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December 06, 2012

Raising the Medicare Age Is a Uniquely Terrible Idea

Posted in: healthcare

There is probably no single policy being seriously discussed right now that is more idiotic than raising the Medicare retirement age. Not only would this benefit cut produce only modest savings for the federal government, but it would also do it in the most inefficient way possible. It would save the government money but by causing an ever greater increase in private spending on health care.

Medicare currently is significantly more cost effective than private insurance. Raising the Medicare retirement age would mean shifting many older people from a more cost effective government program to a less efficient private insurance system. This would not just force those near retirement to pay the full cost of their insurance, but since private insurance is a worse bargain these seniors would need to pay even more to get the same level of coverage Medicare would have provided.

Having these older people still in the private market would raise premiums for everyone who gets private insurance. Removing these young seniors from Medicare risk pool would also require increasing premiums for everyone else in the program.

Basically any other mechanism to impose austerity on people between the ages of 65-67 would produce a less bad outcome. Even raising taxes on this group or making them pay higher Medicare premiums instead would at least result in roughly a one dollar reduction in the deficit for every one dollar this group lost.

The fact that this idea has so much traction, despite it being such a radically inefficient way to reduce the deficit, shows how this debate is more about just forcing suffering on regular people than actuarial projections.

Photo by Mattes under Creative Commons license.


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