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| EXPANDING MEDICARE
The Pros and Cons of Increasing Medicare Eligibility January 16, 1998 |
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Questions asked
in this forum:
Is the Medicare proposal a federal government power grab? If the proposal is "revenue neutral", why not expand Medicare? Is there the political will to increase premiums if health care costs continue to rise? Who can afford $3600 to $4000 a year for Medicare? How will this proposal impact health care generally? Will this allow business to start reducing its health coverage? Ross Kendall from Newberg, OR asks: It seems perfectly reasonable to me to allow people to buy into the Medicare Health insurance system. As long as these new recipients are paying for their polices and the program is income neutral to the Government why not? How many people do you anticipate will take advantage of this program. How are they covered now? If they aren't covered now what do people who oppose this idea of allowing them to buy Medicare propose in its place? No coverage at all?
The National Taxpayers Union responds:
Although President Clinton's proposal to expand Medicare is portrayed as being "income neutral," past experience suggests that such predictions will prove inaccurate.
Perhaps the best (worst?) evidence against promises of Medicare expansions today is the dismal track record of Medicare expansionists of the past. In 1965, Part A was enacted, the House Ways and Means Committee forecast that outlays for the program would reach just $9 billion by 1990. The actual 1990 price tag was $67 billion. In light of this gross underestimate, we would all be wise to question the "revenue neutrality" of Clinton's proposal.
Even if this history of fiscal miscalculation does not repeat itself, proponents of the program admit that it will cost between $2 billion and $3 billion just to administer. This estimate relies on the forecast that some 300,000 of a possible 3 million uninsured individuals take advantage of the program.
Introducing competition for consumer health care dollars could make insurance more affordable for working-class citizens, and could provide a "safety net" for insurance should they become unemployed. This, combined with the existing health care safety net of Medicaid, VA hospitals, and private subsidies, would be a more constructive approach. Any gaps could be addressed through health care "vouchers" given through the tax system for those who could not save enough through their MSAs.
Joseph White responds:
Good questions! On the first, I guess opposition comes from three angles. On the right, there will be fears that more people will become attached to a "government program." On the left, there will be fears that making insurance "available", rather than affordable, will in the end not help very many people and make the program, and so other government action, seem like a failure. From the center, there will be worries that no matter how hard the government tries to make the program revenue-neutral, it will lose some (probably not much) money. The reason is called, in insurance terms, Adverse Selection. That is, the people who take the offer will be those who are surest that they need it, so, on average, sicker and more expensive than most. Or, given that it's a national premium level, people in more expensive parts of the country will be more likely to think it's a good deal, and so the costs of the people who happen to take it will be more than the average.
Nobody knows how many people will take up this program; I've seen estimates as low as a few hundred thousand. One reason is, we don't know how many of the uninsured will feel they can afford those premiums. Another reason is, we don't know if employers who are currently paying for, for instance, early retirees will accelerate their current trend of reducing coverage. One can even imagine an employer saying, "instead of our current contribution towards your insurance, we'll pay $200 (or whatever) per month towards your Medicare premium."
As for what the opponents would recommend instead, they will recommend whatever their current preferred "health care reform" might be. The Cato Institute folks, for instance, are sure to say that replacing our entire current insurance system with Medical Savings Accounts would make everybody happy forever.
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