Wonkbook: Obamacare is giving Medicare a new lease on life

July 29

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Wonkbook’s Number of the Day: 35 percent. That's the percentage of Americans who have debts and unpaid bills reported to collection agencies, a study says.

Wonkbook’s Chart of the Day: This chart shows how Congress prevents the gloom and doom in Medicare trustee reports from ever coming true.

Wonkbook's Top 4 Stories: (1) The state of Medicare and Social Security; (2) the economy's big week; (3) the country's evolution on marijuana; (4) context on the VA deal.

1. Top story: Checking in on Medicare and Social Security's financial health

Medicare gets new lease on life thanks to ACA, hospital expenses. "Medicare’s financial stability has been strengthened by the Affordable Care Act and other forces that have been subduing health-care spending, according to a new official forecast that says the fund covering the program’s hospital costs will remain solvent until 2030 — four years later than expected a year ago....The trustees welcomed the improved financial prospects for Medicare but acknowledged that the underlying reasons are not yet entirely understood....The trustees’ forecast said that the trust fund that pays for hospital care — Medicare Part A — has been strengthened significantly." Amy Goldstein in The Washington Post.

Primary sources: The full texts of the Medicare report and the Social Security report. The Washington Post.

Will the slowdown in health spending last? Who knows. "There's a whole lot of uncertainty...whether it's due to the sluggish economy or structural changes in the health-care system. How long can the slowdown last?...The trustees' report highlights the truly difficult task of predicting Medicare's future....Another source of uncertainty for Medicare's future is the ACA itself. The law calls for $415 billion in reduced payments to care providers, while at the same time trying to encourage providers to adopt care models that cut costs and provide better outcomes. Whether care can be truly reformed is a question that Medicare's best prognosticators still can't answer, but they said recent signs have been encouraging." Jason Millman in The Washington Post.

Chart: Is Medicare going broke? No. "This report has predicted, many times in the past, that the Medicare Trust Fund would run out of money. But...each time the projected insolvency date gets close, there's typically a pattern where Congress steps in and passes some type of policy to make trust fund dollars stretch at least a decade longer....The projected date of insolvency speaks to a world where Congress never changes anything about Medicare, the world of health financing stays static, and, if we keep spending payroll tax dollars at current rates, the fund can't pay its bills. In other words, the date of projected insolvency speaks to a world that doesn't really exist." Sarah Kliff in Vox.

But in today's age, will Congress to act when needed? "There is little appetite in Congress to tackle such big issues. However, the longer Congress waits to act, the more difficult it will become to avoid either large tax increases or significant benefit cuts in both programs, said economist Charles Blahous III, one of two public trustees....If Congress acts quickly, Social Security could be shored up for several generations through relatively modest changes to benefits and revenues. However, many advocates oppose any cuts to benefits, while many Republicans in Congress oppose any increase in taxes." Stephen Ohlemacher and Ricardo Alonso-Zaldivar in the Associated Press.

Another wonky tidbit buried in the Medicare report: Trustees assume 'doc fix.' "For 12 years now, the formula that Congress uses to pay Medicare doctors has fallen short of keeping doctor salaries steady. So...Congress passes a 'doc-fix:' a funding patch to keep physician salaries even, or given them a slight boost. In previous Medicare Trustees' reports, the authors would never assume that they would pass this fix — they would only operate on the baseline of what law is standing right now....After 12 years of watching doc-fixes pass and pass again...the Medicare Trustees' are acknowledging that our haphazard way of funding doctor salaries, with short-term payments, is likely here to stay." Sarah Kliff in Vox.

For Social Security, the outlook is more dire than the summary suggests. " The largest Social Security program, for seniors, is on track for full funding through 2034, but Social Security’s disability benefits face a shortfall starting in 2016. Some forecasters say a jump in the number of beneficiaries in the disability program in recent years stems mostly from...a bulge of baby boomers at the prime age....The CBO estimated recently that closing the long-term gap for Social Security would require boosting the payroll tax by 3.54 percent of worker pay. Or, if Congress moved to expose all the pay of high-income workers to the tax, the payroll tax would still need to be raised on all workers (by 1.61 percentage points) unless other reforms were made." Mark Trumbull in The Christian Science Monitor.

