Most of what’s happening now in the fiscal cliff saga is just posturing—each side is trying to appear open to compromise while at the same time assuring its base that sacred principles will be respected.
But this morning, Politico reported what could be the early contours of an actual deal that’s taking shape behind the scenes. There’s a huge caveat to this story, written by Mike Allen and Jim VandeHei, because it couldn’t be any more vaguely sourced. Allen and VandeHei refer only to “top officials,” “veterans of this budget fight,” and so on, so it’s impossible to discern who is feeding them this information and why.
But assuming for a moment it’s true, there are some details sure to give progressives indigestion. In exchange for Republicans agreeing to tax increases—including rate hikes—on the top two percent of earners, this is what is allegedly being talked about for entitlement reform:
There is only one way to make the medicine of tax hikes go down easier for Republicans: specific cuts to entitlement spending. Democrats involved in the process said the chest-pounding by liberals is just that — they know they will ultimately cave and trim entitlements to get a deal done. […]
Sen. Dick Durbin (D-Ill.) told “Morning Joe” on Tuesday that he could see $400 billion in entitlement cuts. That’s the floor, according to Democratic aides, and it could go higher in the final give and take. The vast majority of the savings, and perhaps all of it, will come from Medicare, through a combination of means-testing, raising the retirement age and other “efficiencies” to be named later.
These are truly damaging concessions. While means-testing might only reduce benefits of wealthy seniors, it begins a transition where Medicare is less an earned-benefit program and more of a welfare program, which would certainly leave it more vulnerable to political attacks down the line.
But the truly terrible idea here is raising the Medicare eligibility age. It’s something Obama reportedly offered in 2011 during the debt ceiling negotiations, and it was every bit a bad idea then as it is now. Yale political science professor Jacob Hacker has called it “the single worst idea for Medicare reform.”
The key facts to understand about raising the Medicare eligibility age: not only does it shift substantial costs onto seniors, it also doesn’t save the federal government any notable amount of money. It’s a lose-lose proposition.
By kicking seniors aged 65 and 66 off of Medicare, the government would at first seem to save $5.7 billion. Of course, this is nothing more than cost-shifting: those seniors would then have to pay $3.7 billion out of their pockets in 2014, according to the Kaiser Family Foundation. And some would likely be unable to find private insurance at that age if they’ve already retired. For those that are still employed, their employers are projected to spend an additional $4.5 billion to insure those who would otherwise be on Medicare.
So you’ve screwed over seniors and their employers, but at least the federal government saved some money, right? Not so fast. Because 65- and 66-year-olds are among the healthiest of all Medicare beneficiaries, what you’ve done is removed pay-ins from the people least likely to need expensive care. The risk-pool math looks worse, and the Congressional Budget Office has concluded that raising the Medicare eligibility age “would have little effect on the trajectory of Medicare’s long-term spending.”
When the Affordable Care Act goes into effect, that could help seniors excluded from Medicare until 67. It would keep them from getting denied for pre-existing conditions, and offer subsidies for care. But that would also likely drive up premium prices in the health care exchanges, because while 65- and 66-year olds are more healthy than the average Medicare beneficiary, they are decidedly less healthy than your average American. And the federal government will be the one kicking in those extra subsidies.
Some Democrats, like Senators Dick Durbin and Kent Conrad, would be open to raising the Medicare age down the road, once the ACA is fully implemented. But even then, you’re not saving the federal government any real money.
Many other Democrats and progressives have said no to this idea, however. House Minority Leader Nancy Pelosi says she’s not open to it, nor is Budget Committee chair Representative Chris Van Hollen. And outside Congress, powerful progressive groups are willing to throw down the gauntlet to stop it.
Adam Green of the Progressive Change Campaign committee told Salon today that if Democrats agreed to raising the Medicare eligibility age, it “would essentially start a nuclear war on the left.” MoveOn.org said it would support primary challengers to any Democrat that supported it. This could be a very dangerous proposition for the targeted Democrats: raising the Medicare age polls terribly among Americans of all political stripes, and notably Democrats, where it’s about 70-30 against.
Again, thanks to this morning’s very vague report, we don’t know to what extent this is actually on the table, or if it really is at all. Were it to happen though, it’s important to stress that raising the eligibility age is a lose-lose for the federal government and for seniors. The only winners are those with the ideological goals of shrinking the program—and the insurers picking up new customers.
Yesterday, nine CEOs met with Washington lawmakers to discuss their stake in fiscal cliff negotiations. George Zornick reports.