NEW AMERICA FOUNDATION HOLDS A CONFERENCE
ON SOCIAL POLICY AFTER THE ECONOMIC PROBLEMS
DECEMBER 5, 2008
SPEAKERS: MICHAEL CALABRESE,
VICE PRESIDENT, NEW AMERICA FOUNDATION
LEN NICHOLS, DIRECTOR,
HEALTH POLICY PROGRAM, NEW AMERICA FOUNDATION
MAYA MACGUINEAS, DIRECTOR, FISCAL POLICY PROGRAM,
NEW AMERICA FOUNDATION, PRESIDENT,
COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET
NONRESIDENT SENIOR FELLOW, BROOKINGS INSTITUTION
DIRECTOR, WORKFORCE AND FAMILY PROGRAM,
NEW AMERICA FOUNDATION
DIRECTOR OF THE WORKFORCE DEVELOPMENT
STRATEGIES GROUP AT THE NATIONAL CENTER
ON EDUCATION AND THE ECONOMY
CO-DIRECTOR, WORKPLACE FLEXIBILITY 2010
SCHWARTZ SENIOR FELLOW AND RESEARCH DIRECTOR,
NEXT SOCIAL CONTRACT INITIATIVE, NEW AMERICA FOUNDATION
JULIE BARNES, DEPUTY DIRECTOR,
HEALTH POLICY PROGRAM, NEW AMERICA FOUNDATION
JOE MINARIK, SENIOR VICE PRESIDENT AND
DIRECTOR OF RESEARCH,
COMMITTEE FOR ECONOMIC DEVELOPMENT
PRINCIPAL RESEARCH ASSOCIATE AND HEALTH ECONOMIST,
ELIZABETH CARPENTER, ASSOCIATE POLICY DIRECTOR,
HEALTH POLICY PROGRAM, NEW AMERICA FOUNDATION
(JOINED IN PROGRESS)
GRAY: … New America Foundation. My name is David Gray. On behalf of our next social contract initiative, it’s my pleasure to welcome you to our discussion on social policy after the economic crisis.
As part of our next social contract initiative, our various domestic policy programs are working to develop ideas to update our social programs in light of the changes and challenges of the current century.
And as you know, the changes and challenges have come fast and furious over the past few months. The challenges in our economy this year have come at a dizzying rate, with some industries, which just a few months ago were earning record profits, now laying off record numbers of workers.
We’re holding this event today on what the U.S. Department Of Labor calls Numbers Day, and the numbers today are not very good. November employers shed more jobs than at any time in the last 34 years.
And so the needs of American workers, families and employers are great, and our social safety net is fraying, and President-elect Obama and the new Congress have their work cut out for them in developing programs and policies to jumpstart the economy in the face of a trillion-dollar deficit and a more than $10 trillion national debt.
And so our government must be creative in its response, and that’s what we’re here to talk about today.
First, by way of housekeeping, we have an overwhelming response to this event, and so you by coming here early get both a seat and a lunch. And we’re grateful that you’ve joined us today.
There are packets about our foundation and our programs with articles from some of our speakers outside. We are grateful that so many members of the press are here today, and we look forward to their questions.
And we welcome those many people who are joining us over the Internet as we are broadcasting this live.
Today we have three panels to talk about entitlements, the American workforce and healthcare. And we are also looking forward to both our panelists and to your questions.
First, to start things off, I am pleased to welcome a good friend of the New America Foundation to be our keynote speaker. Karen Kornbluh came to New America a few years ago as a technology fellow after serving on Capitol Hill in the Treasury Department and the Federal Communications Commission.
And while at New America, Karen founded our Work and Family Program and helped develop new language that we in the working family field use in talking about the needs of working families.
Karen served as a policy director in the office of Senator Barack Obama and this past summer was the primary author of the 2008 Democratic Party platform.
Karen joined us here in August to help us understand and explain and preview that platform, and we’re grateful that she has taken time to be with us today to set the context for our panels to follow.
So please join me in welcoming Karen Kornbluh back to New America.
KORNBLUH: Thanks so much. It’s so nice to be here. I was trying to think of a joke about social insurance, but I couldn’t think of one, all right?
But it’s great to be here at New America. It’s great to be following David, who’s done such amazing work on the Workforce and Family Program and really taking it in new directions and redefining what family values are really all about. So really flattered to be here.
And I just wanted to tell you I had this fantastic experience this past summer, which seems like a hundred years ago, when I got to write the party platform.
And we did hearings all over the country. There were — even though there was only sort of a week that we gave people notice that they could do this, and then they only had a week to organize them, there were 1,600 platform hearings across the country, and 30,000 people participated. It was really pretty amazing.
And I have got to read through all those and you know cull out what — what people thought was important. And fans of New America will be very pleased to know that what wound up in the platform sounds remarkably familiar.
So if you just listen, we have — the first section of the platform is called “Renewing the American Dream.” I always have to read from it, because I want people to read the platform, and I have you captive, so I’m going to do that now.
So the first section is called “Renewing the American Dream,” and the first section of that is “Empowering Families for a New Era.” And you know this is really what people felt.
People around the country really felt like it was a basic bargain in America, and they loved the New Deal, but the bargain wasn’t really holding up right now.
And they wanted to get a way back to figuring out how you could get into a — a — back to a situation where between the American government and the American people, or as I like to say, among the American people, there was this bargain. We were going to be there for each other in times of need.
So it says: Many Americans once worked 40 hours a week for 40 years for a single employer and provided pay to support a family, health insurance, and a pension. Today, Americans change jobs more frequently than ever and compete against workers around the world for pay and benefits.
The face of America’s families is also changing, and so are the challenges they confront. Today, in the majority of families, all parents work. They are members of a new “sandwich generation.”
They are working longer hours than ever, while at the same time having to meet a new and growing set of caregiving responsibilities.
Our government’s policies — many designed in the New Deal era — have not come up with the new — not kept up with the new economy and the changing nature of people’s lives.
Democrats believe that it is time for our policies and our expectations to catch up. From health care to pensions, from unemployment insurance to paid leave, we need to modernize our policies in order to provide working Americans the tools they need to meet new realities and challenges.
So I think you know all of you have been working on this, and especially the folks at New America should feel really proud that you know this concept that you’ve been pushing is really — was such a part of the public debate during this election.
So I’m going to talk about today — while we’re on the transition, we’re not allowed to talk about the transition at all. We’re not allowed to talk about the new administration. We’re allowed to talk about things we worked on before.
Fortunately, while I was at New America, I did research for an article that came out in 2006, and I get to just keep talking about that all the time.
So there are three points that I want to make. One is social insurance is social. The word “social” is in there for a reason. The second is that the New Deal isn’t new anymore. And then the third one is that the way we’re operating right now is cheating the future.
So those are the three big points I’ll try to make pretty quickly.
And what I mean by “social insurance is social” is that in the early 1930s we put together what we think of as the New Deal. In addition to this economic crisis, there was a — we’re living through this transformative economic period, as David was saying, where people have moved from the farm to the city, that we’re now dependent on a single wage earner to support the family as opposed to working on a farm.
The extended family networks are broken down, because people are in the city. And because of public health changes, life expectancy had grown.
So just as we’re living in this transformative area now, and there are these long-term changes that we’re dealing with now at the same time as we’re dealing with a very immediate economic crisis, it was very similar back then — immediate economic crisis, but there were these long-term trends that were really transforming the way people really lived and worked.
So the Social Security Act of 1935 is really designed to address some of these longer-term issues and the falls in income that could result from the retirement of the single breadwinner, from widowhood or a cyclical downturn.
And so you got Social Security retirement benefits. You got unemployment insurance — later on disability insurance and aid to dependent children.
And what I mean by “social insurance is social” is that some people tend to think of our social insurance programs as just being about an individual saving to smooth out their own cash flows you know.
So you’re saving for your own retirement, but the government is forcing you to do that. Or you’re saving for your own period of unemployment insurance. But actually from the beginning, it was always designed to be much more than that.
Not only was it progressive, meaning if you are lower income you got more out and if you’re higher income you got a little less out than you put in, but from the beginning, before it went into effect, there was always this family component to it, where for instance if you’re married for 10 years, there was a spousal benefit, which is not insignificant.
It’s 150 percent that you would get as a married couple in retirement, as opposed to 100 percent if you were not married. And that was intended to be for the dependent spouse and children, of course.
And there’s also the survivor’s benefit, which is meant to be there if the breadwinner died.
So there was always — and then there’s the aid to dependent children — they were always these features of it that were not just about an individual saving for himself, but were about making sure that families would be secure, even when there was an interruption in this income.
And even today the National Limits Loss Center finds that 50 percent of people receiving Social Security benefits actually collect these benefits either as a widow or a widower or spouse or a child of a worker or a disabled worker, rather than as an individual receiving Social Security benefits based on his or her employment history.
So that’s what I mean by social insurance is also — was always social.
And what I mean by “the New Deal is not new anymore” — well, obviously the Social Security system was incredibly important. It’s reduced poverty among seniors dramatically, as well as, as we were saying, dependent, dependents.
But as we all know, the workplace has completely changed. The family has completely changed. Just some statistics — workers are employed in nonstandard positions, as Michael Calabrese taught me, temporary, part-time, freelance, contingent, day labor and so on.
They change jobs on average every five years. They’re unemployed for longer periods. They’re less likely to be offered defined benefit pensions or sufficient health insurance, and if they’re lucky, they get a 401(k) and meager health coverage.
So — and then there’s dramatically rising inequality.
So the workplace has completely changed, and as you know the family has changed so that today 70 percent of all families with children are either headed by two working parents or a single working parent.
A third of children — this is a statistic I can’t get out of my head — a third of children today in America are being raised by a single parent. Sixty percent of children in poverty are being raised by a single mother.
So it’s a really different situation, not — not only is it because of divorce or widowhood, obviously. And the social insurance system just isn’t set up for this.
And so health insurance, which I’m sure others will talk about, is upside down, as New America has always said, and totally inadequate. So in other words if you have a better job, if you have a higher income, you’re more likely to get health insurance and you’re more likely to get benefits from the government through the tax system than if you’re lower income or you have a less good job.
Pension — similar situation. Social Security we don’t think of in those terms, because it doesn’t go through the tax code and it doesn’t go through the employer, so you wouldn’t think it would have those problems.
But because it’s gone through the breadwinner as a proxy for getting to the dependents, it has some of the similar problems I mean because it’s so key to earnings, as opposed to in other countries.
So that means it’s much more generous to a stay-at-home — let’s say a stay-at-home spouse who has no kids and never worked a day in her life than to that single mom who’s raising those children in poverty.
She’s likely to get much less money in retirement actually, even though she’s worked her whole life, pays into Social Security her whole life, and brought up a child who’s going to help support us all in our old age.
It’s also much more generous, because of the way it’s structured, to a family that’s much more like the Cleavers than like Roseanne and Dan. You know it’s a much — if you have a single breadwinner who’s in a higher bracket, because it’s so geared to earnings, you’re going to get more in retirement as a family than if you’re two more equivalent wage earners.
And Jean Stirley has done amazing work bringing out statistics. One of them is a single head of household, who works for $20,000 a year for 40 years and raises her children, will get lifetime benefits of about $95,000 while paying taxes of $50,000, whereas a nonworking spouse, who doesn’t raise children but happens to marry someone making $100,000 a year, will receive about $250,000 in lifetime benefits and pay nothing in taxes.
So this is not — this New Deal is not in use so much anymore.
And what are the results? About a fifth of all women age 85 and over still have income below the poverty level in part because they live longer, in part because of their earnings history. But it’s also exacerbated by the Social Security system.
And women in fact received average monthly retirement benefits of $826 in December 2004, while men average $1,077.
So just some of this sense so that it’s not — if — if the point is in fact to be socialist, the point is in fact to support people who are raising our next generation and to keep people out of poverty. It just needs to be restructured.
And — and when you look at, again, employment insurance system, it has problems of its own that are different from the health insurance system and the pension system or the Social Security system. And you see that only a third of eligible workers receive it, because the jobs are properly classified, because it’s key to how long you’ve been in the job, because you can’t take it for family reasons.
So unemployment insurance again is another piece of the social insurance system that’s not new anymore.
And if you look at what other industrialized countries have done, you see that they have tried to update their social insurance system either because they started out more universally and more keyed to keeping people out of poverty and use less of this ruse that it was all tied to earnings, or because they’ve actually updated it for the way the families are today.
So they’ll have a minimum benefit guarantee to keep the elderly out of poverty, as well as an earnings related benefit. They grant credit towards — towards the earnings related benefit for time spent away from the labor force, and so on, so that as a result we have higher poverty rates here than we do see in other industrialized countries.
And then European countries have also provided family allowances, that we don’t have here, just to help families pay for the cost of raising children. And then they also now have the right to work flexibly and also paid leave that we don’t have.
And so that’s what I mean by the New Deal not being new, especially here.
And then the third thing I wanted to just quickly say is that the result of our current system is that we are cheating the future. And that’s why we have to take it really seriously. It’s not an abstract intellectual exercise.
You know we’re at a think tank. People do a lot of thinking and writing reports, but this is incredibly important to the daily lives of people out there. And even though we’re going through an economic situation right now that requires urgent attention, this is not the kind of thing that we can just ignore and let sit there, because we’re really cheating our future.
And just wanted to think about it is that in the 21st century it’s a knowledge economy, and so parents are really producing families, if you will, are really producing our capital for the next generation, and because it’s the human capital. It’s the children.
And they are not being supported, and they’re going through these terrible cycles of economic insecurity, because their wages aren’t rising. And then when they have these interruptions, they don’t have the cushion, and the social insurance system isn’t there for them.
So you know if we really wanted to address that, what we would do is take a look at income replacement that really makes sense for the current economy and that we’d see that parents, whether mothers or fathers and other caregivers, would actually be supported when they were taking time out.
So what — what are — or when they have these other interruptions — so what — what are some things that would take a big difference?
Obviously, health insurance is the biggest issue, and I’m sure we’ll do a lot of talking about that here, yes. And New America has you know made such a huge difference in that debate.
And one of the things that was wonderful about working on the platform actually — you know we spent the primary fighting over the five percent of disagreement that people had over how to reform health insurance, and it seems so big and insurmountable.
And we came together to work on the platform. It was a great exercise to be able to sit down and work on some language and you know have something really productive to do together. We remembered that 95 percent of the things we agreed on, and so actually the strongest part of the platform I think, the longest part of the platform is the health insurance piece.
And we had — everybody was so happy with it, whether it was the single pair of folks, mandate folks. People you know who were of all — on all sides of the — of the debate were thrilled to see that we were all committed to making sure there was health coverage for everybody, that — that it had prevention in it, that it had chronic care management, and so on.
So I think health insurance reform is obviously you know the biggest thing we can do on the social insurance front, and it’s something that I think there’s a lot of impetus behind. We can’t take it for granted, obviously.
And then Social Security reform that I talked about a little bit. You know who knows when that’s going to happen? But I think whenever we do come to look at Social Security reform, Social Security modernization, we should take a look at some of these issues that Jean Stirley and others have talked about.
How do you reframe it for the new family? UI modernization is front and center in terms of what the Hill is thinking about.
And then I would just throw out there it’s some kind of new family insurance scheme. And that’s just a fancy way of saying we should look at paid leave and expanding the Family Medical Leave Act in a bigger context, not just think of it as like a sideshow, but as updating our system for smoothing out incomes, and that if you think about it in — in family insurance, then you would do things like make sure that if a parent is sick, if a child has to care for an elderly relative, that they don’t have to you know go off to Bankruptcy Court because they have lost all of their income.
And you know there are lots of different ways you could do it. Both Hillary Clinton and Barack Obama had proposals during the campaign to work with the states so that they could create new systems of family — of paid family and medical leave.
You could do it at a federal level. You could do it very broadly. You could make it available to people who work part time. You could think about ways to do — to do it at all stages of life.
So I would just throw that out there and think of it in the context of broad social insurance reforms approach to family insurance.
I know there’s going to be a very exciting set of panels today. They’re going to talk about a whole list of issues. I haven’t talked very much about pensions. I know that’s going to be a major — a major thrust.
