American people.
The American Hospital Association described the site-neutral policy as a “cut” to hospital Medicare payments.
It said in a statement to a House subcommittee that it “disregards important differences in patient safety and quality standards required in these facilities.”
Rather than cutting payments to hospitals, Medicare could accomplish equality by increasing payments to healthcare suppliers, not in hospitals. This would satisfy rural hospitals, grow the economy, and improve the nation’s healthcare.
Chip Kahn, president and CEO of the Federation of American Hospitals, representing for-profit hospitals, offered a similar characterization of the House-passed legislation.
“This is no time for so-called ‘site-neutral’ Medicare cuts that could harm beneficiaries,” he said in a statement.
Right. There has never been a time to make cuts to save the federal government money.
“This is not a hospital cut. It is rolling back an unethical price increase,” said Mark Miller, a former MedPAC executive director now an executive vice president at Arnold Ventures, a philanthropy founded by John and Laura Arnold.
No, it’s a hospital cut. All the mealy-mouth rationalizations don’t change that fact. It is an unnecessary cut with zero benefit to America and much pain to the economy and our hospitals.
Large hospital systems with the money to buy physician practices, Miller said, have exploited the disparity between Medicare payments to physician offices and hospitals to increase their revenue and consolidate.
Miller said he’s hopeful the site-neutral provision of the House bill will be part of a larger government spending bill that must be passed next month to keep the government open.
If lawmakers need to offset the bill’s costs, “then it is more likely to get in the funding package,” he said.
But, lawmakers do not need to offset the bill’s costs. The reluctance to spend and keep the government open is total bullshit. Yes, there is no better way to state it: Total bullshit that has been fed to the American public.
The purpose of the bullshit is simple: To make the middle- and lower-income groups stop asking for federal benefits. When the people are told (falsely) that Medicare and Social Security “can’t afford” more benefits or even existing benefits, they meekly accept their impoverishment.
And that makes the rich, who run America, richer.
Sorry, folks, but your representatives are cheating you by keeping you ignorant of federal finances. Ignorance is costly.
The House-passed legislation is viewed as an “incremental” change, said Fiedler, but it faces a rough path forward.
Evening out Medicare payment for physician-administered drugs, hospitals fear, could lead to similar moves for other outpatient services.
“Hospitals have a lot of money at stake and will fight this hard,” he said. “Hospitals feel if they lose here, there will be more substantial steps down the road.”
Yes, the rich will fight like hell to widenthe Gap between the rich and the rest — if we let them get away with the Big Lie — the bullshit that the federal government can run short of dollars.
President Kennedy was wrong when he said, “My fellow Americans: ask not what your country can do for you — ask what you can do for your country.”
He should have said, “Ask not how much you can pay your federal government — ask how much your federal government will pay you.”
You probably know Motley Fool as a site that spreads reasonably accurate information about the stock market and individual stocks, along with buying suggestions.
I never have subscribed to that service for one main reason: If they knew what they were talking about, they could make a lot more money by following their own trading advice than by giving advice.
So why do they give advice?
A little more than two years ago, they proved to me that they didn’t know what they were talking about by publishing a scare story referencing Social Security’s financial troubles.
The article comes with this caveat: “You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services,” which seemingly means: “If you pay us, we’ll tell you what we really believe.”
DO YOU BELIEVE THIS BIG LIE?
Here are some excerpts from that article.
Over the past eight-plus decades, we’ve watched Social Security grow into the most important social program in this country.
Today, nearly 65 million people receive a monthly payout from the program, with over 22 million of these folks pulled out of poverty thanks to their benefits.
But the program is in big trouble.Every year since Social Security first began paying benefits (1940), the Social Security Board of Trustees has released a report that examines the short-term (10-year) and long-term (75-year) outlook for the program.
Since 1985, the OASDI Trustees’ report has cautioned that program outlays would exceed collected revenue over the long term.
Put another way, Social Security has unfunded obligations over the next 75 years.
More specifically, the latest Trustees report estimates that Social Security’s $2.9 trillion in asset reserves (i.e., its net cash surpluses built up since inception) would run outby 2035.
The above is nothing but bullshit.
“Collected revenue,” i.e., FICA taxes, do not fund Social Security or Medicare.Indeed, no federal tax pays for anything.
All federal taxes are destroyed upon receipt. The federal government has the infinite ability to create dollars from thin air. That is how it created the first dollars, and that is how it still creates dollars.
Unlike you, and me, and state/local governments, and businesses, the federal government pays all its bills by creating new dollars, ad hoc.
