Raising the Medicare retirement age

This has never seemed like a good fiscal solution to me.  In part it simply shifts expenditures from the public books to private hands.  That may have useful “shadow value properties” (if the government budget constraint is more immediately binding), but it’s not a net real resource savings for the economy as a whole.

And in part I am suspicious of such a discrete “notch” in how we treat individuals.  Right before your birthday you’re in one program and the day after your birthday you’re in a totally different program?  Something has to be screwy, though you can debate whether that screwiness is ex ante or ex post.  I usually think more in terms of smoothly sliding schedules and, when needed, changes in their slopes, with only gentle bumps in the relevant notches.

If the choice is “cut all payments by ?? percent” or “raise the retirement age by two years” I would opt for the former.  If (and oh what a huge if) you had a Cowenian dictatorial technocrat in charge, you could even think about lowering the eligibility age.  That said, everyone would be “buying in” to the program at much less favorable rates than is the case today.  I do fully understand the public choice reasons why that wouldn’t stick, why it would survive only in a Cowenian dictatorial technocratic equilibrium, and why in real democracy it would quickly become a “goodie” to be handed out to poorly informed, short time horizon voters in a disastrous, budget-busting manner.

Put all that behind us but store it in memory.  When I see President Obama considering an increase in the Medicare retirement age, here is what I do not infer:

1. I do not infer he is a coward (didn’t he stake his whole political future on ACA?).

2. I do not infer that he is a worse bargainer than are the Republicans.

3. I do not infer that he is a very stupid man.

4. I do not infer White House cabal theories which have his mind in the hands of evil villains, hellbent on reelection and ready to throw all progressive principles to the winds.

Here is what I do infer:

1. I infer he understands that the Medicare Payment Advisory Board isn’t going to live up to the high hopes for it.  It may not even survive.

2. I infer he understands that most other plans for Medicare cuts won’t get through Congress, and that it will only get tougher to pass such plans each year.

3. I infer he understands that somewhat fewer Medicare recipients at any point in time will, possibly, make it easier to reform and indeed improve other aspects of the program.

4. I infer he understands that Medicare truly is the budget-buster of our time and that its future will not ever be ruled by technocratic principles.

Most of all, I infer that our President has had a very deep, very true, and indeed very depressing education in public choice economics.  And I infer that any path to a workable fiscal conservatism will be tougher and more painful and more distortionary than we had thought.

Personally, I still would opt for an alternative route, even if it were doomed to fail politically.  But that’s a luxury I have precisely because I am not…President of the United States.

Addendum: Ezra Klein comments.

Comments

"When I see President Obama considering an increase in the Medicare retirement age...."

You should infer that he is a posturing, lying weasel, who will always claim to be "considering" anything that seems to put him in a positive light with those whose votes he needs at a particular point in time.

When he stops publicly claiming to be "considering" and instead does some "signing," your points may begin to have merit. Til then, you're his puppet.

Ad hominem. Please try again.

Jim -- You certainly have a way of simplifying a difficult problem. While others here on this blog worry about such things as economic efficiencies, balancing cost against benefit, and complex strategies attempting to satisfy apparently conflicting objectives, you distill politics down to its essence -- the opposition is posturing, lying weasels.

::Doofus!::

Where did "...the opposition..." come from? Jim didn't say anything about "the opposition".

I think Jim's point is that it's all political theater and you guys are taking it seriously. Or to put it another way, it costs Obama (and any other politician) nothing to "consider" something.

Actually, Keith Hennessy's post from yesterday says he gets paid to consider things.

Is he a weasel or a clown?

Why either / or?

There was a story in the WaPo today on how dialysis centers were bilking medicare by billing for large vials of meds and then throwing away what was not used for the treated patient. Of course such fraud is present in other areas of both Medicare and the traditional insurance system (e.g., unneeded tests and treatments). It's not a question of whether Medicare is good, bad or indifferent (and while I agree with your points above, the old folks lobby (of which I am one though a year away from Medicare) is not going to go out quietly on this one) but whether we as a society can continue to pay twice as much per capita on health care as the nearest western nation (Switzerland). This continuing cost increase is not only affecting Medicare but everything else since the cost of health care ultimately gets priced into economic activities one way or another (unless one just gives up and doesn't use any healthcare at all).

