Intersting thoughts on Social Security

Rob has some very interesting thoughts on social security.  Not surprising -- Rob is a thoughtful guy.  I think we should take his points as brainstorming, and not be horrified by things like this:

Globalization changes the cost structure of expensive programs like nursing care – we export our elderly to Bangladeshor the Philippines where they can receive top-notch care for pennies on the dollar.

In general, his point is that a lot can change between now and the projected crisis in Social Security, and anyway those nasty conservatives just want to dismantle the system anyway so they can "push the maximum amount of risk onto the shoulders of individuals and families".  He's right, of course, that a lot will change.  However, assuming everything will change in a direction that will save the present form of SS is reckless.  And, sigh (again), he's at his weakest when he projects evil intent onto his political opponents.  I wish he would stop doing that.  It really weakens his arguments.  Well, he's young, still.  Maybe he'll grow out of that.

Here's his list of things that might change, with my comments added:

• We improve the productivity and reduce the costs of healthcare in a number of ways (seems likely to me, as technology barely touches the healthcare system right now – there’s ample room for improvement) .  As someone who just had an open scan MRI done to my knees, I'd have to say healthcare is in some ways at the cutting edge of technology.  Yes, there's room for improvement, but give the devil his due.  Also, new technology in healthcare has not so far lead to lower costs, but rather higher costs with better care.  I would expect that trend to continue -- for instance, all those cool nanobots we sci-fi'ers are always reading about that will scrub our blood are not going to come cheap.
• People live longer, healthier lives. Some statistics point this direction. Reduced rates of smoking among younger people could translate to big medical savings in the future. Also, health regulations that improve food, water, air and environmental quality could cut down on environmental health risks.  Yes, we're living longer, but healthier?  Maybe we are healthier, but at a price -- MRI's, artificial organs, advanced medications, etc.  This trend costs more, not less.  I've heard it argued that smokers save the rest of us money by dieing early. 
• People work longer into old age, deferring the date when they start to draw down from the system and are covered by mandatory employer-paid health plans instead of Medicare. (This seems likely, if only because fewer Americans will be able to afford to retire) It’s also the case that people who lead active lives into later years have fewer health problems.  Ah, you've come very close to the obvious and simple solution to the problem of saving the system more or less intact. 
• Demographic patterns change – say, we allow more immigration of working-age people, driving down the average age of the country and reducing pressure on entitlements for the elderly.  This we can do, but please, let's be much smarter about who we let in and under what terms.
• Fertility rates increase – possible because we don’t have enough info on fertility rates of immigrant populations. More young people paying in and producing in their prime years could offset the relative costs of the system.  Everywhere prosperity has increased, fertility rates have decreased.  New immigrants, that is first generation folks, will have high rates, yes, but as they prosper they'll slow down just like everybody else.  Rob is right as far as he goes here, but does he recognize he's talking about stepping onto a treadmill that will never slow down? 
• Overall economic growth exceeds projections. If the Fed relies on the median OMB projection, then they are highly likely to undershoot actual economic performance by 0.8 – 1.2% over a 25 year period, according to the track record of the median projection over the past 70 years. If that’s the case, the numbers are not nearly as bad as they look.  Unarguable. 
• We have a fundamental shift in the way medical care is delivered, with more incentives for preventative care and less for heroic end-of-life care. Apparently people incur 90% of their lifetime medical costs in the last 6 months of life.  This is the heartbreaker, and I really don't know what to do about it.  Maybe the best we can hope for is improvements in the diagnostics of oncology, so those heroic doctors can give their patients truly realistic odds, and then maybe many of them will choose to go gently into that good night.  But me?  I'll be kicking and scratching all the way, and damn the expense.  At least that's how I feel about it now.  Preventative care will make us healthier longer, yes, but that 90%/6 month problem seems more likely to get worse to me.  Damn. 
• Globalization changes the cost structure of expensive programs like nursing care – we export our elderly to Bangladeshor the Philippineswhere they can receive top-notch care for pennies on the dollar.  Am I the only one who thinks this sounds Stalin-ish?  I'm all for exorting our prisons, but not our nursing homes.
• Reform of the payments system encourages greater competition, which drives down costs.  Three words:  Medical Savings Accounts.  They would be huge and are our greatest hope.
• Medicare or some other government health program becomes a monopsony [thx. Matt!], dictating pricing terms to health care providers in the same way that Wal-Mart dictates pricing terms to its suppliers, effectively putting the breaks on medical inflation.  This is already the case to a huge extent.  Thursday night I was out with a bunch of friends, including two doctors who run the emergency rooms at a couple of hospitals.  For some reason (I missed the beginning of this conversation, being distracted by Duke vs. Virginia hoops) we all whipped out our insurance cards for the good doctors to look at.  They were funny, saying "Stay away" to some cards, and "You should visit us every week" to others.  Rather than turning to a monopsony (?), which would probably just make everything worse, couldn't we at least try Medical Savings Accounts? 
• We change the way we finance entitlements, by collecting more at the front end.  I'm not sure what Rob means, but it sounds scary to me. 

I'd love to see personal ownership of social security.  That doesn't make me an evil conservative, just smart.  But in the meantime, we can hack at least half way through this Gordian knot by simply raising the retirement age to reflect those long healthy lives we're enjoying and introduce Medical Savings Accounts to bring price feedback into the system.

Comments

[Rob Salkowitz]

Pedro - Sorry for the delay. I just saw this and I appreciate your views here. A few quick clarifications:
1. I'm not necessarily imputing evil motives to my opponents on this. A lot of people, possibly even yourself, proudly and unapologetically advocate privatization of practically everything on the theory that the market always provides better outcomes than government. I think that's sometimes true, but not always, and in the case of programs like Social Security and Medicare, the benefits of spreading risk around via government management exceed the advantages of a market-based system. It's generally libertarians and the right who consider any form of government ownership to be "socialism" (a dirty word if ever there was one). In my view, there are important differences to socializing unavoidable risks (aging and illness), as opposed to socializing variable risks (e.g., employment and prosperity). People who insist on dogma without distinction can do a lot of harm. This is one case where a lot of folks could suffer needlessly to demonstrate some "point" about the superiority of markets, and I don't take a kind view of that.

2. The example of exporting the elderly (with their consent, of course) was simply an attempt to consider all the possibilities. You know we are outsourcing a lot of medical procedures these days by sending patients to India, Brazil or Mexico where the costs of surgery are much less. Insurance companies sometimes insist on it. So it's not a huge stretch.

3. "Collect more at the front end" means raise the FICA tax (as was done in 1983) or lift the cap, both of which are being considered. I don't care for this approach myself, but it's hard to argue that it would impact the financial projections.

4. Technology in medicine - I'm not talking about the technology used for treatment. I'm talking about the technology that supports the business. Did you know that something like 90% of medical records are still kept on paper? That medical office workers spend 25-28 hours per week looking for information in files? That it can take three phone calls and 20 minutes to fill a prescription? A recent study showed that fully half of the $2 trillion America spends annually on healthcare is lost to waste and inefficiency, mostly of office processes. To say nothing of the impact on quality of care.

Medicine is behind even government and education in terms of adoption of basic information technology for business processes. Way behind. That's partly because all the budget goes to MRI machines and such, instead of on things that can really squeeze out costs. Even a little investment here would go a long way.

5. Sadly, I'm not that young.

Sorry for the long rebuttal, but what do you expect?