The dollars you pay to Social Security (actually, the Treasury) come from the M1 money supply measure. But when your dollars reach the Treasury, they cease to be part of any money supply measure.
Because the federal government has the infinite ability to create dollars, it has infinite dollars.
Adding your dollars to the Treasury’s infinite dollars does not change the number of dollars the Treasury has. Infinity plus any number = infinity.
When your dollars reach the Treasury, they cease to exist. Although the Treasury keeps records of dollars received and spent, these records are unlike private bookkeeping records.
They do not show “Dollars Available.” The Treasury has infinite dollars available.
To be clear: Social Security isn’t going bankrupt just yet.
It has two recurring sources of revenue — but if and when these asset reserves are depleted, an across-the-board benefit cut of up to 24% may await retired workers and survivor beneficiaries.
Bullshit.
Social Security, like every other federal agency, has just one source of revenue: The federal government.
Social Security has as many dollars as Congress, and the President want it to have.
In total, the 2020 Trustees report estimates that Social Security is facing $16.8 trillion in unfunded obligationsbetween 2035 and 2094, which is $2.9 trillion higher than in the previous year.
How exactly does the nation’s top social program suddenly find itself on such poor financial footing?
Bullshit.
Social Security has no unfunded obligations. All federal obligations are funded by the government’s full faith and credit.
The federal government promises to pay all its bills which it has done since its inception. It never can run short of dollars to pay its bills. Every financial obligation has been funded by money creation.
1. Baby boomers are retiring
I’m not a fan of blaming baby boomers simply for being born, but their exodus from the labor force is weighing down the worker-to-beneficiary ratio.
According to intermediate-cost model estimates from the Trustees report — which represent what’s most likely to happen — the number of retired workers receiving benefits should surge from 45.1 million in 2019 to 64.6 million by 2035.
Over that time, the worker-to-beneficiary ratio is expected to decline from 2.8-to-1 to 2.2-to-1.
As a reminder, the payroll tax revenue collected from workers was responsible for $945 billion of the $1.06 trillion in revenue collected for Social Security in 2019. So, yes, the retirement of boomers is a big deal.
Bullshit.
This is the myth that Social Security is funded by FICA. It isn’t. Even if FICA collections totaled $0, the federal government could continue paying benefits forever.
2. We’re living longer than ever before
Another bittersweet concern is that we’re living longer. Between 1940 and 2020, the average life expectancy at birth for Americans jumped from north of 64 years to almost 79 years.
On the one hand, living longer is fantastic. We get to spend more time with our friends and family, and do what we love. But it’s not necessarily a great thing for the Social Security program.
According to data from the Social Security Administration, the average 65-year-old will live about 20 more years. Social Security was never designed to pay benefits for multiple decades.
Further, the full retirement age — i.e., the age at which retired workers can collect 100% of their monthly benefit, as determined by their birth year — will have only risen by two years through 2022. Meanwhile, life expectancies are up by more than 15 years since 1940.
Put simply, longer average life spans are straining the Social Security program.
Bullshit.
The federal government has the infinite ability to pay benefits. Even if FICA were eliminated, the federal government could supply full Social Security to every man, woman, and child of all ages.
President FD Roosevelt knew SS didn’t need FICA when he began it. He created FICA, not to fund SS, but to keep Congress from ending it.
He didn’t say, “We put payroll contributions in to pay for benefits.” He said,
“We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions… With those taxes in there, no damn politician can ever scrap my Social Security program.”
Congress and subsequent Presidents still have found ways to cut the program by taxing benefits and by raising the qualifying age.
Ironically, they only were able to do this by using FDR’s logic falsely to convince the public that FICA funds SS.
3. Income inequality is on the rise
Social Security’s woes can also be partly blamed on rising levels of income inequality.
The 12.4% above payroll tax, which does the heavy lifting for Social Security, is applied to earned income (wages and salary, but not investment income) ranging between $0.01 and $137,700, as of 2020.
Approximately 94% of working Americans will earn less than $137,700 this year, meaning they’ll be paying into Social Security on every dollar they earn.
Earned income above $137,700 is exempt. Between 1983 and 2016, the amount of earned income escaping Social Security’s payroll tax roughly quadrupled from north of $300 billion to $1.2 trillion.
Additionally, the well-to-do have little or no financial constraints when paying for preventative medical care or prescription medicines.
The same can’t be said for everyone else. As a result, the rich are living notably longer than everyone else and collecting bigger monthly benefits in the process — further weighing down Social Security.
Donald Trump, who pays virtually no FICA taxes, collects the same Social Security you do.
