From AEI, another helpful corrective for the common claim that American incomes have stagnated, this…
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Image of the Day: Yes, Incomes Have Risen

From AEI, another helpful corrective for the common claim that American incomes have stagnated, this one incorporating the fact that the average size of households has declined over recent decades:

[caption id="" align="alignleft" width="1309"] Median Incomes[/caption]

 …[more]

September 20, 2019 • 09:16 am

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Obama’s Medicare Politics Show Ryan Is Right on Policy Print
By Ashton Ellis
Thursday, April 10 2014
[T]he attractiveness of MA plans will diminish substantially if CMS guts the program to help fund ObamaCare.

In a surprise move, the Obama administration has reversed course on an ObamaCare-mandated cut to Medicare Advantage, replacing the long-feared cut with a slight increase in funding. Though motivated by political calculations, the episode confirms that the fundamentals for reforming health care support the policy changes sought by Paul Ryan.

Monday, April 7, was seen as a kind of D-Day for health insurance companies operating Medicare Advantage (MA) plans. Months ago, the Centers for Medicare and Medicaid Services (CMS) announced a 1.9 percent cut in MA’s 2015 reimbursement rates by the federal government. Over the next decade CMS’s goal is to reduce MA’s reimbursements by $156 billion, in order to use the money to help fund part of ObamaCare.

If implemented, the MA cuts would be passed on to consumers in the form of reduced options at higher prices. Much like the health plans offered on ObamaCare exchanges, MA plans in the future would be characterized by narrower doctor networks, fewer hospitals and higher out-of-pockets costs.

And yet since the 1990s, MA plans have been the most popular part of Medicare. Nationwide, enrollment grew 9 percent last year. The reason is choice. Because MA plans are run by private insurance companies, consumers can choose MA policies delivered by Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Private Fee-for-Service (PFFS) plans, Special Needs Plans (SNPs), or Medical Savings Account (MSA) plans.

In short, MA’s flexibility is driving its popularity. But the attractiveness of MA plans will diminish substantially if CMS guts the program to help fund ObamaCare.

In the run-up to April 7, the insurance industry saturated senior-heavy media markets with ads reminding politicians that “seniors are watching” to see whether their representatives in Washington would oppose the Obama administration’s funding swap. Not only did CMS bow to the pressure and cancel next year’s1.9 percent cut; it also announced a 0.4 percent increase in reimbursement rates for 2015.

The logic is purely political. Vulnerable Democrats up for reelection can’t afford to anger seniors who typically turn out in high numbers to protect their health benefits. If the Obama administration could be persuaded to delay parts of ObamaCare that hurt businesses and younger individuals – such as the employer mandate and grandfathering cheap pre-ObamaCare plans for up to three years – then it could certainly put off defunding a program that covers one-in-three American seniors.

And while they’re at it, why not throw in an extra half-percent of new spending so White House-aligned Members of Congress can confuse the folks back home?

But the politics driving the MA delay also reveal the fundamentals of health insurance reform. The variety of coverage options means consumers get to choose the level of care they want, while a standardized reimbursement rate gives insurance companies the security they need to negotiate terms with doctors and hospitals.

Contrast this with traditional Medicare’s fee-for-service system where a one-size-fits-all price schedule annually short-changes doctors and hospitals for the services they provide as a way to reduce costs. Most years Congress intervenes with a so-called “doc fix” that stops CMS from paying only a fraction of Medicare’s health bills. Doctors and hospitals put up with the stingy payment structure because accepting traditional Medicare ensures a greater volume of patients. Whatever they can’t recoup gets passed on to other customers.

The federal government’s health care spending would be more transparent and less subject to abuse if, instead of quibbling over each and every service provided, CMS simply capped the amount it spends per plan and let providers design plans consumers want.

If this sounds familiar, it is essentially what Paul Ryan has been calling for in every budget proposal since 2011. But his idea is even better. Ryan would convert traditional Medicare into a revamped MA program. Seniors would get a set amount in subsidies to purchase a plan, with any savings from spending under the cap going to the individual senior. This change would promote more choices in senior health care, and give government budget writers much more certainty about the amount of money to set aside for Medicare each year.

Of course, Ryan’s idea also invites comparisons to how ObamaCare subsidies work on state-based exchanges. As a matter of economics, they are very similar since individuals in both models get subsidies to help pay for part of their insurance premium. However, as a matter of political economy, they could hardly be more different.

The key difference between Ryan and ObamaCare is the direction of reform. Ryan wants to make Medicare operate more like a market by expanding choices among private providers. ObamaCare exchanges, on the other hand, reduce choices by shrinking the number of insurance plans, doctors and hospitals previously available to consumers.

When it comes to health care reform, Americans want more choices and greater consistency. Since ObamaCare can’t deliver, it’s time to try ideas that will.

Question of the Week   
On September 17 of which one of the following years was the U.S. Constitution sent to Congress for ratification by the states?
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"So, let me get this absolutely straight ...Justin Trudeau, the Prime Minister of Canada and arguably the most woke, virtue-signalling and PC-crazed leader in the history of Mankind -- or 'Peoplekind' as he insisted we rename it last year - turns out to have a rather cracked halo?Wow. I'm so shocked ...not.I've not met a high-horse rider yet who doesn't eventually tumble off into a pit of shameless…[more]
 
 
—Piers Morgan, Daily Mail
— Piers Morgan, Daily Mail
 
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