Medicare and the Downgrade

August 8th, 2011 at 12:02 pm

S&P’s downgrade “analysis” makes it clear that we need to “contain” the growth of entitlements.  EG, in discussing their displeasure with the budget plan, they note:

“…the plan envisions only minor policy changes on [sic] Medicare and little change in the other entitlements, the containment to which we and most other independent observers regard as key to long-term fiscal sustainability.”

Now, look at the below list of countries that both maintain a triple-A rating from S&P (though some are on their downgrade watchlist) and have some version of universal health coverage, in other words, an “entitlement” that goes much further than anything we’ve got over here.

Source: Huffington Post

That doesn’t imply Medicare is on solid footing.  But the problem is the growing cost of health care system wide (in fact, cost pressures are worse in the private sector), and the solutions exist in every other advanced economy, as they essentially cover their whole populations and do so for about half of what we spend relative to GDP.

Yet, S&P needs to see cuts in Medicare if we want our triple-A rating back.

Now, I really don’t need to see the rating agencies get into the analysis of comparative international health systems.  I’d be content if they did a better job on stuff like, oh…I don’t know…mortgage-backed securities.

But if they’re going to make judgments like this, then they should do it right.  An honest analysis of fiscal sustainability would point toward a larger, not smaller, role for publicly provided health coverage.

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9 comments in reply to "Medicare and the Downgrade"

  1. Fred Donaldson says:

    S&P is run by rich people. Rich people don’t need Medicare, Medicaid or Social Security. Rich people don’t want to spend their taxes on things THEY don’t need.

    A White House for the people would recognize the class struggle of rich versus the lower 98% if it would stop listening to the same 2% rich, including friends, advisors, lobbyists and “campaign” contributors.

    A group of rich people patting themselves on each other’s back is not statesmanship, it’s plutocracy, a governance not considered possible by all the rich, because it scares them to admit the possibility of a world other than their own sweet, insulated, carefree existance.

    Money buys “friends,” servants, mansions, poltical power, all sorts of things, but in America it obviously can’t buy character, empathy and wisdom.


    • Bolton Peck says:

      @Fred well said! Us 98 percenters all know we’re taking it in the shorts, and unless the teabaggers have gotten into someone’s head, they know it shouldn’t be this way.

      Obviously, the super rich have benefited from our societal structure in ways most of us can never dream of. So to me, it stands to reason that they should pay taxes most of us never have to dream of.


  2. Ken says:

    Brilliant observation – thank you for pointing this out. I’m worried that the nation will perceive blaming this downgrade on the Tea Party as political – when it is indeed the obvious truth. Even in the face of billions of on-time payments, you honestly and truly cannot trust the U.S. to pay all obligations when you have the Tea Party holding Congress hostage. Not that I like going further into debt, but Congress has agreed to those expenditures and you have to pay for their agreements.

    Btw, with all the false equivalency arguments appearing about government vs. individual debt, how come “you have to spend money to make money” never emerges?


  3. casey says:

    Isn’t the SP just saying that Medicare is costly to taxpayers (and growing in cost), rather than questioning its quality or cost-effectiveness as a health system? These are separate. Medicare could be both the most cost-effective health insurance system in the world and be the most expensive ever (e.g., by keeping everybody super healthy until 120).


  4. jonathan says:

    I just saw charts from a study that looked at health costs per person. We do fine on the public side and very badly on the private. The public number is revealing because the population served by our public system are the poorest, oldest and sickest.

    The extent of the private number can be seen in an article I have from Ventura County, CA. It takes a hospital group study on unreimbursed cost, the ones hospitals eat, and focuses on the amount related to illegals. That was estimated at 10% or so. The illegal share for the state was then $1.25B. That means a total of $12.5B. That means over $11B unreimbursed from citizens. This doesn’t count money paid out of pocket. This is a hint about the real problem.


  5. Roader says:

    Looking at the countries in the table, all are relatively small and none are nearly as diverse as the US. For example, Australia has only 22 million people and is 92% white; Austria has eight million people and is 91% white. Even the largest of the countries listed, Germany and the UK, are small and homogeneous compared to the US: 81 million/92% white & 63 million/84% white, respectively. The US is huge in comparison, 313 million people, and much more diverse, with only 65% non-Hispanic white population.

    With the exception of Japan, none of the top ten most populous countries have universal health care. Japan, #10 with 126 million people, is extremely homogeneous: 98.5% ethnic Japanese


  6. mike says:

    ah..let me see..any of those countries defend the world so they can sPend money on other resORCES??
    USA is spending $700 BILLION IN DEFENCE MONEY??—–EUROPEANS AND OTHER COUNTRIES ARE LIVING OFF OUR HEALTHCARE…. LET ME GUESS..WE PULL OUT OF THE MIDDLE EAST ALL IS PEACE..we can GET OUT OF NORTH EAST ASIA
    AND ALL OUT OF SUDDEN AFTER 5000 YEARS RIVALIES BETWEEN cHINA JAPAN AND KOREA WILL MAGICALLY DISAPPEAR LET LONE NORTH NORTH KOREA WITH IT’S NUCLEAR WEAPONS

    WE CAN BE THE PEACEMAKER OR A EUROPEAN SOCIAL DEMOCRACY WE CAN’T DO BOTH


  7. Steve says:

    I will gladly accept universal care as all these great countries have if you can also get their cost structure (at about 9-11% of GDP) in the US. Nobody has suggested a plan that can come close.


  8. You’re a Boss Blog: This Week in Small Business: Downgrades, Upgrades and Doing Business in Britain says:

    […] Poor’s downgrades a debt. The S.P. chief says to cut entitlements. Jared Bernstein agrees with him. Michael Moore says to arrest him. Ezra Klein thinks S.P. got it right: “Those of us in […]


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