The Health And Welfare Crisis

The combination of soaring costs and economic meltdown means that more and more people have to forego health insurance, which is a given. That's what part of the stimulus tries to stop by offering subsidies to keep the jobless on their old coverage through COBRA. But since health insurance does not translate into health care, we're seeing an additional crisis - people with insurance scrimping on treatment because they can't afford the co-pays.

Take South Dade Realtor J. Berry Hamilton, 57. She's gone to a policy with a $5,000 deductible, meaning she has to pay most costs out of her own pocket. Recently, she brushed off her doctor's request for a diagnostic exam when she got a sinus infection. As her business has declined, she figures: "Let me see if the antibiotic works first, and if it doesn't then maybe I'll have the X-ray."

"Patients are spending less, no question about it," says Bernd Wollschlaeger, a primary care doctor in North Miami Beach. "A patient needs a echocardiogram. And they say they can't afford the $100 or $200 co-payment, so they're deferring. In the long run, this just can't be good for healthcare."

People are certainly pinching their pennies. For the five hospitals in Baptist Health South Florida, Vice President Karen Godfrey reports that patients are now hesitating on tests and procedures even with co-pays as low as $15, "which is very surprising.

"One of the registration managers was telling me some are negotiating for services. If a woman gets a prescription for a mammogram and an ultrasound, she wants to know the co-pay for both," then pick the test with the cheaper co-pay.

I should mention that this is the DESIRED state of health care for Republicans. It's what they've argued for years. They think Americans should all be smart shoppers with health care and then the spending won't be as wasteful. Of course, when this means neglecting needed drugs or tests, it cuts into preventive care, which when used effectively actually saves the patient and the system money. So a short-run savings causes long-term catastrophic costs, and raises overall spending. Not to mention the fact that people get sicker as a result.

This is not to say that there aren't wasteful treatments and procedures offered to patients - that's why comparative effectiveness research, to measure and weed out those treatments, is an important element of reform. But that's a far cry from what's happening now, which actually is the dreaded "rationing" that Republicans like to warn everyone about. In fact, controlling costs and making treatment more affordable is the only way to actually be able to improve health outcomes. Right now we spend and spend, more in some regions, less in others, without value for that spending.

And if you're aging and have some aches and pains and need to be freaked out more than just about the fact that health care becoming too expensive, your pension just shrunk, too.

A wave of US companies are suspending payments to their staff 401(k) retirement plans in a bid to cut costs amid the economic downturn.

Saks, General Motors, newspaper group McClatchy, clothing company J.Crew, FedEx, UPS, Coca-Cola Bottling, Reader’s Digest, Motorola, Regions Financial and Sprint Nextel are among the growing list of companies which have suspended contributions in recent months.

Even the AARP, the influential advocacy group formerly known as the American Association for Retired Persons, will suspend contributions to its staff 401(k) plan from March 22 for the rest of the year.

The growing number of suspensions appears to strike a blow against the viability of 401(k) plans, which were introduced 30 years ago as the main way that Americans should save for retirement, replacing defined benefit pension plans. Companies typically offered to match employee contributions up to 5 per cent of annual salary.

Considering that so much of that 401(k) wealth vanished in the stock market, maybe this isn't such a bad idea. But with defined-benefit pensions going the way of the dinosaur, these defined-contribution plans were, other than a meager Social Security benefit, the only retirement planning a lot of people had. And now that's evaporating.

Have a Smurfy day!

...and by the way, this is why we have to tackle multiple challenges at once. Of course the economy and the financial sector needs to be managed, but our craptacular social services structure was decaying in the 1990s, and just barely limped along during the post-9/11 jobless recovery. A downturn just finishes it off, and we have no choice but to rebuild it.

Why Working Americans Are Scared

Conservative apologists are perplexed. They can't seem to understand why Americans are so worried about their economic struggles. After all, unemployment is down from historical highs, we haven't had a quarter of negative economic growth yet, the Dow is still high relative to prior downturns, so what's the problem?

Maybe if they actually listened to just one average American instead of figuring out ways to place the numbers in the right combination to make all look well, they'd get their answer. Hint: it has nothing to do with what they hear on the nightly news.

Ann Shea, 47, an attorney who lives in Butte, said the nation faces hardships that trump patriotism.

