Academy of Actuaries Praises Obama on Social Security, Medicare

The American Academy of Actuaries issued a statement today praising President Obama for pledging to take on Social Security and Medicare reform.

WASHINGTON, Jan. 21
/PRNewswire-USNewswire/ -- The American Academy of Actuaries
applauds President Barack Obama's pledge to address Social Security's and Medicare's long-term financial challenges and urges public policymakers to reach bipartisan solutions to ensure both programs' viability.

"Historically the American Academy of Actuaries has urged policymakers to address these financial challenges without delay," said John Parks, the president of the American Academy of Actuaries. "President Obama's message shows that he understands that these issues must be addressed now. And the Academy believes this must happen regardless of any other actions taken to address the current economic and fiscal crisis."

The Academy's Senior Health Fellow Cori Uccello
said that the president is right to say that Medicare's issues cannot be solved "in isolation from the broader problems of the health care system." She said that policymakers must enact comprehensive Medicare reform not only to restore the program's solvency, but also to improve its long-term sustainability by lowering the growth of total Medicare spending as a share of the federal budget and of the overall economy.

"It is important to recognize that the problem of rising health care spending in the Medicare program reflects the spending growth seen in the U.S. health care system as a whole," she said. "Unless that spending is addressed, implementing options to control Medicare spending will have limited long-term effectiveness. Medicare reform proposals should focus on options that reduce overall spending, rather than simply shifting costs from the government to another payer."

Regarding Social Security, Tom Terry, the Academy's vice president for pension issues, said that the Academy released a statement in August urging policymakers to address to address the program's longterm actuarial imbalance by increasing Social Security's retirement age. "By acting now policymakers would have a full range of policy options to choose from," Terry said. "They will also be able to apply those options to more of the population, and give people more time to appropriately plan for retirement."

President Obama's message came during a 70-minute interview with Washington Post reporters and editors on Jan. 15. For more information, please contact Andrew Simonelli, assistant director of communications for the American Academy of Actuaries, at 202.785.7872. For more information on the American Academy of Actuaries, please visit: www.actuary.org.

While I'm not sure that addressing rising Medicare spending requires wholesale changes to healthcare provision in general – a point I touched on here – overall the Academy's support is very helpful in giving momentum to reform. Let's hope that Obama's Social Security experts – of whom the new administration has several – are listening.

Update

Anonymous asked:

"While I'm not sure that addressing rising Medicare spending requires wholesale changes to healthcare provision in general – a point I touched on here"

So you are suggesting the drivers of health care cost growth in general are different for the Medicare and non-Medicare population?

A good question, which I think is better to answer answer here. I'm not suggesting that that public and privately-financed health care have altogether different cost drivers. Both have rising costs driven by technology making new (but expensive) treatments available; rising incomes making it more desirable to spend the marginal dollar on health care rather than other goods or services; and declining out-of-pocket spending relative to total spending, which increases incentives to consume and decreases incentives to monitor quality. (Medicare has one cost driver that's different from private sector health care: population aging.)

That said, because they have the same cost drivers does that necessarily they have to be reformed together. It is possible to have different cost structures for Medicare and other health services, and in any event Medicare pricing influences pricing elsewhere. There are a number of areas in which government programs and private sector industry work in parallel, and it's not clear why health care can't be one of them. Moreover, to the degree that Medicare and other government health programs influence the private sector, which is probably significant given that the government finances about 40 percent of health care spending economy-wide, it actually makes sense to start with Medicare, not end with it. So I think the argument that we first need wholesale reform of private sector health care -- which I fear may imply a slippery slope to government control of the overall health sector -- is overstated.