The Daily Item, Sunbury, PA


March 7, 2013

Budget cuts damage economy without aiding outlook


House Republicans in the previous Congress twice passed legislation to convert Medicare to a fixed premium-support plan with the elderly responsible for any shortfall in costs, an approach Obama and Democrats rejected.

Obama has proposed $400 billion in health savings over the next decade, mostly through reductions in payments to medical providers and pharmaceutical companies.

Obama's savings are "not insurmountable" for a health- care system in which costs are about twice as high as in other major countries, said Uwe Reinhardt, a health-economics professor at Princeton University.

The average cost of an MRI scan in the United States is $1,080 compared with $599 in Germany and $281 in France, according to the 2011 comparative price report of the International Federation of Health Plans, an association of private insurers.

Still, Reinhardt said, the approaches both parties have offered are likely to falter over time.

While Republicans tried to make their plan more politically acceptable by exempting anyone under 55, the government would still face the risk of a political backlash once those who are affected begin to retire.

"You can write anything into law now that will happen to people who retire 10 years from now, but when they're there, they will have votes and they can undo whatever deal we now do." Reinhardt said. "People forget that."

Even with current Medicare and Social Security benefits, elderly Americans have relatively low incomes and devote a large portion to health care, Reinhardt said.

Median income for households aged 65 and older in 2011 was 40 percent lower than among younger households: $33,118 compared with $55,640 among households under 65.

As health-care costs rise, households with at least one member covered by Medicare spent about three times as much of their budget on health care as others: 14.7 percent for Medicare households versus 4.9 percent for other households, according to a Kaiser Family Foundation analysis of 2010 data from the Bureau of Labor Statistics.

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