I just say that you know I think we’re — we’re in one of those moments. I remember Ted Halstead, who founded New America. At that period we didn’t feel that sense of urgency that we feel now.
And I know he was always warning us to get ready, so when the country was in you know a situation where we were at war, where he had an economic crisis, we’d be ready.
Well, we’re in that moment now, and I think all the work that everybody has been doing thinking about how we’ll address some of these issues. I think the spotlight is on. The willingness to do things is on. And I think it’s very exciting that people are coming here together to figure out what — what our next steps are going to be.
So thank you very much.
GRAY: Thank you very much, Karen, both for talking about the importance of the moment and also some of the principles and context that we will discuss today.
I’d like to call Michael Calabrese and the entitlement folks forward for the next part of our presentation. Thanks.
CALABRESE: All right, thanks, David.
And thanks, Karen. That was — that was great. We’re — we were very sad to see Karen leave New America, but as it turned out we made a wonderful contribution to the country in the process.
So this is the — and I’ll have my colleagues join Mark Iwry up here — so this is the entitlement panel. And we will — we’re going to try to do this in a bit of a lightning round fashion almost, because we’re packing in a whole — a whole lot today.
When you think about entitlements, at least what — I think what leaps to mind most quickly is Social Security and Medicare. And we’ll be addressing that. You know these programs, of course, guarantee a very basic level of health care and retirement income for older and especially retired Americans.
At the same time we have a president — it’s — it’s interesting the counterpoint that we have a president-elect and a — and a expanded Democratic majority in Congress that has also effectively promised new or expanded entitlements in the form of universal health coverage and more help for retirement savings, such as expanding the savers credit, which I think Mark Iwry will touch on.
So when we think about how is the current economic crisis going to you know complicate this picture, there’s really you know two — two challenges or conundrums even that — that sort of come to mind that I’ll kind of throw up as — as fodder for the discussion that we’ll have and the questions that you might have.
First, the — you know early in 2009, of course, the short-term policy priority will be economic stimulus, which is going to be mainly about stimulating spending. And yet our evolving retirement security crisis is a problem of too little saving, right — too much spending.
We need to find ways to incent and stimulate new saving by middle and lower income workers. So that’s — that’s an interesting conundrum.
Similarly, overhauling our health care system must be grounded in slowing the growth of health care spending, so reining in costs and making the system more efficient, as Len always emphasizes, is equally important to expanding coverage.
And the second, perhaps, conundrum or consideration is that both the current fiscal crisis you know and the — and the efforts to expand entitlements for — for today’s non-older workers, right, so more health care coverage, more retirement saving — it’s also — this is also happening in the context of a much longer term and deeper imbalance in the what you might call the — the older entitlements — Medicare and Social Security.
So we have this unfolding economic crisis and this longer fused crisis — fiscal crisis — in our entitlement — our more traditional entitlement programs.
So with that as a backdrop, let me get the — the panel right up. They will each speak up to, and no more than, 10 minutes. And then we’ll open it up for some discussion, questions. And — and if you do ask a question later, please identify yourself.
Let me just introduce each of them, because there’s actually bios in your folders, so I won’t need to say too much, except that Len Nichols directs the Health Policy Program here at the New America Foundation.
And Maya MacGuineas is the president of the Committee for Responsible Federal Budget, which is housed here at New America, and her other hat is as director of the Fiscal Policy Program, which does budget, tax, entitlement and other related work.
And then Mark Iwry is actually also a — a person of many hats, currently a nonresident senior fellow at the Brookings Institution, where he hopes to direct the Retirement Security Project. He’s a research professor at Georgetown University, of counsel to Sullivan and Cromwell in his spare time, and — and formerly served as benefits tax counsel at the Treasury Department from ’95 to 2001.
So — so, Len, will hand it off to you.
NICHOLS: Well, thanks, Mike, and I appreciate those introductions. I think Mark might be the only person in Washington who was more jobs than Maya, because I didn’t know you had so many different things going on.
Let me begin by being a bit of a curmudgeon and objecting to the title of this section of the thing — entitlement. Entitlement is a deliberately pejorative word that was invented by Libertarians in the ’80s, and it was chosen very carefully — I’m sure they focused cryptic — to prejudice taxpayers against expensive programs and the beneficiaries thereof.
Now, in fact, are mandatory spending programs — go back and look; it was Murray Wingdom (ph) — our mandatory spending programs — Medicare, Medicaid and Social Security — represent promises, promises that we have made to the most vulnerable among us and thus are in many ways our most sacred social contract.
Now, in fairness to the Libertarians, it’s — it’s fair to say they were probably just unaware of the scale of human need at the time, and that was because it was largely hidden. Let’s be frank. And it was hidden in hospitals.
Hospitals — before we had Medicare and Medicaid — hospitals were aware of it, which is how we got Medicare and Medicaid, because they came and said, “You know this is getting overwhelming.”
So I think it’s fair to say they were excused. Some people today still suffer from a lack of awareness of the scale of human need, and I would submit it’s less excusable in today’s world than it was, but I’ll leave it at that.
Now, fairness also suggests honesty, so let’s be honest. Some of our most strident critics of our promised programs really don’t like social solidarity and social contracts.
But we should also be honest that some current beneficiaries aren’t really vulnerable either. That is to say, we need to reconsider our social contract in a very serious way and redefine it, as we will going forward.
But let me be crystal clear at the outset. Redefining our social contract does not mean throwing up our hands in despair and concluding we just can’t afford human decency for a growing share of our population — we’re sorry.
It’s also true that redefining our social contract in total does not mean literally just focus on what subset of current beneficiaries we might be able to continue something for.
It’s really about doing everything Karen said. It’s really about thinking about what we really want our society to do. And — and I’ll come back to that a little bit later. But I would say you’re going to hear some about insurance expansion options from my colleagues, Julie Barnes and Elizabeth Carpenter, in the health reform panel later.
I’m going to talk about Medicare.
So while we’re being honest, let’s get some facts on the table. And I think it’s fair to say that in Washington there are facts, and then there are things that CBO says. And when CBO says that, it’s a superfact.
So when Peter Orszag began to say, which we wholeheartedly endorse, “We don’t have an entitlement problem; we have a healthcare cost growth problem,” that is in many ways the most fact of this discussion.
This affects Medicare and Medicaid. And I’ll be glad to talk about Medicaid as long as you want in the Q&A, but it’s such a special case I’m going to focus on Medicare, because truly what drives Medicare costs drives Medicaid costs over time.
Over the last three decades, one of the fundamental problems is that Medicare costs per capita has grown roughly 2.5 percentage points faster than per capita GDP. Another way of saying that is it’s growing faster than productivity.
And this is the problem. Health care is claiming a larger and larger share of our national output.
Now, growing share of output is particularly problematic in a demographic situation, where the number of workers to beneficiaries is also declining. Those two things going on — cost per person going out and worker per beneficiary going down — it follows as the night the day, either benefits have to be slashed or taxes have to be raised.
Or you have to find some columnists somewhere to send you money. I’m in favor actually of — of having immigrants be pregnant engineers. We just bring them all in, produce babies, and life will be better going forward.
But the key to unlocking this puzzle really is to notice that our healthcare system suffers not only from a bad cost trajectory, but from a stunning level of inefficiency at any given moment in time.
People a whole lot smarter than me — National Academy systems engineers, various academics across the country; we could name them — have concluded with great I would say certainty and — and consensus about one-third of what we spend in healthcare does not add clinical value added, does not add clinical value, does not improve health.
Now, think about it. We spend 16 percent of GDP, so first third of it is not doing anything, that’s five — over five percent of GDP we are in some sense wasting.
Just as an aside, it would cost one percent of GDP to cover everyone. So stand there and tell me we can’t afford this.
What I will say is the key to lowering cost growth in the short run is re-orienting our delivery system to root out this wasteful spending. Let me be clear all of us who do this for a living know this will not be easy. One human’s cost is somebody else’s income. They will defend it.
But partly for that reason, Medicare can’t do it alone. At the same time the rest of the system cannot do it without Medicare. Medicare and the system are inexorably linked. Medicare is the single biggest buyer.
So Medicare reform has to be part of system reform. And a good news, sports fan, it is. Look at what President-elect Barack Obama proposed on the supply side of his — everybody talks about coverage, because that’s where all the excitement is.
But you look hard at that white paper that just laid out the program, and you will see a tremendous similarity to what Senator Max Baucus just proposed, to what Senator Kennedy is talking about, to what Wyden-Bennett have, to what Wassserman Schultz in the House, Stark, chairman of Ways and Means, Wendell Primus, top aide to Pelosi. I heard him — heard it last night say the exact same set of things.
You cannot do coverage without cost growth. You cannot do coverage without value enhancement. You cannot afford any of this in 10, 15 years, unless we bend this cost curve.
And therefore, figuring out how to use Medicare as a catalyst for reform, and vice versa, is actually the — the thing most of us are spending a lot of time on.
Now, it is true — history will show this out — some politicians in both parties have been shall we say reluctant to take on the provider lobbyists, which have been impressively effective.
I think the most — the most stunning success here is you look at the durable medical equipment trade association — I forget the name of it; it doesn’t matter. They have a — a little press release when they won their last victory stopping competitive bidding in Medicare.
They said — I’m not making this up; one of the bullet points — “Competitive bidding is anti-competitive.” Now, let me tell you a secret. You got to wake up early in the morning to convince yourself that that is true. You got to be way smarter than me to pull that off.
But it’s also true — and this is the good news — most Democrats and a critical mass of Republicans do want to figure out how to get all Americans covered. They do want to figure out how to preserve Medicare’s essential promise and that these goals — and they agreed these goals cannot be achieved without delivery system reform. And therefore, that’s what this is all about.
So I would say one way to think about the coming, if you will, grand bargain is this. Covering all Americans is the price that liberals are going to demand to acquiesce to what will have to happen to the delivery system to make it possible for us to make universal coverage sustainable over time — universal coverage and the Medicare program over time.
How? Largely by beginning to build on what Medicare is doing right now. They are turning into a value for purchase purchaser and — and tying payment to performance. There are good experiments going on out there, a lot of it started by the Bush administration. I give them — Tom Scully and Mark McClellan — high marks in a lot of ways.
And I would say what we got to do is turbocharge those experiments with systemwide reforms led through Medicare experiments.
What are the pieces here? Health information technology, which will probably be in the stimulus health package, because it is a low-end investment that should pay off, if we do things smartly with it.
But you can’t just do information technology alone. You got to have both decision support, too, so every clinician-patient encounter has access to good information.
You also have to have incentives. You’ve got to change the way we pay. The fundamental thing that’s wrong in our healthcare system is our incentives are misaligned.
It comes down to payment reform. I know I’m an economist, and I’m a little bit territorial about that, but I will say it does come down to money, and it comes down to incentives. So if you link incentives with information, you can do better.
And again, the good news is the major congressional support agency data advisors, the Medicare program — MedPAC, Medicare Payment Advisory Commission — has said, and I quote — this is almost a fact, not quite CBO, but it’s almost a fact — it says, “The fee for service business model has to be phased out. It’s obsolete.”
We have got to move to more bundled pricing. We have got to move to way smarter ways of buying. And that’s what all this payment experiment stuff is about.
Comparative effectiveness — which again, President-elect supported; Senator Baucus has a bill; the House has a bill — we are probably eventually going to also have to think about more serious income relating premiums. I have no problem with that in the long run. It’s part of the grand bargain.
I do think, though, you want to be careful not to dismantle the common risk pool. The whole point of insurance, and certainly social insurance, is to make the risk pool as effective as it can be, and that means it’s got to be large.
Now, implementing all this is it has a point. The point is to enable us to buy smarter, which is another way of saying — the language I prefer to use — it allows us to exercise stewardship over our healthcare resources, indeed our social resources.
And why do we do that — oh, sorry — why do you do that? Because — the phone rings — because we want to enable all, as Karen said, all our citizens to participate in the life of our community. That’s what makes social insurance real, and that’s how Medicare will survive.
Thank you very much.
MACGUINEAS: Hi. Thank you, everybody, for coming today. OK, I’m going to have to admit that Len’s first sentence threw me for a loop, because I had no idea that entitlements was a poll tested Libertarian word. So I’ve quickly gone through my remarks, scratched out like every other line, and will try not to use the word “entitlement.”
But it does remind me of a — I think — lightly amusing story, which is like seven years ago a cruel hoax was played on me, where I was told that I was being interviewed for a TV show. And secretly, they were poll testing my remarks.
So if you look in my office, there’s a picture of me like happily smiling, talking to cameras, and lines just plummeting. And it turns out that the reasons they were plummeting is that two things — the word “entitlement” and the word “actuarial balance” not popular in speaking. So it’s a good reminder to take those out of my remarks, and I will try to cleanse them completely.
I think the — I think the program we’re doing today is immensely important, because everything that’s going on in the economy right now is revealing the cracks in our social insurance system, and yet the immediate pressure is to deal with the economy.
This is not where we’re focusing. We are focusing on industries. We’re focusing on financial issues. We’re focusing on stimulus and a macroeconomic level. But this has to be one of the next discussions — all the risks and vulnerabilities that people in our country faced today and whether our systems are set up properly to deal with them.
So starting with the economic recovery system that we’re going through right now, what we’re looking at going forward is absolutely massive. We recently estimated that is likely to be a trillion-dollar budget deficit that we face next year. And that was before we noticed that the stimulus proposal seemed to be increasing by you know tens, hundreds of billions of dollars a week.
So I actually think the trillion dollar deficit next year is a conservative estimate.
And this poses a real tension for lawmakers, because what they need to do is spend all the money that’s necessary now to stabilize the economy. And quite honestly, nobody knows exactly how to do that.
We’re going to make a lot of mistakes, and we’re going to waste a lot of money, but it’s going to take a lot of money to put the stimulus into the economy that’s necessary.
But at the same time they have to walk the fine line of realizing that on the other side of this, once the economy starts to recover, we’re hit with mounds of debt.
And you want, at the same time that you’re stabilizing the economy, to reassure financial markets that we’re not going to have the next big bubble going from a stock market bubble to a housing bubble to a government debt bubble.
And so I think what Senator — or what President-elect Obama has said is absolutely right, that we need to take all the measures now to deal with the economy. But on the other side of that, we have to go line by line and think through the budget how we’re going to pay through — pay for or deal with all these fiscal pressures we have.
And it’s right in line with what the Committee for Responsible Federal Budget has been saying. We have suggested that any stimulus package also include a mechanism to deal with longer-term issues, whether it’s a working group or a promise to have a budget plan out there in 18 months.
And what we’re doing right now is trying to develop a fiscal roadmap to guide our way through the current economic downturn and the long-term fiscal challenges we face.
The problem, of course, with going through the budget line by line, an example that President-elect Obama used, is it’s not just going to be millionaire farmers that pay the price for what’s going on right now.
We’re going to have to fundamentally rethink how we spend our money, and the largest place that the money goes is into — not entitlements — but mandatory government spending — can I use that — OK…
UNKNOWN: Very good, Maya, very good.
MACGUINEAS: … to mandatory government programs, which take up about two-thirds of the budget. That’s where the real money is, and it’s not going to be able to be ignored when we re-think the budget.
I actually think that the economic crisis — it’s bad; there’s a lot of bad that goes with it; you can’t put a lot of you know upside on this — but there is an exciting possibility to make what we have to do as transformative as possible.
And I think that holds true both for the stimulus that we’re looking at now and the long-term fiscal issues that we have to come to terms with.
So how do we do that? In terms of stimulus, we’re not looking at the traditional measures that have been most useful — things like temporary tax rebates and food stamps and nothing beyond that.
We have the opportunity, because we actually need to spend so much money — and believe it or not, it’s hard to spend $300 billion, $500 billion, $700 billion — to make sure that we target that money to things that are investments in that they will provide higher returns in the economy in the long term.
There are a lot of ways that we need to spend money, because there are a lot of pent-up demands in our economy, and investment has been shortchanged for numbers of years, and the opportunities right now to put more money there are very useful.
We are proposing that when you do put in new money in — in kinds of investments, we also have offsets for that spending that you wouldn’t put in now. We want to borrow all the money now. But once the economy has stabilized, you do need to find ways to offset the costs.
