The Daily Item, Sunbury, PA


April 5, 2013

Entitlements are the problem?


This is the other, perhaps more pressing, Social Security crisis: It's not generous enough to counteract the sorry state of retirement savings nationwide.

In a report for the New American Foundation, Michael Lind, Steven Hill, Robert Hiltonsmith and Joshua Freedman survey this data and conclude that the debate over how to cut Social Security is all wrong: We need to make Social Security much more generous.

They would keep today's income-based Social Security program, but add a "Part B," which would be a flat payout to all retirees. When parts A and B are combined, all retirees would be guaranteed 60 percent of their average working wage in retirement, with low earners seeing closer to 100 percent replacement. Part B would be pricey, adding almost a trillion dollars to Social Security's costs in 2037, and the authors don't have a clear proposal, much less a politically realistic plan, for how to pay for it. But not paying for it doesn't mean those costs disappear: It either means living standards for seniors will tumble, or families will strain as they try to support older relatives.

Medicare, too, can help solve some of our tougher health-care problems. A key fact — perhaps the key fact — about health care is that the prices Americans pay are far, far higher than in any other country.

According to new data from the International Federation of Health Plans, an angiogram costs $218 in Switzerland but $914 in the United States. Bypass surgery is $22,844 in France but $73,420 here. A hip replacement runs you $11,889 in Britain but $40,364 here.

"Other countries negotiate very aggressively with the providers and set rates that are much lower than we do," says Gerard Anderson, director of the Center for Hospital and Finance Management at Johns Hopkins.

But not all American payers are the same. Medicare uses its massive market power to negotiate much lower prices than private insurers. For that reason, the Congressional Budget Office (CBO) estimated in 2011 that "average spending in traditional Medicare will be 89 percent of (that is, 11 percent less than) the spending that would occur if that same package of benefits was purchased from a private insurer." Back during the health-care debate, the CBO estimated that a public option able to use Medicare's pricing power could save more than $100 billion over 10 years.

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