Life, Death and Deficits
By PAUL KRUGMAN
America’s political landscape is infested with many zombie ideas —
beliefs about policy that have been repeatedly refuted with evidence and
analysis but refuse to die. The most prominent zombie is the insistence
that low taxes on rich people are the key to prosperity. But there are
others.
And right now the most dangerous zombie is probably the claim that
rising life expectancy justifies a rise in both the Social Security
retirement age and the age of eligibility for Medicare. Even some
Democrats — including, according to reports, the president — have seemed
susceptible to this argument. But it’s a cruel, foolish idea — cruel in
the case of Social Security, foolish in the case of Medicare — and we
shouldn’t let it eat our brains.
First of all, you need to understand that while life expectancy at birth
has gone up a lot, that’s not relevant to this issue; what matters is
life expectancy for those at or near retirement age. When, to take one
example, Alan Simpson — the co-chairman of President Obama’s deficit
commission — declared that Social Security was “never intended as a
retirement program” because life expectancy when it was founded was only
63, he was displaying his ignorance. Even in 1940, Americans who made
it to age 65 generally had many years left.
Now, life expectancy at age 65 has risen, too. But the rise has been
very uneven since the 1970s, with only the relatively affluent and
well-educated seeing large gains. Bear in mind, too, that the full
retirement age has already gone up to 66 and is scheduled to rise to 67
under current law.
This means that any further rise in the retirement age would be a harsh
blow to Americans in the bottom half of the income distribution, who
aren’t living much longer, and who, in many cases, have jobs requiring
physical effort that’s difficult even for healthy seniors. And these are
precisely the people who depend most on Social Security.
So any rise in the Social Security retirement age would, as I said, be
cruel, hurting the most vulnerable Americans. And this cruelty would be
gratuitous: While the United States does have a long-run budget problem,
Social Security is not a major factor in that problem.
Medicare, on the other hand, is a big budget problem. But raising the
eligibility age, which means forcing seniors to seek private insurance,
is no way to deal with that problem.
It’s true that thanks to Obamacare, seniors should actually be able to
get insurance even without Medicare. (Although, what happens if a number
of states block the expansion of Medicaid that’s a crucial piece of the
program?) But let’s be clear: Government insurance via Medicare is
better and more cost-effective than private insurance.
You might ask why, in that case, health reform didn’t just extend
Medicare to everyone, as opposed to setting up a system that continues
to rely on private insurers. The answer, of course, is political
realism. Given the power of the insurance industry, the Obama
administration had to keep that industry in the loop. But the fact that
Medicare for all may have been politically out of reach is no reason to
push millions of Americans out of a good system into a worse one.
What would happen if we raised the Medicare eligibility age? The federal
government would save only a small amount of money, because younger
seniors are relatively healthy and hence low-cost. Meanwhile, however,
those seniors would face sharply higher out-of-pocket costs. How could
this trade-off be considered good policy?
The bottom line is that raising the age of eligibility for either Social
Security benefits or Medicare would be destructive, making Americans’
lives worse without contributing in any significant way to deficit
reduction. Democrats, in particular, who even consider either
alternative need to ask themselves what on earth they think they’re
doing.
But what, ask the deficit scolds, do people like me propose doing about
rising spending? The answer is to do what every other advanced country
does, and make a serious effort to rein in health care costs. Give
Medicare the ability to bargain over drug prices. Let the Independent
Payment Advisory Board, created as part of Obamacare to help Medicare
control costs, do its job instead of crying “death panels.” (And isn’t
it odd that the same people who demagogue attempts to help Medicare save
money are eager to throw millions of people out of the program
altogether?) We know that we have a health care system with skewed
incentives and bloated costs, so why don’t we try to fix it?
What we know for sure is that there is no good case for denying older
Americans access to the programs they count on. This should be a red
line in any budget negotiations, and we can only hope that Mr. Obama
doesn’t betray his supporters by crossing it.
I could not have said it better!!!
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