Jack Lew calls for diverting payroll tax revenues to SSDI. Here's how that would work. "SSDI gets its revenue largely from the payroll tax that workers and employers pay. The payroll tax rate is 6.2%. Of that, 5.3% goes to the Social Security fund that pays retiree benefits, and 0.9% goes to the disability insurance trust fund. The fund that pays benefits to retirees had $2.674 trillion at the end of 2013, so Mr. Lew’s point is that income should be diverted to buttress the disability fund because the retiree fund is on more solid footing. This change wouldn’t increase taxes, but it would change how tax dollars are spent." Damian Paletta in The Wall Street Journal.

In other financial news, what would the latest round of Russia sanctions do? "While criticized at home as not being tough enough on Russia, Mr. Obama has been pressing Europe to stand firmer against Moscow. With their economies far more dependent on energy-rich Russia, the Europeans have until now imposed mainly modest sanctions....On Monday, they agreed to target a handful more individuals. But the package to be finalized Tuesday would go much further, matching and in some cases exceeding the actions Mr. Obama took on his own this month in blocking access to medium- and long-term American capital markets for some of Russia’s largest and most global banking and energy companies." Jack Ewing and Peter Baker in The New York Times.

Other financial reads:

Banks cash in on mergers to cut taxes. Andrew Ross Sorkin in The New York Times.

Top opinion

SUNSTEIN: The poor need Ryan's regulation reform. "True, under Ryan’s proposal, agencies could try to persuade Congress to enact any regulation that has regressive effects, but that brings us to the third problem. Because Congress is so frequently paralyzed, the consequence of this proposal would be to block highly desirable rules, many of which have already been subject to careful cost-benefit analysis. But let’s not lose the forest for the trees. Ryan is on the right track insofar as he suggests that occupational licensing is a big problem and that regulatory agencies should take steps to reduce or eliminate adverse effects on people who are struggling. Democrats and Republicans should be working together to solve the problems that Ryan has identified." Cass R. Sunstein in Bloomberg View.

MORGENTHAU: VA deal promising, but here's what it's missing. "The draft bill is a step in the right direction and should be approved by the joint conference committee and passed by Congress before the August recess. But further steps are necessary to provide lasting care for veterans, particularly those with post-traumatic stress disorder (PTSD) and traumatic brain injury. Treatment for combat-derived mental illness is a pressing problem that is overwhelming the VA and requires the assistance of our nation's best health-care facilities, including top teaching and clinical hospitals." Robert Morgenthau in The Wall Street Journal.

DOW: The day the death penalty died. "The death penalty...is the sausage factory of America’s legal system: Nobody wants to know what is actually going on. So the states eventually embraced lethal injection as the preferred method....People sometimes ask me what it is like to witness an execution, and I tell them the most powerful thing about it is walking outside the prison after it is over, into the bright light of day, and seeing that the state has just killed someone, and the citizens don’t have a clue. We do know, however, when the end of the modern death-penalty era began: April 29, 2014. That was the day we could no longer remain willfully naive. It was the date Oklahoma executed Clayton Lockett." David R. Dow inPolitico Magazine.

DOUTHAT: The new Republican populism. "In 2012, Mitt Romney won back the over-$200,000 vote, mostly by regaining ground in the suburbs around New York City. But what he didn’t win was the actual election, mostly because voters outside Greenwich and New Canaan decided that a G.O.P. obsessed with heroic entrepreneurs didn’t have their interests close to heart. So haltingly at first, and then with increasing seriousness, Republicans began to look for a different path back to power — one tailored to the party’s growing dependence on working-class votes, and one designed to deliver populist substance as well as style." Ross Douthat in The New York Times.

REYNOLDS: Supreme beings of leisure. "We've seen repeated cycles of worry that automation would leave large swathes of the populace unemployed. Each time, we've instead seen new (generally better) jobs replacing the jobs that were destroyed. The conventional wisdom is that the same thing will happen now. People may be losing jobs to robots, but soon they'll get new jobs, fixing the robots, or selling them....But there are two objections to this....First, just because something has happened before doesn't mean it'll happen that way again. And second, the new jobs don't necessarily replace the old jobs for those who have lost them. There are reasons to worry about both." Glenn Harlan Reynolds in USA Today.

FLAVELLE: College cost isn't poor students' big problem. "To judge by this summer's banner policy proposals, the most important question for higher-education reform right now is giving students easier access to loans. But evidence from Canada suggests those changes won't address the greater need: Getting more kids from poor families into college, the key to moving up in an increasingly unequal society....If the goal is to make loan payments for college graduates a little more manageable, this summer's proposals are promising. If the goal is making the distribution of income in the U.S. more meritocratic...then better loan terms probably won't help." Christopher Flavelle in Bloomberg View.

Science interlude: How much sleep do people actually need?

