Transcript
Question & Answer Session: Go to transcript for Debate and Panel Discussion.
Dan Schorr: Those of you who have questions, please stand up. A microphone will be brought to you. Wait for the microphone, so that everybody can hear you, and say who you are.
Are there questions, comments?
Q: I have a question with regard to Governor Bush's plan, as it pertains to his insistence that he will not raise payroll taxes. I have two questions in that regard. Number one, the first part of the question with regard to pushing aside any notion of higher payroll taxes is, how does that square with his desire to have a bipartisan solution to this, when he already walls off one possible option? When we go back to the last time Social Security was revised and reformed with the Greenspan Commission, everything was on the table. He's already taking off a big part of it. And the other thing is, by saying he won't raise payroll taxes, and not specifying what can happen to guaranteed benefits, isn't he really leaving the impression that he's more interested in not raising taxes, than in preserving guaranteed benefits?
D. Schorr: Before you answer, I was quite fascinated by the words you used there, raising payroll taxes should not be a keystone issue. I have a certain sense that something lies behind the use of those words.
Glenn Hubbard: Well, I think the governor's position is quite close to what was just mentioned, ruling out payroll tax increases.
D. Schorr: I see, so not being a keystone issue is not meant to cover--
G. Hubbard: No, not at all. Just to get at the pieces of your questions, starting first with the bipartisan part, putting aside the 1983 reforms, I don't know of proposals in the bipartisan debate, there may be some, that involve significant increases in the payroll tax. I don't think that's generally conceived as a desirable place to go by people in either party.
As to the bulk of your question on how all this works. Again, the points are two, the small piece of this, just pick a number, 2 percent, let's say, diversion of Social Security payroll tax into private accounts would yield a higher rate of return than on the Social Security wage base, the current rate of return implicit in Social Security. The Social Security funds would also get credit for new tax revenues that are associated with that national saving. If you want an extremely detailed version of that calculation, there's a paper two years ago in the National Bureau of Economic Research Macro Economics Annual, by Martin Feldstein and Andrew Sanwick [sp], which does this both for the Social Security program, and for the Medicare program. So I don't think it's inconsistent to both rule out the increase in the payroll tax, and to rely at least in small part on market forces in personal accounts.
Does that get at the two pieces of you question?
Q: --the proposal when he was asked, can you guarantee that the younger folks coming up under your plan will not receive less than they would under the current system, his answer was maybe yes, maybe no. So he himself, even with great faith in what markets would produce, is acknowledging that you're taking a certain amount of risk, and you really cannot guarantee, as you can under the present system, exactly what you would get when you retire
G. Hubbard: No, I think there's a couple of elements to the risk point. I think the purpose of Governor Bush's equivocation was to say, we don't know what the baseline will be for today's workers under the current system. The counter factual we propose, is current policy sustainable. Current policy is not sustainable. That's the whole purpose of generational accounting. So that will change. The question is how it will change. In terms of the risks, there have been elaborate simulations of potential outcomes with different fractions of portfolios in stocks and bonds, and different assumptions about rates of return. It's very hard not to do as well as under the current system, except with very, very extreme events. There are always risks in financial markets, absolutely correct. It is inaccurate to say there is no risk in the current system.
Stuart Butler: Could I make just a comment on that, with regard to the payroll tax, and risk? The issue with the payroll tax, and this is on both sides of the aisle, and I think Vice President Gore may well agree with the same position, that raising payroll taxes as a way of either dealing with the current liabilities, the current short falls of the existing system, or any change, does necessarily--it's a form of tax that necessarily means that lower income people would have to shoulder a significant burden of whatever that tax increase is. There are other ways of raising revenue in the tax system which does not tend to do that so much. So the issue with the payroll tax, in large part, is do you want to see the people at the lowest end of the income level paying into something, paying into any kind of a form, or any kind of support for the existing system or not.
