Social Security isn?t Health Care

Several pundits, including Weekly Standard editor Bill Kristol, have warned that pushing Social Security reform has the potential to damage the Republican party much as the failed Clinton health care debate hurt the Democrats in the 1990s.

But the comparison is wrong. President Bush?s Social Security proposal is very different from the health care reform plan offered a decade ago, for three main reasons:

1. President and Mrs. Clinton proposed major changes to the U.S. health care system that would have impacted the great majority of Americans. Their restructuring plan was mandatory, and their proposed Health Security Act contained in its 1342 pages a plethora of fines, penalties, and even jail terms to enforce compliance.

In contrast, President Bush is proposing Social Security reforms that are voluntary. There is no forced compliance. And polls show that young people who would have an opportunity to divert some of their Social Security taxes to personal accounts support the idea by the widest margins. The existing Social Security system stays the same for retirees and near-retirees. But young people, who find the idea most appealing, can voluntarily select new options.

2. The people who stood to gain the most from the Clinton health reform plan were the then 39 million people without health insurance coverage. But many people who were relatively comfortable with their health care arrangements would have been forced to change so that the country could achieve the social goal of universal health coverage. The famous Harry and Louise ads, in which a middle-class couple worries about how the Clinton reforms would affect them, played a big role in sinking the plan.

In contrast, older Americans aren?t being asked to make any changes to their Social Security arrangements. Only today?s young people, who say that they have little hope that Social Security will be there for them when they retire anyway, face prospective change.

They are being given a relatively low-risk option now to begin to save for their retirement and have the prospect of a decent return rather than face the near certainty of a system that won?t come through for them.

3. The changes proposed in the Clinton Health Security Act would have taken place relatively quickly, without time for a gradual evolution that would have given people and institutions time to prepare and to figure out the least disruptive ways to adapt.

In contrast, the changes in the Social Security system will evolve over decades, not be forced over a few short years. That gives people, the government, and financial institutions time to fine-tune changes, create new options and opportunities, and learn what works best. Change would evolve gradually and affect only those who choose the new option.

For these reasons, those who believe that personal accounts are the right thing need not worry. Social Security reform offers voluntary choices rather than mandates, the people who stand to gain from the new system are those with the most to lose if nothing is changed, and the changes will be gradual.

In the 1996 Republican presidential primary campaign, outsider candidate Steve Forbes brought this issue to the forefront of the political debate, bravely touching the political third rail by talking about personal accounts in Social Security.

Whenever he stopped in college towns in New Hampshire or talked with crowds of young people, he was treated like a rock star. He took a risk, and other candidates saw that it actually was possible to talk about Social Security reform.

Personal Social Security accounts are a winner. Be not afraid.

Grace-Marie Turner


? Health courts: Fair and reliable justice for injured patients

? The health care safety net we want and need

? U.S. health spending projections for 2004 – 2014

? CBO’s current projection of spending for the Medicare Part D benefit

? Canada’s drug price paradox: The unexpected loss caused by government interference in pharmaceutical markets

? Don’t vilify drug companies


Authors: Nancy Udell and David B. Kendall

Source: Progressive Policy Institute, February 2005

While some blame rising medical malpractice rates on “junk lawsuits” and others blame the malpractice insurance industry, Nancy Udell of Common Good and David Kendall of the Progressive Policy Institute argue there are “more fundamental defects” in our medical liability system. “It does not give most injured patients access to justice, and it does not send clear signals about standards of care that would help health care providers avoid medical mistakes,” write the authors. They propose setting up a network of specialized health courts to replace the current system and describe the steps needed to create these courts. “A health court system would be similar to workers’ compensation in that there would be a schedule of benefits to compensate patients for medical injuries, and it would be designed to provide quick, consistently fair damage awards,” write Udell and Kendall.

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The New York Times on Tuesday also examined the factors behind medical malpractice rates and concluded, “Lawsuits against doctors are just one of several factors that have driven up the cost of malpractice insurance, specialists say. Lately, the more important factors appear to be the declining investment earnings of insurance companies and the changing nature of competition in the industry.”

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Authors: Victoria Craig Bunce and Merrill Matthews

Source: The Council for Affordable Health Insurance, February 2005

Victoria Craig Bunce and Merrill Matthews of The Council for Affordable Health Insurance argue that, while most Americans have private health insurance, millions are covered by an “ad hoc safety net” that has two major flaws: “There are millions of Americans who should be in the safety net but are not; and there are millions who have no business being in the safety net but are.” The authors say that “The public policy challenge facing the U.S. and its elected representatives is to develop a safety net that provides quality and timely care for those who need it most, and allow the market to work for everyone else.” They suggest that we need to return to a real safety net that would be funded with public dollars, be built on a free market system, and provide incentives to encourage people to spend the money wisely.

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A Wall Street Journal editorial on Thursday described how the Medicaid safety net that was “never intended as a middle-class entitlement or as inheritance protection for the children of well-off seniors” has become just that.

