Scholarships and financial aid

My oldest child is going to be a frosh at American University in the Fall; she wanted to go to school in NY City or DC and is thrilled. We visited many schools, and it was fascinating for me to tag along and watch schools pitch students and families because I spent five years directing the Benjamin N. Duke Scholarship* at Duke–so was very much used to pitching Duke to students with many good options.

Several things became clearer about the opaque nature of college admissions and financial aid/scholarships for me while watching/assisting my daughter navigate these choices.

Universities offered my daughter extremely divergent amounts of scholarships, both merit awards offered via specified competitions (based on a weekend of interviews, etc), as well as money offered under the guise of a variety of names granted outside of an overt scholarship competition, and communicated at the same time that need based aid was denied. Lesson: apply for financial aid even if you know you will be denied.

Duke has a tuition benefit that has a fairly complicated structure but that roughly makes an expensive private University cost $30,000 instead of $60,000 +/-$5,000 depending on tuition versus room and board costs at a given school. This means that a University offering a scholarship simply replaces Duke’s tuition benefit up to its maximum amount. In two cases, my daughter was offered more money than the benefit, which would let me not “use” the benefit and save it for my other two kids (the Duke benefit is limited to two children). One University explicitly discussed this with me (wanting to know how much aid it would take for her to attend sans Duke’s benefit, thus saving it for one of my other kids). Lesson: talk to the financial aid folks at schools.

Back to the other side of the table, I had lunch today with a B.N. Duke scholar that I recruited to Duke several years back. S/he was picking between Duke, Princeton and Harvard. Upon being offered the B.N. Duke, this was communicated by the family to the other schools who upped the financial aid amounts offered (they do not have ‘merit’ scholarships). However, there were limits to what they offered (my experience is that this sort of ‘counter’ depends on the school and how bad they want the student), so the family was faced with a cost of very near zero to attend Duke versus lets say half price at the others (~$120,000 over four years). This family had income in the $150,00-$175,000 AGI territory, and lets say an underwater mortgage on their house. This is precisely the family income range/financial situation at which a scholarship like the B.N. Duke has the maximal recruitment effect.

Lets imagine a different student with family AGI of $40,000 who wins a B.N. Duke. They are going to be getting full financial aid from Harvard and Princeton and everywhere (including Duke, even without a B.N. Duke) if they are the type of kid who wins a B.N. Duke. In such a case, the recruitment effect of the B.N. Duke (or any other scholarship) is greatly reduced for a family with relatively low income; they are going to go to college gratis anywhere they want; they may pick Duke, but it won’t be because of money. And Harvard reports that its yield is 82%; that means Duke has a less than 1 in 5 chance of yielding a kid who is also admitted to Harvard if Duke is average against Harvard. The student I lunched with today came to Duke because of the scholarship (and is thrilled with, and has thrived at Duke).

One of the knocks on merit based aid is that it mostly provides money to families that don’t need the help as much as others. I basically agree and it has been proven to be correct in my experience. However, Universities are responding to incentives by using merit aid to recruit students who otherwise would be less likely to attend. And the maximum impact can be brought to bear on families just above the financial aid cut offs (~$150,000-$200,000) for places like Harvard, Princeton, etc.

Since the B.N. Duke is for kids from North and South Carolina only, we are able to recruit the parents directly as well, since most of them brought their child to campus for a scholarship weekend and we hosted them for dinner. Having a personal connection with the parents is a big advantage that the other scholarships at Duke don’t have (because the students come from all over the world, typically). Hence, the B.N. Duke could be expected to have a higher yield that the other Duke scholarships, which is borne out in most years.

In the end, if you want to provide more money to students based on financial need, that argues for a place like Duke to get rid of merit aid and put it all in needs-based pots of money. However, if you want to recruit kids away from Harvard, merit aid targeted towards families in the $150,000-$200,000 income level is the way to go. A merit scholarship is a surprisingly difficult way to recruit a top student from a low income family to a place like Duke.

*These are my personal thoughts and don’t reflect those of others at the University, or in the scholarship program(s).