The other issue with risk is important to understand, which is that it's all well and good saying that nobody has any risk if they keep within the current system if the benefits are guaranteed, and so on. The risk that you, in fact, bear under that circumstance is that you don't know how much of extra taxes you will have to pay in order to get those benefits. So on the one hand you're being told, yes, the government is going to guarantee you'll get a certain income when you retire. What they cannot tell you, and will not tell you is, in fact, you will, in fact, end up having to pay more through your lifetime in terms of extra taxes, and so on. But, we're not going to tell you that, or even discuss it. That is a risk. There is no question about it.
Chris Edley: That is very elegantly put, because I think it frames it quite well. What you're sort of saying, it seems to me, is that in your view there is a political risk in the current system. And what you're suggesting is to substitute for that political risk, a financial risk. Well, I think I would disagree with you with respect to the political risk. I think that the American people are going to live up to the commitment--
S. Butler: That's fine. But, let's be clear--
C. Edley: Hold on just a second--that's been made in the Social Security system. Moreover, with respect to the financial risk that's posed by the sort of program that Governor Bush is talking about, it does introduce a $900 million to trillion dollar increase in the budget gap in Social Security. That is to say, into the benefits that have been promised now, on into the future. And the question is how to close that gap.
Now, Glenn suggests two things. He suggests that on the one hand there will be a higher return. Well, of course, that's only a higher return on average, and not for every individual. And, but if you mean there's going to be a higher return, but you're trying to close a budget gap, that suggests that you're going to reduce benefits, so that you'll end up being able to get the same return--you'll end up being able to hit the promises that have been made, the full promises that have been made. So you're cutting benefits.
The second possibility you've suggested is that there's going to be some supply side effect on increased tax revenues, growth in the economy, and the like. But, there you haven't responded to the point that's been made by Henry and others, that you're simply substituting one form of savings for another form of savings, in the national accounts, which will be a wash. So it seems to me that at the end of the day this notion of wanting to fan the flames of political anxiety about whether solemn promises are going to be kept, and instead suggest that there are financial risks that nobody really needs to worry about, because there are some models, and it will all work out on average, is quite a distance away from the core concept of a defined benefit insurance program.
G. Hubbard: Can I just get--
D. Schorr: I'll give you one more shot.
G. Hubbard: Okay. Fine.
D. Schorr: I really want to go to the floor. No more of this Mr. Niceguy.
Are there other questions or comments?
Q: Thank you. I'm Judy Waxman at Families USA, and we're a healthcare consumer advocacy group. So I'd like to switch the question to Medicare, if I might. When you said in your principles, I tried to write them down, that a couple of them, that there would be access to needed advances in technology, but we weren't going to raise taxes, and there would be a new solvency test. Now, I have been following the Breaux-Frist Commission activity quite a bit. And I guess I don't know what those things mean. So I wondered if there was any more meat to put on those bones, or any background that you could use to explain a little more how you're going to have access to needed advances, yet have a new undefined solvency test for Medicare.
G. Hubbard: Two different questions. The first, on the scope of Medicare benefits. I would group the access question you just raised with the prescription drug discussion we had on the panel. I think that competition among health plans is going to reveal what consumers want in terms of access to alternative healthcare therapies, whether they're drug therapies or new technology, rather than limiting under the current system.
The question of solvency is a question about budgetary accounting. The current assessments of solvency are not false in terms of their arithmetic, but they have no economic reality. The focus only on the part A allows many budget games. The bipartisan commission, Governor Bush, and all the pieces of bipartisan legislation which I'm aware of would suggest putting part A and part B together, so that the Congress could see that, looking at payroll tax revenues, looking at the general revenue transfers, what's the true financial health of the Medicare system. I think that's agreed upon by virtually every party involved.
Q: [Off-mic and inaudible]
G. Hubbard: The criteria, of course, are up to the Congress, and the president, they're our decision makers. It gives full information about the true budget balance situation of Medicare, as opposed to current policy where focusing on the part A trust fund is just misleading.
D. Schorr: All right. Next.
A very important addition?
