Raising Medicare age won't work

By Theodore R. Marmor

and Jerry L. Mashaw

Just when there seemed to be no more dopey ideas for reducing America's deficit, another one appeared.

Raising the age of Medicare eligibility from 65 to 67, according to Sens. Joseph Lieberman (I., Conn.) and Tom Coburn (R., Okla.), would save Medicare billions over the next decade and more. This was part of a package of proposals to reduce Medicare spending, including combining hospital and doctor coverage, changing deductibles, charging wealthier seniors more, increasing premiums, and cutting hospital debt payments. But the change in the eligibility age deserves the sharpest criticism, especially given that President Obama appears willing to consider it.

The only supposedly redeeming feature of the idea is that it would reduce Medicare spending by $7.6 billion a year, according to a recent Kaiser Family Foundation study. But that spending would only be shifted, not controlled.

Indeed, total health-care spending would be increased as both employers and seniors paid more. The Kaiser study estimates that 65- and 66-year-olds would spend another $5.6 billion a year, while employers would spend another $4.5 billion. That's spending $10.1 billion to save $7.6 billion.

If it's not prudently managed, Medicare does present a threat to federal finances. Though it has historically spent less per person than private insurers for comparable coverage, its spending has grown faster than American incomes. The problem is rising health-care expenditures, whether public or private.

But that has nothing to do with the number of Medicare beneficiaries. When most Americans turn 65 and retire, they shift from private health insurance to Medicare. More doing so means more Medicare expenditures. But this is a change in where expenditures show up - in public or private budgets - not in total health-care spending.

So there are two questions: How should public expenditures be paid for? And how can health-care spending be better controlled? The Lieberman-Coburn proposals conflate these issues, treating budgetary shifts as real increases or decreases in total health-care spending.