Medicare Madness

It’s been even longer than usual since my last post. In addition to my usual slothfulness, I’ve recently moved out of New York and back to the Midwest for another round of graduate school (just in case you care, which you shouldn’t). The upshot is that I’m feeling more energized these days and will hopefully be posting more often, particularly on economics-related issues.

I’m now going to put my newfound sanity to the test by dipping a toe back into the world of politics. I’d rather not rehash the whole ridiculous debt ceiling episode, but let’s just say that the whole debate, along with the subsequent S&P downgrade, had me thinking a lot about Baudrillard. More than usual, even.

Still, the devil is in the details, and it’s now emerged, at least if you believe what you read on Politico, that President Obama and Speaker of the House John Boehner had agreed, as part of a possible grand bargain, to gradually raise the eligibility age for Medicare from 65 to 67.

This is a terrible, terrible idea. Indeed, I’d go so far as to say that it’s the single worst idea for reducing the deficit that has any chance of being enacted anytime soon. And the fact that Obama would agree to such a thing less than 18 months after pushing an ambitious (albeit flawed) health care reform bill through Congress raises serious questions about the coherence of his policy agenda and/or the strength of his political character.

Why is raising the Medicare eligibility age such a bad idea? Clearly, many people (myself included) would find the idea of shifting more of the health care cost burden onto 65- and 66-year-olds, many of whom are already retired or otherwise ineligible for employment-based insurance, reprehensible in and of itself, but even if you don’t share this view, there are plenty of reasons to be opposed to this proposal. Chief among them from a fiscal point of view is that throwing 65- and 66-year-olds off Medicare would actually increase overall health care costs, as illustrated in this study by the Kaiser Family Foundation. Money saved by the federal government would be dwarfed by a combination of increased out-of-pocket costs, increased costs for employers, increased premiums for other Medicare beneficiaries (remember that 65- and 66-year-olds are, on average, the healthiest Medicare beneficiaries, so removing them from the pool necessarily increases costs for everyone else), and increased Medicaid costs for state governments.

This issue illustrates the myopia inherent in Washington’s current fixation on the national debt. Contrary to what you may have heard, we do not have a debt crisis in this country. We are not “broke,” and the current debt load is easily manageable with a few relatively minor policy changes, such as full repeal of the Bush tax cuts. We do, however, have a significant issue with escalating health care costs. Our health care system needs to become more efficient, regardless of what proportion of its costs are borne by individuals, employers, states, or the federal government. Any reform that saves the federal government money by increasing overall health care costs is a step in the wrong direction. The fact is that Medicare is the most efficient provider of health insurance that we have, and we should be expanding eligibility to everyone, rather than further restricting it.