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Of all the "austerity" proposals that Democrats are now proposing or supporting, the one that baffles me the most is the proposal to defer Medicare eligibility to age 67. This was one of the various recommendations in the Catfood Commission's proposals last December, and a favorite of Alice Rivlin, who concurrently served on the Catfood Commission and Pete Peterson's parallel commission, The Peterson-Pew Commission on Budget Reform. (Rivlin recommended Medicare eligibility be pushed back to age 67 for Peterson's commission, too.)

The Catfood Commission couldn't summon 14 votes from its 18 members to pass on any of its recs to Congress to enact--but as co-chair Alan Simpson correctly predicted last November, before the commission took its final vote on its recs, that the austerity measures would be resurrected during the debt-ceiling debate:

"I can't wait for the blood bath in April," said Alan Simpson at a Christian Science Monitor breakfast roundtable with reporters this morning. "It won't matter whether two of us have signed this or 14 or 18. When debt limit time comes, they're going to look around and say, 'What in the hell do we do now? We've got guys who will not approve the debt limit extension unless we give 'em a piece of meat, real meat, off of this package.' And boy the bloodbath will be extraordinary."

And here we are, eight months later. Joe Lieberman--who singlehandedly killed Medicare at 55 during the PPACA debate--has paired up with Republican Sen. Tom Coburn (who served on the Catfood Commission) to promote their proposed legislation to raise Medicare eligibility for to age 67.

Even worse, Pres. Obama has now come out in favor of pushing back Medicare eligibility to age 67, as David Nir, among others, diaried here a few weeks ago, and the president indicated in his speech last night that he's still planning on austerity measures for "entitlement" programs--if not now, then in the immediate future, as Rep. Kucinich points out in today's diary.

According to five separate sources with knowledge of negotiations — including both Republicans and Democrats — the president offered an increase in the eligibility age for Medicare, from 65 to 67, in exchange for Republican movement on increasing tax revenues.

The proposal, as discussed, would not go into effect immediately, but rather would be implemented down the road (likely in 2013). The age at which people would be eligible for Medicare benefits would be raised incrementally, not in one fell swoop.

The "incrementalism" that would come "down the road" in two years would be structured so that one year in age would equal one month's deferment toward Medicare eligibility. So someone turning 65 on Jan. 1, 2013, wouldn't be eligible for Medicare until Feb. 1, 2013; someone turning 65 on Jan. 1, 2014 wouldn't be eligible for Medicare until March 1, 2014, etc.--until the earliest age for Medicare eligibility for all seniors is pushed back to month of their 67th birthday.

I was among those who tentatively sighed relief in the past few days as the specter of a Grand Bargain lessened in favor of Harry Reid's proposal. But austerity measures like these, which are being offered up as a "balanced sacrifice" offsetting the tax rates for the wealthiest Americans dropping from 35 percent to 27 percent in some convoluted twist of logic, aren't now dead if Reid's bill passes; we'll just get a temporary reprieve until Catfood 2, Electric Bugaloo, comes out in a few months with its recs, which are almost certain to include deferred Medicare eligibility now that Pres. Obama has given his seal of approval.

The real question that comes to mind is how shunting 65 and 66 year olds into the private insurance market, without cost controls, will save either the government or consumers any money--given PPACA's subsidies. Take a look at the numbers:

In its most recent report, the government determined the annual average cost of spending for each Medicare recipient as of 2008:

The national average "actual" spending per beneficiary was $9,103. The corresponding "adjusted" average was $7,500.

Seniors themselves pay around $2,000/year in out-of-pocket costs (premiums, co-pays, donut hole for Part D), bringing the total to a ballparked $10,000 or so toward the cost of providing healthcare for Medicare recipients.