2. A big week for the economy

Christmas in July for economists. "The Federal Reserve Board's policymakers are meeting over two days this week to...decide whether to continue the current policies that restrain interest rates....Wednesday...the Commerce Department will release its first estimate of GDP growth for the second quarter....Thursday...the USDA will report on farm prices....Friday: The Labor Department will release its July jobs report....In recent months, jobs have been growing rapidly. Did the pace continue in July? In addition, economists will be watching for lots of wild cards this week....Lawmakers could make decisions involving issues with big economic impacts, such as on immigration and federal highway spending." Marilyn Geewax in NPR.

Explainer: 5 things to watch on the economic calendar this week. Kathleen Madigan in The Wall Street Journal.

The U.S. economy has woken from its winter hibernation, but the damage is done. "Gross domestic product likely grew at a 3.0 percent annual rate, according to a Reuters survey of economists, lifted by an acceleration in both consumer spending and stock accumulation by businesses....Earlier in the second quarter, growth estimates were as high as 4 percent, but they were lowered as consumer spending and business investment rebounded less than expected. With output having contracted at a 2.9 percent pace in the January-March period, first-half growth was likely flat. As such, growth for the year as a whole could average below 2 percent." Lucia Mutikani in Reuters.

Charts: U.S. government serves as lone star of first quarter. Eric Morath in The Wall Street Journal.

Fed policymakers are divided over when to raise rates. "Many...want to avoid moving rates up until they are sure the economy is on stronger footing, a view supported by Ms. Yellen in her recent testimony and likely to hold at the coming meeting. Most policy makers in this camp see short-term rates staying near zero until well into next year....Fed officials also will keep working on their blueprint for how they will raise interest rates when the time comes....Among the issues on the table: when to start shrinking the central bank's $4.1 trillion bond portfolio." Jon Hilsenrath in The Wall Street Journal.

Explainer: The Fed’s five (not so) easy steps back to normal. Ylan Q. Mui in The Washington Post.

The IMF's warning on rates to the Fed. "The IMF suggests the Fed should think twice before relegating...the federal funds rate, to a supporting role. Minutes of the Fed’s June meeting showed central bank officials agreed they will use a newer interest rate — the rate it pays banks to park their reserves at the central bank overnight — as their primary tool for raising short-term rates broadly....The IMF also says it might be a good idea to stick to a single interest rate rather than adopting a system based on several rates, including the rate on banks’ excess reserves." Pedro Nicolaci da Costa in The Wall Street Journal.

And advice on forward guidance. "The Federal Reserve’s various efforts at honing its low-rates message have been successful at keeping borrowing costs down by giving investors greater clarity about the likely path of policy, according to the International Monetary Fund. However, the policy’s effectiveness has varied depending on the type of guidance used, the IMF study on the U.S. economy said, published this week as part of its global economic forecasts. The Fed’s guidance has shifted quite a few times in recent years." Pedro Nicolaci da Costa in The Wall Street Journal.

Obama is running out of time to fill 2 remaining Fed board seats. "The White House hasn’t nominated anyone for the seats on the seven-member board, and even someone submitted this week wouldn’t be confirmed until two weeks after the Nov. 4 elections, if history is any guide: the Senate has taken an average of 119 days to confirm Obama’s 10 Fed Board nominations since 2009....For the White House, the Fed is taking a back seat to crises foreign and domestic, from strife in the Middle East and Ukraine to U.S. health care and immigration." Jeff Kearns in Bloomberg.

Pending sales of existing homes unexpectedly fall. "Fewer Americans than forecast signed contracts to buy previously owned homes in June, a sign residential real estate is struggling to strengthen. The index of pending home sales declined 1.1 percent from the month before after rising 6 percent in May, figures from the National Association of Realtors showed....Limited availability of credit and sluggish wage growth are making it harder for prospective buyers to take the plunge, threatening to throttle the pace of the housing recovery. Continued gains in employment and a bigger supply of available homes will be needed to help accelerate the industry’s progress, which Federal Reserve Chair Janet Yellen has said is lackluster." Victoria Stilwell in Bloomberg.

Other economic reads:

Export-Import Bank faces danger from all sides. Eric Bradner in Politico.

FISHER: The danger of too loose, too long. "I have grown increasingly concerned about the risks posed by current monetary policy....The Fed has been running a hyper-accommodative monetary policy to lift the economy out of the doldrums and counteract a possible deflationary spiral....But with low interest rates and abundant availability of credit in the nondepository market, the bond markets and other trading markets have spawned an abundance of speculative activity....There are some who believe that 'macroprudential supervision' will safeguard us from financial instability. I am more skeptical." Richard W. Fisher in The Wall Street Journal.