The future of the UNC System: Overview of Benefits

Determining the set of policies that will determine the future of the UNC system (the 16 colleges and universities and the North Carolina School of Science and Mathematics [NCSSM]; a baording high school offering 11th and 12th grade) is one of the most consequential actions the North Carolina General Assembly will undertake this session. Indeed, it is an ongoing effort, but few doubt that the reduction in per pupil expenditures since 2007-08 necessitated by the economic downturn means that we are now in a particularly consequential time for the future of our State’s system. I am going to write a series of posts on how I think we should think about the future of the UNC system.

Given finite resources, we need to carefully assess the cost and benefits of public expenditures on our University system (and anything else paid for with public money). Precisely estimating benefits is tricky, but at least we can make clear what the categories are. This post lays out what I think the broad categories of “what we get from the UNC system” are. Measurement of these can be hard, and the relative importance of them can be disputed, but the first step is getting the categories straight.

Direct Education

• Teaching undergraduates. A basic task of the UNC system is providing undergraduate education. What is the goal of getting an undergraduate degree? A better informed citizenry is an assumption of a democracy, and producing educated citizens is a vital goal of college. There is often viewed to be a tension in the drive for more/better science, technology, engineering and math (STEM) education, which I support, and the re-invigoration of a vibrant liberal arts education, which I also support. We need both, and the liberal arts education should teach students to assess, interpret, decide and advocate. In the end, both forms of education (liberal arts and STEM, which are best integrated), are about teaching students to solve problems. A key goal of the UNC system is to produce better citizens who can solve problems, and while doing so provide the skills and credentials necessary for students to obtain a job or prepare for more education. The UNC system also has a high school in the form of NCSSM.
• Credentialing professionals. The UNC system provides professional education in the form of Medical, Dental, Nursing, Law, Physical Therapy, Business schools.
• Training researchers. The creation of knowledge is the essence of a research university, and the education of Ph.D. students is a vital part of this for the UNC campuses that have at least 1 Ph.D. program.

Research

• Universities in the UNC system are typically involved in the creation of knowledge and understanding, which is a practical definition of research. UNC Asheville is the only undergraduate-only teaching college in the UNC system, and NCSSM is a high school. The other institutions are necessarily engaged in research to varying degrees, with UNC Chapel Hill and North Carolina State being world class research universities. I know that NCSSM is also involved in research and suspect that UNC Asheville is as well, simply because that is the way professors and teachers tend to think about the world (increasing knowledge).

Service

• The basic job description of a professor in a research university is Research, Teaching and Service. Service can mean within the University or to a given discipline, but in a public University system typically encompasses a responsibility of faculty to interpret, explain, advance and apply research findings and knowledge to the general problems of society. You could think of this as translating research into practical benefits for the State, and also informing future research by understanding the needs of the State. In this way, the University of North Carolina system has the responsibility to make North Carolina a better place, not only for the students that are taught, but for all of the people of the State.

Health Care

• Both UNC Chapel Hill and East Carolina University have direct patient care responsibilities that benefit North Carolina. This could be called service, I suppose, but is a big enough enterprise to warrant its own category, I think.

Intangible

• I submit that the University of North Carolina system has provided large intangible benefits to the State of North Carolina. Such benefits are hard to quantify, and may be disputed. The question here is how important is our University system in defining the essence of our State.

These are the broad categories of benefit that are provided by our University system. Of course there are costs, or money that is spent on our University system that cannot be spent elsewhere. The question going forward is how much to spend, how and to what effect? I have not included “jobs” as a benefit of our University system because in a cost:benefit analysis framework, jobs are typically thought of as transfers, in large part because we could do something else with the money we spend on Universities. The point here is that the goal of Universities is not to give people jobs, but to undertake teaching, research and service. Above and beyond the question of how much we will spend on our University system are the questions of how will this spending be employed.

The future of the UNC System

The future of the University of North Carolina system (the 16 campuses) does not look bright.

In the face of the economic downturn and reduced tax revenue, difficult choices had to be made in the past and that is true going forward; Gov. McCrory’s new budget represents a roughly 8.5% reduction from the pre-recession budget of 2007-08 (per pupil spending; adjusted for inflation) for the 16 campus University system. Most states have cut even more from their higher education spending the past 5 years, and the question for each state is how to best spend/invest finite resources going forward?

