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Monday, October 10, 2005

Incrementalism, Meet Medicare Expansion

Not many posts lately, because not much time. Here's an idea I've been thinking about for a while. I wrote it up recently when a friend who works for a DC consulting firm asked me (and others)
If ... you got to add one thing [to a list of things to improve America], what would it be? It has to be something you can deliver on that is measurable, e.g., equal pay or more affordable housing. You only get one.
Here's what I sent:
Here's my one idea: Expand health care coverage to all children under Medicare (NOT Medicaid). Arguments in favor are simple:
  1. Medicaid coverage generosity and eligibility rules are set by the states, so children in poor and rightwing states get very poor coverage. Medicare coverage rules are set nationally. You have one political fight to win on coverage and eligibility, and then everyone covered gets same coverage.
  2. As things stand now, Medicare's costs are skyrocketing---which as I understand it is due mostly to the fact that health care costs for adults are skyrocketing. Thus Medicare will be in serious political trouble in the near term if nothing is done: the GOP will argue that it is just too expensive, and its denizens will seek to undermine it piece by piece (a la the asymmetric rules for drug-price bargaining for private plans compared to traditional FFS Medicare that were tucked into Bush's prescription drug plan [note: one of the ironies of the GOP attack on entitlements is the costly--and likely inefficient--expansion of Medicare via prescription drugs; nonetheless, I think the endgame there is still clearly to kill FFS Medicare]).

    As an accounting matter, adding children will almost surely diminish the rate of growth of Medicare spending: I'm pretty sure that the rate of growth of children's health care is substantially below that of seniors'. Thus this reform would tend to make the numbers look better (even without changing the underlying facts).

    More importantly, adding children to Medicare would vastly enlarge the political constituency for Medicare preservation. Children have parents, uncles, aunts, and grandparents under the age of 65; moreover, children will remember that they received coverage when they become adults. If you want to diminish the possibility of generational warfare over the remaining welfare state pillars, this is by far the best way to do it.

  3. There would be inevitable pressure to expand coverage up the age ladder (from 18 to 21, say, and then 25, and so on), as well as down the ladder from 65 (the Clinton Administration considered a buy-in version of this idea for those aged 55 and up if I remember). Thus this policy would provide a clear way to harness children's coverage to the incrementalism wagon, with an eye to ultimately providing universal coverage.
  4. Consolidating coverage under Medicare likely would reduce fixed administrative costs that get paid many times by private insurers and state Medicaid programs. Thus this policy would tend to increase the efficiency of offering a given insurance policy [note: see Does Contracting Out Increase the Efficiency of Government Programs?Evidence from Medicaid HMOs by my colleague at UMD, Mark Duggan, for evidence that private insurers are in fact more expensive, at least compared to California's Medicaid program]. It would also allow employers to reduce their health insurance costs greatly (much of these savings would necessarily be offset by the higher taxes needed to fund expanded Medicare coverage, but given efficiency gains there would still be net savings; also, this is another place where the politics would be good because the reduced business costs would *look* business-friendly).

I'm sure I could think of more reasons. But personally I think this policy would have greater positive impact and also be more feasible (both technically and politically) then lots of other usual liberal wishlist items.

Just my one cent.

I'm sure my fiscally conservative econ peeps will thrash me (mentally, if not in the comments---though i bet strategery4 comes out of his self-imposed silence to blast me on this one). But in the long run this idea might well actually cost less than the status quo, and it has the advantage of expanding health coverage in a politically advantageous and sustainable way.


Anonymous Blue Cross of California said...

Great blog I hope we can work to build a better health care system. Health insurance is a major aspect to many.

12/02/2005 9:16 PM  

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