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The Only Path to Medicare Solvency?

January 21, 2010

Ezra Klein proposes an alternative health-care bill to help the Democrats save at least a little face if they turn out to be as yellow-bellied as we think:

Democrats could scrap the legislation and start over in the reconciliation process. But not to re-create the whole bill. If you go that route, you admit the whole thing seemed too opaque and complex and compromised. You also admit the limitations of the reconciliation process. So you make it real simple: Medicare buy-in between 50 and 65. Medicaid expands up to 200 percent of poverty with the federal government funding the whole of the expansion. Revenue comes from a surtax on the wealthy.

And that’s it. No cost controls. No delivery-system reforms. Nothing that makes the bill long or complex or unfamiliar. Medicare buy-in had more than 51 votes as recently as a month ago. The Medicaid change is simply a larger version of what’s already passed both chambers. This bill would be shorter than a Danielle Steel novel. It could take effect before the 2012 election.

Well, Medicaid should definitely be federalized before it’s expanded, but the Medicare buy-in is really an interesting idea.  We’re all aware that Medicare is catastrophically insolvent, and the proposed cuts in the Senate bill will simply serve to drive doctors’ offices like the President’s beloved Mayo Clinic into not seeing Medicare patients anymore, which would probably eventually lead to a mandate on seeing Medicare patients, which will drive clinics out of business, which will lead to fewer medical treatment facilities, which will drive the cost up…

Anyway, it may no longer be possible to cut Medicare the way that Congress currently wants to.  But Medicare has to be cut.  Somebody has to do it.  And the Republicans, who are the favorite to clean up this fall, certainly don’t have a plan to do that.  But, as Mickey Kaus points out, the Medicare buy-in could be the only way to solve the program’s, uh, insolvency:

1) if the “buy-in” is unsubsidized, the new 55-65s will be paying much higher premiums for Medicare than the already-in 65+ crowd, whose premiums are subsidized by the Medicare portion of the Social Security payroll tax.**

2) Eventually these younger Medicare enrollees will start to complain to their Congressmen, “Why am I paying $550 a month when these old geezers pay so much less–even though they are bigger risks?”

3) Eventually, Congress will be forced to adjust the two premiums to bring them closer to parity–i.e. force to raise the premium on older Medicare recipients;

4) But that means many older Medicare recipients will be too poor to pay the increased bill. They will have to get subsidies;

5) Once these subsidies are accepted, there will be less reason not to raise Medicare premiums even further on the more affluent 65 recipients, while protecting the non-affluent with the subsidies;

6) Eventually, rich 65+ recipients might pay something close to the full cost of the Medicare insurance they are getting;

7) What’s the phrase they use for a government program in which the rich get little or no benefit but the poor get full benefits, with those in the middle getting middle-sized benefits. … Oh, right: Means-testing. The Medicare buy-in looks like a back door route to means testing what will be the most expensive part of Social Security.. …

Yeah, this is unfair.  It’ll be unfair if you’ve paid into Medicare your whole life and then the people who don’t have as much as you get free Medicare while you have to pay for yours.  But look at it this way: Medicare is insolvent.  Re-read that.  Something has to be done, and since every politician, including Barney Frank, is too scared of the “senior voting bloc” to act on it, this could be the only way.

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