For North Carolina, the UNC System is more important to the essence of our State, than average. If you want to find a bipartisan idea across the State, it is that we are not the deep South. If you go further, this notion is summed up by the question: why is North Carolina different from Alabama today? Two answers leap to the front of my mind:

• Political leadership (think Terry Sanford instead of George Wallace)
• The UNC System

The system of public Universities in this State have had a tangible impact on our people. For example, only one of my grandparents graduated from high school. But my mother and father both graduated from UNC Chapel Hill in the early 1960s and become a Pharmacist and a CPA. I then benefitted from 3 degrees from there and am now a professor at Duke.* Endless versions of the same story can be told for all of the UNC campuses.

There is a powerful intangible benefit of our University system as well. The investment in the UNC system over the latter half of the 20th Century sent a signal that our State was investing in a future based on education. The development of the Research Triangle Park and the two great public research Universities (and the private one down the way) in the Raleigh/Durham/Chapel Hill area made North Carolina at first a safe, and eventually an attractive part of the South into which businesses could locate, grow and thrive. Each UNC campus has a similar story of local and regional impact. The status of a our State as ‘new South’ could be quite fragile–earned over long periods of time, but lost quickly. The wrong decisions on the future of the UNC System are about as quick a way to erode it that exists.

Tough decisions do have to be made in our State budget, and University system, of course. However, the fact that our new Governor’s first substantive comments since inauguration on the topic came in breezy form for on a nationally-syndicated political radio talk show audience doesn’t inspire a great deal of confidence. The decision of the Republican-controlled General Assembly to only appoint Republicans to the Board of Governors places the future of our State University system in a similar “political first” light. And in this instance, it is not the case that the Democrats did the same thing. As anyone who understands North Carolina politics knows, there are plenty of Conservative Democrats, especially down East. I don’t think the corollary exists in the modern Republican party. Making difficult decisions about the  future of our University system is hard enough. The fact that these decisions, and this future now lies within an overtly partisan atmosphere is bad for our State.

I will have some thoughts next week about how I would go about thinking through the future of the University of North Carolina system.

*for my fellow Tar Heel grads, the last part is a good thing. Trust me.

North Carolina Republicans Intro bill to block Medicaid expansion and exchange

Update: Thursday, 1/31 11:2am the State Senate Insurance Committee has passed S.B. 4; floor debate Monday night.

Republican Senators Apodaca, Brown and Rucho today introduced Senate Bill 4, whose title is “No N.C. Exchange/No Medicaid Expansion.” The text primarily seems to restate/make clear that the N.C. General Assembly is the only body that can enter into a Partnership Exchange with the federal government (and not the Insurance Commissioner, for example), and also states that only the General Assembly can undertake the Medicaid expansion under the ACA.

My guess is that we will have a federal exchange this year, and the partnership exchange that was put in process under Gov. Perdue will be terminated. I would be very surprised if we don’t do the Medicaid expansion, mostly because of who is for it (Think Duke, UNC, Carolinas Health Care System, Hospital Association), and I suspect it turns out to be a key issue in looming tax reform to be undertaken in a balancing of worries about regressivity in preferred tax reform propoals. Also, most attention on tax reform moves to increase sales taxes are focused on worries about their regressive nature and harming the poor (which are legitimate concerns), but the proposals being discussed would add tremendous sales taxes to health care systems (like Duke, UNC, etc.) in a variety of ways. They are more politically powerful than the poor….

I predict that going ahead with the Medicaid expansion becomes key in allowing the Republicans to get the tax reform they want (overall progressivity/regressivity is influenced by both the tax and spending side). More on all that later

Here is some of my past blogging on the N.C. Medicaid expansion/Exchange set up choice:

• June 28, 2012 (SCOTUS reform decision and federalism)
• June 30,2 012 (outline of N.C. decision and redistributional nature of federal spending)
• July 3, 2012 (more details on N.C. decision)
• August 3, 2012 (Impact of Medicaid expansion on jobs)
• August 13, 2012 (Medicaid is not one program)
• August 21, 2012
• A good overview of evidence on the impact of Medicaid on health from Austin Frakt

Health Exchanges and N.C.

