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President Lyndon Johnson signed the Medicare bill July 30, 1965, as Vice President Hubert Humphrey and former President Harry Truman checked the time of the signing in ceremonies at the Truman Library in Independence, Mo. Lady Bird Johnson and Bess Truman stood behind their husbands. / File photo.

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Deficit doesn't require higher eligibility ages

  • November 16, 2012 - 6:14 PM

America's political landscape is infested with zombie ideas -- beliefs about policy that have been repeatedly refuted but refuse to die.

Right now the most dangerous zombie is the claim that rising life expectancy justifies a rise in both the Social Security retirement age and the age of eligibility for Medicare. Even some Democrats -- including, reportedly the president -- have seemed susceptible to this argument. But it's a cruel, foolish idea -- cruel on Social Security, foolish in the case of Medicare -- and we shouldn't let it eat our brains.

While life expectancy at birth has gone up a lot, that's not relevant to this issue; what matters is life expectancy for those at or near retirement age. When, to take one example, Alan Simpson -- cochair of President Obama's deficit commission -- declared that Social Security was "never intended as a retirement program" because life expectancy when it was founded was only 63, he was displaying his ignorance. Even in 1940, Americans who made it to age 65 generally had many years left.

Now, life expectancy at age 65 has risen, too. But the rise has been very uneven since the 1970s, with only the affluent and well-educated seeing large gains. Bear in mind, too, that full retirement age has already gone up to 66 and is scheduled to rise to 67 under current law.

This means that any further rise in the retirement age would be a harsh blow to Americans in the bottom half of the income distribution, who aren't living much longer, and who, in many cases, have jobs requiring physical effort that's difficult even for healthy seniors. And these are precisely the people who depend most on Social Security.

So any rise in the Social Security retirement age would, as I said, be cruel, hurting the most vulnerable Americans. And this cruelty would be gratuitous: While the United States does have a long-run budget problem, Social Security is not a major factor in that problem.

Medicare, on the other hand, is a big budget problem. But raising the eligibility age, forcing seniors to seek private insurance, is no way to deal with that problem.

It's true that thanks to Obamacare, seniors should actually be able to get insurance even without Medicare. But let's be clear: government insurance via Medicare is better and more cost-effective than private insurance.

You might ask why, in that case, health reform didn't just extend Medicare to everyone, as opposed to setting up a system that continues to rely on private insurers. The answer is political realism. Given the power of the insurance industry, Obama had to keep that industry in the loop. But the fact that Medicare for all was politically out of reach is no reason to push millions out of a good system.

What would happen if we raised the Medicare eligibility age? The government would save only a small amount of money, because younger seniors are relatively healthy and low-cost. But those seniors would face sharply higher out-of-pocket costs. How could this tradeoff be considered good policy?

The bottom line is that raising the age of eligibility for either Social Security benefits or Medicare would be destructive, making Americans' lives worse without contributing in any significant way to deficit reduction. Democrats, in particular, who even consider either alternative need to ask themselves what on earth they think they're doing.

But what, ask deficit scolds, do people like me propose doing about rising spending? The answer is to do what every other advanced country does, and make a serious effort to rein in health care costs. Let Medicare bargain over drug prices. Let the Independent Payment Advisory Board, created as part of Obamacare to help Medicare control costs, do its job instead of crying "death panels." (And isn't it odd that the same people who demagogue attempts to help Medicare save money are eager to throw millions of people out of the program altogether?) We know that we have a health care system with skewed incentives and bloated costs, so why don't we try to fix it?

What we know is that there is no case for denying older Americans the programs they count on. This should be a red line in any budget negotiations. Let's hope Obama doesn't betray supporters by crossing it.

Paul Krugman's column is distributed by the New York Times News Service.

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