The elephant in the room with Senate Finance Committee members negotiating a health care reform package is not Republican recalcitrance, it’s the Medicare deficit. According to the Medicare Trustees “intermediate assumptions,” $38 trillion (260% of current GDP) would have been needed at year-end 2008 to fund over the next 75 years projected shortfalls for Medicare hospital coverage and to meet the federal government’s statutory obligation to pay its share of other Medicare benefits, including prescription drug coverage.
Yet Congressional Democratic leaders remain wedded to a health insurance mandate with subsidized premiums for low-income individuals, which would create a new federal entitlement. They are scrambling to find additional tax revenues and savings in projected medical costs to make their proposals budget neutral, including reductions in projected Medicare spending. However, even if it helped achieve budget-neutral legislation, a projected reduction in Medicare spending would not reduce projected overall deficits for federal health care spending. It would just shift projected spending from one program (Medicare) to others (Medicaid expansion and subsidized health insurance for the non-elderly).
Ironically, the American Association of Retired Persons (AARP) supports Democrats’ proposals for a health insurance mandate, even if cuts in Medicare spending are then needed to produce budget-neutral legislation. It has even been reported that AARP lobbyists are not authorized to sign off on any controls on Medicare spending unless legislation includes a health insurance mandate.
Given politicians’ visceral fear of antagonizing seniors, it’s conceivable that one motivation for Democrats’ byzantine legislative proposals is to begin the process of controlling Medicare spending with less political resistance than would result if the Medicare deficit were attacked head on. If so, then only in Washington could looming Medicare deficits help motivate a new entitlement that would extend government control over private health insurance and health care – without reducing overall projected deficits for federal health spending.
It’s possible that a health insurance mandate could benefit some seniors and near seniors temporarily. Apart from any low-income premium subsidies, caps on age-related differences in health insurance premiums under Democrats’ proposals would force younger buyers to pay higher premiums to subsidize baby boomers (like me) in their 50s and early 60s. Moreover, if legislation instead focused directly on addressing the Medicare deficit, current and pending retirees would likely bear more of the pain through higher Medicare premiums and less generous benefits. Enactment of Democratic leaders’ broad agenda might marginally reduce their pain, at least for a time, by pushing more costs on the non-elderly population.
Compared with targeting the Medicare deficit directly, legislation that includes a health insurance mandate and expands government control of health care might also produce a much larger interest group – most of the adult population – that could attempt to resist future constraints on government authorized medical care. Seniors would not have to rely primarily on their own political clout and that of many health care providers, however formidable.
It’s not clear whether AARP’s support for a health insurance mandate reflects these short-run considerations, as opposed to liberal idealism or other factors. For example, AARP might be able to generate significant increases in revenues by partnering with health insurers to sell coverage to people aged 50-64, one of its target markets, just as it currently partners in selling Medicare supplement coverage and Medicare Advantage plans to the 65 and over population.
Regardless of proponents’ motivations, the elephant will not go away if liberal Democrats’ reform agenda is enacted. Even if legislation were truly budget neutral, the $38 trillion health care spending deficit would still be there, and the legislation’s expansion of government controls over health care would inevitably be used to reduce services and limit peoples’ ability to obtain medical services they are willing to pay for. A significant majority will end up worse off, old and young alike.