Now let's take a look what the private-insurance costs will be for a 64 year old under PPACA's various scenarios of the new health exchanges for individuals, using the Kaiser Calculator (the calculator only goes up to age 64 because of the assumption that anyone over that age is eligible for Medicare):

A senior whose income is $20,000 in 2014:
* Unsubsidized insurance premium = $10,172
* Federal government subsidy to private insurer = $9152
* Insurance premiums paid by the senior = $1,019
* Maximum out-of-pocket costs (not including insurance premiums) for the senior = $2,083

A senior whose income is $35,000 in 2014:
* Unsubsidized insurance premium = $10,172
* Federal government subsidy to private insurer = $6,847
* Insurance premiums paid by the senior = $3,325
* Maximum out-of-pocket costs for the senior (not including insurance premiums) = $4,167

A senior whose income is $45,000 or more in 2014:
* Unsubsidized insurance premium = $10,172
* Federal government subsidy to private insurer = $0
* Insurance premiums paid by the senior = $10,172
* Maximum out-of-pocket costs (not including insurance premiums) for the senior = $2,083

Actual insurance costs will likely be higher than those estimates  since age rates will increase at age 65, and absent price controls on private-insurance costs. And because PPACA's subsidies are based on percentages of insurance as a part of total income, it's almost guaranteed that the federal government's cost for the subsidies will increase each year--which seems as if it'd be a budget-buster on its own.

So essentially, the government will be taking the money it now spends per recipient on Medicare and instead giving it to private insurers as subsidies under PPACA. In other words, the government will be "voucherizing Medicare" for 65 and 66 year olds under this proposal.

Since around half of all seniors have incomes less than $22,000/year, it's a good bet that if Medicare eligibility is pushed back to age 67, many of them will be covered by Medicaid under PPACA's guidelines, which raised Medicaid eligibility up to 150 percent of the federal poverty level, or roughly $16,335/year. Since a portion of Medicaid costs are borne by states, rather than the federal government, it's hard to pin down actual cost; according to the SSA, Medicaid's cost-per-recipient in 2008 ranged from a low of $7,731 (Oklahoma, Coburn's home state) to a high of $32,309 (Connecticut, Lieberman's home state).

The combined state and federal cost of shifting seniors to Medicaid will be more expensive than keeping them on Medicare.

To sum up:

* For seniors who are 65-66, and who are lucky enough to find or retain employment that provides health insurance, costs will be shifted to employers and the seniors, and will be used as another excuse for age-related employment discrimination. Seniors' holding onto jobs that provide healthcare will make it even harder for entry-level workers to find jobs. But hey, it'll reduce the federal deficit!

* For seniors who are 65-66, and whose incomes don't exceed the federal poverty level, Medicaid will likely pay more per recipient than Medicare would have cost for more accessible coverage. But hey, the cash-strapped states pay about half the costs of Medicaid, so the fed's shifting its costs from Medicare to Medicaid will reduce the federal budget!

* For seniors who are 65-66, and who make less than the cap to qualify for subsidies under PPACA, the government will voucherize healthcare (as it does for others under PPACA) at a higher cost than it would have paid under Medicare.

* For seniors who are 65-66, and whose incomes exceed the level by which PPACA provides subsidies (about $42,000/year), the burden will fall directly on the senior with the expectation that they will pay about $12,500 toward insurance and out-of-pocket costs--or around one-third of their net incomes. But hey, it'll reduce the deficit!

Where are the advocacy groups that are shooting down this idea before it turns into a grim reality? Why are Democrats willing to risk their political futures, and the future of the party, with support of such a bone-headed proposal? And what can we, as activists, do to make sure this trial balloon turns into a lead balloon before it's passed as some sort of omnibus deficit-cutting legislation?

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Comment Preferences

  •  Really terrific diary. (6+ / 0-)

    Bookmarked for future use.  Thank you.

  •  I'm 61 (9+ / 0-)

    I can't check if I might have cancer (killed my sister, aunts, both grandparents), diabetes, cardiovascular disease until I am 65 because I have no insurance.  Frankly, my option right now is the "kindness of friends," which I learned from my dear gay friends who lived through the early HIV/AIDS nightmare -- collect pills from those who care about you and have a nice dinner party prior to sucking them down with a glass of wine.

    That's basically how I see health care for everyone who is without insurance in this country -- millions.  

    How many blue collar workers (if the employed are all the assholes are thinking about) can work to 67?  I'd like every politician to work as a steamfitter, electrician, nurse, coal miner, construction worker, etc. for just one week and get back to me.  Assholes.