Q: [Off-mic and inaudible]
D. Schorr: I think we'll have to leave that there.
G. Hubbard: I think that's the answer that underlies the bipartisan commission's proposal, and all the pieces of legislation that have been proposed on a bipartisan basis in this area, that the substantial scope for innovation in plans and developments, as opposed to traditional Medicare.
D. Schorr: Are there other questions? Yes, ma'am.
Q: My name is Melody Flowers, I'm with the National Rural Development Partnership, and while this is a great and a very important debate going on here, I'd like to shift gears for just a second. And throw out the issue of the aging rural population. There's actually an increased rate of growth of the elderly in rural America. And the great portion of this population would be female, and living in poverty. And so the issues facing this population, such as healthcare, are exacerbated by an extreme lack of mobility and access, because they either can't afford private transportation, can no longer drive because of their age, and there is an extreme lack of public transit.
So I'm interested in ideas to address the under-investment in rural public transit or other ideas to address mobility issues for the rural population.
G. Hubbard: Well, just to get at the first part of your question, and I'll leave rural transit, but to get at the first part of your question, one of the problems in the Medicare plus choice which is available in many places is that because of per capita reimbursement, it hasn't been as viable in rural areas, in small city areas, and so moving to a much more choice based system of Medicare more generally I think will help a great deal.
As to transit issues in rural areas, I'd have to confess ignorance on the part of Governor Bush as to his policies there.
C. Edley: I agree with what Glenn said about the problems obviously with the availability of providers, and access to services in rural areas. And, the vice president has spoken about this. But I don't want to pretend that we've got an answer to it, that anybody has an answer to it. Certainly, what I've seen, speaking personally, I am not convinced that simply an expansion of choice, for example, would make managed care plans--bring more managed care plans into Medicare is going to do the trick because there are shortages of adequate managed care plans in rural areas today for the non-elderly population. So that is not a panacea. You can't just wave at the market and assume that it's going to take care of itself by any means.
So, I think that this issue of the growing number, particularly of the frail elderly in rural America has got to be part of the modernization agenda for Medicare, point number one.
Point number two, the vice president is also hopeful that there are going to be some openings here as a result of the technology, that breakthroughs in telemedicine that are right around the corner are going to make it possible for what is now a very thin delivery system in rural areas to be able to do a better job than it is today. And that not only in making telemedicine part of the reimbursement structure within Medicare, but by making direct investments to stimulate telemedicine, that part of the reason to do that is to improve the quality of healthcare delivery in rural America.
S. Butler: Can I just add a point to that which I think the question really underscores, which is, if you look at different parts of the country, different populations, their situation, their needs, very often are very different. And, therefore, it's very important to have in a Medicare system an ability for different kinds of structures and different kinds of organizational arrangements to occur in different places recognizing the differences. That's why it is so important to encourage this diversity and to allow people to choose between them. And then it gets you down, I think, to the central question, are you more confident in the ability of individual organizations, nonprofit groups, and other types of arrangements to look at what might work in certain areas, or do you want to have the federal government saying, well, today it's telemarketing, so we're going to subsidize that. Tomorrow it's something else, and then let's see which lobbyists come in on Thursday, and we'll respond to them. I think, myself, and I think that Governor Bush, and many others feel the same way, that you've got to move towards the system which allows people on the ground to be the determinants of what kind of arrangements occur, and to encourage innovation in that way, not to centralize it in Washington. That's essentially the reason why we're in the problem with Medicare today.
G. Hubbard: Can I just draw a tangent, and you can take a shot at the economical? One example, were you from a none elderly population following up on what Stuart just said, if you look at Governor Bush's policies for low income uninsured, you see multiple elements to a plan. There's a well-discussed health insurance tax credit. But there's also increased funding for and growth of community health centers to get precisely at rural areas where the health insurance infrastructure simply isn't there. So, following up on Stuart's point, I think one-size-fits-all solutions are seldom a good idea, a bad idea here, and community health centers could also be part of the solution.
