News from the Net: Medicare Saves Money
from the New York Times via Bob DiSimone
By PAUL KRUGMAN
Published: June 12, 2011
Every once in a while a politician comes up with an idea that's so bad, so
wrongheaded, that you're almost grateful. For really bad ideas can help
illustrate the extent to which policy discourse has gone off the rails.
And so it was with Senator Joseph Lieberman's proposal, released last week,
to raise the age for Medicare eligibility from 65 to 67.
Like Republicans who want to end Medicare as we know it and replace it with
(grossly inadequate) insurance vouchers, Mr. Lieberman describes his
proposal as a way to save Medicare. It wouldn't actually do that. But more
to the point, our goal shouldn't be to "save Medicare," whatever that
means. It should be to ensure that Americans get the health care they need,
at a cost the nation can afford.
And here's what you need to know: Medicare actually saves money - a lot of
money - compared with relying on private insurance companies. And this in
turn means that pushing people out of Medicare, in addition to depriving
many Americans of needed care, would almost surely end up increasing total
health care costs.
The idea of Medicare as a money-saving program may seem hard to grasp.
After all, hasn't Medicare spending risen dramatically over time? Yes, it
has: adjusting for overall inflation, Medicare spending per beneficiary
rose more than 400 percent from 1969 to 2009.
But inflation-adjusted premiums on private health insurance rose more than
700 percent over the same period. So while it's true that Medicare has done
an inadequate job of controlling costs, the private sector has done much
worse. And if we deny Medicare to 65- and 66-year-olds, we'll be forcing
them to get private insurance - if they can - that will cost much more than
it would have cost to provide the same coverage through Medicare.
By the way, we have direct evidence about the higher costs of private
insurance via the Medicare Advantage program, which allows Medicare
beneficiaries to get their coverage through the private sector. This was
supposed to save money; in fact, the program costs taxpayers substantially
more per beneficiary than traditional Medicare.
And then there's the international evidence. The United States has the most
privatized health care system in the advanced world; it also has, by far,
the most expensive care, without gaining any clear advantage in quality for
all that spending. Health is one area in which the public sector
consistently does a better job than the private sector at controlling
costs.
Indeed, as the economist (and former Reagan adviser) Bruce Bartlett points
out, high U.S. private spending on health care, compared with spending in
other advanced countries, just about wipes out any benefit we might receive
from our relatively low tax burden. So where's the gain from pushing
seniors out of an admittedly expensive system, Medicare, into even more
expensive private health insurance?
Wait, it gets worse. Not every 65- or 66-year-old denied Medicare would be
able to get private coverage - in fact, many would find themselves
uninsured. So what would these seniors do?
Well, as the health economists Austin Frakt and Aaron Carroll document,
right now Americans in their early 60s without health insurance routinely
delay needed care, only to become very expensive Medicare recipients once
they reach 65. This pattern would be even stronger and more destructive if
Medicare eligibility were delayed. As a result, Mr. Frakt and Mr. Carroll
suggest, Medicare spending might actually go up, not down, under Mr.
Lieberman's proposal.
O.K., the obvious question: If Medicare is so much better than private
insurance, why didn't the Affordable Care Act simply extend Medicare to
cover everyone? The answer, of course, was interest-group politics:
realistically, given the insurance industry's power, Medicare for all
wasn't going to pass, so advocates of universal coverage, myself included,
were willing to settle for half a loaf. But the fact that it seemed
politically necessary to accept a second-best solution for younger
Americans is no reason to start dismantling the superior system we already
have for those 65 and over.
Now, none of what I have said should be taken as a reason to be complacent
about rising health care costs. Both Medicare and private insurance will be
unsustainable unless there are major cost-control efforts - the kinds of
efforts that are actually in the Affordable Care Act, and which Republicans
demagogued with cries of "death panels."
The point, however, is that privatizing health insurance for seniors, which
is what Mr. Lieberman is in effect proposing - and which is the essence of
the G.O.P. plan - hurts rather than helps the cause of cost control. If we
really want to hold down costs, we should be seeking to offer Medicare-type
programs to as many Americans as possible.
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