Monday, June 13, 2011

More on the Thoma – Krugman – Lieberman Health Care Debate

In Which The Dismal Political Economist’s Posting Helps Create a Good Discussion

Earlier The Dismal Political Economist posted a rare (for him) criticism of Paul Krugman’s criticism of Sen. Liberman’s proposal on changing the funding for Medicare.
This has resulted in a fair amount of exchanges on Mark Thoma’s Forum (sorry about the earlier misspelling Mr. Thoma, problem with spell check).  The Thoma posting and the comments are here.

Now The Dismal Political Economist is always surprised by what comes from issues like this.  He expected the focus to be on Mr. Lieberman’s proposal to raise Medicare Premiums and to raise the Payroll Tax to help fund the future Medicare funding shortfalls.  Instead, as readers will see from the Thoma Forum, the focus has been on raising the eligibility age.

One of the best things to come out of the comments was a link to a Kaiser Foundation study which looked in depth at that issue.

It turns out, as expected that the results are complex.  There is no single generalization and the conclusions of the Kaiser report are

We estimate that one-fourth of the 65- and 66-year-old adult population who would be affected by an increase in the age of Medicare eligibility—those with low incomes who would qualify for Medicaid or generous premium tax credits and cost-sharing assistance through the Exchange—would face lower out-of-pocket costs than they would have paid under Medicare in 2014 as a result of this policy change. However, three-fourths would face higher out-of-pocket costs, on average, due to higher premium contributions for employer-sponsored coverage and for coverage in the Exchange. The shift of adults ages 65 and 66 from Medicare to the Exchange is also projected to increase premiums that would be paid by adults younger than age 65 in the Exchange, as older adults enter the Exchange risk pool. In addition, Part B premiums paid by the elderly (ages 67 and over) and by disabled Medicare beneficiaries would be expected to increase, as the healthiest and lowest-cost segment of the Medicare population is removed from the Part B risk pool and shifted to the Exchange or to employer-sponsored plans. States and employers are also expected to see increased costs. In light of the 2010 health reform law, this analysis updates—and to some degree upends—the conventional wisdom about the effects of raising the age of Medicare eligibility.

 As with previous studies, we find that raising the age of eligibility for Medicare would be expected to reduce Medicare spending, although the savings are expected to be lower than previously estimated because of the new costs of providing subsidized coverage to those with low incomes under Medicaid or the Exchange. Raising the age of eligibility is expected to reduce out-of-pocket costs for 65- and 66-year-olds with relatively low incomes, on average, while increasing premiums for others, including the majority of those ages 65 and 66 with incomes above 200 percent of the FPL, adults younger than age 65 in the Exchange, and seniors and people with disabilities who remain on Medicare. Given the magnitude of the changes that we estimate would occur by raising the Medicare eligibility age, this analysis underscores the importance of carefully assessing the distributional effects of various Medicare reforms and savings proposals to understand the likely impact on beneficiaries and other stakeholders.

This is good stuff, and other than the expected level of  hyperbole and histrionics, the discussion on the Thoma Forum is also good.  All in all, a relatively good day for the debate on Medicare.

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