C. Edley: I just want to voice the obvious objection that hand waving about market solutions when you're talk about poor people who don't have the basic resources to be able to go into a market and purchase anything is nuts.
Number two, I also think our experience is quite clear that in many markets, healthcare among them, there is a critical role with respect to access, with respect to quality for government. The reason we are locked in a battle over the patient's bill of rights is precisely because relying purely on the market in the managed care context has brought about a set of results that the vast majority of American people find absolutely unacceptable. So, some role for the government in ensuring that in rural America, as in the rest of America, there's not only choice and a variety of plans, but also a safety net with respect to access and quality seems to me essentially.
Henry Aaron: The charge of one-size-fits-all doesn't fit for Gore. As I understand it, you just said that the vice president was supporting a competitive defined benefit framework, so that, Stuart, the principles you're espousing, I think, are valid, but they would be fulfilled admittedly in different ways by the plans of both of the candidates.
S. Butler: I must agree, and I said what we see is a bipartisan opportunity.
H. Aaron: But you mentioned Bush and not Gore, and I just wanted to point that out.
S. Butler: I think one is more enthusiastic about what I said than the other.
C. Edley: We'll count the number of health speeches given by each candidate.
D. Schorr: May I ask one question, an uniformed question. When Medicare started in 1965, one of the things people were proudest of, that this was an entitlement without any means testing. Medicaid was where poor people went. And in some of the things I've heard from both of you, and in your case, Chris, most especially with regard to prescription drugs, I sense the beginnings of means testing, am I wrong?
G. Hubbard: Do you want to go first?
C. Edley: No, go ahead.
G. Hubbard: I don't know that I would quite put it that way. Let's go back to what you would hope Medicare would do. You would hope that a Medicare program provides social insurance and access to insurance for the elderly. Achieving that goal need not require the current Medicare program, you could have any of a number of programs that could have accomplished the same thing. In terms of means testing, means testing based on lifetime income, or things like that, is clearly something to think about. Means testing based on current income is almost always fraught with peril. So, I certainly wouldn't want to characterize Governor Bush's proposal as centering directly on means testing.
D. Schorr: All right. Yes, sir.
Q: I think I heard you guys imply that the notion of having a supplemental insurance to Medicare sort of doesn't make sense. Was that under the current system or would it not make sense even under a modernized system? And I'm curious as to why you say you don't need it.
Robert Reischauer: Right now, we have a Medicare program that pays about 50 percent of the medical costs of those over 65, has huge gaps in it, prescription drugs being the most obvious of them. Over 85 percent of Medicare recipients believe that the coverage they get from Medicare is insufficient, and they go out and buy a supplemental policy through medigap, or they have an employer who provides it, or they'll choose to join a Medicare plus choice plan. What that does is introduce tremendous inequities, some people have very good overall coverage, some people have really lousy overall coverage. It introduces extra costs because their administrative costs when twin insurance companies are paying the bill for the same service, and there are marketing costs for medigap plans, and administrative costs for Brookings to cover its retired employees. And so we're spending a whole lot more than we could to get an efficient single package.
The proposals for a reform system edge in the direction of providing a benefit package that people would regard in and of itself. They generally don't go all the way there. They'll offer prescription drugs, but they don't offer a stop loss. I mean, Medicare you can be bankrupt, simply because the co-insurance the deductibles keep going forever and ever. And so, I think, with a few rather simple steps we can expand the Medicare package to one that would be less confusing, efficient, and provide adequate coverage.
C. Edley: Let me say that I agree with everything that Bob just said. I think one of the realities there is that Americans want to spend more money on healthcare, just in general, and why do we want to spend more money on healthcare, because fortunately we see a return to increasing our spending on healthcare, our health is getting better, our lives are getting longer, the innovations, the discoveries, and so forth, are creating more opportunities to consume health services.