The reason: Social Security benefits have nothing to do with FICA. The government pays for SS benefits just as it pays for every other financial obligation: By creating dollars from thin air.
Did you ever wonder why Social Security has a “trust fund” but the military has no “trust fund?” The SS trust fund is a fake. It is not a real trust fund at all.
All the phony rules related to the fake SS trust fund are arbitrary inventions to reduce the benefits paid to you. The whole process is a fraud on America.
There are no real federal trust funds.
4. Net legal immigration levels have been halved
Immigration is also a serious problem, albeit not for the reasons you might have read about.
As a whole, immigration is a net positive for the Social Security program.Most legal migrants into the U.S. tend to be young, and are therefore going to spend decades in the labor force contributing via the payroll tax.
The Trustees’ intermediate-cost model assumes a net average of 1,261,000 legal migrants entering the U.S. every year over the long-term.
However, net immigration rates into the U.S. have been sinking for the past two decades. In the most recent rolling five-year measurement from the World Bank, a net average of 954,806 legal migrants entered the U.S. annually between the second half of 2012 and the second half of 2017.
Less legal (and undocumented) immigration will almost certainly weigh on the worker-to-beneficiary ratio.
Bullshit.
The worker-to-beneficiary ratio is meaningless. Beneficiaries are paid in U.S. dollars. The federal government has the infinite ability to create U.S. dollars.
5. Birth rates are at all-time lows
Couples also bear part of the blame for Social Security’s woes.
The program counts on a steady or rising level of births each year to offset the number of older workers leaving the labor force.
The intermediate-cost model had been running with an assumption of 2 births per woman for years, but lowered this figure to 1.95 births per woman in 2020. This is a big reason we saw unfunded obligations jump by $2.9 trillion from the previous year.
In 2019, the U.S. birth rate hit an all-time low of 1.68 births per woman, below even the high-cost model estimate of 1.75 births per woman provided by the Trustees. Couples are waiting longer to get married and have children.
They’re having fewer unplanned pregnancies and have been discouraged from having children by the poor state of the U.S. economy. Without a quick turnaround in birth rates, the worker-to-beneficiary ratio will be negatively impacted.
Bullshit.
Workers don’t pay for SS. The government does.
The government could pay double or triple the number of workers simply by doing what it always does for every government agency: Create dollars from thin air.
That is the process it has used since the inception of the dollar.
6. The Fed has crippled Social Security’s interest-earning capacity
Even the nation’s central bank gets a wag of the finger.
The Federal Reserve is tasked with controlling and influencing monetary policy.
It primarily does this by increasing or decreasing the federal funds rate, which is the overnight lending rate that banks charge one another. Moving this rate higher or lower causes ripples that influence interest rates.
With the U.S. economy currently in recession, and the Fed maintaining a predominantly dovish stance for much of the past decade, the federal funds rate is now at a record-tying low range of 0% to 0.25%.
This is great news for companies and individuals looking to borrow, but awful for anyone looking to generate interest income.
Social Security’s $2.9 trillion in asset reserves are required by law to be invested in special-issue bonds and, to a lesser extent, certificates of indebtedness.
The yields on newly issued bonds have been plummeting, with some yielding a meager 0.75%. In other words, the Fed’s dovish monetary policy means less interest-earning capacity for Social Security.
Obsolete bullshit now that interest rates are high.
But even if interest rates were triple or one-third of what they are now, this would not change, by even one penny, the federal government’s ability to fund Social Security.
Think of how nonsensical the notion is of the federal government not paying enough interest to an agency of the federal government (which is what the Motley Fool claims).
This is how ridiculous the Motley Fool argument has become. They are telling you: “If the federal government paid more interest. The federal government could afford to pay more benefits.”
Wow!
7. A Capitol Hill deadlock
Finally, point your finger at lawmakers on Capitol Hill.
Though lawmakers may be somewhat responsible for some of the issues described here, it’s really their inability to find common ground to fix Social Security that’s worthy of blame.
For every year that Congress doesn’t resolve Social Security’s cash shortfall, it usually widens. The longer lawmakers wait to act, the costlier the fix will beon working Americans who form the backbone of the Social Security program.
Democrats and Republicans have each offered plenty of solutions on how best to resolve Social Security’s shortcomings. But since both parties have solutions that work to strengthen the program, neither side feels compelled to find common ground with their opposition.
We can only hope that Congress finds a way to work together on a bipartisan solution sooner rather than.
Mostly bullshit with one small glimmer of truth in the final statement.