I suspect we will migrate to some type of grand reform since the current cost trajectory is unsustainable for both Medicare and the traditional insurer based model; the only question is when.

In part it simply shifts expenditures from the public books to private hands.

Isn't this precisely the objective of a lot of conservative policy? The government being wasteful with spending and privates more careful and so on?

Right before your birthday you’re in one program and the day after your birthday you’re in a totally different program?

Even if we don't raise the Medicare age doesn't this still happen in the existing setup, albeit at an age 2 years younger? The birthday discontinuity is still there. I don't see how we can practically transition without such a changeover?

I've no opinion about raising nor lowering ages, just that I couldn't understand the argument being made here.

I had the exact same reaction. What if instead of 2 years, we raised the eligibility age by 20 years? Would we still be talking about "simply" shifting costs?

I also had the same reaction. Wouldn't cutting payments also shift spending from public to private?

Hmmm. Does anybody ever lie and say that they are older than they really are so that they can get on medicare?

The answer is yes. Unless something changes than nothing changes. 20 years might be a reform. 2 years is a gimmick.

For a lot of people, the medicare retirement age is the operation retirement age -- they need to maintain employer provided benefits until they qualify for Medicare, which means they have to keep working. If that is pushed back, then probably so will their retirement, meaning not only a savings for Medicare but SS as well. This would, BTW, have relatively little impact on major groups of Democratic interest groups (public sector employees and unionized private sector employees) who generally have retiree health-care coverage that kicks in before Medicare. So, politically, I can see why Obama might be OK with this -- Republican voters are, on average, more dependent on Medicare than Democratic voters.

Would pushing retirement age older adversely affect unemployment rates in younger cohorts?

It may. If it did, I'd imagine it would cascade all the way down. Middle aged cohorts may have to wait longer to move up since those above them are retiring later. This causes entry level workers to wait longer to move up to middle-management, which in turn affects the demand for labor for younger cohorts entering the job market since fewer entry level people have moved up.

Why does anyone have to dig so deep to find some sense of competence or intelligence here? shouldn't it just pop out? How convoluted could it be?
Tyler, Why do you disagree with Obama's position then offer this tortured rationale? I am generally disinterested in what you think of Obama as a person, so i don't really care what you can and cannot infer about Obama.

Because when someone proposes something silly you have to convince yourself they aren't silly. And he may not care what you think about what he thinks about Obama, but he may care what you think about Obama. Most...ummm...whatever you want to call them...don't realize that they have a tiger by the tail and supposedly Obama does.

I would like to know more about Cowenian Dictatorial Technocratic Equilibria in other aspects of policy.

I'm with Rahul (first comment) on this one. My jaw dropped when I read Tyler's claim that government and private spending on healthcare are near-perfect substitutes. That's contrary to just about everything we know about the impact of incentives on the efficient allocation of resources. You could nationalize literally the entire economy on the basis of such a claim. DId perhaps Tyrone write this entry instead of Tyler?

The answer here is that medical care is a unique part of the economy in that (a) its rate of inflation far surpasses that of anything else and (b) it's very much an open debate over whether more individual cost sharing or more government involvement leads to a more efficient outcome.

That’s contrary to just about everything we know about the impact of incentives on the efficient allocation of resources.

"It's not what you don't know that hurts you. It's what you know that ain't so."

Tyler, you write "I infer that our President has had a very deep, very true, and indeed very depressing education in public choice economics."

For public choice scholars, politicians are lab rats. They are the ones to be studied, not the ones to be trained to become researchers or to understand research output. Are you suggesting/blaming public choice economics for your President's current standing? What about reelection as the driving force of an incumbent politician in a democracy as assumed/concluded in public choice economics? I'd have expected that your beloved Ezra Klein had written that nonsense, but you?

"If the choice is “cut all payments by ?? percent” or “raise the retirement age by two years” I would opt for the former. If (and oh what a huge if) you had a Cowenian dictatorial technocrat in charge, you could even think about lowering the eligibility age. "

Give a politician a choice between lowering benefits to all the old/sick/poor, or telling someone they're not eligible because they're not old/sick/poor enough yet. They'll pick the latter, especially old. Because everyone's going to be old enough one day and when that day comes they'll get their lavish benefits. Or dead, and if they're dead they can't complain about benefits not received.