What we obviously don't want is to spend more on healthcare wastefully. And that's why the structural reforms are so necessary, and bringing substantially more competition into the way Medicare is structured is so critical. And I think it's important when we talk about the budget gap that exists in Medicare over the long-run, and frankly I don't think that the accounting stuff is the issue. I think that everybody who pays attention to these issues fully appreciates the scale of the program, and the fact that there are multiple sets of books isn't confusing anybody. What's confusing people is how to wind their way through the policy obstacles, and how to make the social judgments about how much of our resources we want to spend through this kind of social insurance program, but it is going to grow in the outyears.
D. Schorr: We are coming towards the end of our time. What I would like to do before we get to the end, in order to bring things back into focus, is to give each of you two-three minutes to define as you see it the main differences between your candidates positions.
Chris, will you start.
C. Edley: Sure. Let me just try to mention three. First, I would say that there is an overarching difference, and that is that the vice president believes in many fundamental respects we are on the right track, and in particular with respect to our economic policies, we are on the right track, and he will sustain the policies and the principles that have led to this growth.
There is a risk aversion to schemes that threaten that progress. And the reason I start with that is because that same attitude towards risk, I think, is what he brings when he comes to Social Security and listens to proposals like the one advanced by Governor Bush with respect to diverting 2 percent of the revenues. Posing that kind of risk to the financial stability of Social Security as well as to the individual retirees will be most dependent upon a defined benefit plan is, from Al Gore's perspective, simply unacceptable.
A second is, I think it's fair to say that Vice President Gore speaks with more ardor about some of the fundamental principles that have sustained Social Security and Medicare over the years. The notion that this is a compact that will be honored that is not, in fact, fraught with political risks because we will, in fact, live up to these commitments is central to him. The notion that Medicare must be modernized and preserved rather than whittled away, rather than subjected to some kind of a market model that is ill-defined. So I think that he has not supported means testing in Medicare, and the prescription drug benefit simply is a subsidy for the lowest income of the elderly, but the prescription drug benefit would be available for all of the elderly. So, if that is means testing, it is only in the mildest and hypertechnical of senses.
And the third thing I'd say is that this is all within an overall framework of trying to respect what Henry Aaron would think of as a principled obligation on the part of candidates to be clear about the priorities, and be clear about how the numbers add up. He's tried very hard in talking about both Social Security and Medicare to explain how the changes he would make fit into an overall fiscal package of a balanced budget in which the debt is reduced, the budget is balanced year-by-year, and there is still room for important investments in education, and so forth.
So those are the three that I would tick off, a general risk aversion, a fidelity to the principles that have worked quite well in Social Security and Medicare, and an overall framework of fiscal responsibility and clear speaking to the public.
G. Hubbard: I think Chris has framed the basic issues very well. I just want to give you my perspective on it. As to risk, and risky schemes, a common phrase used by the vice president in many venues, not restricted to Social Security and Medicare, the vice president, of course, had endorsed, at one point, according to today's New York Times, has now backtracked on that, investing Social Security surplus in the stock market. So, it's simply disingenuous to talk even about the financial market risk.
Second, on the issues of principles, my reading of the vice president's principles is somewhat different from Chris, I see him at every juncture almost in this debate, and the Social Security and Medicare aging area, as being for the status quo. Governor Bush put out a very lengthy fact sheet on the principles and his objectives in Medicare and Social Security, which is available on the campaign web site, if any of you would like it. A key sub-area there, where I think there continues to be a big difference, and it came up today, is on each side has a different view about the role that markets and choice can play in this process. There's just a stark comparison in both Social Security and Medicare.
Finally, on the issue of budget transparency, it's only Governor Bush in this race who has put out a total budget box, both on the spending side and the tax side. The vice president distorted Governor Bush on the tax side until the joint committee had to score the governor's plan, all those numbers in five-year detail, ten-year detail, as much as you want, are available on the web site. We really don't know what the pieces of the vice president's plan would cost.
D. Schorr: Thank you. On behalf of the management, I'm sorry that we were a little more placid than you would have liked. We couldn't have these people really address each other at all, and I know you all admire the stern discipline that was enforced.
Thank you very much.
[APPLAUSE AND END OF EVENT]