Counterparties: How not to fix Medicare

By Ben Walsh
December 11, 2012

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Among the many conventional wisdom fixes in the latest reports on the fiscal cliff negotiations: raising the eligibility age for Medicare.

Combine the costs of Medicare with Medicaid expenses for the poor and, as one professor said, you’ve got “pretty much the entire ball game” of US debt. “Government spending on medical expenditures outstripped revenues by $775 billion, which represents 58% of the 2011 Federal deficit,” Robert Dittmar calculated.

But the mention of a raising the Medicare eligibility age has drawn an outcry from economists and policy wonks. For that, you can blame, well, math. Raising the cut-off for Medicare to 67 from 65 would save the US government $5.7 billion in 2014, but would increase total health care costs by $11.4 billion, including higher costs for employers and states. Worse, it could raise premiums by some 3%. And, though the CBO says the move could save the government $148 billion over 10 years, it would have an outsized effect on the less educated, minorities, and the bottom 50%, who, unlike the well-off, have seen almost no increase in life expectancy in the last 30 years. In Duncan Black’s words: “it will cost money, not save money, and also kill people”.

Matt Yglesias calls this “an absurd means of saving the federal government money—akin to raising $12 billion in taxes and then setting half the money on fire. The only people who actually benefit from this shift are health care providers who get to charge higher prices to 65- and 66-year-olds.” Ezra Klein wonders if policymakers have “a kind of elite blindness” to the idea that some people — poorer people, especially — don’t like to work. Making people wait longer for Medicare, he writes, would address exactly none of America’s truly crucial healthcare problems:

It doesn’t modernize the system or bend the cost curve. It doesn’t connect to any coherent theory of health reform, like increasing Medicare’s bargaining power, increasing competition in Medicare, ending fee-for-service medicine, or learning which treatments work and which don’t.

Klein’s preferred age-related approach, from Ezekiel Emanuel, would tie of Medicare eligibility to lifetime earnings. — Ryan McCarthy 

On to today’s links:

Long Reads
E.Coli, antibiotic resistance and heart attacks: Inside the modern beef industry – Kansas City Star

Liebor
Three men arrested in Libor manipulation investigation – Dealbook

Housing
It should really be possible for middle-class families to afford decent-sized houses in places like Brooklyn – Matt Yglesias

Milestones
New Yorkers’ miserable lives reach record length – Mike Bloomberg

Regulations
The unsurprising winners and losers of right-to-work laws – Brad Plumer

Investigations
HSBC will pay a record $1.92 billion to settle charges that it laundered money for Iran and drug cartels – Dealbook
HSBC got the bank equivalent of a stiff speeding ticket – Tim Fernholz

Popular Myths
No, risky mortgage lending didn’t cause the financial crisis – Noah Smith

Oxpeckers
Adventures in absent fact-checking, Buzzfeed edition – The Oatmeal
Why we won’t have tablet-native journalism – Felix

Quotable
MBA expenses: expensive dinners and “traveling to ski resorts over long weekends” – Forbes

Contrarian
Peter Peterson, failure – Dave Weigel

Good Luck With That
Fareed Zakaria’s grand fiscal bargain: end the war on terror – WaPo

Data Points
The alarming decline of Jedi Knights in England and Wales – Guardian

Time to Panic
America’s milk industry is in crisis – WSJ

New Normal
A rising number of active duty soldiers are too obese to serve – WaPo

7 comments

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“Government spending on medical expenditures outstripped revenues by $775 billion, which represents 58% of the 2011 Federal deficit,” Robert Dittmar calculated.

I think $775B is darned close to what the pigs-at-the-trough at the Pentagon consume each year. Add in DHS, “Intelligence”, military “assistance” at State and you easily push $1T.

Certainly health costs need to be managed. Single payer would do that. Why don’t these supposed “wonks” look for fat pigs to slay and advocate single payer? Why not thow in Eisenhower income tax rates, indexed to inflation and taxing capital gains and carried intrest as ordinary income while we’re at it…

Posted by upstater | Report as abusive

“Ezra Klein wonders if policymakers have “a kind of elite blindness” to the idea that some people — poorer people, especially — don’t like to work.”

What’s the stupidest thing I’ve read today? I’m grading papers, so it’s still close, but I’m going with this. Almost everybody takes for granted that most people, if they don’t hate to work, at least would prefer something other than what they do for money if money weren’t necessary. It is the people who complain “I don’t like to work; you should pay for my living expenses so I don’t have to” who earn the most contempt from people who do jobs, even jobs they sometimes or usually find fulfilling or otherwise enjoyable, to earn their living expenses and the taxes that get taken out by these cretins who think “I don’t like to work” is a reason to enslave the rest of us.