SS doesn’t have a “cash shortfall.” The word “shortfall” implies something unintentional.
But this “shortfall” is intentional. It’s like claiming the federal government has a law shortfall.
The “fix” needn’t be costlier “on working Americans.” No working American would need to pay for the “fix.”
Congress quickly could solve the “problem” only when it admits that the real problem is the Big Lie that taxes fund federal spending.
That would result in a giant step toward “fixing” SS.
The average person doesn’t understand the difference between federal government finances, state government finances and personal finances. The same could be said of most politicians and most editorial writers.
But one expects more of the Wall Street Journal, whose editors are, after all, immersed in finance all day long. So it was saddening to read WSJ’s March 1, 2010 editorial titled “Back to the ObamaCare Future.”
The editorial begins, “Natural experiments are rare in politics, but few are as instructive for ObamaCare that Massachusetts set in motion in 2006.” Do you detect the problem? The WSJ thinks a state-run, health-care program provides a learning template for a federally run program, despite the crucial differences in ability to fund programs. (States’ access to money is limited; the federal government’s access is unlimited.)
The WSJ properly criticizes Governor Deval Patrick for wanting to set hospital and doctor rates. Why does the governor want to do that? So he can cut the rates. You see, the Massachusetts program is running a deficit (of course), so rather than committing political suicide by raising taxes, the governor wants to assure worse health care by discouraging doctors and hospitals from operating profitably in his fair state.
The editorial continues, “The administered prices of Medicare and Medicaid already shift costs to private patients, while below-cost reimbursement creates balance-sheet havoc among providers.” Yes, that’s right. Medicare pays too little, which forces our most talented doctors into boutique programs, where annual fees run anywhere from $50 to $5,000 (or more?) Eventually all the best doctors will be unaffordable to the very people Medicare is supposed to help. And smaller hospitals will disappear. This because of federal price controls.
The editorial continues, “It doesn’t even count as irony that former Governor Mitt Romney (like President Obama) sold this plan as a way to control spending.” Sure, states need to control costs, but why doesn’t President Obama understand the difference between state spending and federal spending?
Let’s see if we can clarify the difference: Taxpayers pay for state spending. Taxpayers do not pay for federal spending. Can I make it any simpler?
Because states do not have the power to create unlimited amounts of money, they must rely on taxes and borrowing. Eventually, the ability to borrow runs out, and everything falls on the taxpayer. Ultimately, there is a direct relationship between state taxes and state spending.
The biggest problem with Medicare (and Social Security, for that matter) is that it’s limited by FICA collections. Medicare is a version of federal price controls, which WSJ properly criticizes. Government price controls always are damaging. As WSJ said, “. . . hospital rate setting in the 1970s and 1980s . . . didn’t control costs . . . and it killed people.”
If government medical rate setting doesn’t work, and in fact kills people, please tell me again how the universal health care plan is designed to save money.
And if the federal government has the unlimited ability to create money, without ever charging the taxpayer, please tell me again why the universal health care plan is designed to save money.
Oh, the unnecessary damage the debt hawks have caused — not just financial damage, but human damage — and all for refusing to acknowledge that federal deficits not only are beneficial, but necessary for a growing economy.
In other posts, I have called to your attention the coincidence of reduced federal deficit growth and the start of recessions. History shows this repeated coincidence dates back even to the 1800’s, which arguably indicates a cause/effect relationship.
I also have noted that reduced deficit growth can continue for several years before a recession begins. I searched for a factor, that, when added to reduced deficit growth, would trigger the recession. One such factor seems to be rising energy prices, perhaps more specifically, rising oil prices.
Economics, like meteorology, is complex, so perfect correlations seldom are found, but this correlation is striking:
The graph shows that when reductions in deficit growth are added to oil price increases, there is a strong incidence of recession.
An exception might be in 1981, though this may have more to do with the arbitrary definition of “recessions.” The recessions of 1980 and 1982, may more realistically be considered one long downturn.
I mention this, because today (Feb., 2010) we see the first hints of reduced deficit growth accompanied by increased energy prices, a possible danger signal. If these mini-trends continue, we may find ourselves on the cusp of yet another recession.
The U.S. government may have two options for preventing the next recession: Keep oil prices from rising, or increase deficit growth. The former might temporarily be accomplished by executing a release from the Strategic Petroleum Reserve. The later can be accomplished in myriad ways, though I tend to favor the elimination of the FICA tax as described at http://rodgermitchell.com/reasons-to-eliminate-FICA.html.
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#Monetary Sovereignty - Mitchell 