So we’re going to be looking at things like are there ways to put a lot of money into green technologies now, but offset that with something like an energy tax that triggers once the economy has stabilized.
Can you put a whole lot of money into the kinds of investments in healthcare that Len and his team are looking at — help IT and other things that we think will save money over time, but make sure that those costs are recaptured after we put them — put them into place, and so that they’re not permanent new spending items?
We also have the opportunity to make the physical reforms and the mandatory programs transformative as well.
So there will have to be a major budget deal when we are through dealing with the economy as it stands right now, and — it’s hard to get rid of the word — mandatory spending…
UNKNOWN: You’re forgiven, Maya, for three more days, and so…
MACGUINEAS: You know I have to say I don’t feel like an evil Libertarian when I’m saying the word. It’s just Len in my head.
But mandatory spending will certainly be at the center of any budget deal, because that’s where the money is.
My personal belief — and I’ve written on this in the past — is that we need to think about this in a bunch of different ways. We first need to think about what the unmet needs in our country are.
And I would list certain things like children, the changes that have resulted from globalizations, the new risks that we’re seeing now from a volatile economy, many of the issues that Karen Kornbluh was talking about in terms of family issues, modernizing our social insurance system.
I would also talk about the need for more individual responsibility. We have focused so dramatically on individuals borrowing in the past decades instead of saving. I think we need to look at new dramatic forms of individual saving for the kinds of needs that we know that they will meet in the future.
I also think we need to have a more progressive role for government. I think when there are unlimited resources, as we have now, it’s important that where government focuses its resources is on those people that most need them.
So particularly I’ve written about things like mandated savings for things that we know will happen, like retirement and basic health care, matched with progressive matches to help people of low income and two are particularly vulnerable.
Real insurance so that we have insurance that pays out when you need it, not regardless of the actions that happen. You don’t insure your house for cleaning gutters. You insured for when it burns down — so real insurance like that.
And then government reinsurance of all sorts of programs. We’ve seen that the government actually does reinsure almost all parts of our economy. But we don’t — I don’t think it’s right for it to reinsure financial sectors you know to make sure that you get good on the upside, but we all pay for it when it’s on the down side, but not do the same things for individuals and their kind of financial security.
So I think that the underpinnings of an updated mandatory spending system would help — would help with things like it does now with health and retirement, but also wage security, long-term care, structural unemployment and housing — many of the issues that are not permanent — currently covered that need to be.
So I’m going to end where I actually think the national discussion should begin, which are some of the fundamental questions, because what I think of how it should look is not you know necessarily right at all.
But we need to figure out a way to have national discussions about making big changes, because what is going to have to happen, given the fiscal realities of the budget, is not just incremental changes.
So I think we need to think about things like what needs do we need to focus on. Right now we focus through these programs primarily on health and retirement for seniors, less for workers and children. Is that the right mix? Or do we have to rethink some of that?
When should a program be universal, where everybody gets benefits? And when should it be targeted, where it’s based on need or events that occur?
When should we focus on income support, meaning keeping you at the income level to which you are accustomed to versus creating safety nets so that nobody falls below a certain limit — level, excuse me?
And then what kind of options will we use for structuring these programs? There’s all sorts of options. There’s individual and government partnerships. There’s a role of employers that we’re currently grappling with. They’re saving versus social insurance versus targeted insurance.
And there’s things like tax incentives versus mandate versus vouchers. There are all sorts of structures. We need to be able to rethink which the most appropriate for our goals and our current economic conditions are.
So I think that it’s just appropriate to say that no matter what, no matter how you feel about these issues, these things are going to change the fiscal realities that we will face, and we’ll start to deal with after we’ve dealt with this terrible economic situation we’re currently in, will demand dramatic rethinking.
And so I’m hopeful that that discussion will start taking place as quickly as possible. And I’ve always been really lucky to work with the New America Foundation, which I think has taken a real lead in starting that discussion.
IWRY: I’m Mark Iwry from Brookings. I love to listen to Maya and Len. I’d almost rather just do that than take 10 minutes to talk myself. But Michael’s asked me to do that, and I’m really happy to be here at New America with Karen and Maya and Len and Michael Calabrese, Ray Boshara, Reid Cramer, Melissa Koide and others.
New America does fantastic work, and I think you all recognize that. But it’s recognized very, very widely.
I’m going to zero in on the retirement savings, the private pension part of this picture. And in 10 minutes I’m not going to try to turn to private healthcare issues. I think Len just summarize things beautiful, though, beautifully with respect to Medicare and also touching on the fundamental health costs and coverage issues in our — in our system.
So let me just say that in the wake of the election and in light of our financial crisis, I would suggest that retirement policy apart from Social Security needs to move in three basic directions.
First, we need to do whatever we can to prop up our defined benefit pension system. I mean these are, of course, the private sectors extension of the Social Security-like benefit, not as good as the mother of all defined benefit plans, the Social Security system itself, but plans that at least mimic in a way many of the cardinal virtues of Social Security.
We need to do what we can to prop these up. They are suffering from various long-term fundamental secular trends that run against them, but one thing that we can do and we need to do in the short term is to give employers relief from the funding obligations which are now about to be so dramatically and suddenly increased due to the drop in asset values during this market crisis.
I think Congress is likely to do that as part of the stimulus package.
Number two, with respect to 401(k) plans, I would suggest we do not need to replace the 401(k) or to give up on the 401(k), but rather to reform the 401(k), or more properly to continue reforming and accelerate the pace of reform of the 401(k) plan.
The (k) plan was originally established as a supplement to the traditional pension — the defined benefit pension — but done in a way that really did not reflect the kinds of values that Karen so beautifully articulated today in the — in the platform — the collective risk-sharing, the being there for each other in time of need, the spreading of resources, progressivity.
The 401(k) originally was a sort of every person for themselves kind of arrangement to a — to an excessive degree. It has a nondiscrimination regime so the wealth has to be shared somewhat, but this did not go far enough, and people were left in a very laissez faire structure.
You decide whether to participate. You decide how to invest. You’re on your own. Good luck.
We’re transforming that, have been transforming that so that people are almost universally covered in workforces that have a 401(k). You’re automatically enrolled in the plan unless you opt out.
The investments are professionally managed up to a point. You’re given a default investment that reflects professional expert input. And ultimately, the payouts of these plans can likewise be made more intelligent.
Defaults can be used in a sensible manner to orient people to annuities, to lifetime income, whether it’s commercial annuity or a different kind, but an income that actually gives people security in retirement, rather than leaves them with the almost intractable problem of determining how to manage a pile of dollars over an uncertain life expectancy.
The reforms of the 401(k) that have been taking place now have been sweeping the market.
This automatic enrollment, automatic increases or step-ups in the level of employee contributions, automatic investment — that is, people being placed in a default investment that make sense for most people and given the choice to opt out if they want — and hopefully some kind of automatic annuitization or a greater role for lifetime income in 401(k)s, together with a — an intelligent use of defaults to stem leakage as well — that is, to encourage people to keep the money rolling over or retaining their plan when they change jobs or lose their job so that the savings are there for the long term, rather than getting consumed prematurely.
The other fundamental way we can reform both the 401(k)s and our IRAs, the stalwart pillars of our retirement savings system as opposed to our traditional pension system, is to do what President-elect had proposed during the campaign, which is to reform our tax treatment.
The deduction is the way we reward people for saving now. Tax deductions don’t work progressively. The higher your bracket, the more you get. The lower your tax bracket, the less you get. A very backward policy.
By replacing that with a credit, as we’ve begun to do through the so-called saver’s credit, which gives people the financial incentive that’s not proportional to how high their income is, but is proportional to how much they save, which is obviously the behavior we’re trying to incent — by doing that, we can make the system more effective and more equitable — more effective because by encouraging saving by people who are not high income, who are not very affluent, we tend to promote actual new saving.
That is, people aren’t just shifting money from a taxable mutual fund, let’s say, into a tax-free account, money that they already had saved or that they would save anyway.
Those among us who are affluent tend to do that. Moderate, lower income people don’t have those savings to begin with. Give them a better financial incentive. They’re more likely to actually do incremental new saving.
But expansion of the saver’s credit to make it refundable so that people without an income tax liability will get it, to deposit it into the accounts like a 401(k) or an IRA, to make sure that the amount is actually saved to the extent we can, is something that the President-elect propose during the campaign and that has a lot of support, albeit it’s costly.
The third thing we need to do is to pursue universal coverage in pensions and retirement savings. Obama’s proposed an automatic IRA to do that. This is a — an approach that has been developed by two of us.
My co-author is David John at the Heritage Foundation, a senior fellow there who’s come together with me to develop this universal coverage proposal essentially extending something like a 401(k) to the half of the U.S. working population that has no retirement savings vehicle at work, no convenient way to save.
We would automatically enroll people in IRAs the way we automatically enroll people increasingly in 401(k)s and have employers that are not willing to sponsor any kind of plan — a 401(k), a defined benefit, anything else — have them at least offer their payroll system as an effective mechanism for helping employees save conveniently and automatically in the workplace.
Interestingly, Senator McCain during the campaign endorsed this proposal as well. It’s gotten wide bipartisan support and has been supported by a number of the key players in the top-tier economic team that the President-elect has — has already nominated and appointed.
States are also active in trying to do something to promote broader coverage here in a manner slightly analogous to the health care area where the states are coming up with their own creative ideas. It’s much more incipient in the pension area. The states are just beginning to think about it.
But those of us who’ve been involved in trying to get the states to move on a track parallel to the federal government are encouraged by the amount of interest that we see among key people in the state legislatures, in the state executive branches, who administer pensions and 529s, and among stakeholders.
I think all three of us — all four of us are looking forward to discussing and two Q&A.
CALABRESE: Yes. Thanks, Mark.
And as you had on that very last point on the — on the state-based universal voluntary retirement funds, you know I’d like to thank Mark. He’s actually worked very closely with New America’s California program to really to initiate and promote that.
It almost got through the California legislature into law this year with you know CalPERS administering the accounts. And you know we’re going to be revisiting that, of course.
So I’d like to open it up. This is quite a — a you know a broad canvas that was painted here, a number of different angles from Medicare to the — to also the needs of the current workforce.
So if you — if you’d like to ask a question or make a comment, please we ask you to please identify yourself in that process. And we’ll take it.
UNKNOWN: Do we have a mic?
CALABRESE: Do we have a handheld mic or…? Oh, yes, there we go. Thank you.
QUESTION: I’m Victor Bassett (ph), consultant in international and security policy, and this is the comment about Medicare. About three years ago I published an article on Medicare pointing out that in — in 2080 the cost of Medicare would be per year $17 trillion. $12 trillion of these $17 trillion would be deficit.
Now, the figures I’m giving you are up to date figures, not from an article three years old. They are slightly different.
Now, what I propose is to have — to — to solve this problem or help to solve this problem by rather unorthodox means by — by postponing human longevity and by — by a gerontologist that I talked to — and this is again up to date information — say that if they receive adequate money within 10 years, they can postpone human longevity or the aging process by up to 20 years.
Three of aging related diseases — and this is the critical consideration — is free of aging related diseases. The prime (inaudible) is that after the 20 years expire, the diseases will come back.
So as a temporary solution, which gives us 20 years of reprieve — at least 20 years, possibly 30 years of — of reprieve. But after that, but — but at least medi science will come with another solution. Maybe we’ll have a more permanent policy. But this is definitely a consideration.
UNKNOWN: You had that baby boom. You can’t get rid of them.
UNKNOWN: Did they tell you how much it would cost?
UNKNOWN: Yes. Between $10 billion to $20 billion for 10 years.
UNKNOWN: OK. Well, let me just say maybe we should work on that, but I — I would honestly say that 2080 you know reminds me of a — a joke an actuary at CMS, where they run Medicare and Medicaid, used to tell.
You look out you know the projections of economic growth being slower than health care cost growth, and this was back in the ’80s when people were worried about employment back then, too. He said you know the good news is you took out 80 years. We’re going to have — we’re all going to have a job. The bad news is we’re all going to be carrying bedpans.
So it is true that it does look like it’s going to claim the entire output. I would submit to you Herb Stein’s (ph) wisdom is quite useful here. If something is unsustainable, it won’t be. So it — it probably is true that 2080 looks awful. That’s precisely why people have to pay attention.
I would say it this way. We can’t afford Medicare tomorrow. We can’t afford Medicare 30 years from now. And so I think we’ve got 20 years to fix it, but for a different reason than your…
CALABRESE: OK. Yes?
QUESTION: I’m Elliott Wickes (ph), and this is a question for Len.
UNKNOWN: Is this here, though? Elliott speaks loudly enough, but still…
QUESTION: Thirty years ago I argued that we couldn’t afford the rate of increase of health care costs that we’re experiencing, and I said we have to come to the point where we’ll make decisions not to provide some care that has very low benefits for the cost.
Almost nothing has happened along those lines. I have two questions. Do you really know how to do that? And do we have the political will to do it?
NICHOLS: Yes and no. I mean I would say yes, we’ve learned. What’s happened in the — first of all, you’re ahead of your time. But second, no question we have learned a lot, and you know as much as I do but what we’ve learned.
We know — I mean look, the variation in treatment patterns and expenditures just in our nation alone is so sad. If we could get the whole country to practice medicine like they do in certain pockets, we could get that 30 percent back really fast.
So we do know how. But we don’t know how is to transform the larger part of the country that doesn’t practice that way. And we haven’t done a very good job at all, although our colleague Shannon Ban (ph) did a great job of helping in this regard.
We haven’t done a good job at all of convincing the American people that more is not better. We tend to think that you know when in doubt, do it. The providers often have incentives to encourage us to think this way, but it is true that you know when you have insurance systems that are set up to basically, for those who have good coverage, cover everything down to a certain point, then there’s no incentive not to do the marginal value added thing.
And similarly, if the fee-for-service compensated clinician gets money for doing it, and it’s not thought to be harmful, then why not?
So fundamentally, that’s how you build in really bad incentives. I would say 30 years ago, Elliott, we’re looking at maybe seven percent of GDP, and today it’s 17.
So when you think about what really is driving, in my view, the conversation you’re having right now is because when you were thinking about that way ahead of your time, it was a nuisance, and healthcare premiums per family were about seven percent of medium family income, and today it’s 17.
So what’s happened is that it’s become a much bigger nuisance so that more and more people are finding it unaffordable.
Second, it’s true that employers, while in the long run, Lord knows, everybody gets their wages reduced from employer contributions, in the short run it’s kind of hard to do that any given year.
So what’s happening is in an — in an increasingly international economy, more and more employers feel vulnerable about an uncontrollable item that is a bigger nuisance than it used to be, and that has helped their cost growth.
So they feel like they got to have some relief. So you got middle-class anxiety that’s real and systemic. You got business anxiety, which is real and systemic. And you know I think it was Rob Emanuel we said the other day you don’t want a good crisis to go to waste.
I mean fundamentally, let’s be frank. A hundred — you know six months ago $150 billion was thought to be beyond the pale. $150 billion is lunch money now. So at the end of the day, you didn’t talk about — well, here’s the — here’s the real deal. Here’s the real deal.
Go back to that night when Bernanke and Paulson went to the Hill and explained to Pelosi and — and all of these, “We’re going to have a depression unless you do something now.”
You know I call that the come to Jesus. Now, everybody had to think about this really hard. But that did is made as to think about priorities. When you think about priorities, you’ve got to do what Maya said. You’ve got to think long-term about what you spend now. We’re going to have to pay for it. Trust me. Maya won’t let me forget. We’re going to have to pay for it.
But it’s stupid not to think about fundamental restructuring. You can’t think about fundamental restructuring of our economy and ignore healthcare.
So I submit, Elliott, we would have had a good chance at having a serious conversation without this economic thing. In a funny way it’s made it more likely that we’re going to take it on, because people realize we don’t really have a choice.
CALABRESE: Yes. It’s interesting. When $150 billion becomes lunch money, then people are going to quickly stop using the old Everett Dirksen — you know a billion here and a billion there, and at some point it adds up to real money.
UNKNOWN: It’s right here in the trillion.
CALABRESE: Yes, right back there. I think we just in time for one or two more, but go ahead.