• November 12, 2012 (Will NC implement Obamacare-I?)
• November 15, 2012 (Will NC implement Obamacare-II what is an exchange?)
• November 15, 2012 (Gov Perdue exchange decision)
• November 16, 2012 on N.C. exchange decision (with vid)

Disclosure: I am a professor at Duke but not an employee of Duke Health System, nor do I have any role in the leadership of the health system. My wife is a nurse at UNC hospitals.

North Carolina tax reform options

Scott Drenkard and Joseph Henchman of the Tax Foundation outline four tax reform options for North Carolina that are based on a report financed by the Carolina Business Coalition. The link noted in the News and Observer op-ed doesn’t make it to the full report; I will add it and read it when I can find it (update: here is study).

I like the way that the op-ed lays out four options that they claim each raise the same amount of revenue as the current tax code (with the proviso that I haven’t read the full report; I am taking what they say at face value for the time being). As I have written about federal tax reform, the most important decision is how much revenue you intend to collect; then you legitimately move to the issues of fairness, impact on growth, and the like. There is no need touting an idea that cannot raise the revenue being targeted.

The op-ed highlights four options. Again, they say that each will raise the same amount of revenue as the current tax code and they  focus on the growth side impacts; issues of distribution and fairness are also important. I would also note that progressivity/notions of fairness are also influenced on the spending side, so the state’s decision on the Medicaid expansion will become very important in how any tax reform is viewed.

• “Option A” makes North Carolina the most pro-growth tax system in the country, simplifying the personal income tax at 6 percent, lowering the statewide sales tax to 3.5 percent while expanding its base to services, and repealing the corporate income and franchise taxes.

• “Option B” keeps all the major taxes, but simplified and at low rates: a 5 percent income tax, 5 percent sales tax and 5 percent corporate tax. A similar positive reform was adopted in Utah, contributing to its economic success.

• “Option C” would eliminate taxes on individual and corporate income and broaden the sales tax base to services to make up the revenue. The total state sales tax rate would have to be raised to 8.75 percent to fully fund current levels of state spending, but the benefit of this option is that North Carolina would be one of the few states with no taxes on investment or job creation.

• “Option D” eliminates taxes on retail sales and corporate income, paying for these reductions with a single, simple tax on individual income at a flat 10 percent rate.

By the way, if you think all these options sound “easy” read this.

Why did normal order go away?

Later today the House is to vote on HR 325, a bill to suspend the debt limit until mid-May and then the debt limit will automatically be increased by the new debt incurred during the interim.* The idea is to take away the notion of defaulting and then move toward normal order budgeting (Senate and House do their thing, including instructions to committees for things like tax reform, health policy, etc.) and then they bang it out in a conference committee(s). Just a few thoughts:

• Normal order (House and Senate doing their thing and having conferences) really stopped with the release of the Simpson-Bowles plan in Decmeber, 2010. Recall that if it had gotten 14 of 18 votes that it was to get an  up or down vote in both Houses, so already that wasn’t normal order.You could say POTUS walked away from his own commission (I said it was a mistake in my book, namely because the Fiscal Commission assumed the implementation of the ACA), or you could say that Republicans (and Bernie Sanders) filibustered the initial proposal to create such a commission (aka Conrad-Gregg Commission) within the Congress (no one seems to remember this). My main point is that once you had a big commission and the promise of an up or down vote with certain levels of passage, that was the end of normal order.
• Then we had the debt limit fight of July/August 2011. No way there was going to be normal order while that typically political stunt event (party out of power laments debt increase, but a few vote for it if needed) was turned into some pledging to default, etc. for leverage. That was resolved by setting up a Super Committee that was supposed to either undo the Sequester with a Grand Bargain, or let the Sequester (that was designed to be mutually hated) move forward. No way there was going to be normal order while Super Committee was meeting; it sucked all the policy oxygen out of the room.
• Then it was an election year, and the sun-setting of the taxes and the Sequester (together the fiscal cliff) and so there was no hope of normal order given those two things. There was even less hope of normal order when you had the administration moving to implement the ACA and Republicans saying if you elect us (House + Senate + Gov Romney) we will repeal the ACA.

