Addressing Medicare the Wrong Way

| Fri Jun. 10, 2011 1:33 PM EDT

Joe Lieberman has a plan for saving Medicare:

First, I will propose raising the Medicare eligibility age every year starting in 2014 by two months until it reaches 67 in 2025. So if you turn 65 in 2014, you will have to wait an additional 60 days before you become eligible for Medicare. That’s a small sacrifice to ask for the benefits you will receive from a healthy Medicare program for the rest of your life.

Etc.

I'm not a fan of raising retirement ages, and I'm really not a fan of raising the Medicare eligibility age. If you raise the Social Security retirement age, many seniors still have the option of leaving work at 65 and living off their own savings for a couple of years. But if you raise the Medicare eligibility age, they're stuck. It's flatly impossible for anyone that age to get private insurance, so they either keep working or they go without health insurance. Especially given the regressive structure of the life expectancy tables (poor people die at a younger age than rich people), this is just an egregiously punitive policy.

But there's another problem here. As I mentioned the other day, there are two problems with healthcare costs: levels and growth rates. Lieberman's plan reduces the level of Medicare spending, but it does nothing to address growth rates. That's backwards. If healthcare costs keep growing at the same rate they're growing now, it swamps everything else. If you cut spending a bit without controlling cost growth, all it means is that you've pushed your bankruptcy forward a couple of years.

Of course, the problem is that controlling spending and revenue levels is a lot easier than controlling cost growth. So, like the proverbial drunk looking under the lamppost for his car keys because the light is better there, that's where Lieberman is looking. But in the end, it won't work. It's true that we're likely to need ways to cut Medicare's spending levels and increase its revenue levels, but 80% of our energy should be spent on reining in cost growth. Lieberman's plan doesn't.

UPDATE: Actually, it's even worse than this. Raising the Medicare eligibility age would probably be bad for health outcomes and, in the end, might raise Medicare costs, not lower them. Austin Frakt and Aaron Carroll have the data and the charts here.

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