UNKNOWN: Yes, I have two questions. One is what do you think the long-term process are for the PBDC? I know it was sort of statewide. It was in really bad shape quite a while ago, and then it got stabilized. What’s the possibility of the number of more bankruptcies? What’s going to happen to that?
And second, is there any discussion of continuing to raise the age of retirement for full Social Security benefits? And if so, how do you deal with — I mean, I’m a — I’m a professor. I don’t mind teaching until I’m 72. It’s not that bad. I just go to sleep while the students continue to talk.
But a lot of people have got — they’re — they’re quite a lot more harder and difficult. And I’m wondering if there’s any thought about how to sort of equalize that for people who have manual labor jobs, things like that. How do you — how do you make that more (inaudible)?
MACGUINEAS: OK. I’ll talk about retirement age, and then I’ll talk about pensions.
You know all the options trying to deal with this are pretty unpleasant. When you start going into the details of which taxes do you want to raise, which expenses do you want to cut, nobody wants to do anything. So you go through the unfortunate political cycle where everybody takes everything off the table. And many people have taken raising the retirement age off the table.
So I think it will quickly come back on, because it’s actually so much more appealing than many of the other possibilities. One, it absolutely makes sense. We’re living longer. We can’t possibly be expected to be supported by other generations for many, many more years, and even that facing retirement.
And it just — it fits with part of where the problem is coming from. I also think it has a benefit we saw that when the retirement age was increased in 1983, when we reformed Social Security, they passed the bill at the time that increased the retirement age in the future. And you can do that again. So being able to hide from voters what exactly you’re doing has a political benefit to it.
I know it didn’t work for me, because when my father was about to retire at 65, he realized he didn’t get to retire until he was 65 and four months and like calls me yelling, because it’s my fault because I do Social Security reform. Somehow it must be my problem.
But I still think the appearance of being able to pass something now that gradually phases into change down the road makes a whole lot of sense.
I also think the point you bring up is a well understood one, but certain people can work a lot longer very easily. Other people, who are particularly doing manual labor or get disabled for other points, for other reasons, certainly can’t.
And it just goes and reveals one of the broken social insurance programs that we have. Our disability program in this country doesn’t make sense in so many ways. So disability will be what has to kick in to compensate for the growing retirement age, and we need to reform disability insurance so that it’s more sensible and works for the problems we have now.
IWRY: Let me just add that I think that what happens with the PBGC is going to depend very largely on what happens with our economy in the next few months and the next couple of years.
And because we’ve seen so much turmoil — we’ve got the big three now on the brink — these are the kinds of things that are going to determine the fate of the PBGC.
Let’s remember that the PBGC ultimately is not what it’s about. As you know, it’s an intermediary. Ultimately, it’s whether the workers are going to get the benefits that have been promised to them and whether the taxpayers will ultimately have to step up in order to insure that or — or not over the long term.
I would note that we have raised the retirement age in the private sector. I think we did it a few weeks ago. Many of us may not have noticed that, but unfortunately de facto the American dream of early retirement is really largely gone.
I say that not because I don’t think the market will recover. I am hopeful, as most of us are, that the markets will recover sooner or later. But that — that was always a bit of a hollow dream. It’s something that the advertisers dangled in front of us during breaks in the Super Bowl and not something I think that — that comes from fundamental values or traditions of our society.
So the idea that you can set of take your shoes off and walked down the beach you know starting in your late 50s or early 60s and played golf for the rest of your life is something that — that is only available to a few of us, and always was available to only a few of us.
But I think the expectation of being able to do that, especially when many people don’t like their work, don’t like their boss, don’t like their situation, the ability to look forward to that and the illusion that that will be possible you know in a relatively — at a relatively early age is one that — that I think has been unfortunate for many years. And now it’s just become more obvious.
CALABRESE: Yes, this lady back here. We can have one last question.
UNKNOWN: My name is Cynthia Samuels (ph), and my question is partly based on your — somebody’s remark about you can’t get rid of the baby. What is your research showing you about — I work with bloggers, and they’re all two billion years younger than I am.
What — you should hear them — what do you see in your research about the potential for everything you’re talking about affecting, when we talk about social togetherness, how the generations are going to relate to each other as these choices become apparent? Have any of you done any looking at that side of it?
UNKNOWN: Sounds like the team for Davy Brake (ph).
MACGUINEAS: No, I’m curious what you hear from your bloggers.
UNKNOWN: Well, they’re very — they don’t have anything — you’ve heard it all. They don’t have any faith in Social Security. They think that — that my generation has made a mess and a selfish. And there’s just a lot of what you were to expect, but more of it in my (inaudible).
NICHOLS: Well, if they say (inaudible) think Social Security is going away, that’s probably a good thing.
IWRY: But unfortunately, unfortunately, I think this may be something, Len, like you know the entitlement word that you started talking about.
You know that myth that you should assume Social Security will not be there has caught on with such dramatic success among it seems everybody under a certain age. And they seem to repeat it you know robotlike, because they’ve heard other surveys where their cohorts repeat it robotlike.
So you know a whole set of generations has been brainwashed to assume that Social Security will not be there for them. I don’t think that most of us who work in this area assume that Social Security will not be there.
We’re worried about the lack of sustainability of Medicare in particular. We’re worried about making sure that things are solvent and that we’re fiscally responsible. And that may, of course, involve all kinds of changes. But that’s a far cry from not being there when he retires.
UNKNOWN: Well, the other part of it is that it’s such a high tax compared to their income tax for most of them. Social Security tax is way higher, and so that’s part of it.
MACGUINEAS: You know I’ve actually always been struck about it in the opposite way. I’ve always thought that younger generations kind of take this sitting down, and it’s sort of very impolite to suggest that they are should be generational war. You know that’s the wrong thing. Let’s resolve this without generational war.
But I’m always sort of stunned that many 20-year-olds think both of that Social Security won’t be there for them. What’s been promised to them won’t be there. Something will be there. You know that’s what the truth is.
But that they think it will be there, and yet they still pay 12.4 percent tax without very much protest — to me that actually an incredible amount of you know, OK, we’re getting, we’re letting baby boom have this one.
And I think that the baby boom has done well by themselves, and I think they will continue to. I think that is a very powerful political generation. I think that we’ll see things like the expansion of prescription drugs without figuring out how to pay for before we see more investment in pre-K.
So it’s not considered polite to pit generations against each other, but there are no win-win-win when it comes to spending one dollar.
The other day I was at a conference with somebody who is talking about economic mobility and how it was so critical that we increase mobility for all the quintiles. That can’t happen. When one goes up, someone else comes down.
And unfortunately, the same is going to be true when they figure out how to divide resources. Now, we can do it smartly. We can try to find ways to make investments that grow the economy. And we can try to grow the macro economy as much as possible.
But still it looks to me as though older workers have done much better from any of these programs than the next generation will. And I’ve always thought that younger people take that rather politely.
CALABRESE: All right. So with that, I’d like to turn it back over to David Gray for the next panel concerning workforce.
GRAY: Thank you very much, Michael.
And, yes, everyone take a big stretch here as we switch — we switch panels.
I’d like to welcome Katie Corrigan and Ray Uhalde and Phil Longman up to — to the panel here.
Michael did a good job of — of balancing. We’ve got a lot going on today in keeping us on time, and I’m grateful for that, and we’re going to continue to make that our goal for this and for our health care panel as well.
In my capacity in directing our Workforce and Family Program, I’m pleased to introduce our workforce panel to you. I won’t go into the backgrounds in detail of all of our speakers, because they are listed in your packet.
But just briefly, Ray Uhalde is director of the Workforce Development Strategies Group at the National Center on Education and the Economy. He comes to us with significant experience at the U.S. Department of Labor in general unemployment and training policy.
Katie Corrigan is the co-director of Workplace Flexibility 2010, where she helps oversee the strategy, legislative lawyering, policy research, media and constituent outreach of that important effort. Katie’s served on Capitol Hill at their law clinic at Georgetown and that the ACLU.
And Phil Longman is a Schwartz Senior fellow at the New America Foundation and research director for our next social contract initiative and is the author of numerous articles. And his latest paper on the principles of the family social contract, which I was honored to help co-author with him, is available in your packet.
So as the — one of the themes we’ve talked about today about some of the opportunities to transform some of our policies as a result of this social crisis. The crisis makes that harder for us to afford certain things. It also provides an opportunity for a transformative change in policy moment.
And nowhere is this perhaps more evident than in the workforce and how we do our work. And that’s what we’re going to talk about today.
I think from a workforce standpoint, the idea of workplace training is something that has been unfortunately ignored both fiscally in terms of investments over the last generation, and while education has gotten a lot of — of focus the last eight years, workforce training has not — has not gotten as much focus.
And now as we look — as Obama talks about 2.5 million jobs created by beginning of 2011, a stimulus package and — and an infrastructure training program that will help put people back to work, it’s an opportunity to think differently about workforce development.
So it’s also an opportunity for us to think differently about how we do our work, how flexibility might enhance — lessen the anxiety of — of families and workers, but also help us all to do work in a different way that is better for both employers and employees.
And I think if we have an opportunity to think about ways which we can have policies that can get us the most bang for the buck and solve the most problems in one fell swoop, I think Phil may share an idea with us with his creative mind that helps us move in that direction.
So with that, I want to welcome you to our workforce panel and invite Ray Uhalde to join me here and come up and present some of his thoughts on the American workforce.
UHALDE: Thank you, David. I’m glad to be here with the New America Foundation.
With regard to these times, I guess in talking about social insurance programs that you’d have to start in the workforce area with the unemployment insurance system and unemployment insurance reforms.
The stimulus is going to extend unemployment insurance benefits, but we need to go beyond that. It’s — the unemployment insurance system is not up to the task. It has too many holes, and it’s not well-connected to helping workers continue their education and — and training.
Fewer than 40 percent of unemployed people receive unemployment benefits, yet unemployment insurance is not only an important part of the — of the social safety net, it’s a critical economic stabilizer, returning about $2.40 to the economy in its multiplier effects versus every dollar of benefits spent.
And the fewer people that actually receive benefits, the less stabilization you get during a downturn like we have now.
Representative McDermott and Senator Kennedy have introduced what is referred to as unemployment modernization proposals. They make numerous reforms on unemployment insurance. They would cover part-time workers.
In most states if you’re part-time worker and you’re unemployed and you want to get a part-time job, you’re not able to draw unemployment benefits. They insist that you take full-time employment.
Yet a growing percentage of the labor force is in part-time work.
Low-wage workers have a particular difficulty, actually. While 97 percent of workers are covered by unemployment insurance, many workers don’t actually receive the benefits. Low-wage workers often times don’t have the near-term wages accessible in the databases to determine automatic eligibility. That needs to be fixed.
And lastly, in — now most — the vast majority of states, if you want to get some up-skilling and occupational learning in this country while you’re unemployed, only a few states allow you to do that beyond 26 weeks. And we insist that people get certificates and more rigorous occupational training. It takes longer than that period of time, so we need to tie unemployment insurance to getting longer-term occupational training.
When we look to the workers being laid off, trade adjustment assistance has been a relatively small program tied narrowly to — to impact people losing their jobs because of trade and imports.
This program, too, needs to be reformed and expanded, and I would expand it and sort of disconnected from trade over time. Although that won’t happen in the near term, make it a worker adjustment assistance program as part of a comprehensive dislocated worker and worker adjustment system.
You could conceive of unemployment insurance reforms, trade adjustment assistance reforms proceeding apace so that workers are covered with both income support and for training, regardless of the reason of their layoff.
We spend an incredible amount of inefficient time trying to attribute the cause of somebody’s layoff to whether it was trade related or not. This makes very little sense to the workers themselves. Dislocated workers should be addressed like that.
And you could vary the length of training and the length of income support based on something like tenure and age for workers so that you could adjust, and maybe would phase in over time and start with longer tenured workers getting longer-term training and — and reduce the wages as resources became available.
And you could support these training by something like the Federal Unemployment Tax Act surtax that’s been a temporary surtax 1978, and it generates about $2 billion. It’s constantly renewed for a budget deficit purposes, but in fact ought to be deployed for a purpose like this.
The stimulus that’s going to happen is — is probably going to increase funding for current programs, probably $300 million or $400 million for dislocated worker training, $200 million or $300 million for youth employment activities, and some money — $100 million or so — for free employment services for our one-stop career centers where people — it’s sort of the emergency room for unemployment and unemployed people.
I particularly point out in the near-term the issue with use — youth employment. Andy Summer, Northeastern University, emphasizes the — the youth employment rate this past summer before the financial crisis hit — only 32 percent of teens were able to get work during the summer time.
This is the lowest employment rate that teens have been able to have, one-third below the employment rates in 1989, the largest decline of any demographic group since World War II.
And there’s plenty of evidence that if you don’t get work experience at a young age, it affects long-term career progression and the like.
The infrastructure component of the — of the economic stimulus will happen. There’s discussions on the Hill about having an authorization for maybe a one percent, 1.5 percent carve-out authorizing voluntarily to governors that they could direct some portion of that for support of getting workers to jobs, making referrals, kind of the bridge training that is needed to move workers from residential construction to commercial and industrial and public works construction and some job readiness training and pre-apprenticeship training that could go on with referrals and placements and skill assessments being done to these one-stop career centers.
Which brings me to the apprenticeship system, which the United States has about 400,000 apprentices around the country. This is a system that is — talking about demand driven systems, it’s the most demand driven training system that we have.
It’s got career ladders embedded in it. It’s virtually totally private-sector funded, but it’s small in terms of the scale, but terribly important for the kinds of skilled workers that we’re going to need for an ongoing infrastructure repair and — and building project over the next decade or more.
And we’re going to run into skill bottlenecks very quickly if we don’t expand something like apprenticeship, both with pre-apprenticeship programs, which probably ought to be funded at some significant scale, but also to expand the joint agreements and marketing that would be relatively low cost.
And then we ought to consider subsidizing, putting some federal money into supporting the related instruction — that is, the classroom instruction that goes along with apprenticeships that — that are a combination of classroom and — and work-based work experience and work-based learning.
And Bob Lerman at the Urban Institute and others are doing a lot of thinking in this area.
And lastly, I’d just say we — we have a public workforce system. Calling it a system is — is generous, I think.
We need to look at a — at a next generation of that that’s truly comprehensive, that tries to tie together a continuum between adult — adult education, career and technical education, post-secondary level and the — the employment services and workforce investment programs.
There is an employment and training program buried in the Food Stamp Program. There’s a sizable employment and training program as part of TANF for our welfare program.
These things are all not aligned, and none of them are really systematically aligned with economic development.
So where I come from at the National Center, we recommended building something called regional authorities that would tie economic development, workforce development, career and technical education, adult education into a continuum at a regional level for regional authorities.
And we think that we could actually incent that with a large incentive pool of funds that try to transform the existing conglomerations of programs we have now.
So thank you very much.
GRAY: Ray’s comments made me think that there are so many questions in my mind, and all three of these speakers are folks which you could spend an afternoon just picking their brain on a variety of subjects.
I’m going to ask each one to talk for only 10 minutes so that we can have as much time for your questions as possible.
It’s my pleasure now to welcome a good friend of the New America Foundation, Katie Corrigan.
CORRIGAN: Thanks again, David, for having me here.
So when David invited me to come and speak on the workforce panel, one thing that I really appreciate about New America is they always include so-called work and family issues as part of this broader workforce agenda.
And, quite frankly, that’s — that’s not always the case, so I always appreciate the opportunity to speak to an audience that I don’t actually always see, although there are some familiar faces there.
So the way I start out was the question on the table is basically — is the issue of workplace flexibility, which we defined to include flexible scheduling, time off issues, and career maintenance and reentry — essentially still relevant, given all of these big picture questions that are out there right now.
I read an article. Obviously, we’re not the only people talking about this. And I recently read an article on work and family and specifically paid time off in the context of the recession.
And not surprisingly, the kind of you know two competing arguments in the article — one came from a free-market think tanker, said a recession is certainly not the time to raise the cost of work.
And, of course, the rebuttal from our family advocate — bad economic times are the worst times to lose a job because your child is sick and you don’t have access to paid sick days, or your father has a stroke and you don’t have paid time off.