That is how the last two years were ‘not normally ordered.’ Now there is a reasonable chance for a return to normal order and I generally think that is good thing. The area in most need of clarity is health policy, especially with House Republicans saying they will have a budget that will balance in 10 years (last Spring’s took 30). If they go ahead and embrace the higher tax baseline it will make it a bit easier, but they sure won’t be able to have a Medicare policy that says we have all these great things that will start in 10 years. Should be interesting.

In the drive for a sustainable budget, the Democratic party is far more reality based than are the Republicans for two reasons. First, they realize it will take higher taxes to fund any vaguely palatable level of spending as the Baby Boomers move into Medicare, Medicaid and Social Security. Second, they have a health reform plan that is flexible, meaning it allows for mid course corrections, additions, etc. Republicans say they want lower taxes, and still don’t have a coherent health reform approach even for a higher level of taxation, much less for one lower one. Normal order should make this a bit clearer.

*This approach has the effect of allowing the debt limit to increase without anyone ever voting for an explicit amount. This is actually a reasonable way to do this forever. It is better to fight it out via budgeting/appropriation process rather than after the fact.

note: revised Democrat party to Democratic party….didn’t trade in my card. thanks to @afrakt for the pointer, and revised in several others places for clarity.

A Chance for Normal Order

Word from the House Republican retreat that they will take up a 3 month debt limit lift vote next week along with a stipulation that both the House and Senate pass a budget (or don’t get paid; 27th Amendment notwithstanding; Issa has already said it is Unconstitutional). This is good news from an ‘avoiding economic calamity standpoint’ and is designed to get the Senate to ‘go first’ in terms of taking the next step in our ongoing discussion of our nations fiscal future.

This presents the Senate–as an Institution–with a great chance to step it up and chart the way forward, in much the same way that they did with the fiscal cliff impasse when they passed the bill that finally resolved the issue 89-8. My guess is that they will get this and get down to business and pass a normal order Budget Resolution with some big policy provisions, which they haven’t done for several years (Kent Conrad would say the Debt limit deal in August 2011 was the 2012 and 2013 FY Budgets). However, it would be good to get back to normal order legislatively. The below is a prediction of sorts, probably colored by what I want to see happen.

• A budget out of the Senate that does not cut domestic discretionary spending spending any more than the Budget Control Act of 2011 did. This is not where the problems lie.
• A framework for a full tax reform, individual and corporate (with target amounts of new revenue to be raised via tax reform) with the House Ways and Means Committee to then take up the heavy lifting along with the Senate Finance Committee on the details. In my book Balancing the Budget is a Progressive Priority, I say that we need to collect at least 21% of GDP in tax revenue given any plausible level of spending given the movement of the Baby Boomers into Medicare, Medicaid and Social Security. I think the current tax code we have might raise ~19.0-19.5% of GDP, but don’t know that we know for sure….but it will take more taxes given the Baby Boomers (we often spent more in the 1970s and 1980s when they were paying taxes). If you disagree, show me your health reform plan.
• The Senate will identify a set of next steps on health reform, some of which are bad policy and some pretty good. However, this is a budget resolution, so the heavy duty work will have to be done later in the House Commerce and Senate HELP committees (and maybe others). I expect they will do more means testing in Medicare for sure, and might raise the Medicare age, do something to the tax treatment of employer sponsored insurance, and link a competitive bidding demonstration in Medicare to state movement on exchanges. The details are important, but the details will not be done in a budget resolution. Anything that gets both parties on board to some degree on health reform is a good step.
• The outline of a Social Security reform that couples the raising of the OASDI payroll tax cap (the wage amount to which the tax applies) back slowly to the 1983 Greenspan Commission target of the 90th percentile of wages, along with a benefit cut (and tax increase) likely from the chained CPI that was bubbling around the fiscal cliff deal
• We need to cut Defense spending, but I am not that optimistic about that taking place.

My guess is that they pop something out of the Senate with ~70 votes and then we see what happens in the House and they have a conference committee and the various committees get to work on the policy details. It is a big moment for the Senate, and a chance for them to be the grown ups. We will see if they can take the opportunity.