VINIK: Inflation hawks have been wrong for years. Should we listen now? "Fisher and his fellow inflation hawks...want to tighten policy now to make sure that inflation stays under control. But doing so would mean blocking real wage growth for workers, something they haven’t seen in more than a decade. On the other hand, Fed Chair Janet Yellen, who has the best record of forecasting the economy out of any of her Fed colleagues, wants to keep monetary policy on its current trajectory and adjust it if inflation increases. In the meantime, she will allow wage growth to happen and continue, rightly, to ignore inflation hawks like Fisher and Santelli." Danny Vinik in The New Republic.

Scaredy cat interlude: This cat, freaked out by the outdoors, tries to hide in a stranger's bag.

3. The country's cultural shift on marijuana

A profound cultural shift on marijuana legalization that long preceded the NYT editorial. "These are not new arguments. But this time they come from the New York Times, not High Times. Support for marijuana legalization has grown so rapidly within the last decade, and especially within the last two years, that some advocates and pollsters have compared it with the sudden collapse of opposition to same-sex marriage as a culture-redefining event....Yet through a combination of ballot measures, legislative action and judicial action, same-sex marriage has found far more success across the U.S., in a campaign supporters liken to the civil rights movement." Matt Pearce and Maria L. La Ganga in the Los Angeles Times.

Charts: The Times was surprisingly late to the legalization party. Philip Bump in The Washington Post.

At Colorado’s borders, a dividing line over marijuana. "It should be no shock that as attitudes toward marijuana have shifted, fault lines have appeared along state boundaries. On the Great Plains east of the Rockies, a three-hour drive from Denver’s profusion of pot shops — 340 medical and recreational at last count — Colorado’s bold social experiment is confounding parents who have to explain to their children why this alluring but troubling substance is legal just down the road, a state line — and a cultural divide — away. The same policy decisions that liberated pot smokers in Colorado are filling tiny rural jails in Kansas, Nebraska and Wyoming." Marc Fisher in The Washington Post.

Explainer: Which states are voting on marijuana this year? German Lopez in Vox.

How stoned is too stoned to drive? The feds want to know. "A small group of volunteers spent much of the last year getting drunk and stoned on marijuana furnished by the federal government before getting behind the wheel. The volunteers were part of what federal scientists say was the most comprehensive study ever conducted on how marijuana, and pot combined with alcohol, affect drivers. The data now being analyzed ultimately will help regulators decide how stoned is too stoned to drive. It's similar to the studies conducted to develop levels for drunken driving. Volunteers were recruited from around Iowa City, home to the University of Iowa's National Advanced Driving Simulator." Trevor Hughes in USA Today.

Explainer: What are the risks of marijuana? More than many realize. Liz Szabo in USA Today.

Pot issue unnerves 2016 contenders. "In presidential politics, pot is being treated as a dangerous substance. Kentucky Senator Rand Paul, New Jersey Governor Chris Christie and former Secretary of State Hillary Clinton have signaled varying degrees of support for medicinal marijuana. Yet at a time when the majority of Americans say recreational pot use should be legal, and two states have already made it so, none of the top-tier 2016 presidential prospects in either party has gone that far." Jonathan Allen and Jennifer Oldham in Bloomberg.

Moms' marijuana-for-kids campaign seeks to quiet epilepsy. "The lack of scientific evidence hasn’t kept the parents of children with severe epilepsy from turning to it, though, based on anecdotal evidence carried across the Internet. After Sintz first heard about the compound, she joined and helped lead a nonprofit called Hope 4 Children with Epilepsy that set up educational events and lobbied state lawmakers in a campaign that resulted in Utah becoming one of just 11 states to allow use of the marijuana extract by youngsters, all coming this year. Twenty-three states allow medical use of marijuana for other conditions including cancer, glaucoma and HIV/AIDS. Utah’s health department last week began issuing registration cards." Marie French in Bloomberg.

Meanwhile, another win for gay marriage. "A federal appeals court on Monday struck down Virginia’s voter-approved ban on same-sex marriage....The 2-to-1 decision by a panel of the U.S. Court of Appeals for the 4th Circuit, based in Richmond, upheld a lower court’s decision....Legal challenges to state bans filed systematically nationwide have prevailed in every test since the Supreme Court in June 2013 struck down part of the federal Defense of Marriage Act....Two federal appeals courts have now said the bans are unconstitutional. The Supreme Court probably will have to make the final determination and could consider the issue as soon as next year." Robert Barnes and Jenna Portnoy in The Washington Post.

