Two Reasons Why The Lieberman/Coburn Medicare Proposal Is A Bad Idea

Yesterday, Sens. Tom Coburn (R-OK) and Joe Lieberman (I-CT) introduced a bill that would reduce Medicare spending by $600 billion over 10 years “through premium increases, gradually raising the eligibility age and other changes.” Those include: 1) increasing monthly premiums for enrollees in Medicare Part B by 2 percent a year for five years, 2) asking individuals making more than $150,000 a year and couples making more than $300,000 a year to pay full Part B premiums, 3) instituting one deductible for both Medicare Part A, which covers hospitalization, and Part B, which covers doctors’ visits, 4) raising the age for Medicare eligibility from 65 to 67 by 2025, and 5) patching up the sustainable growth rate to eliminate payment cuts to doctors for three years.

The most striking provision is No. 4, and it’s part of the the reason why House and Senate Democratic leadership have already dismissed the plan as “a bad idea” and “unacceptable.” And for good reason. As the Incidental Economist’s Aaron Carroll explains, life expectancy is a fairly complicated measurement that varies drastically across geographical and economic lines. Any proposal that increases the program’s eligibility age would disproportionately affect people in both the poorest states and lowest income brackets:

But the other obvious problem is the cost shift to seniors: increasing monthly premiums would force beneficiaries to pay more at a time when they’re just scraping by. According to a new study from the Kaiser Family Foundation and the Urban Institute, half of seniors “had income lower than $22,000 in 2010; 25 percent had income lower than $13,000. Only five percent had incomes above $85,000.” Their savings aren’t any better: “half of seniors have savings less than $50,000; a quarter have less than $8,400 money set aside. Ten percent had more than half a million dollars, half of those people had a million dollars or more.”

The problem is that even if you ask seniors to pay more, health care spending would still continue to rise unsustainably — it’s just that individual beneficiaries rather than the federal government would be footing more of the bill.