Progressive Economics: A Long Overdue Conversation

The U.S. Economy is broken. Long-term economic growth is fluctuating on average between two and three percent which ranks this as perhaps the worst economy since W.W. II excluding major recessions.

Decades of adherence to “supply-side” economics (translation: tax cuts for the rich)  is mainly to blame.

In addition, advances in information technology, globalization, the decline of unions, and the government’s virtual abandonment of worker protections, have caused wage stagnation which , in turn, has led to lackluster demand and slower overall growth.

So how do we fix it?  Well, we should do the exact opposite of what has been done for decades since the 1980’s.  Rather than cutting taxes, we should be investing to grow the economy.  The technical name is “demand-side” or “Keynesian” economic theory.

Under this approach, the government can stimulate demand and growth by investing directly in infrastructure, such as highways and rail systems, and in people, in programs such job training, health systems and education. That’s what progressive Democrats are getting at when they talk about things like the “Green New Deal” and “Medicare-for-All.”

In effect, the Progressive wing of the Democratic Party is having a long overdue conversation about failed economic policies and what is really needed going forward to distribute economic benefits more equitably to all Americans and grow the economy through increased demand.

How do you pay for it?   Thanks in large part to long-standing adherence to “supply-side” economics since the 1980’s and resulting tax cuts, we now have a hugely regressive system where wealthy individuals, who derive a significant portion of their income from dividends and capital gains, pay less in taxes as a percentage of income than average working men and woman.

And if that isn’t bad enough, our tax code is riddled with loopholes that corporations and other wealthy individuals and businesses often use to avoid taxes altogether.

It needs to be fixed – and that is what Democrats are getting at when they talk about raising taxes on the wealthy: It is really about making our tax system fairer and more progressive so we have the resources  needed to invest for the future, stimulate economic growth and reduce income inequality.

And so those who have benefited the most, pay taxes in proportion to the benefits they’ve received.

Radical ideas? Hardly. They worked in the aftermath of W.W. II, one of the greatest periods of overall economic and wage growth in American history. And they can work again.

Let’s start by at least having the conversation and not demonize as “radicals” and “socialists” those who dare to talk about important economic issues affecting the lives (and livelihoods) of everyday Americans.  And let’s admit that there will be compromise along the way.

Let’s keep talking, respectfully, to each other.  Let’s not be distracted by those, including much of the mainstream media, who want to turn everything into a conflict, a virtual war of opposing ideas and ideals.

And when we are done talking, let’s try to actually get something done, because the economy (and our political system) is broken and change is long overdue.

The Real Debate Over Health Care: the Role of the Insurance Companies

A lot is being written over the fissures within the Democratic Party on Health Care. Some, like Bernie Sanders, unequivocally support Medicare-for-All. Others, like Amy Klobuchar and Sherrod Brown, both Midwest senators with more conservative constituencies, want a more incremental approach, a Medicare buy-in option for example, or lowering the age for Medicare eligibility from 65 to 50.

Sounds good, right. Medicare-for-All is way too radical. A more moderate approach stands a better chance of getting the broad-based support needed to get through Congress and be signed into law.

Except that the insurance companies, with their web of campaign contributions and armies of lobbyists, will pounce on any compromise and turn it into a variation of what we have today – a system with huge overhead and administrative costs that rewards waste and inefficiency over positive health outcomes.

Sound familiar – that’s essentially what happened with Obama Care. State-by-state exchanges just to make sure there are no incentives to create national plans that operate more transparently and efficiently.

So Progressive Democrats are right – it is time for universal health coverage in a nationwide program that takes the insurance companies out of the mix, thereby saving U.S. economy and the American consumer huge amounts of money that today are wasted on a system that rewards administrative inefficiency over the health of the American people.

Medicare for All? – Reforms Are Needed Before Coverage is Expanded

DrugPrices_B&WPortions of Medicare work well as government programs go, and Bernie Sanders is right to hold it up as a reasonable approach to expanding and improving health coverage for younger Americans under 65.  But Bernie is proposing to go one step further and transform Medicare into a comprehensive “single payer” system – which it is not what we have today.

Todays’ Medicare is a highly complex, multi-part system with some parts administered by the Federal government and others by private insurance companies.  It is financed through a combination of sources including payroll taxes, and premiums paid to the government and private insurance companies.

Parts A & B (hospitalization and doctor’s visits) are the only portions of Medicare that are similar to the “single payer” approach Sanders is recommending.  But even these parts of Medicare have copayment, coinsurance and deductibles and thus are not true “single payer” programs.  In addition, Medicare does not cover a number of health services including vision, dental, hearing aids and long-term care.   .

Other parts of Medicare include HMO programs under Medicare Advantage (Part C); Prescription drug coverage (Part D), and Medigap policies which vary but typically cover copayments and deductibles.  These parts of Medicare are administered by insurance companies and funded through premiums paid by users directly to those companies.  For non-covered services, such as dental and vision, users are typically on their own to purchase private insurance or pay out-of-pocket.

The advantages of a “single payer” approach is that it is easier for consumers to navigate.  In addition, fees (or taxes) are paid to the government, and the government purchases services directly (or through a designated agent) from health care providers.  Under this approach, the government is a major player in the marketplace with the bargaining power to ensure quality of service, negotiate prices and hold down costs.  Today’s systems is so fragmented that no one entity has the market power to effectively control costs.

Part D, prescription drug coverage, provides a vivid illustration of how this part of the Medicare system has been structured for the benefit the drug and insurance companies, not the consumer.

Under current Medicare rules, the government is forbidden by law from negotiating prices for drugs.  Each insurance company under Part D has it own “formulary” (or list of covered drugs) and tiers (price ranges).  Part D is so complex that figuring out the best plan for your particular needs is hugely difficult, limiting competition and contributing to the huge increases in drug prices we’ve seen in recent year.   This is not surprising since the bill authorizing Part D of Medicare appears to have been written by the drug lobby and came to the floor for vote in the middle of the night to avoid public scrutiny.

To meet Medicare for All / Single Payer criteria, Parts A & B of Medicare effectively will need to be expanded to cover all health related services, including dental and vision.  Copayments, deductibles and coinsurance will need to be eliminated.  Similar approaches are used in other developed countries including Canada and Taiwan.  Meanwhile, research shows that many developed countries with near universal coverage and government run and / or insured services have much lower costs and better outcomes than the U.S.

To those who argue that the government should not be in the health care business, it is important to note that under a Medicare for All, Single Payer approach, the government is not providing services directly; it is using its economic clout to “purchase” services through the private sector at reasonable cost on behalf of the American people.

Given that the costs of health care and prescription drugs are sky high in this country, maybe it is time to reform the existing system by taking the insurance companies out of the middle between the government and service providers.  Similar to the way Parts A & B work today, the government (or its agent) should negotiate directly with providers on costs for all health services including dental, vision, mental health and prescription drugs.

That should help control costs and, if done right, substantially improve the system’s overall efficiency and service quality – all of which will be good for consumers, business and the U.S. economy.