Genetic Nondiscrimination Act of 2008 and LTC Insurance

NPR has a story on the legal (h/t Brad Flansbaum) use of genetic information to discriminate (underwrite, set premiums) in the private Long Term Care (LTC) insurance market. I am the first author of the paper that Bob Green (the P.I. of the underlying study) is discussing in the NPR piece and I have blogged about its findings here and here.

The basic story of the paper in Health Affairs is that persons with at least one copy of the e4 variant of the APOE-4 genotype were found to be both more likely to move to a nursing home in a community cohort of elderly persons living in 5 N.C. counties, as well as being found in the REVEAL II study to alter their behavior upon finding out they were at increased risk of AD, including making changes such as buying Long Term Care Insurance. In short, this is adverse selection whereby consumers have information that companies do not, a story that likely keeps insurance executives up at night.

The biggest news of the segment was the report that Genworth, the largest seller of LTC Insurance in the U.S. acknowledged that the The Genetic Nondiscrimination Act (GINA) of 2008 does not ban the use of genetic markers to underwrite their product, and they stated they wished to keep this option available to do so (some states have moved to do so). I blogged at some length on this back on October 2011 (that it was allowed for LTC Insurance), but I have never heard anyone from the LTC Insurance industry acknowledge they wanted to keep this option.

I think it is a mistake to take a reflexive “see the insurance companies are bad” response to this story, and that in Long Term Care especially, we need some renewed thinking about what ‘fairness’ means.

The general idea behind GINA 2008 is that you cannot pick your genes, so to discriminate against someone on that basis is unfair. This makes general sense to me, and likely to most people. However, in a private insurance market with very low penetration (~less than 7-10% of persons in age ranges to consider such products buy them; this post highlights the many reasons) what constitutes fairness is not as clear. An average risk person who wants a LTC policy because they have no children, for example, yet who ends up paying a higher than warranted premium due to adverse selection in the market (those with higher risks signing up) could also be viewed as being harmed in an unfair manner.The chart below lays out how different scenarios of who knows genetic information in LTC could influence uptake and premiums. The table is meant as food for thought.

The bottom line answer to planning for LTC is risk pooling, and if ever there were a risk distribution that called out for social insurance it is LTC. That seems impossible politically at this time. However, the LTC system in this country is a patch work mess that is in need of some sustained policy efforts. This post has a weeks worth of links on planning for LTC, from both an individual and population basis if you want more. Long Term Care is always the forgotten topic until someone in your family needs it.

Social Security: OASI and DI

A brief response to a comment from yesterday’s post. When CBO projects the point at which the Social Security trust fund will be “exhausted” that means there are no more securities to redeem to pay benefits that are now greater than payroll taxes flowing into Social Security, and under current law when this occurs benefits must equal taxes flowing in. Thus,  if we do absolutely nothing, there will be an ~ 25% benefit cut in about 20 years (shown as 2033 in table below, 3rd column OASDI, last row). As an aside, while this would be a big cut, it also means that people saying “Social Security won’t be there at all when you retire” don’t understand the program’s finances. I don’t suggest doing nothing and allowing such a cut, but ~75% of benefits is a lot greater than 0% of benefits, obviously.

However, something must be done to Social Security (2012 Trustees report from which above table taken) within the next few years, because the trust fund that back stops the Disability Insurance portion of the program will be exhausted in 2016 (DI column above, last row). Again, this doesn’t mean there will be nothing, but there will occur an automatic benefit cut within the next few years sans action. When CBO provides a date of 2033 for OASDI trust fund exhaustion, they are assuming that Congress and the President will pass a law that will allow the co-mingling of the OASI (old age, survivor) with the DI (disability) trust funds, thus allowing Disability benefits to not be cut around 2016. It has long been assumed they would act in this way, but it is my understanding that it will take legislative action for this to occur.

cross posted at samefacts

Keith Hennessey on debt limit and health reform

Keith Hennessey has a long piece noting that a debt limit fight is bad politics and bad economics, that prioritization won’t work and that Republicans should instead fight it out around the sequester and the continuing resolution that is funding the government. It is a reasonable strategy that reduces the chance of economic calamity, while allowing them to make their policy case in the House of Representatives. The weak point of his strategy is stated in a simple sentence:

Propose specific entitlement spending cuts to substitute for the sequester cuts you don’t like (presumably in defense). On this one sit and wait for Democratic nondefense appropriators to panic. You won’t have to wait long. (emphasis mine)

Keith’s analysis of the politics of replacing the defense side of the sequester with specific entitlement cuts is likely correct, but the House Republicans will have to actually write down these entitlement cuts to trigger this effect. By entitlements, he means Social Security, Medicare and Medicaid. Given his past positions in health policy, he might include the tax expenditure on employer paid health insurance, which would be reasonable in my opinion. So, he is suggesting that House Republicans finally commit to a detailed health reform proposal and/or suggest cuts in Social Security (means testing Medicare and/or Social Security could also be proposed).

I completely agree with him that Republicans need to do this. That has been what is most missing from public policy debate since the passage of Obamacare–what Republicans are actually for in health reform. A few program specific thoughts:

• Obamacare actually caps the heretofore unlimited tax preference of employer paid insurance via the Cadillac tax (in 2018). Republicans could call for a more direct capping of the preference that would serve to point out the subsidy flows to people like me with good jobs. I would be in favor. Of course the risk of altering this tax treatment is making sure there is a stable source of health insurance in case it serves to weaken the employer/insurance link (a good outcome IMO, all else equal). Well, Obamacare has a Medicaid expansion and is setting up exchanges, so the Republicans could embrace that now. Or propose an alternative to expand coverage, or they could just say we do not believe in using public policy to expand coverage. As Keith said in July 2012, unless Republicans clean swept the 2012 election, Obamacare would be here to say. Republicans could just acknowledge that and move to specific alterations they would like and maybe we could have a policy debate.
• Medicare. Where to start. House 2012 Budget cut Medicare by $716 Billion over 10 years just like Obamacare. Gov. Romney pledged to restore the cuts, and start a premium support program in 10 years, thereby pledging to do nothing for a decade in Medicare. In Nov/Dec as part of fiscal cliff Republicans said we have to cut entitlement spending, but never said where or how. Keith says they should do so now. I agree. Reihan Salam suggests the Domenici-Rivlin approach. I think if you got rolling on an exchange-based-deal-cutting approach it could look something like this.
• Medicaid. A block granting of Medicaid of the type and magnitude of the House 2012 Budget is a total non-starter; just ask all the Republican Governors, who didn’t have to say anything last Spring because they knew the budget would go nowhere. However, this is where a consequential deal could take place, that could actually improve care and reduce costs. My book calls for federalizing the cost of the dual eligibles to reduce left hand/right hand cost shifting, and moving low income Medicaid beneficiaries into state based exchanges down the road. Now this would be plenty controversial on left and right, but my point is that the care of the duals is a big problem from both a quality and cost problem, and the politically viability of Medicaid long term is in doubt, so we would be better served to move toward subsidized private coverage. Big changes are needed here in my judgement.
• Social Security. I think it is laughable that Republicans will propose a Social Security cut. Think back to the Sunday before New Years when word bubbled about chained CPI for Social Security being in a deal, Harry Reid said no, and Republican Senators stampeding the cameras in the Capitol to say it wasn’t their idea. Now chained CPI and/or more means testing plus raising the cap to which the OASDI payroll tax applies back to the essence of the 1983 Reagan/O’Neill deal (90th percentile of wages) is inevitable at some point, why not now.

The Democratic party believes taxes has to rise more to have a sustainable budget, and has passed a health reform plan that has a logic that can be modified. It includes a Medicare cost containment strategy (IPAB) that is the part that Republicans seem to hate the most. Yet, elected Republicans have as yet offered no concrete legislative proposal to which they will commit. Thus, they say they don’t want to raise taxes more, and that we must address entitlement spending but don’t say how. We most decidedly do if we were to ever have a budget that balanced anywhere near 18-19% of GDP that they claim to want. The bottom line as I read Keith Hennessey is that Republicans should commit to these details now as part of the sequester and continuing resolution debate and fight it out. I agree, but will be shocked if they do.

update: fixed typo