Counterparties: How not to fix Medicare

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

Three men arrested in Libor manipulation investigation – Dealbook

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

New Yorkers’ miserable lives reach record length – Mike Bloomberg

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

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

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

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

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


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