Phasing out Medicare
May 22nd, 2008 | by Brian T. Schwartz |Congressman Paul Ryan has outlined a "comprehensive legislative plan called ‘A Roadmap for America’s Future’ in Wednesday’s Wall Street Journal . Despite its scary big-government sound, it has some good proposals for medical insurance, Medicaid, Medicare, and Social Security:
[T]here is a growing, bipartisan consensus about the greatest threat to our nation’s long-term economic prosperity: the explosion of entitlement spending. Unfortunately, Washington is not planning to address that problem this week, or any time soon. By doing nothing, we are shackling our future with unsustainable debt and taxes. …
The bill secures the existing Medicare program for those over 55 – so Americans can receive the benefits they planned for throughout most of their working lives. Those 55 and younger will, when they retire, receive an annual payment of up to $9,500 to purchase health coverage – either from a list of Medicare-certified plans, or any plan in the individual market, in any state.
Lin Zinser pointed out that people over 55 should have an option for a voicher, and that Medicare should eventually be phased out. Arnold Kling has suggested the following method:
The most practical way to phase out Medicare is to raise the age of eligibility, so that people spend more of their lives paying for their own health insurance and less of their lives taking government money. However, it seems to me that it would be unfair to change the terms of the social contract for people who are within 15 years of the traditional retirement age of 65. Therefore, I would start to phase out Medicare for people aged 50 and younger (which includes me - barely).
I would immediately raise the Medicare eligibility age to 75 for everyone aged 50 and younger. Then, I would index the eligibility age to average longevity, so that the eligibility age continues to rise as longevity increases. If longevity continues to increase at the rate of about 1/4 year per year, then the eligibility age would rise at that rate.
Once you reach 50, your eligibility age would be locked in. For example, someone who is 46 today would be given an initial eligibility age of 75. However, by the time they reach 50, the eligibility age might have increased to 76. At that point, that person’s Medicare eligibility would be locked in to age 76.
The medical insurance component resembles McCain’s policy proposals : tax credits for insurance that would free us our employer’s plans. Since this would be easier to change plans, insurers would have to compete for our business more than they do now.
As I’ve noted earlier , a tax-credit would be a more appropriate measure to offset what’s responsible for our employer-based system in the first place: that employer-based policies are tax-deductible.
Since tax-policy shouldn’t favor insurance over out-of-pocket spending, then either all medical expenditures should be tax-deductible, or none of them should.
Ryan also supports allowing us to buy insurance policies that are legal in other states. This would allow us to find less expensive plans and give states incentives not to cave in to special interests by loading up on benefits mandates. (As discussed here and here .)
(via Arnold Kling at EconLog )
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