N.C. attorney general says state will stop defending its ban in response to ruling. "North Carolina’s attorney general said Monday that the state would stop defending its same-sex marriage ban against legal challenges, just hours after a federal appeals court ruled that a similar ban in Virginia is unconstitutional. At a news conference Monday afternoon, Atty. Gen. Roy Cooper said he had made the decision because the appeals court ruling 'predicts our law will be struck down.'" Christine Mai-Duc in the Los Angeles Times.

Other legal reads:

Proliferation of online services poses hurdle for law enforcement. Ellen Nakashima in The Washington Post.

More states push homicide charges in heroin overdoses. Eric Litke in Gannett Wisconsin.

Are opponents of the death penalty contributing to its problems? Alan Greenblatt in NPR.

Arizona executions face scrutiny. A guide to the debate. Michael Kiefer in The Arizona Republic.

Animal acrobatics interlude: Watch incredible long-jumping dogs compete.

4. More details on the VA agreement

Why the VA agreement should pass easily before recess starts. "In addition to approving changes to veterans’ medical care, negotiators are working on deals to continue federal funding for the nation’s major road projects and whether to grant President Obama’s request for billions of dollars to deal with the historic influx of illegal immigrants along the U.S.-Mexico border. Members of both parties have been warning for weeks that leaving Washington before responding to allegations of mismanaged or delayed care at VA medical facilities nationwide would reflect poorly on Congress." Ed O'Keefe in The Washington Post.

The rising costs of veterans' care and benefits. "The VA is now among the largest federal agencies. After scaling back its operations in the 1990s...the VA found itself unprepared for the influx of veterans from recent wars and the aging of the Vietnam War generation. Between 2002 and 2013, the medical staff grew...while the number of annual outpatient visits nearly doubled to 86.4 million. Hospital admissions — the biggest driver of costs in most hospitals — rose 23% to almost 695,000. In all, medical spending climbed from $29.8 billion to $54.2 billion....But the biggest increase in spending was on disability and pension pay for disabled veterans." Alan Zarembo in the Los Angeles Times.

Mark your calendars: Senate to vote this afternoon on Obama VA pick. Ramsey Cox in The Hill.

Tucked into the VA bill: A measure to extend program for brain-damaged vets. "Congressional negotiators agreed Monday to extend a government program that funds assisted-living homes for veterans suffering from traumatic brain injuries, including dozens of troops wounded by roadside bombs in Iraq and Afghanistan....With Congress in a partisan stall and legal authority for the program due to end in October, the VA had begun discharging veterans from the care facilities....A VA spokeswoman declined to say immediately whether the VA would stop the discharges now that Congress has signaled its intent to continue funding the brain-injury program." Michael M. Phillips in The Wall Street Journal.

Other health care reads:

CDC urges U.S. health workers to be vigilant as Ebola virus’s toll grows in Africa. Caelainn Hogan in The Washington Post.

Digital patient records: The sober statistics so far. Steve Lohr in The New York Times.

Obamacare's employer mandate a political orphan. Noam N. Levey in the Los Angeles Times.

One more animal interlude: Happy puppies rolling down hills.

Wonkblog roundup

A Boston program aiding foreclosed homeowners could be a national model for fighting blight. Dina ElBoghdady.

Medicare isn’t going broke, but don’t celebrate just yet. Jason Millman.

Here’s why Obama should get credit for reducing income inequality. Zachary A. Goldfarb.

Zillow wants to make online real estate listings more like online dating. Andrea Peterson.

The Fed’s five (not so) easy steps back to normal. Ylan Q. Mui.

We asked you to Name That Data and you kind of didn’t. Christopher Ingraham.

Where cats are more popular than dogs in the U.S. — and all over the world. Roberto A. Ferdman and Christopher Ingraham.

Et Cetera

Not in my backyard: U.S. sends some of its dirty coal abroad. Dina Cappiello in the Associated Press.

Analysis: Clinton impeachment shadows GOP lawsuit. David Espo in the Associated Press.

Criticism arises after children are rushed to see judges. Kate Linthicum in the Los Angeles Times.

Annoying minor floods are increasing on U.S. coasts. Seth Borenstein in the Associated Press.

How the government exaggerates the cost of college. David Leonhardt in The New York Times.

 

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Wonkbook is produced with help from Michelle Williams and Ryan McCarthy.

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