That’s right, as I get angrier and angrier I start echoing the libertarian extremist rhetoric I read on my social media. I’d better stop now before I start trying to quote Ayn Rand.

Posted by dWj | Report as abusive

We WILL have a single payer system in the US by 2020. That is not avoidable mathematically. Companies are already splitting full-time benefited positions into 2 or 3 part-time non-benefited positions. The large majority of non-owner employees at small businesses carry no insurance.

At my small-friendly-profitable-traditional-mu tually-owned bank family health insurance alone is worth 50% as much as an entry level salary.

What we will need to accept is healthcare will not be any more equal than the housing stock we allocate, the cars we chose or chose not to drive, or the quality of food we eat.

The idea that a 70 year old non-working poor person should be eligible for EXACTLY the same government provided benefit as a 18 year old working poor person is a quaint notion which makes zero sense for society at large. The idea that a high earning worker will get EXACTLY the same level and quality of care as a low wage worker is equally non-nonsensical.

ALL government paid health benefits will continue to morph into a high return on investment system. For example every government dollar spent on flu shots saves 10 in costs. At the other end of the spectrum would be the $100 the government routinely spends for every hours of additional life provided by intensive end of life “care.” In that worse case scenario our return on investment is much worse than a total loss. There we “invest $100 to keep someone alive another hour and what do we get… nothing but the bill for the next hour.

The government can provide dignity, comfort and, compassion for 1/2 of what we spend today… but to do it we need people to see the truth.

Posted by y2kurtus | Report as abusive

Excellent comments, y2kurtus!

The questions over who should be eligible for Medicare when obscures the real problem — health care is more expensive here than anywhere else in the world. And as bean-counters take charge, that will translate into reduced quality of care.

If it is true that shifting the burden from government to employers doubles the cost, then a single-payer system is obviously the way to go. It is a “tax” on business operations either way you pay for it, so employers would surely prefer the cheaper path.

Posted by TFF17 | Report as abusive

“$5.7 billion in 2014, but would increase total health care costs by $11.4 billion, ”

It almost certainly would NOT do this. Part of the reason non-medicare healthcare costs are high is subsidize the medicare patients, so by taking patients out of medicare costs would likely go down.

On top of that while I am in favor of single payer (basically medicare for everyone), if we are going to have “healthcare for the old who are unable to work”, it only makes sense to raise the age as people are healthier and more able to work and jobs become less physically strenuous, and more amenable to e-commuting.

There is no reason we cannot ask the 65 and 66 year olds of today to perform like the 63 and 64 year olds of 1980.

Posted by QCIC | Report as abusive

dWj-

Couldn’t agree more, and while I have sympathies with the libertarians, I often think they make fools of themselves.

But nothing makes me more sympathetic to them then when you hear the cry go up for the poor souls who don’t want to or cannot work.

A) Almost no one wants to do whatever it is they do for money. Most people have some hobbies or other interests they would rather pursue if they could get paid for them or didn’t have to work.

B) While I feel sorry about the lack of life skills and institutionalized barriers a lot of low income people face, the basic fact of the matter is a lot of them are not hard working and don’t have many economically useful skills. It is all well and good to say “oh being an airport greeter for $8/hr is a hard job and Bob the Banker couldn’t do it”. But in my experience Bob the banker could do it really well and the person who does do is just as often a horrible employee as a diligent one.

We provide a huge amount of assistance for the less well off in this country and any of them who really wanted to and were committed to improving their lot and life could. That is the tricky thing about equality of opportunity.

Liberals say “see poor parents ending up raising kids who are poor so their is no equality of opportunity”. And in some sense they are right. But in another sense the problem is that poor parents raise lazy ineffectual workers and that is why their kids typically stay poor.

In generally I still fall on the liberal side politically, but the older I get and the more interaction I have with the lower class the less sympathy I have for fixing all their problems with handouts.

Posted by QCIC | Report as abusive

“We provide a huge amount of assistance for the less well off in this country and any of them who really wanted to and were committed to improving their lot and life could.”

Which country is this that you live in? I will have to suggest to Americans who are unlucky enough to get sick, miss some work because of it, lose their job and insurance, then die b/c without a job they can’t afford healthcare, that they should move there. Your country sounds much nicer.

Posted by Auros | Report as abusive