    Vi er alle norske " My faith in the Constitution is whole; it is complete; it is total." Barbara Jordan, 1974

    by gchaucer2 on Tue Jul 26, 2011 at 05:36:39 PM PDT

    •  I'm 56 and self-employed... (5+ / 0-)

      ...and while I'm fortunate enough to be able to afford a junk insurance policy now, I figure with Anthem's 25 percent annual increases I'll be priced out of affordability around the time the PPACA mandates kick in.

      My high annual deductible and co-pays have resulted in my paying around $40,000 over the last decade in insurance premiums and yet never having met the deductible so Anthem had to pay a claim. While I'm happy that I've never experienced a serious illness or accident, I can't help but wonder where that $40,000 (plus the thousands I've spent out of pocket while technically "insured") would have been better spent or saved toward my retirement.

      And, as Eve and others have pointed out, even having junk insurance leads to deferring medical care, thus making it more expensive to cover us when we, as folks like you who are going naked on insurance, do finally become eligible for Medicare.

  •  Really great and well written diary. (3+ / 0-)
    Where are the advocacy groups that are shooting down this idea before it turns into a grim reality? Why are Democrats willing to risk their political futures, and the future of the party, with support of such a bone-headed proposal? And what can we, as activists, do to make sure this trial balloon turns into a lead balloon before it's passed as some sort of omnibus deficit-cutting legislation?

    Where are they? They are in one of two places: in bed with Wall Street or where the majority of the American people are: getting their fix of bread and circus, fretting about who will win "American Idol" or "Dancing with the Stars".

    We have become a country of nincompoops.

    "Perhaps it would be easier if the Government dissolved the People and elected another"--Brecht. equalitymaine.org

    by commonmass on Tue Jul 26, 2011 at 05:44:24 PM PDT

    •  Even labor's been kinda mealy-mouthed... (3+ / 0-)
      Recommended by:
      commonmass, Sunspots, Tanya

      ...as have Move-On and other third-party groups:

      On Friday, a coalition of national groups including MoveOn.org, Democracy for America, the Progressive Change Campaign Committee and the AFL-CIO organized an “emergency call-in day,” urging members in an e-mail to contact Democratic members of Congress and tell them to “keep their promises to reject any debt deal that slashes programs for seniors and working families while doing little or nothing to make the rich and corporations pay their share.”

      Members of MoveOn.org are also planning on calling Senate and House Democrats’ campaign arms as well as Obama’s Chicago-based reelection campaign in opposition to any deal that would not include spending cuts but no immediate revenue increases.

      The Service Employees International Union also sent an e-mail to 400,000 activists Friday calling on them to contact Democratic lawmakers and ask them to oppose any deal that “would make deep cuts to Medicaid, Medicare and Social Security benefits without asking for an ounce of sacrifice from corporations and millionaires.”

      *

      SEIU President Mary Kay Henry said that while the specifics of the reported Obama-Boehner compromise are yet to be seen, such a proposal would be “morally wrong at a time when it’s crystal clear that Republicans will not put revenue on the table.”

      “I think what the White House has been saying all along is that they want a balanced approach that has revenue in it,” Henry said in a brief interview Friday. “I know there’s lots of rumors about this Boehner proposal; we haven’t seen the details. We obviously support the White House approach (favoring a plan that includes both cuts and revenue increases). ... We’re going to continue to pound away on everybody we can.”

      Note the conditional opposition to "entitlement" cuts: Why is it "morally wrong" for these cuts to be made without getting rid of a few tax loopholes but "morally right" for them to be made if the tax rates are flattened, or for any other reason?

      Same goes for the call-ins to members of Congress that Pres. Obama urged last night: He wants us to say that we're for a "balanced approach" rather than in favor of spending cuts only--which has the effect of shifting that window a little further to the right, where "shared sacrifices" vs. all spending cuts becomes the allowable frame for discourse.

  •  According to a graph on the NYT.... (3+ / 0-)
    Recommended by:
    tardis10, Sunspots, Tanya

    ...those unemployed workers defined as "old" (55-64) are currently experiencing the longest wait for reemployment: an average of 54 weeks.

    http://www.nytimes.com/...

    These are the people who will be forced into Medicaid or voucherized into PPACA when they're 65 and 66, should the proposal for deferred eligibility come to pass.

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