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Authors: Stephen Heffler, Sheila Smith, Sean Keehan, Christine Borger, M. Kent Clemens, and Christopher Truffer

Source: Health Affairs Web Exclusive, 02/23/05

National health spending is expected to grow by 7.5% in 2004, down from 7.7% in 2003, and “over the next ten years, growth is expected to slow to 6.7% between 2013 and 2014,” write authors Heffler et al, economists and actuaries from the Centers for Medicare and Medicaid Services. The report also includes the first analysis of the effects associated with the new Medicare prescription drug benefit, estimating that public funding of health care will exceed 49% by 2014 due in part to a “significant shift in funding from private payers and Medicaid to Medicare.” The authors note that “the introduction of the Medicare Part D benefit is expected to have only a minor effect on prescription drug spending…price discounts associated with the new benefit will nearly offset the increased usage associated with extending drug insurance coverage to the Medicare population.” The report also examines spending trends for hospitals, physicians, prescription drugs, and long-term care, as well as projected trends for various payers including Medicare, Medicaid, consumer out-of-pocket payments, and private health insurance.

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Source: Congressional Budget Office, 02/16/05

The Congressional Budget Office’s (CBO’s) current projection of spending for the Medicare Part D benefit, published in the January 2005 Budget and Economic Outlook, “is nearly identical to the cost estimate for Part D that [the CBO] prepared in 2003,” writes CBO Director Doug Holtz-Eakin in a letter to Rep. Joe Barton, Chairman of the House Committee on Energy and Commerce. “In November 2003, CBO estimated that the Medicare Modernization Act?would result in additional direct spending totaling about $395 billion over the 2004-2013 period. That amount was the net of a number of different types of expenditures and receipts that would result from the legislation.” CBO’s November 2003 cost projections of the Medicare Modernization Act included an estimated $552 billion in mandatory spending for Medicare Part D, but its baseline projections were recently updated to account for the “slightly higher inflation rate in CBO’s most recent economic assumptions.” This change, writes Holtz-Eakin, “added about $6 billion to the projected cost of the Part D program over the 2004 – 2013 period, raising it from $552 billion to $558 billion.” In addition, the 10-year projection period used by the CBO for its baseline has been changed to extend through 2015, adding two more years of prescription drug benefits. During those two additional years, “net mandatory spending for Medicare Part D will total about $240 billion”.

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Author: Brett J. Skinner

Source: The Fraser Institute, 02/05

“Canadians could save between $2 billion and $5 billion annually if governments allowed the pharmaceutical market in Canada to be as competitive as the U.S. market,” writes Brett J. Skinner of the Fraser Institute in Vancouver. On average, generic drugs are 78% more expensive in Canada than in the U.S. “because the American market has more generic manufacturers competing for sales, which leads to lower prices and higher voluntary rates of generic drug use.” Canada’s market is dominated by two generic companies which account “for 68% of all prescriptions dispensed among the 100 top selling generics in 2003.” Skinner concludes that “price controls and other policies distort the pharmaceutical market, reduce competition and harm Canadian consumers by causing inflated prices for non-patented drugs, and suggests that Canadians would be better off if governments repealed such policies.”

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Author: Dick Meyer

Source:, 02/17/05

“Personally, I am incredibly thankful for drug companies,” writes Dick Meyer, a veteran political and investigative producer for CBS News and editorial director of “People I care about deeply are alive and full-strength because of drug companies. I think that is true of every single person reading this sentence.” Meyer argues that the media and many politicians have made drug companies out to be the villains. They fail to focus on several well-documented facts including: The cost of prescription drugs is only about one-tenth of overall health care spending; and when more people use more effective drugs, overall health spending costs decrease and national productivity goes up, but in ways that are difficult to measure. “It is also a spectacular feat of ingratitude to not appreciate the lives saved and bettered by new medicines in the past few decades,” concludes Meyer. “Drug companies aren’t saints, but they aren’t sinners either. And they surely shouldn’t be our scapegoats.”

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Escaping the Morass: South Carolina’s Plan to Transform Medicaid

The Heritage Foundation Event

Monday, February 28, 2005, 12:30 p.m.

Washington, DC

Featuring The Honorable Mark Sanford, Governor of South Carolina. For additional details and registration information, go to:


Making Coverage Affordable through a Nationwide Marketplace for Health Insurance

Cato Institute Policy Forum

Tuesday, March 1, 2005, 12:00 PM (Luncheon to follow)

Washington, DC

For additional details and registration information, go to:


Is America’s Hospital Sector Open to Competition?

Cato Institute Policy Forum

Tuesday, March 22, 2005, 12:00 PM (Luncheon to follow)

Washington, DC

For additional details and registration information, go to:


America’s War on “Carcinogens”: Reassessing the Use of Animal Tests to Predict Human Cancer Risk

Hosted by the Center for Medical Progress at the Manhattan Institute

Wednesday, March 16, 2005, 8:30 am – 10:00 am

New York City

This event will feature Elizabeth Whelan, Sc.D., M.P.H., M.S., President and Founder of the American Council on Science and Health. RSVP acceptances only to 212-599-7000 Ext. 407 or send an e-mail to


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