So those are the two competing arguments now in the context of the recession. I can tell you, after working on this issue for a number of years, those have been the two competing arguments I think since the beginning of the conversation on these issues.
So it’s the same conundrum essentially before December 2007 as we’re facing right now.
So what I want to offer you took a is not so much getting into the weeds on this issues, but rather a new way of thinking about these issues. And I think given this opportunity where people are thinking about the new generation and the next generation, the new economy, now is exactly the time to think about how to build in the workplace flexibility issues up front, rather than trying to retrofit them in after this train has moved along the tracks.
So one thing is my organization, Workplace Flexibility 2010 — we’re a policy initiative at Georgetown Law School. One thing we’ve tried to get beyond again those sort of two basic arguments and really dig in to figure out, OK, what is the problem here? What is the problem we’re trying to diagnose?
And we are part of a broader initiative funded by the Alfred P. Sloan Foundation, of which David Gray is a part, that includes lots of academics, lots of projects looking at business practice. And we have been looking more at the role of public policy.
And one thing we’ve tried to do is essentially to get beyond those two competing arguments, is to actually talk to a whole bunch of people. We haven’t had any positions on any legislation or bills.
We’ve been maintaining a form of discipline neutrality so that we have been able to invite in these competing views to try and figure out, OK, can we kind of get beyond that initial premise and think about what’s the real problem” might be some possible solutions.
So what is the problem?
I have lots and lots of research that can tell you there’s a basic mismatch between the structure of the workplace and the needs of the modern workforce.
Whenever I tell people that Sloan had funded $60 million of academic research cross-disciplinary on this issue, people kind of look at me on the Hill at least like yes, no, duh.
But the problem is, and the reason why I think they funded this research is, when you — sometimes when you state the most obvious, no one’s really even taking it seriously.
Such an obvious statement, and Phyllis Moen, who was one of the initial researchers first at Cornell and now at University of Minnesota, articulated in her book, “The Career Mystique,” you know the reality of the workforce is no longer, as we all know in this room, that you either graduate from high school or college, go into the workforce and then retire. And that’s sort of quick retirement.
Instead, it’s an undulating line, and that’s true for women and men you know. The reality is that different points in time, we may or may not get sick. We may have caregiving responsibilities. We may lose a job. We may decide to take off to take care of small children.
You know there’s lots of reasons for that undulating line, but the reality is that the structure of the workplace in terms of how time is parsed out, how time off neither dealt with, and certainly the types of training you might need to reenter the workforce, the public policy simply hasn’t mapped to that reality.
And again, this is nothing new and different. I was reading a transcript of the hearing that Phil Addto (ph) held in the early ’70s that identified these exact same issues. She was somewhat projecting out, but I think she was projecting out till now, and a lot of what she was talking about has become true.
So when we think about this workforce — and I just want to articulate it clearly — we’re talking about young people, who may especially in a time of recession need to be working and getting training or education. So they are ramping into the workforce earlier.
People are starting first and having kids later in life. The question is how can they dial down and then dial back up? For those folks who have a stay-at-home parent, I kind of think there’s no such thing as a stay-at-home mom. At some point everybody is in the workforce, either part-time, whether that’s when they’re younger or older.
So again, how do you ramp back in?
The sandwich generation, obviously, has been well documented — flexible scheduling and time off needs much more acute when you have both a parent you’re caring for and a child.
And the big shift, which I think our project has paid particular attention to, has been this issue of living longer. And certainly in the panel before, we heard a lot about retirement security.
So we’re living longer, and retirement is going to the different. And certainly groups like AARP have been paying attention to this, because their members are saying they’re going to have to work, and they don’t want to work in the way that they used to, which was kind of a full-time, full schedule job.
So we definitely kind of have the attention I think of some of the aging community.
And the issue that was — these are all big changes in the workforce, but public policy? There has not been a comprehensive, targeted strategy on how to deal with this.
If anything, I think some of the solutions have been somewhat scattershot. And just as a sort of point of data, which I think shows that we need more progress in this area and that the lack of that strategy is the problem, there were some big gains on flexible scheduling in the ’80s and early ’90s, a big jump from ’85, where you had 12.4 percent of folks on flexible schedules all the way to a job to 27.6 percent in ’97.
But in 2004 that number from ’97 hadn’t changed a bit. In fact, and went down just the slightest bit.
So what’s the problem? There’s certainly more women, more caregiving, more aging going on. Why isn’t this more acute?
You know I have my theories. Certainly, in looking at this issue, I think one of the keys sort of odd things about it is it is so obvious. We all deal with it. It’s right there every day. You know this morning I left my two toddlers at home and figured out how to get out of the house and time to make it here and prepare these remarks.
So we’re all dealing with it in different ways. But interestingly, an anthropologist at UCLA did a study on this and showed that Americans have a lot of guilt in this area — women and men, but particularly women.
You make these decisions that are very personal about which job you take, about whether you leave work early to go home for dinner or not, and they feel very individual, and people take them on in a very individual way. That is my decision, my choice, and I’m going to pay the consequences in the form of feeling really guilty about it.
Interesting issue — they did this comparator with Italian families. Same — same pressures you know, sane people working, dual you know dual earner couples, but not the same guilt.
They view this very much as a community problem, something that wasn’t just on their shoulders. Their church, their family, their community, their government was there to help deal with it for them.
So again, I think that all that is to say if there’s not one way to look at this. This can very much be viewed as something that’s a social problem. And certainly, that’s one of the things we’ve spent a lot of time with David proving.
And we’ve done a series of hearings over the years — how flexibility relates to health and its impact on distress. How does it relate to people with disabilities trying to maintain credibility in the workforce? How does it relate to children? How does it relate to families?
I mean there’s lots and lots of connections, but it’s sort of one of those issues that seeps out, rather than being squarely in one place, which I think makes it hard to do with the policy problem.
So again, that’s something that we’ve spent a lot of time on and our project and had the luxury to do, which is really define this as a public policy field squarely.
So if you go on our website, you’ll see a whole lot of information on the data, on the law. And we’ve very much I think proven the fact that this is something that the society needs to deal with, because there’s so much spillover effect.
Again, we’re still not quite there. And then something like this economic crisis happens, and I think it kind of blows things open.
I mean there’s a lot of big picture thinking going on in a lot of different areas, and I feel like we’re actually poised at an interesting moment where we’ve now got this field. We have the sets of issues. We’ve made the linkages.
And — and now what I would like to see as we move forward is to really kind of integrate. So integrate into these conversations on workforce development.
When you think about crew maintenance and reentry, we have now scoured the law. No one’s really thinking about a stay-at-home caregiver who now might have to go back into the workforce because of the recession.
Training programs don’t squarely kind of address them and their needs, which is they been out for a long time. How do you deal with that? You might — they might have been an accountant in their past life, and now you know you don’t want them to have to become the retail clerk. You want to maximize that knowledge.
So — so just to sort of end it, three thoughts. In terms of these three different areas of flexibility, flexible work arrangements, lots and lots of businesses are doing it, and lots of them aren’t. Some of it’s pretty mundane why they’re not. They don’t know about it. Their managers don’t understand it. They’re a small business and they don’t have the resources to kind of learn about.
So that’s a very simple way government can do a lot of education of business itself.
The time off issues are tricky. They’re — they can be very expensive. But one of the things I think we’ve serviced in — in conversation is that certainly it may be big-ticket, but also there may be some way to draw in business where one of the big-ticket items is replacement costs, so someone’s out you know dealing with a sick parent, who’s filling in for them?
Well, that’s something government can think about.
And then, finally, like I’ve already mentioned on that crew maintenance and reentry, this is just an open field. I feel like there’s so much work to be done in thinking about again the fact that people may decide to take some years off, but they — because of different economic reasons, they’re going to have to ramp back in eventually. So how do keep them relevant in this new economy?
And this is my last plug. As we talked about a new economy and create jobs and infrastructure grants of all of this stuff, you know flexibility plays a role in each one of those.
So when you’re in your silo, how do you deal with the reality that the workforce looks a whole lot different? And you’re going to have to have this flexibility built in, if you really want to maximize the value of that workforce.
GRAY: And then Phil Longman will be our next speaker. Please join me in welcoming Phil.
LONGMAN: Well, thank you very much.
I’m afraid my remarks might at first seem a little strange and eccentric and off point, but I will tie them together, because I can’t — by observing, just to start, that even before this current economic downturn, there were more American children who experienced their parents’ bankruptcy than experienced their parents’ divorce, so that the state of economy, the availability of good jobs is very much do with the state of the American family.
Now, one of the things that’s changed a lot in the last few months is there has come to be this tremendous new consensus that we need to be spending a whole bunch of money real fast on infrastructure.
It looks like we’re going to be moving earth like it’s 1959 again with the interstate highway and the St. Lawrence Seaway and stuff, except that if you listen to this conversation very much, you quick we realize that while everybody kind of agrees that infrastructure is good, when you scratch down a little bit, what do people mean by infrastructure?
And almost inevitably it’s — it’s roads and bridges, roads and bridges, roads and bridges. And at the same time we’re going to be building all these roads and bridges, we’re going to be reducing energy dependency and making the air cleaner and — and all that.
So I want to use my time here to just briefly float an idea that will be in the next issue of the Washington Monthly, when I get it written all down, for a sort of single policy lever that would, among other things, stimulate the economy, make driving faster and more fun, reduce the cost of highway repairs, prop up home prices, save thousands of lives, reduce greenhouse gases, dependence on dirty energy, and some other stuff I won’t get into.
And what is that? To give you the vision of this, I have to tell a little story about Interstate I-81, which is not too far from here. Some of you probably know it, have driven it.
It basically starts on the border of Canada and comes down through Harrisburg, Shenandoah Valley and just winds up in Tennessee. And why this road is there is kind of hard to say, because it doesn’t really go anywhere. You know it passes Scranton and Harrisburg and Roanoke.
And — and yet if you go on this road, it’s worth your life, because every fourth vehicle on this road is a truck, a long-haul truck. It’s got a higher percentage of trucks on it than any interstate in the country.
It’s also, through Virginia at least, very hilly. So you find yourself behind this truck, and then you pass it, and the next thing you know in the rearview mirror here it comes down.
Add last November 24th — or 21st — in an all too typical accident, four-year-old Ivan Rheinmann (ph) and his one-year-old sister Maggie and their 80-year-old grandmother were all killed, and many other people were injured, when none of these trucks came down the hill, couldn’t stop and smashed into them. It’s a dangerous place.
Well, why are these trucks on this road? Well, mostly it’s because I-95 is so congested and has tolls on it that truckers find it worth their while to drive all the way around — hundreds of extra miles — to destinations in the Southeast to avoid I-95.
So anyway, so Virginia’s got — got to do something about this. First — first idea is, well, let’s build more lanes. That’s what highway departments do.
But there’s a problem with that. It would — it would cost $11 billion to add two more lanes to this highway just in Virginia alone. And Virginia doesn’t have that kind of money, so they said, “Well, we’ll have to put tolls on this road, and we’ll have to charge something like $.17 a mile for people to drive on it in an automobile.”
And when that idea got floated, you know anybody who’s anywhere near the Shenandoah Valley heard a huge explosion. That’s not going to happen, right?
Then some folks in Virginia had a smarter idea. It turns out that parallel to I-81 all the way through Shenandoah Valley and up to Harrisburg is a line of what was once Norfolk Southern Railroads, now the Norfolk Western Railroad.
Now, railroads, as you might know, are actually gaining back a lot of business from trucks these days, mostly to do — do with the price of energy and price of labor and this congestion problem.
And that line’s got more traffic on it, but the railroad can’t really get any more traffic, because it’s only a single line. It was neglected in the ’70s. They have hardly any signaling. So they are basically at capacity.
And at the same time you know it’s been going to Wall Street for a long time, sort of making the case that, “Hey, look, our business is up, but we need more money for infrastructure.” But Wall Street — you know they had a better idea. They said, “Oh, no, no. We’re going to take the railroad savings and put that into subprime and credit cards, all right?”
And, of course, now credit’s not available at any cost. So people of Virginia have this choice. The railroad has decided that they would be more than happy to have public money, that otherwise would be going to building these two lanes on I-81, put into upgrading double tracking and otherwise increasing the capacity of that line.
In return for that, the public would gain access — public access to — to some of that capacity for purposes such as running commuter trains.
And I ask you — you know what is the better policy choice here? Trains get 11 times — are 11 times more fuel efficient per ton mile than trucks. They produce far less pollution.
Now that we live in a world of freight logistics where — where most stuff is put into containers and those containers can be just lifted from truck to train to boat, it’s quite easy to integrate these different modes.
But, of course, talk about silos. These — these kind of proposals bridge many, and there’s not many folks that put the dots together. That’s the example of one project.
Throughout this country there are choke points that enormously disadvantage rail and increase the cost of shipping and ultimately goods for all of us. Some of it’s amazingly pedestrian.
The Howard Street Tunnel in downtown Baltimore — some of you might remember a few years ago it caught on fire. They had to cancel three Orioles games. When that happened because of that choke point, they had to divert trains as far west as Cincinnati that were on their way to Florida from the Northeast. That’s just the way the network works.
If you — the tunnel is too small to put double-stacked trains through. It needs to be widened and deepened.
Because of that disadvantage, the Port of Baltimore is really hurting, and the whole economy of Baltimore is hurting, because if you want to ship anything south, it’s got to go through that tunnel. Fix that tunnel.
In Chicago, which is the rail hub of America, it takes a container 48 hours to go from New York to Chicago. But because of the way the tracks don’t meet up, it has to be unloaded, put on a truck, hauled across town, put on another train. They call it rubber wheeling, right?
It’s an enormous environmental disaster. It causes all sorts of traffic congestion. It would cost $1.5 billion to fix. Congress gave them $100 million at the same time they were authorizing the Bridge to Nowhere, OK?
We don’t do infrastructure very smart, but there is — there are ways to do it. I just want to leave you with one vision, and I call this the steel wheel interstate. And the missing component here is electrification.
Electrical motors are really a remarkable thing. It’s the only form of transportation that doesn’t carry around its own fuel source, not even a battery, right, which means that the physics of the thing are such that it accelerates much more fastly. It can go faster and use less energy than any other form of — of land transportation.
More beautiful than that is you can power it any way you like. Think about the windmill debate. What’s — what’s the wisdom about wind power? That the big problem with the wind power is the wind isn’t where the people are, right? That you have to build these tremendous high-tension lines across the country to get from Texas to Los Angeles, for example.
But what if you put the windmills next to the newly electrified steel wheel interstate system, right? Now you have the wind where you need it. You don’t have any transmission loss.
A hundred years ago a railroad called the Milwaukee Road used to run. It was the last transcontinental railroad built, and so they got the worst route. And it crossed the Continental Divide in Montana and the Grand Tetons.
No steam engine of the day could possibly handle this grade, so they electrified the line, one of the few to do so in this country. And what they found out is not only could these electric trains get over the hill, they could use the abundant hydropower that’s in the region — totally clean energy, right?
And because of — of electric locomotives, when they brake, they go from consuming energy to creating energy, right? It’s called regenerative braking. So as one train is struggling to get up over the Continental Divide, another train braking down the other side is giving it power. How beautiful is that?
That’s a hundred-year-old idea, and I bring it to you again, a steel wheel interstate. Thank you.
GRAY: The last Rolling Stone concert I think I saw was the Steel Wheels Tour, and we’re going to send Phil Longman on the Steel Wheels Tour to promote this idea, hopefully stopping at 1600 Pennsylvania as the first stop.
I really appreciate all three panelists providing thoughts on the social insurance program and the broader workforce piece, how we all might work differently and how flexibility could be a component of the structure, and then a specific idea that we could create a lot of jobs and be good for a lot of folks.
We have about 15 minutes left. I’m going to take some questions here, but I’m first going to start. We have questions from the press. Is there — are press folks still here with specific questions?
QUESTION: Why hasn’t the employment trend report — a question for Ray Uhalde — what areas do you think the new administration, especially within ETA, be most wise to put its research demonstration and discretionary funding behind?