The reason why politicians delay eligibility rather than reduce entitlements seems similar to why private industry prefers layoffs rather than across-the-board wage cuts. Or why public transport offers off-peak hour ticket lotteries rather than uniform ticket discounts.

"Cowenian dictatorial technocrat"

I would love to see a series of posts about this guy. Maybe go through all the major sectors and issues and give the Cowenian dictatorial technocratic response.

If only Tyrone did a little better in Cowen's classes.

He is a bully. He's lazy and not that smart. He overestimates his own intelligence because he has had his ass kissed for so long. His basic political orientation is socialist. He's a crap orator and still doesn't get it that his words no longer have effect. He should be removed from power in November 2012 to spare the country additional harm.

...he's an Illuminati, he smells funny, he was Casey Anthony's co-conspirator, he refereed the 2006 NBA championship, he consumes the blood of innocents to stay young...

Only difference between Dean and Rich's analysis is that Dean's requires some inside information, while Rich's is obvious to anyone.

Au contraire, my analysis applies to every political figure I don't like. Rich and I benefit from the streamlined efficiency of having a standardized set of ad-homs.

You had better look up the definition of ad hominem again. BTW, my comments are based on my observations of his demeanor, including his speeches, and as Tom indicated, they are pretty obvious. Even David Brooks is starting to see that Obama's pants' crease isn't so sharp any more.

My assessment of Obama is not standardized - it's custom made. I can't think of another person to whom they would apply. Also, he's a crybaby, too. That's how a bully reacts when others stand up to him.

From Webster's, an ad hominem is defined as "marked by or being an attack on an opponent's character rather than by an answer to the contentions made." Stick to talking about actual issues, it makes for a better and more interesting comments page.

If you reread my comments, I am not contending that Obama is wrong on any substantive issue because of bad character. I just think he is a bad character. That is separate from my almost complete disagreement with his ideas and desires for the country.

That's a lot of inferring based on a pretty thin set of evidence. As for him being a coward, with the ACA it was just like the bathroom scene in "Resevoir Dogs" for Obama - "you shit your pants and dive in and swim." He doesn't have to do that here because he hasn't really put himself into any sort of bind that where folding or holding pat have equally bad consequences.

Default isn't a bad consequence?

Are the politicians really concerned about default? Does that match the incentives they are looking at right now?

The irony here is that in order to prevent selective underwriting of the elderly who didn't get medicare later at 65, you would have to support the ACA--to prevent adverse selection and to create large pools from which insurers could not pick and chose.

After watching relatives, no one gets to chose their health conditions when they are older, even if they had a healthy lifestyle.

You could flip the problem the other way as well: let people, beginning at 62, buy into medicare, paying at 120% of medicare pool costs and using the excess returns of those who opt in to pay for the deficiency you were trying to recover by raising the age.

"After watching relatives, no one gets to chose their health conditions when they are older, even if they had a healthy lifestyle"

Bill, this is basically a non-sequitur. First, people do choose a lot of their health conditions. Their parents choose others. I know you aren't really declaring it a crap shoot, but if it really were a crap shoot then it is already game over. All of the future progress is going to be in personalized medicine. However, cryonics aside, you do have to die of something at some age. Once someone has signs of the disease a lot of the damage is done. Medicine can't be a crapshoot if we deal with the initial stages of diseases when the endpoint can actually be affected. The 'macro' question we are dealing with is do we grossly subsidize research, health, prevention, cure, or palliative care. Currently the government chooses to subsidize primarily palliative care.

I don't think it is entirely irrelevant. The question is how much do we hold a person accountable for his ill health? That affects a lot of the moral hazard arguments etc. and whether or not a state should help someone in bad health or deem it his own damn fault.

Andrew': Is the non-sequitur you're referring to your own comment:

"First, people do choose a lot of their health conditions. Their parents choose others."

The first is self choice, the second is another's choice (the parents), unless you believe you chose your genetics.

I also don't buy "people do choose a lot of their health conditions."

Don't know too many people who choose cancer (other than smokers).

People do choose genetics. That's the point. It may not be the child's free will, but the other point is what they are not is random.

"Don’t know too many people who choose cancer (other than smokers)."

This is what I'm talking about Bill. Some people can smoke and won't get cancer due to genetics. But all smokers are the only people you see as choosing their illness even though cancer is highly environmental.

