How to Kill Medicare Even Faster Than Repugs Would

Raise the eligibility age, that's how.

Health insurance economics is simple: If you want to make or save money, you want more young, healthy people in your group of customers than old, sick people.

The young, healthy people pay lower premiums, but you still make/save money on them because they use so little medical care and therefore cost much less than they pay in premiums.

The old, sick people pay higher premiums, but they use so much medical care that they cost more than they pay in premiums, and you will lose money on them unless you have enough paying young people to make up the difference.

So, here you have Medicare, which is 100 percent old people and about 90 percent sick people, and as you might guess it's not saving as much money as it should if it had a bunch of young, healthy people in it.

How do you get younger, healthier people into Medicare? Lower the age of eligibility from 65 to, say, 60. Or maybe even 50. Then you get people who aren't as young and healthy as 30-year-olds, but they're younger and healthier than 80-year-olds, and their premium-to-cost ratio is still in Medicare's favor.

Simple, right?

Not if you're blinded by Austerity Hysteria.

Digby:

Just keep working old man

Brad DeLong writes about this dangerous CBO report that indicates that raising the Medicare eligibility age would save money and wouldn't be a big problem for 65 year olds because they could just stay employed or buy their own insurance:

[T]he major problem is with how CBO presents its estimates. It writes:

Director's Blog: Raising the Ages of Eligibility for Medicare and Social Security: If the eligibility age was raised above 65, fewer people would be eligible for Medicare, and outlays for the program would decline relative to those projected under current law. CBO expects that most people affected by the change would obtain health insurance from other sources, primarily employers or other government programs, although some would have no health insurance. Federal spending on those other programs would increase, partially offsetting the Medicare savings. Many of the people who would otherwise have enrolled in Medicare would face higher premiums for health insurance, higher out-of-pocket costs for health care, or both.

CBO estimates that raising the MEA [to 67] would reduce Medicare outlays, net of premiums and other offsetting receipts, by $148 billion from 2012 through 2021…

What is should have written, IMHO:

CBO estimates that raising the MEA [to 67] would reduce net Medicare outlays by $148 billion from 2012 through 2021. It would also reduce tax revenue collections over that time frame by $80 billion as corporations upped their tax-shielded spending on employee health benefits. 65 and 66-year olds and the businesses that employ them would spend an extra $220 billion purchasing Medicare-level health insurance. And 1/4 of 65 and 66-year olds would find themselves uninsured.

Raising the MEA: a really bad idea.

I have a sinking feeling that this one's going to happen. It's backed by all the Republicans and the centrist Democrats and the White house has been eager to sign on. It doesn't have the dedicated funding stream that Social Security has and Democrats won't fight it because the ACA will supposedly make up the difference. Except, of course, it won't, not really. For people over a certain age, the ACA helps mitigate the highest insurances costs, but it's still going to be very, very expensive for people of average to below average means. I have a suspicion that a very large number of the people who fail to buy insurance under the ACA will be in this older age group, and they are among the sickest. Paying the penalty will be far less than their insurance would cost and they'll just try to hang on for two more years until they can get into Medicare --- as they do now. Except they'll be two years older. And sicker.

Here's more from the Incidental Economist on why this is such a destructive, poor idea:

Why it costs two times more to raise the Medicare age from 65 to 67
Why it is bad for health, regressive, and requires the ACA to be fully in effect
Why the liberal case for it is weak
What it means for certain, large unions
Why the federal savings are actually very small
A podcast on this topic

Medicare's overhead is already just one-fifteenth that of private health insurance - 2 percent compared to 30 percent. The dirty-cheap, highly-efficient "government bureaucracy" of this single-payer program is a feature, not a bug. All it needs is a youthening tweak to the group demographics and it's solid forever.