UHALDE: Well, they haven’t asked me, but if — I think — I think an important area is to — how to better align the workforce adult education and economic development so that they are working in regional growth strategies.
Too often they’re — they’re pulling in different directions. They’re not speaking with one another. And they’ve learned how to — how to do transactions based on recognizing employer demand, but we haven’t learned how to develop strategies that work on the regional demand and line up with those.
So I think that needs to be done more. They’ve begun some of that, and I’d put more R&D into that since we because it’s — it’s the regional economies that work in that area that’s going to help those (inaudible) the national economies.
QUESTION: Do you — do you see any community college investment that would be significant — in the next administration? We’ll tackle community colleges for just the second, and then we’ll (inaudible)?
UHALDE: Well, I would think so. I mean they’re — they’re a major — major force and provider in — in workforce development.
I think I would invest some more in trying to link them much closer to our public workforce development system, incurring technical education, and it goes on from there — better certification of skills acquisition and better assessment of — of skills and knowledge skills and abilities and trying to get both the public workforce system and the community college system to develop these regional strategies.
QUESTION: OK, thank you.
GRAY: Any other press questions?
QUESTION: Peggy Simpson (ph) with Owens (ph) Media Center.
Ray, I was interested to know if you agree with Ms. Corrigan on this being — this (inaudible) of economic collapse being an opportunity possibly — possibly to move forward with some family work placement flexibility policies and integrate those into…
UHALDE: Well, I think she described at the outset the — the major challenge that’s always faced by — I workplace flexibility issues. And that is to the extent you are raising the cost of — of work, those would be used as objections to — to that.
I think there are a lot of opportunities — for example, the unemployment insurance reforms I was talking about — part-time workers, which affect families tremendously.
I mean much of that part-time work is — is not involuntary. It’s voluntary, and yet on this being in the unemployment insurance system we — we treat it as a second-class option. And to the extent that that was treated more favorably, that would help in — in these choices that people have to make, for example.
GRAY: Katie, go ahead.
CORRIGAN: I didn’t — I think one thing that I thought was quite interesting that you’re talking about is really tapping into community economic development.
And certainly what we’ve seen — we found a bunch of policy sessions around the country in different communities, and one reason why they been successful is because lots of local communities are looking at ways to attract and retain workers, which is (inaudible).
For example, Arizona there’s been a lot of focus on the aging workforce and how can you keep those folks employed in a way. They use flexibility is one of the tools, including part-time flexible schedules.
So what I really like out of your time I think is absolutely there has got to be better conversation between that local community (inaudible), those in the workforce training, but really I think across the board (inaudible) and a connection to flexibility both for the aging workforce and for those that (inaudible).
GRAY: Any other question from the press? All right? Sir? Identify yourself, if you would.
QUESTION: I’m Otto Packer (ph). I have a two-part issue. One is I’m surprised in this discussion of family policy that nobody has mentioned the change in the welfare law that took place during the Clinton years with the WorkFirst situation at the time limit, what was the safety there.
In the second half of that is both in the Carter administration and I believe in the Clinton administration that program was to have government be an employer of last resort of family heads with children.
Much of the infrastructure jobs are more male oriented than female oriented. The social services are going to be decimated by the shortfall in state and local resources. You don’t need blueprints and months of engineering.
So why don’t we just implement a situation where the states can provide jobs on a countercyclical basis so to (inaudible) subsequent to the recession or depression and give out those jobs either to every family had with children who has no other income or as a priority?
And why wouldn’t that be a family and workforce and anti-recession policy that makes sense?
GRAY: Yes, in putting together this workforce panel, we also knew we would lose the family component of — of the broader social insurance piece. I appreciate your — your including it.
Does end on wand to respond to — to this question?
CORRIGAN: Maybe you should go ahead.
UHALDE: I — I was just going to say on the — on WorkFirst Bush on TANF, that also influenced where all the states implemented the WorkFirst investment unit subsequently, because it followed in the second year.
But also the economy was very hot through that time (inaudible) on jobs. Now you’re going into a period through probably 2011. The labor market is going to be very slow and tight, and it’s a much more — should be much more emphasis on building skills and — and talent development amongst welfare recipients and others to try and build up their skills, not trying to have them search around for — for jobs (inaudible).
On countercyclical jobs, I’ve heard no discussion on the Hill about public service employment. (Inaudible) enough of the black guys in countercyclical and public service jobs that are saying that there isn’t time, and you know obviously we could learn from it and try and prevent having half the Los Angeles (inaudible) some other cities doing some of this beyond public service jobs and all of that shifting and substitution.
But I haven’t heard that. I’ve heard making more of the emphasis on trying to link these jobs to the — to the investments, and that would be with the smart infrastructure investments over the other green jobs and others being private jobs hired by contractors.
GRAY: Katie, do you want to add anything?
CORRIGAN: Yes, we don’t — we don’t squarely address welfare policy, but certainly one thing that we really have spent a lot of time looking at is I think workplace flexibility tends to have a brand of the white collar professional.
But when you really dig in, you can see even the flexible scheduling has a lot to do with workforce attachment. And for those who are single parents with children or have other you know caregiver needs for grandchildren, there is again a more acute need sometimes for scheduling that maps onto the childcare situation.
And also there are some different views (inaudible) workforce around predictability. Now, we’re getting flexibility as being ultimately flexible, but we also design it to include some predictable nature of the schedule, otherwise we can’t deal with things like scheduling (inaudible).
So we’ve kind of absolutely looked at the population I think that is now either in the workforce and dealing with having kids and juggling their job. That’s…
UHALDE: I just want to mention that Bob Lerman is having a session at the Urban Institute on this issue on the 16th. And you contact Bob if you want to come, and it’s wonderful to do so.
GRAY: Phil, did you want to add anything to do that or anything you want to (inaudible) on family policy that…?
LONGMAN: I think the train’s enough.
GRAY: All right, all right. Stick it with it, man. Tell us the proof of that. Good, good.
LONGMAN: When you take the train from Washington to New York, it’s (inaudible). It’s wired. The wires there are the result of a New Deal program that put lots of people to work in the Reconstruction Finance Corporation.
Unfortunately, the New Deal ended before they completed the wires. All right? Up to — they got as far as New Haven you know, but — but this is the kind of work that is semi-skilled, right?
To build the generator — that’s — that’s tough. It takes engineering. It takes time. But you can put people out there in gangs, putting those (inaudible), the poles in and stringing the wire, even if you don’t yet know how you’re going to generate it.
And I think just in the spirit of — of the New Deal where we had, talking about the CCC, that this was enduring infrastructure, and the Reconstruction Finance Corporation that electrified the old Pennsylvania Railroad.
You know we can — we can create an industrial army and put them to work.
GRAY: Do you think that the bailout of General Motors is best spent helping them to build cars? Or might there be a role for General Motors in this?
LONGMAN: General Motors, until they sold the division a couple of years ago, was the leading maker of these electric locomotives in the United States. And they specifically built engines they could — could run both under wire, on a third rail, or as just stand-alone pieces.
So they know how to do that. And if they’ve forgotten, they can ask General Electric, which is the world leader in building these things and has a huge plant in Erie, Pennsylvania, that could use some work.
GRAY: Very good. Further questions? Yes?
QUESTION: My name is Sally Scheck (ph) and I just had a thought. We have new G.I. Bill benefits for — for Iraq, Afghanistan, for veterans. Those benefits were passed, I think, with authorization of about $62 billion over a period of time.
The benefits go into effect on August the 1st of 2009. A lot of the veterans are just now learning about it. There is a provision that allows spouses and dependents to receive the benefits transferable to them if the veteran doesn’t use it.
So you’re going to have a whole cohort of veteran Sue are going to be going to college beginning in August, September, October and thereafter. So it seems like you’ve got a cohort for study and for intervention relative to family policies that if they have families now, they forward it into some kind of family dysfunction or — or the steps they need to adjust because of employment in the past.
So they have a concept of variety of family structures and ways of approaching problems, and in terms of the labor market, these are people who have been trained — whatever training they received in the military — and now they’re going to be looking for more career oriented opportunities.
So to the extent that they receive information and guidance relative to green jobs, whatever that may mean, or participating in infrastructure, whatever that means, is that these opportunities — there is a cohort that, to use the current aphorism, that are fired up and ready to go.
GRAY: Before we answer all those questions, but I think there was — let me take one more question over here. And there was a hand I saw over here.
QUESTION: I’m a visitor from Arizona, very pleased to have a briefing, real Washington briefing. I had a question (inaudible).
I work in education, so I (inaudible). Over the last seven years, we’ve made tremendous progress in anti-discrimination in employment. I wondered if you (inaudible) are thinking about structurally protecting that achievement in (inaudible) of so many, many layoffs.
And remembering what happened in the ’30s when (inaudible) government allowed married women to be selectively dismissed when there were two incomes coming in (inaudible).
GRAY: I appreciate it. So we have two questions here. Anybody want to jump out here and (inaudible). Does anybody have any thoughts — I just — you know in reference to either of the two questions, or if — if not, just to the point of a wrap-up (inaudible).
Kate, you want to jump in on either one of them?
CORRIGAN: Yes, I’ll just — I’ll just (inaudible). Our project didn’t really take in a very deliberate approach of not using a non-discrimination model of trying to focus in on (inaudible) that’s a women or caregivers.
And instead we have really emphasized more of a neutral (inaudible) shift that would create flexibility as being normative. So regardless of the reason why you might need that flexibility, we think that the — especially in flexible scheduling, you know whether it’s because an older person (inaudible) or whether it’s because you have you know a sick child or whether it’s because you wanted to (inaudible), which a lot of the data shows (inaudible), too, that we really have tried, especially in flexible scheduling, to try to approach this in a very neutral way, because quite frankly, what we really heard from business is once we start dividing out some of the (inaudible), then it can get tricky.
So it’s not fully (inaudible), but that’s — that’s the approach we have generally taken.
UHALDE: I just mention with regard to — to veterans, we have a relatively small veterans employment training service that a principal function is twofold.
One is to ensure that veterans when they were being called up and — and leave a job, go to service and come back, that their job rights are retained.
But secondly, they have this small program to be able to certify skills of returning veterans, essentially translate their military occupation specialty into certifications for domestic occupations. But it’s relatively small.
But there was — during the Clinton administration, we launched a fairly substantial set of projects in discharge centers around the country — Fort Bliss, Texas, and San Diego, for example — where large numbers of — of soldiers are being discharged, and trying to make a concerted effort to help place them and do the certification and place them in the local communities, frankly, as an economic development strategy for these people.
And if you could retain 30 percent of them before they were dispersed around the country, they could help build up their economy locally, because they are young and — and very skilled, and you could translate that to at least the economy. But we don’t do that very systematically.
GRAY: Thank you. Phil, any last word on this?
LONGMAN: On the discrimination point, one of the real challenges was (inaudible) and limited its knowledge about these. It’s actually very difficult to get yourself educated and established economically before your biological fertility or your partner’s (inaudible).
In other words it’s very difficult to start a family for many people before they’re in their mid-30s.
It was an interesting case, the last case the Supreme Court looked at on affirmative action with the University of Michigan Law School case, you remember.
Who was the plaintiff? It was a — a woman about 35 years old, white, who had, after graduating from undergraduate, an undergraduate degree, I decided to get married and start a family. She raised two children till they were about age five in kindergarten, and then she decided she wanted to pursue her education at the University of Michigan Law school.
And the school turned down. Now, I don’t want to speak to the merits of the case, except that notice nobody, in all the discussion of diversity and its value and as a — as a rationale for affirmative action, brought up the idea that maybe the diversity that would be achieved by having a woman of her profile and her experience on campus would be something educationally useful.
I think this is actually one of the biggest on address discriminatory issues and that’s in our society today. It affects women. In fact, it affects men.
And if we were at minimum trying to raise the consciousness enough so that universities and employers viewed that kind of diversity is something worth pursuing, I think we’d go a long way in achieving a lot of this flexibility that you’re talking about, too.
GRAY: Our panel is electric. I knew they would be, and they are. And I appreciate their taking the time to be with us today. Thank you.
And I’d like to welcome my colleague Julie Barnes to the podium for our panel on health care.
BARNES: Thank you so much for being here for the third and final panel of this program to discuss the possibilities of reforming our health care system in the midst of an economic crisis.
They saved the best panel for the last, so I’m glad you’re here. You may have noticed that this panel has received several plugs throughout today’s program. It’s because, as Karen Kornbluh said earlier, that addressing our health care system crisis is arguably the most pressing social problem of our time.
Again, I’m Julie Barnes, deputy director of the Health Policy Program. You heard from our director earlier, Len Nichols, in the entitlement program.
And we in the Health Policy Program at the New America Foundation, like so many organizations and stakeholders and policy makers these days, are dedicated to developing solutions about how to create an economically sustainable health-care system that does three things: covers all Americans, reduce health care growth, and enhances the quality of our health care delivery system.
Those three — coverage, cost and quality — are the three big-ticket items that everybody’s talking about these days. We know the next administration is serious about them. Certainly, Obama campaigned on the idea of reducing medical costs and improving quality and eventually achieving universal coverage for everyone.
We know that Senators Kennedy and Baucus and other key policymakers are continuing to work on their already well-developed healthcare proposals, which is such a refreshing change from what we experience the last time we tried this in ’93 and ’94.
Unions and businesses are coming together with one voice to say we need healthcare reform now. This — just this week the Insurance Association, no less, released its health-care reform proposal, saying among other things that they are going to guarantee coverage regardless of pre-existing conditions so long as everyone is required to have health insurance.
So we are truly in a — in a new time of realization that this is in a crisis we need to fix, and it’s even in Time magazine this week, just as further proof. So that is the only visual aid I have.
So if it’s obvious that we have a consensus that we have a crisis, I guess the next question is can we afford to fix it in the midst of an economic crisis?
And so the big story today, you may have noticed, is that our unemployment rate is at an all-time high for the last 15 years. More than 500,000 people lost their jobs in November, 1.2 million over the last three months.
And that’s bad enough, but if you think about what that means, since most people have their health insurance through their jobs, what are they going to do about their health care benefits?
Some people will be lucky enough to go on their spouse’s plan. But some people — probably a lot of people — will not. So what will they do? Would they buy COBRA? COBRA costs on average about $13,500 a year.
And if you lost your job, are you going to be able to afford that? And so what do you do? Do you enroll in Medicaid? Do you choose to say uninsured and further burden our system with uncompensated health care costs?
So this is an issue about which we can no longer wait. Today, our panelists, thank goodness, will help us understand these problems and hopefully propose how he might be able to go about affording them.
So we begin with Joe Minarik, who is the senior vice president and director of research at the Committee for Economic Development. And Dr. Minarik leads the policy research projects on CED’s agenda, including healthcare and the economy.
Joe will be discussing the business case for reform, why the current economy is making it difficult for businesses to offer health insurance coverage. And frankly, I’ve seen his slide presentation, and it’s just really depressing, so I’m hoping he will tell a couple of jokes or something.
Jenny Kenney is a health care economist at the Urban Institute with more than 20 years of research experience on public health care programs, and she would discuss the effect of the economic crisis on Medicaid and SCHIP, something certainly near and dear to the hearts of the states and their budgetary crisis.
And last but not least is Elizabeth Carpenter, who will hopefully have the — the good things to say the end of the program. She’s our associate policy director at the New America Foundation Health Policy Program. She will comment on the data that we just released on the economic costs of doing nothing on health care reform.
So that will really explain why health care reform should be a priority in the midst of an economic crisis. So let’s begin with Joe.
MINARIK: Well, I’m the skunk at the picnic who’s going to show you charts.
And, Julie, if you thought that the charts were depressing, I should warn you that I woke up in the middle of the night last night thinking about another one, and it’s actually the most depressing of the bunch.
So that’s the — that’s the bad news. And there is good news, and as soon as I think of it, I’ll let you know.
Let me talk about really basically five things. Number one, what is the problem in the aggregate? Number two, what is the problem for employers? Number three, what is the problem for households? Number four, what is the problem? And number five, what is the problem of solving the problem?
And I think that’ll kind of give you the picture by the time we’re done.
