Medicare a savings over private insurance

>> Sunday, June 19, 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 Sen. Joseph Lieberman's proposal, released earlier this month, to raise the age for Medicare eligibility to 67 from 65.
Like Republicans who want to end Medicare as we know it and replace it with insurance vouchers, Lieberman, I-Conn., 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." 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 compared with relying on private insurance. This means that pushing people out of Medicare, in addition to depriving many 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 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.
Health is one area in which the public sector consistently does a better job than the private sector at controlling costs.
Indeed, as economist and formerRonald ReaganadviserBruce Bartlettpoints 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.
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 kind of efforts that Republicans demagogued with cries of "death panels."
The point, however, is that privatizing health insurance for seniors, which is what Lieberman is in effect proposing — and which is the essence of the GOP 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.
Nobel Prize-winning economist Paul Krugman is a columnist for The New York Times.

Numbers

400% Increase in spending per Medicare beneficiary, adjusted for inflation, from 1969 to 2009
700% Increase in private health- insurance premiums, adjusted for inflation, during the same period

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