a citizen’s journal by Thomas Nephew

Van Hollen OK on Medicare — but “willing to consider” Social Security “spending reform”

Posted by Thomas Nephew on November 21st, 2012

Click image to view C-SPAN clip of Rep. Chris Van Hollen’s (D-MD-8) discussion of
Medicare and Social Security in the context of the “fiscal cliff” — running from
~8:15-14:30 in the full C-SPAN video of his interview with Wall Street Journal
deputy editor Alan Murray.

Last week I got a worrisome Progressive Change Campaign Committee (PCCC)  e-mail: the Wall Street Journal was reporting that Rep. Chris Van Hollen (D-MD-8),  my Congressman — and the ranking Budget Committee member — was open to  “cutting entitlements,” as a part of negotiations around ending tax cuts and avoiding the so-called “fiscal cliff.”  Journal reporters Janet Hook and Carol Lee added that Van Hollen — who was attending a Wall Street Journal confab with CEOs — said “changing Social Security and increasing the Medicare eligibility age above 65 should be part of negotiations,” and that “I’m willing to consider all of these ideas as part of an overall plan.”

Personally, I think the current deficit mania is disastrously misguided at a time when the economy is still struggling.  But  I certainly want Social Security and Medicare benefit cuts completely off the table — so I called Van Hollen’s DC office to say so.  A staffer told me he’d been misquoted, leading me to wonder, “So what exactly *did* Van Hollen say about Social Security and Medicare?

Luckily, it turns out that the interview was taped by C-SPAN, so I could see for myself; the relevant remarks started around the 8:15 mark and continued for another six minutes.

Van Hollen began with Medicare, and to cut to the first chase, he did not advocate increasing Medicare eligibility age as the Journal had reported.  Instead, Van Hollen’s ideas were generally about seeking efficiencies in Medicare rather than reducing access to it:

We need to move Medicare away from a fee-for-service system. And we’ve begun to do that.  Because fee-for-service systems contains no incentives for anybody in the system to contain costs.  … We’ve actually begun to put in place the building blocks to get there: accountable-care organizations, bundled payments.

I think we can make significant savings in the area of … dual-eligibles: people who are on Medicare and Medicaid –  a relatively small percentage of the overall Medicare/Medicaid population but a very high percentage of the costs. And there are lots of misaligned incentives between the Medicare and Medicaid payments.

You can look at things like redesigning “Medigap” policies, because right now, some Medigap policies actually create incentives for people to spend a lot more on Medicare.*  […] 

What I think we should avoid is …simply transferring [health care] costs on to other individuals.  I think our first focus should be on trying to contain overall healthcare costs

Regarding substituting “premium-support” voucher plans for Medicare, Van Hollen responded:

…the nonpartisan Congressional Budget Office looked at that and concluded it does not contain costs, it simply transfers costs. …what they concluded was if you simply …provide a voucher to go out there in the private health care system, as you know, in the private health care system costs have been rising at at least the same rate as in the Medicare system.   […]  Simply transferring somebody out of Medicare to the private health insurance market, it will save Medicare money, but …by requiring premiums to go up dramatically on these individuals whose median income is $23,000 right now.

I quite agree with Van Hollen’s opposition to “here’s a lump sum, go figure it out” voucher plans that discourage seeking medical help and transfer costs to the poor instead of helping them.  People more knowledgeable than myself may take issue with some of Van Hollen’s Medicare suggestions — e.g., maybe there can be good reasons for dual eligibility (though less so for inconsistent subsidies).  But overall, and to his credit, Van Hollen’s solutions are quite a bit less less draconian than simply raising the Medicare eligibility or retirement ages — a.k.a. “hope you die first.”

Turning to Social Security, however, Van Hollen stumbled right out of the block:

 In Social Security, number one, I think we should create a process like we had with Ronald Reagan and Tip O’Neill. 

I.e., exacting a pound of flesh in benefit reductions in return for revenue increases and bipartisanship for show?  Well, Reagan-worship is de rigeur these days, maybe this was just a polite nod to the CEOs in the audience.  Van Hollen recovered with a reasonable revenue-enhancing measure:

But some specifics: I think we should look at the early retirement age in Social Security, which is 62 currently, and look at ways to create incentives for people to be working longer. And that means doing things like increasing the early-retirement penalty, which has the joint beneficial effect of reducing some Social Security costs but also keeping people working longer, providing for their families and of course generating more income for economy and for the Treasury. 

So far so better: making it a little more costly to retire early is not really an entitlement cut, it’s an incentive to keep paying in to the system the way everyone else does, or at least get some of that money back via the penalty.  But then things went downhill again. Van Hollen’s near reverence for the  “balanced approaches” in general and the Simpson-Bowles commission in particular prompted him into advocating “spending reform” for Social Security:

I think there are other things you can do — look, I’m open to a conversation about this.  I think when it comes to things like Social Security, again, you’ve got to take a mixed approach.  I mean if you look at Simpson-Bowles or other plans, again, they have a combination of additional revenue along with spending reform.  — [Alan Murray, Wall Street Journal: But you’re willing to at least look at that?]  — I’m willing to consider all these ideas as part of an overall plan.  I don’t think we should jump to the solutions which simply … especially in Medicare, which simply transfer costs, and within Social Security, I think there are actually other ideas, some of which some of us discussed in the SuperCommittee, but unfortunately to no avail.

I’m looking into what those “other ideas” were; I’m hoping that low-balling cost-of-living adjustments (“chained COLAs” and the like) weren’t among them.

The saving grace was Van Hollen’s insistence that Social Security should not be part of any “fiscal cliff” panic deal.  When Alan Murray asked him “Social Security has to be part of this?”, Van Hollen responded:

I think we should look at Social Security off budget, that’s what Simpson-Bowles did.  Simpson-Bowles said let’s look at strengthening Social Security, but we’re not going to do it as part of our deficit reduction targets.  So I think there’s room for a conversation there.  What I think others have said is that they don’t want that to be part of …how you calculate your deficit.

It’s possible Van Hollen wilted a bit at the end of a probing interview in a hostile arena, and got his own positions on deficit reduction and Social Security tangled up with each other. But recall that he opened with a paean to the Reagan-O’Neill revenue plus benefit cuts deal. Judge for yourself, watch the clip.  While it’s a judgment call, I think the Journal reporters arguably got Van Hollen right on Social Security: while he may not want Social Security benefit cuts as part of  a “fiscal cliff” deal, it’s not clear at all how strenuously he’d resist them as part of some Reagan-esque/Obama-esque “grand bargain” down the road.  As the Journal reported, Van Hollen is in fact “willing to consider” changes to Social Security — including “spending reform.”

EDIT, 11/26: “I mean if you” for “When” in Van Hollen Social Security remark.
* UPDATE, 12/2: Each of the fee-for-service, dual-eligible, and Medigap ideas are discussed in some detail in the Center for American Progress publication “The Senior Protection Plan: $385 Billion in Health Care Savings Without Harming Beneficiaries.”

2 Responses to “Van Hollen OK on Medicare — but “willing to consider” Social Security “spending reform””

  1. » Blog Archive » Van Hollen, Geithner reassure on earned benefits — but just for now Says:

    […] Van Hollen OK on Medicare — but “willing to consider” Social Security “spend… […]

  2. Vanessa Elizebeth Says:

    Let’s begin by cutting congressional healthcare and pensions, first. When Mr. Van Hollen has achieved that, then he can begin performing other impossible miracles!

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