For starters, what’s the problem in the aggregate? Len mentioned this already, but the picture — there we go — the picture here shows what we call excess cost growth — that is, how much faster is the cost of per beneficiary of health care consumers than the rate of growth of the GDP.
So costs per beneficiary are growing faster than the cost of — then the income out of which reproduce the cost. And if you take that kind of excess cost growth and you extend it out over time, you can’t a picture of where over a long period of time — and this chart has one observation for 1993 and then gets to the most recent years where data are available — and you see that healthcare is — the cost of providing health care is a growing share of our economy.
If — if it continues to grow at current rates, at some point it’s going to eat Cleveland and — and everything to the west of there. So that’s the problem to the extent that we look at what our long-term budgetary situation is.
Now, the point of the conversation here all day has been where are we going after the economic crisis. And this is what I woke up in the middle of the night in a cold sweat thinking about.
Suppose that by the time we’re done by the end of 2009 — and this is probably not an unreasonable number — we will have piled on an additional trillion dollars of public debt to cover the various and sundry bailouts, a stimulus program and, of course, the addition of deficit that we have because we have the effect of the crisis on the economy in the first place.
And I just — it just struck me. Let’s see what that does to the growth of the public debt going out for a few years.
And on the basis of CBO’s most recent numbers with assumptions that are reasonable about what we do with policies such as the cost of the war and the expiration of tax cut, if you put that all in a blender and add one — the debt service costs of that additional trillion dollars of debt — essentially what happens is that the ratio of the debt to economy that we would’ve had in 2018 we will have in 2012.
So in other words, we’ve — the long run has gotten six years shorter, six years closer as a result of the likely costs of the financial crisis.
Now, what that says is if you believe that the rate — the growth of health care costs was running us into a wall at it cumulated additional debt that we could not manage, and it would begin to become a serious economic problem, and if you believe that you had a certain amount of time to fix it, we just lost six years.
George Allen — not the Senator, the — the Redskins football coach — was famous at one point for saying the future is now. It’s almost as though the future is yesterday. We’ve — we’ve run out of a lot of time to deal with the health care problem before it deals with us.
Now, what does this mean for employers? This is a slightly tricky chart, and the scales of the two sides are not identical, but you’ll get an idea from this the amount of money that corporations — this is corporations only — have been paying in health insurance premiums, and this goes back to 1960, and expense to as close to current as I could get, has grown by about three percent of the GDP.
And, of course, over that time what has happened to profits is essentially they’ve been fluctuating up and down in a relatively narrow range. You’ll note that over the last few years corporate profits as a percentage of GDP were relatively high. As the data become available for the next few years, let me assure you that will go down.
So corporations have been squeezed by the rising cost of health care. Health care is becoming more expensive. Insurance is becoming more expensive. And businesses have had a hard time catching up.
Len Nichols from New America has written persuasively that businesses in fact are caught on a treadmill that’s really spinning faster than they can run, when they try to pass along the cost of higher health care costs to their employees, and they’re stuck in the short run paying for some of those costs.
Now, where does that take you? Here’s where we’ve been from 1999 through 2007. And the scales of the two axes of this chart are equal numbers of people from top to bottom. I made it this way to give you a sense of what’s been happening.
To put it in words, over the last eight years the U.S. population of working age plus children, so in other words under 65, has grown by just about 20 million people. Over that period of time the number of people covered by employer-based health insurance has not increased at all.
So in other words, what has happened over the last 20 years is the entire increment to our working age population and their dependents has not found coverage under employer-based health insurance.
Some of those people have gone on public programs. Some of them have become uninsured. But there’s been no increase in employer-based coverage over those eight years, even while the population has been growing.
So that’s been a problem for individuals of working age and their dependents.
If you look at what’s been happening to firms offering health benefits, this is a percentage who do offer, and you can see it’s dropped by almost one-seventh, from 69 percent to 60 percent.
What has been happening largely is that as businesses of small and moderate size have been going out of business, businesses that offer health insurance have gone out of business. New businesses that have been created don’t offer health insurance, because they can’t afford it.
And as a result, health insurance is becoming less available to individuals, and that’s part of the reason why you saw what was going on in the last chart.
The percentage of Americans not covered by health insurance has been growing, and employees have been taking the hit in a number of ways.
Contributions from employees and employers have been going up. Deductibles under health insurance policies given by employers have been increasing. Co-payments have been increase.
These are all ways in which employers have tried to pass the cost along to their employees to the employees’ pain over time.
And another phenomenon which I have not been able to represent quantitatively, but anecdotally — it’s becoming significant — employers to an increasing degree have been telling their employees, “OK, I’ll give you a health insurance policy, but I’m not going to cover your wife and kids.” And that has been one way of keeping the aggregate cost down.
OK. So what is the problem? In my remaining 30 seconds let me try to explain one important phenomenon here. And this is something that I think many people probably have not been tuned into.
For those of you in the back of the room, I’ll try to explain this. For those of you in the front, maybe you can read it.
If you look at the U.S. population that is offered health insurance by their employers — so this is people who have a health insurance offer — 77 percent of those people are offered one insurance carrier — no choice. So you’ve got essentially one deal, take it or leave it.
For those who have a choice, another eight percent of the total — let me — let me look instead at the little slice in the middle up in the northwest corner — for about nine percent of those people, they are offered health insurance choices.
You could have more than one insurance carrier, more than one plan, but whichever of those plants you choose, the employer pays the whole thing. So in other words for the employee it makes no financial difference which — which plan you choose.
I’ve spoken to some HR reps from — from companies and asked them, “You know when confronted with three health insurance contracts — you know I’m sure you all read health insurance contracts along with murder mysteries for recreation — when confronted with three health insurance contracts and people look at them and they can’t figure them out and they can’t make up their minds what they want to choose, do you get the sense that it’s ever the case that your employees will look at them and say, ‘Well, this one is the most expensive one, so it must be the best, and that’s the one I’m going to take’?”
And every HR VP I’ve spoken to has told me it happens all the time. So think about it. What you’re doing is you’ve got a bunch of people who are looking at health insurance choices, and they’re taking — there is an incentive at least in their minds to take the most expensive plan.
That is not like what happens in any other market. When you go out to buy a computer, when you go out to buy a car, you don’t think, “Well, this one’s more expensive, so I’m going to buy that one.”
It’s driving — the way the system works is driving people towards more expensive choices, or at least telling them that whatever choices you make, it doesn’t make any difference to you, so have a good time.
Bottom line therefore is we have a health insurance market in which individuals either have no choice or have no reason to choose on the basis of value, on the basis of getting quality at a reasonable price.
And because that’s true, you have health providers who have no reason to worry about the cost of what they’re offering.
And you have situations where it’s in the interest of a doctor to tell a patient who comes into his office that that person needs five services when you really only needs two, because somebody else is going to pay for it, and the doctor gets to collect five fees instead of only two.
So that is part of the reason why we have a health care system that is driving us towards higher costs, is not dreadfully concerned with values, and probably in the bottom doesn’t care very much about quality either.
So we have to try to fix that system. Now, how are we going to do that? I will tell you one thing in my remaining -30 seconds.
When I talk to HR vice presidents of corporations and I say, “You’re always saying that health insurance is bankrupting you and it’s very expensive and it’s a big problem and it’s hard to manage. Why do you want to keep that system?” And many of them do.
I basically get two answers. One answer is, “Yes, it’s a lousy system, but I work for a big company, and we’re good at it. And so I can come up with a good health insurance package, and I can use that for recruitment and retention, and I can beat out the small businesses, and I can give people a reason to come to work for us.”
So in other words they — they’re telling me that they’ve got the best cabin on the Titanic and doggone it they’re not moving.
The second reason that I hear — and this is one where I think for public policy thinkers, it’s an important burden — they will say, “Yes, it’s a bad system, but at least I’ve got the controls. And if our costs are going up, I can make my employees pay more, the higher share of their premiums. I can increase deductibles. I can increase co-payments. I can refuse to insure the kids. There are things that I can do to reduce my costs. However, if instead we have a federal government driven program, what’s going to happen is that the great unwashed out there are going to vote to expand the benefit package and to pay for it with taxes on employers, and I’m going to have to pay.”
So one of the things that we have to do in thinking about where we’re going in healthcare is to create institutions that reassure people that while attempting to pursue quality, we are also going to try to keep costs down.
And ultimately, as Len said earlier on, we have to keep costs down, because if we don’t, nobody’s going to have workable insurance, including the people who now think that they’re very secure.
I’m sure that there were a lot of people six months ago working for automobile manufacturers, who thought that they were insured for life and they had absolutely nothing to worry about.
So long as the system is not financially sustainable in the long run, we’re all in the soup. So that’s the problem we’ve got to solve.
And thank you very much for your attention, and we’ll see you for questions.
GRAY: Anyone with slides?
KENNEY: I don’t have slides.
GRAY: You don’t have slides.
CARPENTER: I do.
GRAY: You do. OK.
KENNEY: Hi. I wanted to thank Len for asking me to come here today.
I’m going to focus on the impact of the current economic downturn on Medicaid and SCHIP programs, the other big entitlement that actually is very affected by economic circumstances, much more so than Medicare.
And I’m going to make three major points. First, given that so many Americans depend on the employer or employers for their source of insurance coverage, the fortunes of Medicaid and SCHIP and employer-sponsored coverage or ESI are inextricably linked.
In boom times ESI grows and reliance on Medicaid and SCHIP coverage shrinks, and the converse during economic slowdowns the reverse happens, and reliance on Medicaid and SCHIP coverage grows, or at least there’s pressure on those programs.
Second, given that Medicaid constitutes about a fifth of all state spending, and given that states, unlike of the federal government, have to balance their budgets in good years and in bad years, states are under tremendous pressure to cut back on Medicaid and SCHIP during recessionary times, precisely at the time when the need for the programs is growing.
And finally, greater federal support for Medicaid during economic downturns, which is being proposed right now as part of the economic stimulus package and was actually implemented — we have experience with this; in the last downturn that happened earlier this decade — can help states avoid deep cuts in their Medicaid programs and act as a countercyclical force in state economies, lessening the adverse impacts of the downturn.
So let me talk about each one of these in turn.
First, there’s really strong — I’d say unequivocal — evidence that the need for Medicaid and SCHIP grows during recessionary times. Medicaid and SCHIP, as you probably all know, provide a social safety net for low-income children and too a much lesser extent, but still an important extent, for low-income adults.
Almost all states cover children in Medicare or SCHIP up to 200 percent of the federal poverty level, and when we have an economic downturn, the more kids in that income band who qualify for coverage and more kids who lack employer-sponsored coverage and need that coverage.
While Medicaid and SCHIP have much less generous coverage for adults than for kids, they still cover many poor adults, particularly those adults raising minor children.
Altogether, Medicaid and SCHIP cover about 45 million children and non-elderly adults, mostly in low-income families.
Numerous very careful econometric studies that examined the impact of economic conditions on insurance coverage find that when unemployment rates increase, employer-sponsored insurance coverage declines, which in turn leads to an increase in enrollment in Medicaid and SCHIP coverage.
A recent study by Stan Dorn and colleagues at the Urban Institute estimates that for every one percentage point increase in the unemployment rate, Medicaid enrollment rises by one million, and the breakdown is about 600,000 more children, about 400,000 more adults. And that’s reflective of the eligibility policies that favor kids.
And the flipside of that is that many more adults become uninsured during recessionary times.
And then if you stand back and look at the implications for Medicaid and SCHIP spending, they’re estimates suggest that one percentage point increase in the unemployment rate in turn increases Medicaid and SCHIP spending by about one percent.
Now, over the past year alone the unemployment rate has risen by almost two percentage points. The unemployment rate now is at the highest point it was during the previous recession.
And so we don’t have up-to-the-minute statistics on insurance coverage. That’s a frustration. But if this model’s anywhere in the ballpark, we’re going to see at least four million Americans losing ESI in this last year, and in turn greater pressure on Medicaid investor programs.
And if the unemployment rate continues to grow over the next year — and some projections have the unemployment rate reaching as high as nine percent — demand for Medicaid and SCHIP coverage is really a whole order of magnitude larger.
Second, just as there is strong evidence that the need for Medicaid and SCHIP grows during economic downturns, those are precisely the times when states are not in a position to absorb budgetary increases.
During economic downturns state revenues also shrank. Recent estimates suggest that a one percentage point increase in the unemployment rate leads to a three to four percent decline in state revenues.
And this particular downturn may have more profound declines in state revenues because of the nature of it. We’ll have to see how that plays out, but it’s a — it’s a pronounced effect on state revenues.
We already know that 31 states are facing midyear shortfalls in FY ’09 that total over $20 billion. And even more states are projecting shortfalls in their FY 2010 budgets, and the shortfalls they’re projecting are — are greater than what they’re projecting for ’09.
When state revenues decline, it really forces states to look to places to make budget cuts. Since states can’t run deficits — they can’t print money — and since all but one are constitutionally obligated to balance their budgets, given the prominence in state budgets, Medicaid and SCHIP programs are logical place to look for budget savings.
Since they constitute about 20 percent of all state spending on average and since they’re the single biggest budget category between — behind education in most states, in the last downturn earlier this decade all states make cuts to the Medicaid and SCHIP programs to one extent or another.
And given where we are in this recession, states have already tapped their rainy day funds to a large extent and have already taken a vantage of sort of the low hanging fruit. And now they’re looking elsewhere for where to make cuts.
Seventeen states now are looking at or proposing eligibility access cuts for children and families in Medicaid, and 15 states are proposing cuts in services for the elderly and the disabled.
But the really tricky part is that the federal-state matching structure for Medicaid and SCHIP means that states have to make very deep cuts in their Medicaid programs to really save much in terms of state dollars.
In the best-case scenario, for every dollar they cut, they save just $.50 of state spending. But for poor states that have more generous federal matching rates for their Medicaid programs, every dollar that they cut in terms of the service or savings in the program at large can translate to as little as $.25 in terms of state spending that they’ve saved.
So to achieve meaningful savings in Medicaid and SCHIP, states really need to make deep cuts. And when they make such cuts, it in effect magnifies the adverse effects of the downturn.
And then I want to point out that given how close this downturn is occurring to the last one that occurred earlier this decade, state spending had not returned to its pre-2001 levels, which means that the states have kind of made the easier round of cuts already and hadn’t kind of gotten to a point where they had more generous eligibility or service or payment levels.
So what can the government do to help? During the last economic downturn, the federal government provided states with an across-the-board increase in the federal matching rate over five quarters. And they did that on the condition that states met a maintenance of effort requirement related to their eligibility levels.
While this assistance was late in coming to states in terms of the recession, it didn’t kick in until those second quarter of 2003 when many states were already beginning to pull out of the recession, and while all the states received the same increase in their matching rate independent of their circumstances in terms of how bad the recession was affecting them, analyses of state spending patterns that looked at all 50 states suggests that at least half, and probably more, took advantage of that increased federal funding for Medicaid and made — as a consequence, made fewer cutbacks to Medicaid and SCHIP than they would have otherwise.
And it prevented them from — and they actually rolled back on earlier cuts that they had made earlier in the recession.
Many have argued that a countercyclical funding mechanism should be built into Medicaid and not just discussed every time we face a recession. In fact, Senator Baucus included such a provision in his white paper on health care, a forum that came out a couple of weeks ago.
And the idea would be that states would automatically receive a greater federal match during recessionary times, though as you can imagine, there are debates about the specifics of what should trigger such an increase in the FMAP and how fund should be targeted across states.
In the context of the current recession, the governors have requested an additional $40 billion in federal support for their Medicaid programs over the next two years.
And by all accounts the economic stimulus package that Congress is putting together for the new president includes a substantial increase in federal funding for Medicaid.
The timing is really critical that it — that it happen early next year, because state legislative bodies meet early in the year, and they’ll be discussing not only how to address the ’09 shortfalls, but they’ll be making plans for 2010. And if they know that money is coming, I think they’ll make different decisions about whether and how much to cut Medicaid.
So there are a lot of specific issues in terms of the trigger mechanism, and — and they’re in play right now — how much additional federal funding will be provided, how it will be distributed across states, and what type of maintenance of effort — effort will be required.
But there’s a consensus that a large infusion of federal funds is needed.
