Monday, March 29, 2010

Robert J Waldmann on Robert J Samuelson

I think that not Paul has managed quite a sweep. His op-ed is hammered by Jonathan Chait, Steve Benen, Ezra Klein (in the same paper !), Brad DeLong, and Menzie Chin.

update: and the editors. With videos.
That's impressive. Hard to believe that I have a criticism to make that they missed. Expecially since I am not willing to read the column and will discuss only one clause of one sentence

"If the administration has $1 trillion or so of spending cuts and tax increases over a decade, all these monies should first cover existing deficits -- not finance new spending,"

NotPaul is totally confused. Klein notes that the spending cuts and tax increases would have been politically impossible without the new spending. I add that about half of the total would have been economically disasterous.

The tax increases, elimination of the extra 14% per enrollee of spending for Medicare Advantage, removing the middle man from student loans and end of the black liquor tax loop hole generated savings which could have been used to reduce the deficit.

However, that still leaves a large part of the total spending cuts which were reduction in Medicare payment rates paid to hospitals nursing homes and home health agencies. These cuts would bankrupt hospitals etc if it weren't for the new spending. Hospitals etc will get less per medicaid/medicare patient but they will get more from medicaid because there will be many more medicaid patients. Also they will get more from people who get private insurance partly with the help of the subsidies.

In practice a large part of the spending cuts and new spending are the same dollars going from the same Federal government to the same hospitals, nursing homes and home health agencies. Just with different patients' names on the bills. This is how the new law can cut Medicare spending without cutting Medicare benefits or bankrupting care givers.

This does not mean that nothing changes. Currently hospitals attempt to extract money from the uninsured. This nets hospitals little money, but is very painful to the uninsured (good bye credit rating). This causes the uninsured to delay seeking care until they are very sick. It also causes the uninsured to go to emergency rooms not doctors' offices.

However, the change in the names on the bills paid by the CMS and the shift from money going CMS to hospitals etc to money going from the Treasury to families to insurance companies to hospitals etc does not create a huge opportunity to cut the deficit. Same money starting the same place and ending the same place. No wasted opportunity to cut the deficit.

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