Invest in the future, or subsidize the past?
One of our long-running political stories is the economic assault on the young by the old. We have become a society that invests in its past and disfavors the future. This makes no sense for the nation, but as politics it makes complete sense. The elderly and near elderly are better organized, focus obsessively on their government benefits and seem deserving. Grandmas and Grandpas command sympathy.
Everyone knows that the resulting "entitlements" dominate government spending and squeeze education, research, defense and almost everything else. In fiscal 2008 -- the last "normal" year before the economic crisis -- Social Security, Medicare and Medicaid (programs wholly or primarily dedicated to the elderly) totaled $1.3 trillion, 43 percent of federal spending and more than twice military spending. Because workers, not retirees, are the primary taxpayers, this spending involves huge transfers to the old.
Now comes the House-passed health-care "reform" bill that, amazingly, would extract more subsidies from the young. It mandates that health insurance premiums for older Americans be no more than twice the level of that for younger Americans. That's much less than the actual health spending gap between young and old. Spending for those age 60 to 64 is four to five times greater than those 18 to 24. So, the young would overpay for insurance that -- under the House bill -- people must buy: Twenty- and thirtysomethings would subsidize premiums for fifty-and sixtysomethings. (Those 65 and over receive Medicare.)
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AARP justifies the cost-shifting as preventing age discrimination. Premiums based on age should be no more acceptable than premiums based on medical expenses reflecting race, gender or preexisting health conditions, it says. The House legislation bans those, so it should also ban age-based rates. AARP dislikes even the 2-to-1 limit. It thinks premiums for someone 22 and someone 62 should be identical. (In insurance jargon, that would be full "community rating.")
This is unconvincing. All insurance aims to protect against risk -- but within groups facing similar risks. Put differently, most insurance is risk-adjusted. Auto insurance premiums vary by age; younger drivers pay higher rates because they have more accidents. Homeowners' policies for similar houses cost more in high-crime areas. This is not "discrimination"; it's a reflection of risk and cost differences. Insurers that ignored these differences would soon vanish because they'd suffer heavy losses and lose customers.
On health insurance, we may choose to override some risk adjustments (say, for preexisting medical conditions) for public policy reasons. But the case for making age one of these exceptions is weak. Working Americans -- the young and middle-aged -- already pay a huge part of the health costs of the elderly through Medicare and Medicaid. These will grow with an aging population and surging health spending. Either taxes will rise or other public services will fall. Already, all governments spend 2.4 times as much per capita on the elderly as on children, reports Julia Isaacs of the Brookings Institution. Why increase the imbalance?
It's true that premiums for older people would be higher. But this might have a silver lining: Facing their true health costs, older Americans might become more eager to control spending.
David Brooks, NYT
During the first many decades of this nation’s existence, the United States was a wide-open, dynamic country with a rapidly expanding economy. It was also a country that tolerated a large amount of cruelty and pain — poor people living in misery, workers suffering from exploitation.
Over the years, Americans decided they wanted a little more safety and security. This is what happens as nations grow wealthier; they use money to buy civilization.
Occasionally, our ancestors found themselves in a sweet spot. They could pass legislation that brought security but without a cost to vitality. But adults know that this situation is rare. In the real world, there’s usually a trade-off. The unregulated market wants to direct capital to the productive and the young. Welfare policies usually direct resources to the vulnerable and the elderly. Most social welfare legislation, even successful legislation, siphons money from the former to the latter.
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But, alas, there would be trade-offs. Instead of reducing costs, the bills in Congress would probably raise them. They would mean that more of the nation’s wealth would be siphoned off from productive uses and shifted into a still wasteful health care system.
The authors of these bills have tried to foster efficiencies. The Senate bill would initiate several interesting experiments designed to make the system more effective — giving doctors incentives to collaborate, rewarding hospitals that provide quality care at lower cost. It’s possible that some of these experiments will bloom into potent systemic reforms.
But the general view among independent health care economists is that these changes will not fundamentally bend the cost curve. The system after reform will look as it does today, only bigger and more expensive.
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Reform would make us a more decent society, but also a less vibrant one. It would ease the anxiety of millions at the cost of future growth. It would heal a wound in the social fabric while piling another expensive and untouchable promise on top of the many such promises we’ve already made. America would be a less youthful, ragged and unforgiving nation, and a more middle-aged, civilized and sedate one.
We all have to decide what we want at this moment in history, vitality or security. We can debate this or that provision, but where we come down will depend on that moral preference. Don’t get stupefied by technical details. This debate is about values.
Did y'all know in Communist China the state-run system allows only one child per family, to benefit society? I wonder what Mr. Brooks thinks of that -- values, baby!
You choose yours (and pay for 'em); I'll continue paying for mine, without pushing the costs on to others in the pool. Sadly, we don't have the luxury anymore of "choosing" as Broooks suggests. In reality, we're spending somebody else's money, and the heydays of high living that Mr. Brooks and so many of his Boomer cohorts knew, are gone. No extra money laying around means we don't get to make these choices (on somebody else's dime, of course.)
I have a strong feeling that the Boomers just don't get this though. That they can continue consuming -- medical services in this case -- and eating themselves fat while others (non citizens?) do their manual labor chores. And then, no distinguishing in insurance plans between the healthy with minimal care costs and needs, and those with "pre-existing conditions" perhaps self imposed by poor diet, exercise, and smoking/drinking. Where's the red light for all that, if'n it costs the same to drive in the fast lane as the slow, and the slower ones are responsible for cleaning up after any crashes?
If there's honestly going to be no opt-out for those who would prefer to pay directly for their own costs incurred -- those people who indeed do treat minimally, yes all the way up to their date of death (you don't think those elderly exist? that they all run up huge costs in their final years -- ha!)-- then this bill had better die soon.
Can you imagine trying to sell this plan with the economy in deep hurt, the deficit out to here already, and an increasingly unpopular president with a Congress that -- to put it bluntly -- nobody trusts because they are so bought and sold....
Listen to the people of today and tomorrow, and kill this bill. Those still living in the flush past are welcome to donate their extra money to charity, to cover the costs of the needy uninsured poor with no relatives to help pay for their care, as well as the fatcats who understand how to make a buck by selling unnecessary services and shifting costs.
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