"The issue is, we're paying almost five bucks a gallon in gas, we're in a war we shouldn't be in, and the current administration, which is the one McCain will carry on, is just lying to the American people to get what they want," she said. "Obama's not about that."

Indeed, people are incredibly unhappy and worried about their prospects for the future. And it's pretty simple to understand why, if you actually interact with this economy instead of spin numbers about it. Staple items cost more, and wages remain stagnant. Health care is out of reach. Junk mortgages are re-setting and threatening millions with foreclosure. A car is more of a fiscal liability than ever. Suburban housing developments and shopping centers are becoming ghost towns.

In short, risk has shifted entirely in the direction of the worker and the consumer as the rich become more insulated and disconnected. The recovery from the initial Bush recession in 2001-2002 was a recovery solely for the rich and well-connected. Out of seven indicators of economic growth, only corporate profits surged from 2001-2007.

This CBPP chart from April does a great job of describing Republican Party economic policy in a nutshell. The Bush expansion may have featured sluggish wage growth, sluggish GDP growth, sluggish investment growth, and sluggish employment growth, but it also featured a terrific, tax-cut driven surge in corporate profit growth! That makes it a success by anyone's measure, right?

At the same time, the middle class has almost disappeared as stratification between rich and poor has exploded.

In recent years, the statistics regarding income disparity in America have been startling. After-tax annual income for the bottom fifth of American households inched up just 6 percent form 1979 to 2005, according to the Congressional Budget Office. During that time, income for the middle fifth of households grew by a modest 21 percent, with much of that gain caused by women in many households working more hours. Over that same period, income for the top fifth of households jumped by an impressive 80 percent, while income for the top 1 percent more than tripled, soaring by 228 percent.

The highest-earning fifth of households received 51.6 percent of the nation's after-tax income in 2005, meaning that the income of the top fifth exceeded that of the bottom four-fifths. As for the top 1 percent of households, they received more after-tax income than the bottom 40 percent, according to the Congressional Budget Office. A study that Thomas Piketty and Emmanuel Saez did based on federal tax returns found that the top 1 percent of households, averaging $1.1 million in annual income, received nearly 22 percent of all reported income in 2005, up from 9 percent in 1980. That income shift helped create the greatest level of inequality since the Roaring Twenties.

The leading economic indicators cited most often by Republican hacks and Bush apologists often don't capture this dangerous situation, which is why they sound more and more out of touch. They look at the Dow and corporate growth while ignoring the growth in real wages for the middle class. They look at inflation while taking away food and fuel prices, making it look far more stable. They will do anything to preserve those gains for the super-rich and the losses for the shrinking middle class.

If you're a working American, you know all this intuitively, and all this talk about how "there is no recession" and "the fundamentals of the economy are strong" and "it's the Democrats' fault for doomsaying about the economy" just make you angrier. In a superb op-ed for the Los Angeles Times, Peter Gosselin explains how the risk shift has engendered this uneasiness:

Working Americans and their families arrived on the doorstep of the current economic crisis uniquely ill-equipped to cope with its consequences. Rather than having gained a financial protective coating during the period of growth that preceded it, working families up and down the income spectrum were actually nudged further out on an economic limb and therefore were primed for being picked off once problems emerged.

It's not that the growth of the last generation wasn't real; it was. The U.S. economy doubled in size between 1980 and last year. It's not that all of the benefits of the just-past era went to those at the top (although a very substantial chunk did); millions upon millions of Americans prospered right along with the super-rich.

But the prosperity we enjoyed was purchased at a price of diminished security for our families and ourselves. Even as our incomes went up, economic risks -- the costs of being laid off, of suffering a work-stopping illness or of a catastrophe like a house fire -- that were once largely borne on the broad shoulders of business and government were being shifted onto the backs of ordinary families, from the working poor to the reasonably rich.

That means that even before the current crisis struck, families were primed to take steeper financial falls than in the past, ones from which they'd have a harder time recovering. And now that trouble is upon us, they are falling in greater and greater numbers.