And I’ll just close by saying that to the extent that Medicaid — this incredibly important program, in terms of our low-income families with children and our disabled and our elderly and really our most vulnerable members of society, to the extent that it continues to rely for such an important part of its funding on state-level funding, we really do need to think about building in a countercyclical federal funding mechanism for Medicaid and SCHIP that would occur automatically and that we wouldn’t have to dither every time we face an economic downturn about what, how much and — and when.
We should really think that’s true. And the pushback on that is that it could leave states to be less fiscally responsible during good times.
And I think they’re — they’re certainly concerned about that, but the flipside is to have a program that is needed for low-income folks and that where the demand goes up during recessionary times, where the funding mechanism is not matched to that is — is just structurally unsound.
CARPENTER: OK. So thank you, Joe and Jenny, for your great presentations.
Oh, my boss fears giving me instruction while I’m — OK.
So — and thanks all of you for sticking with us through this day. And I’ll be quick.
During the campaign season, we heard candidates on both sides of the aisle talk about their domestic priorities for our country, yet in the month following the conclusion of the campaign, a number of people have speculated that some of the president-elect’s domestic priorities — specifically health care reform — would have to make their way to the back burner in favor of the more pressing needs of the economy.
And while it is certainly the case that we must take immediate action to stabilize our economy and shore up our nation’s housing and financial markets, this does not preclude us from taking on our nation’s health care crisis.
In fact, the economic crisis may make it more urgent that we fix our U.S. health care system. So rather than talking about if we can afford health care reform, we should be talking about if our nation can afford the costs associated with failing to fix our health care system.
So today I’m going to lay out some of the costs of doing nothing, the economic impact of the status quo, and some of the prospects for reform.
So a while back, the Institute of Medicine estimated that the U.S. economy lost as much as $135 billion in 2001 because of the poor health and shorter life span of the uninsured. Since that time, however, we know that a couple of things have changed.
One, we know that there are more uninsured Americans, and two, the value of economic output has increased. So in a recent report, my colleague Sarah Axeen updated those numbers and found that the U.S. economy lost as much as $207 billion in 2007 because of lost productivity stemming from the poor health and shorter lifespan of the uninsured.
Now, that’s a pretty good number, and I’m a little scared of big numbers, so let’s think of it this way. If you take that $207 billion and divide it up by the number of uninsured people, you get a little more than $4,500.
And what’s interesting about that is that this is more than the average cost of an individual insurance policy. So in other words, our economy is forgoing more economic value than it would cost to make sure every American had quality affordable health coverage.
Survive now we know that healthcare costs are growing faster than wages, and they’ve been doing so for some time. This will continue to happen if we don’t act, which will make healthcare more and more unaffordable for more and more American families every day.
Today, the average cost of a family employer-sponsored insurance policy is a little more than $13,000. Fast forward to 2016, however, and we project that that same premium will be more than $24,000 and represent 45 percent of median family income.
So let’s think about that for a minute. That means that half of American families would have to spend more than 45 percent of their income to buy health insurance for themselves and their families.
Another trend we see, and something that Joe touched on briefly, is that when it comes to health insurance, Americans are paying more for less, because deductibles and co-payments are rising in addition to premiums.
In 2016 we project that the average household will have to spend almost $2,700 in addition to their premiums before their insurance begins to pay for their medical care.
And sell all of this data is available on our new State of State Health website and in our cost of doing nothing report, which I believe is in your packets and on our Health Policy Program website.
So we don’t have to look into the future to see that failing to fix our health care system is costly. In fact, perpetuating the status quo also comes with a price.
Worker contributions to employer-sponsored health insurance are also rising. Between 1999 and 2006, family employer-sponsored health insurance premiums rose by 88 percent. During that same period, worker contributions to employer-sponsored health insurance rose by 102 percent.
In the end, this means that as healthcare costs continue to rise, employers are asking employees to bear a greater and greater share of the health care burden.
We also know that today the insured pay higher premiums — somewhere between three and 11 percent higher — to pay for the medical care of the uninsured. This is because when medical bills go unpaid, providers raise rates for services. In turn, insurers raise premiums.
So as Joe laid out, employers are increasingly concerned with rising healthcare costs, but here are two more statistics.
Recent work from Len Nichols and Sarah Axeen found that U.S. manufacturing firms pay more than twice as much for health care as our trading partners — $2.38 per worker per hour versus $.96.
Also, we know that the uninsured are more likely to be sick unnecessarily for prolonged periods of time and that a majority of the uninsured are connected to the workforce in some way.
James Collins in the Journal of Environmental and Occupational Health found that poor health reduces work hours by as much as one-fifth, which adds up to as many four — as many as four days a month.
So as you think about that and you make the connection between health insurance and health, that statistic is particularly powerful.
So we have heard a whole bunch about how health care costs are impacting state and federal budgets, so I think I will skip this for now.
And finally, we know that we do not always get high- quality care for our healthcare dollar. Repetitive testing and preventable medical errors cost our system money. In fact, the Institute of Medicine estimated that preventable medical errors cost our economy as much as $50 billion a year and our society as many as 98,000 lives.
So what are the prospects for comprehensive health reform? Should we believe the cynics? Well, I think there is a lot of evidence to suggest that that — that this issue is here to stay despite what’s going on in our economy, and maybe in fact because of it.
First, the president-elect made health care reform a top priority for his campaign, even as the economy worsened. He is also said repeatedly that he views comprehensive health care reform as part of a broader strategic vision to shore up the future of the American middle class.
We also know that health care and the economy are two issues that broke decidedly for the Obama campaign on elections day, and what this means is to some degree that people’s concerns about the economy are really about health care and that as the polls indicate that voters overwhelmingly favored President-elect Obama’s plan to Senator McCain’s plan, and so the American people are ready, and — and they’re expecting some action.
Congress is addressing this issue already. This is not to say we’re going to have a vote on the Senate floor in the first hundred days of the new administration, but I think you may expect to see the legislative planning process gets under way in a real way right away.
And as Julia mentioned, the good news is that it appears as though both Senator Baucus and Senator Kennedy have made this issue their number one priority.
We also have bipartisan bicameral legislation in the Healthy Americans Act, which really helped to elevate and build momentum for this issue over the past year and a half.
And finally again, as Julia mentioned, we have a number of initiatives and coalitions emerging that indicate many groups previously opposed to health care reform are actually coming on and saying, “Saying no is not — is not good enough this time.”
So in conclusion, I think the chances of action are high, as they should be, because the cost of it in action is higher.
BARNES: Well, thank you very much. And I’m very glad that it’s Friday and almost happy hour, because that was just depressing stuff. But thank you very much to our — our distinguished panelists, who are making that incredibly clear and — and producing all those fantastic statistics.
We’d like to open it up for questions. We would invite the press to start first, because we like our friends from the press, and we want to make sure that they feel welcomed to ask the first question. Do we have any members of the press?
Well, then, we’d like the rest of you to.
QUESTION: Hi. I’m Bob Anderson. I’ve worked at OMB. I used to work for Joe. And I wanted to ask why would — I want Joe to put on his old hat as — as the chief economist at OMB and in listening to all kinds of proposals to spend more government money.
And — and granted, next year we — we can probably put that on the deficit, but that won’t work for too much longer, and I know you’re always pretty concerned about maintaining a responsible federal budget when — when you were our boss.
Aren’t we headed for a huge tax increase in about two years if this is done?
BARNES: And just for the — for the folks at home, the question is, are we headed for a — a huge tax increase for the next two years to pay for all these wonderful ideas.
MINARIK: Under current policies, outlays are projected to rise in a ballistic fashion. That, of course, means that debt increases, which means that debt service increases, which means that debt increases, which means that debt service increases, et cetera, et cetera, et cetera.
BARNES: It was a yes or no question.
MINARIK: Sounded like an essay question.
It seems pretty clear that once we get through this period when we’re basically trying to make sure that we’re going to have an economy three years from now, we will have to face up to the consequences of, number one, accumulated debt, and then, number two, though rapid increases in health care costs, of which the federal government bears I guess about four percent right now total.
CED has a statement that we issued a couple of years ago in which we suggested that the way to deal with this problem was to simultaneously reform the income tax and add to that the value-added tax to help to hold that debt down while we tried to figure out how to cut off the exponential growth of health care costs.
So we’re on record to suggest that in the longer term we are not going to be able to deal with the costs of a growing elderly population unless we have (inaudible). So I guess the answer is yes.
BARNES: Yes, yes. And obviously, you’re not running for president, Joe.
QUESTION: Yes. Ben Weil (ph) from Congressional Quarterly. And I think this is mostly for Jenny, but maybe Elizabeth, too.
So Congress is going to have to reauthorize SCHIP. I think it’s in March of next year. And that shouldn’t be very difficult with a Democrat had to the White House. But how does that plan to attempts for a larger overhaul of the system?
BARNES: So the bears at home want to know from CQ if the SCHIP preauthorization is going to happen sooner or later and easily. Is that fair?
QUESTION: And how it affects — makes it easier or harder for a broader overhaul.
BARNES: And will that make it easier or harder for more comprehensive health care reform package?
KENNEY: I’m not the best person to talk to the politics, but I’ll tell you from my vantage point what happens in March 2009 is that the program funding level — so the program expires. So no one thinks that it will be extended.
The question is will it be fully reauthorized or will it additional funds be appropriated to keep the funds — the programs going at the current levels. I don’t have a crystal ball, but I’ll make two observations.
It used to be the case that advocates for all-out health care reform felt that the incremental steps that we’re taking somehow interfered with, debate, put off you know really addressing the bigger problems in the system.
I don’t see that case being made right now. I think there’s understanding that there’s — and there seems to be a consensus that it’s not a zero-sum game. You could address SCHIP in the short run. You could especially I think, given the up and growing — and this is even true this year, which is shocking, but the real support at the state level for moving ahead with covering children, and I think politically it’s — it could be a powerful win for the new administration to have an SCHIP preauthorization.
But I don’t know that it will be a five-year reauthorization. I think that could be the compromise that it’s a shorter reauthorization, long enough to give states confidence that if they move, there’ll be federal funding there, so maybe two years, two-and-a-half years.
But that would be more on the track with and consistent with the health care reform at the federal level that included a phased-in approach and with pieces coming in I think is — is one argument that I’ve heard, and the SCHIP piece could be just one piece of it.
BARNES: A couple more questions. Sir?
QUESTION: Yes, Paul Lunden (ph).
Julie made an interesting comment. She said she’s not a political expert. And I have a question. I mean I wonder whether we’re also sure that the American public is ready for this.
But I have seen a statement says that about 80 percent of Americans think they have pretty good healthcare. They are more or less satisfied until they have to go to the doctor, but most people don’t go to the doctor.
Most people think they have pretty good health insurance. There is a lot of talk up here about people who don’t have coverage. But I think maybe, Julie, next week or something you ought to bring in the political experts about this and have them talk.
I mean Hillary Clinton collapsed the whole health care program of the Clinton administration. It collapsed not because there wasn’t a plan, not because all sorts of people didn’t have a plan, but because the politics didn’t work.
Now, I agree with everybody up here that the politics is a lot better now than it was in 1993. Obama has a huge open field to run in, compared to the very narrow one in which the Clintons had to run.
BARNES: But is your question that we are — are not ready as a people?
QUESTION: Are we really — are we really ready? When the costs come in, when people have to — everybody has a — Obama has a program where he says you will keep the insurance you have. A lot of people want to do that.
So you know we have to really start talking not so much about all these different plans, but about the politics of doing this. Now, I’m sure somebody’s doing that, but I haven’t heard very much of it here.
BARNES: Well, Elizabeth Carpenter, what do you think? Are — are we ready as a people for comprehensive health care reform?
CARPENTER: Well, I mean you obviously bring up an interesting point that was made central to by both Senator Clinton and President-elect Obama in the campaign. And that was if you like what you have, you can keep it.
But there is kind of a disconnect here, because people want to keep what they have, yet they’re unhappy to some degree with what they have. I mean polling shows that health care is — is a priority for a lot of voters.
So I think the key politically is going to be to find a way, one, to prove to the insured voter that investment in health care is going to lower their costs over time, but then, two, to demonstrate to them that delivery system reforms are really going to improve the quality of care that they receive.
And I think that’s something else — that you’re seeing more and more people are encountering some of the cracks in our health care system.
And you know I don’t think that everyone’s ready for the entire system to be dismantled tomorrow, but I think some of them are ready to begin to lay the groundwork for a more efficient system that’s going to serve their families better than the current one that’s today.
QUESTION: Let me just make one comment. You had to figure up there that came from 1995 — that figure 48,000 to 98,000 people entry. There’s much more discussion of all the things we don’t have in health care than with these kinds of problems.
I think until you negatively frame — something that the Institute of Medicine worked up — negatively frame the healthcare system so people understand how bad it is, we’re never going to get reform.
CARPENTER: Well, and that’s complicated to a degree, because what — you know if you go back to the political stuff, people like their doctors. So it’s really about communicating to people, who have insurance, who like their doctors, that, hey, we’re going to help let their doctors spend more time with them, make their doctors’ lives easier — you know fill out less paperwork.
And really the case for quality is the case for the insured middle class. And you know you hit the nail on the head as far as we have some real work to do in that respect. But I think there’s a compelling case to be made. We just have to work on making it.
BARNES: Thank you. I’m sorry. I think we have to move on. We’re just really pressed for time. The lady in the purple, and then the lady in front of her?
QUESTION: I’m (inaudible). I don’t see how Obama or anybody else can promise people that they can keep what they have, when — as some of you have just pointed out — employers are shedding their plans you know by the day or reducing them.
And you know I just — has anyone done — I mean there — I know that so many times the (inaudible) population would show the senior — senior payer — senior — single payer pay is obviously more efficient and much less expensive. I — I imagine that — I assume that’s off the table, unfortunately.
But I made the other players that we haven’t heard anybody talk about is businesses here. I mean are they going to really go along with all these reforms that are being suggested?
BARNES: Joe, our employers really going to go along with what President-elect Obama has suggested, that they get — people get to keep their health insurance?
MINARIK: I think the — these two questions are linked together to some extent. The environment is changing somewhat over time. Most people with insurance like the insurance they have, but fewer people have insurance. And more people who have insurance know people who don’t have insurance.
And I always wind up telling the personal story of having two daughters. I had wonderful health insurance as a federal employee. My daughters grew off of it, graduated from college, went to work for — for small businesses that did not offer insurance, and so, yes, if you ask me are you happy with your health insurance, the answer is yes.
But I could — stayed up — I was awakened in the middle of the night worrying about my children. And I think that is an increasing phenomenon even among many people, who do like the children — who like the children they have.
The rest of you — I’m sorry.
KENNEY: Make you work for a private employer, who has — is under no mandate to keep his or her — their insurance. You may like it fine, but you may not have it tomorrow.
BARNES: I think essentially the question is the government doesn’t have control over private employers, so what do you do about that?
MINARIK: Well, it depends on the system that you create. Senator Clinton and Senator Obama went to some pain to try to put forward proposals under which an employer who wanted to continue to offer insurance could do so.
That is a relatively complicated thing to do. If you ask people in the rank and file of the — the nation, “Would you like to have the federal employees health benefits plan,” most people would jump at it.
You’ve got a wide range of choices. There’s going to be something in there that’s going to enable you to keep your doctor, keep your hospital, and many people would be happy with that.
So suppose that you came up with a system that said, all right, we’re dealing your employer out of it, but you’re going to get to have a menu of choices like the federal employees health benefits plan. You’d have many people who would say, “I’m willing to go away from my employer’s plan to do that.”
So now all you have to do is convince the employers to let go. I believe that the environment there is changing somewhat as well. Many employers still like the idea of the recruitment and retention advice this advances, that I can do it better than my competitors.
However, I believe that some are coming to the conclusion if I look down the road five years, we’re heading for the wall and I don’t know how to avoid it. And so I believe that you’re feeling the earth moving a little bit under your feet on this one.
BARNES: And with that, I’m afraid we have to end. I’m sorry. I’m sure the panelists will be more than happy to stay for just a couple of minutes to answer some — some questions. But we thank you so much for coming today. We think this is a great program. We really appreciate your presentation.