Finding Some Good News About Health Reform

No, nothing to do with the website—that still seems problematic at best. But the CBO just released new estimates of the budget savings that would result from raising the Medicare eligibility age from 65 to 67. The punchline that most have focused on is that this (terrible) policy change is now estimated to save just a small fraction of what it was estimated to have saved in previous years ($19 billion over 10 years in the latest estimate, compared to $113 billion over 10 years in previous estimates).

Why the change? Mostly because CBO has changed its estimates to better reflect that fact that those who enroll in Medicare at 65 and 66 are less expensive than previously thought. The genuinely expensive 65- and 66-year-olds that are covered by Medicare tend to have been allowed to enroll at earlier ages because of chronic illness or disability. Further, many 65- and 66-year-olds still receive employer-sponsored insurance and use Medicare as secondary insurance. CBO seems to have made re-estimates that boost the importance of both these issues in reducing the estimate of what newly enrolled 65- and 66-year-olds spend on Medicare.

But the report also reminds us of something else important, even if it is not new this year and did not change the 10-year cost-estimate significantly: a non-trivial portion of the estimated savings to Medicare stemming from raising its eligibility age would be lost to the federal government as a whole because lots of seniors would now have the option of being covered by expanded Medicaid or would receive subsidies to buy private insurance in the new health care exchanges.

We should be clear—these seniors would likely be worse off, and to the degree that raising the eligibility age moves management of health insurance away from Medicare and to private insurers (even regulated ones in the exchanges), this is both a bad and inefficient policy change.

But all of this should remind us of a key reason for liking Obamacare even if you think (like I do) that it has significant flaws: universal access, even delivered in a flawed fashion, makes it harder for policy hucksters to achieve false savings in our health care system and our budget through simple cost-shifting. This is a big deal.