What we're really talking about is the unmaking of the New Deal, and it pre-dates this President, going back to failed conservative policies that refused to limit consumption, rein in health care costs or address inequality. Conservatives have used federal laws like ERISA to allow businesses to deny benefits to employees, in contravention of the law itself. They have sat by idly as insurers in the health and homeowner fields made their customers responsible for more and more of the burden of what the insurance is supposed to cover. They have cheered on the shift from defined-benefit plans like pensions to defined-contribution plans like 401 (k) retirement accounts which are subject to the whims of a volatile market. They have shrunk the amount of available federal grants for college education, leading to more borrowing and an entire generation of college students sunk with debt.

Indeed, similar changes have occurred in just about every corner of Americans' financial lives.

Some argue that in the new, globally competitive economy, U.S. business and government simply cannot afford to provide the kinds of protections against financial peril that they used to. Perhaps not. But that doesn't mean that we should automatically shunt the job of bearing these dangers to families alone. And it most assuredly doesn't mean that we should pass along the task without letting people know they've just been assigned the job of bearing a big new load of risk.

But that's essentially what has happened. As a result, working Americans and their families are operating on an economic high wire -- only one or two missteps from a steep financial fall. Little wonder people are so bleak about their prospects now that times are tough.

People know this without seeing the numbers from economists - they feel it in their daily lives, and they acutely understand the notion of their world in peril. Americans not in charge of major corporations are starved for some economic leadership and a glimmer of hope that the government cares about what happens in their lives. That's the choice in this election.

401(k) Capital Gains Aren't Taxed At The Capital Gains Rate

It's nice that DFH Atrios and Barack Obama said the exact same thing yesterday to parry the incredibly stupid charge that we can't raise the capital gains tax rate because 100 million people own stock and you'd be hurting working families. The vast majority of "working families" with stock have them tied up in retirement or 401(k) plans, which means they aren't taxed until retirement, and then they're taxed at the normal rate. It's a complete red herring, and it's good to see the argument down pat on all sides of the Democratic spectrum.

UPDATE: K-Drum is right - liberals do this too, when they talk about middle class tax cuts and how gas taxes affect the poor (but the programs created with that money benefit them). And he's right about the solution:

I suppose there are two possible answers to this. The first is for liberals to get better (and braver) about proposing tax hikes. I'm all ears for any bright ideas on this score. The second is to do what Republicans do: propose spending increases and just don't worry about the taxes. If the Washington Post editorial board huffs and puffs, who cares? Eventually things will work themselves out. That's not the way I'd like to see things get done in a perfect world, but we don't live in a perfect world, do we?

I'm more inclined to the former. Taxes are the dues we pay for a free society. It's as patriotic an action as you can make, and those who want to avoid taxes actively hate America and don't think it's worth paying for. That's a little extreme, but I'd love to see liberal lawmakers writing ticky-tack pieces of legislation like changing the name of tax day to "Patriot's Day" or things like that to hammer home this "America is worth paying for" theme.

Own Your Own Sickness

I think the real story about this EEOC decision is that big business is more ready for government-provided health care than ever.

The Equal Employment Opportunity Commission said Wednesday that employers could reduce or eliminate health benefits for retirees when they turn 65 and become eligible for Medicare.

The policy, set forth in a new regulation, allows employers to establish two classes of retirees, with more comprehensive benefits for those under 65 and more limited benefits — or none at all — for those older.

More than 10 million retirees rely on employer-sponsored health plans as a primary source of coverage or as a supplement to Medicare, and Naomi C. Earp, the commission’s chairwoman, said, “This rule will help employers continue to voluntarily provide and maintain these critically important health benefits.”

Legacy costs are crushing US manufacturing and putting as much as $1,500 on the nose of every car made in this country. Meanwhile, working class Americans are unable to save for retirement, have seen their pensions turned into 401(k) plans subject to the vagaries of the stock market, and now their familiar health care can be taken away from them. This ruling puts more Americans out on their own, like practically everything in George Bush's ownership society. But it also offers the possibility to expand the only health care system that will truly be able to drive down costs.

Wouldn't this be the perfect time to approach key businesses and ask for their support in reducing the Medicare age to 55, with this ruling as the template allowing them to loosen their entitlement burden? They could join with unions and interest groups in an outside-in strategy to pressure the Congress. We're obviously going to get a tremendous amount of pushback from pharmaceuticals and insurance companies in the coming health care fight, but having a corporate element on our side would at least make it more fair. And I think they're ready to ask for help, finally.