People don't choose their own genes. Also, parents don't choose their childrens' genes. If they could, I'd have green eyes instead of brown. It's not completely random, but it isn't "free will" either. Don't be intentionally obtuse.

Wonder why Andrew's parents made such a bad choice. Free will indeed.

"4. I infer he understands that Medicare truly is the budget-buster of our time and that its future will not ever be ruled by technocratic principles."

Disagree. I think he has supreme faith in technocracy versus free markets.

"Most of all, I infer that our President has had a very deep, very true, and indeed very depressing education in public choice economics." True enough. The man didn't think normal laws and theories applied to him. He has been revealed for the utter novice in the real world that many of us knew him to be from the outset.

You are correct here Davey. I am kind of surprised by Tyler on this one. Tyler says I infer he understands that the Medicare Payment Advisory Board isn’t giving to live up to the high hopes for it. It may not even survive.. I agree that Obama maybe realized that IPAB may not survive. However, I don't think the former is correct, and that Tyler is forgetting one important fact. All of the current assumptions about Medicare cost growth, including those done to justify Obamacare, assume that IPAB works as advertised. However, Obamacare takes those savings and spends them on an entire new entitlement, therefore not reducing overall spending one cent. Forget about Conservative arguments that these costs are over-optimistic and unrealistic-- this problem exists even in the Administrations own numbers!

Obama got himself into this pickle by using his *savings* in Medicare cost to pay for Obamacare. This is a point the Megan McArdle makes all the time.

That's not a pickle, that's intentional. Using your savings in one program to fund another is how budget neutral legislation works. There's no sense really in including the probably that the opposition party will dismantle your cost controls when you price things out in the first place, so it's a forgivable error. Certainly better than the case where massive spending is agreed to without any offset.

Right, that is well understood, but you're missing the point. We had a long term growth issue in health spending. Obama comes up with a plan that cuts this spending, and then promptly spends these savings. The point is that the original issue remains, long term growth in spending! It just shifts the spending slightly into new programs, but nothing actually drops. And this is even under the President's own optimistic scenarios.

Even if you believe the administrations numbers, the savings in Obamacare are quite small relative to the original problem. There is no *fix* there.

Now, faced with the deficit battle, which remains even after his big headline program has passed--the President's preferred policy options for savings in Medicare is already used up, and he has to cast around for more dramatic solutions, with much of his political capital already spent. He put himself into this pickle.

I get what you're saying a little better now. I'd say in response that no one, as of yet, really has a plan to deal with the growth issue. You make a good point about not leaving any Medicare cuts in reserve, but ultimately I don't think it's as big an issue for the president because Medicare cuts aren't a priority for him. He can float plenty of ideas, but he's not going to expend any political capital to cut Medicare further. It's going to be the GOP that has to use their own political capital to force him to accept cuts. He's free to float compromise ideas, but he's fundamentally on the status quo side.

Medicare in the US costs as much per US resident as Medicare in Canada, but Medicare in Canada covers everyone while Medicare in the US covers only about a third (Medicaid is part of Medicare law).

The US spends more privately per capita than Canada spends per capita in total.

The US governments spend more per capita than Canada spends per capita in total.

And yes, in Canada, you do need to wait - in Canada, you have a two year wait for a death bed so you are forced to live two years longer to die in Canada because of rationing of death care.

The logical solution in the US is to use the Medicare spending to pay for more people to be more like Canada which has health care costs half of what we have in the US. And in the US,millions of people wait for one of the medical services who started out delivering health care in Africa and Asia to setup in the US and offer a free health clinic like they get in Africa here in the USA. The claim you must wait for health care in Canada does not change the fact millions in the US must wait far longer to get health care than anyone waits in Canada where the costs are half as much.

I took his suggestion to mean that he wanted to move the affected people to Medicaid. (Those who have been following the ACA news will know what I mean.)

I read Ezra to agree with me. They are willing to raise the Medicare eligibility age because many seniors will be able to get free health care from Medicaid (even middle class seniors), and upper middle class and high income seniors can purchase insurance (perhaps with some subsidy at the lower end of the income spectrum) through the ACA's exchanges. In other words, we can save Medicare some money, and spend most of it elsewhere, and, in the administration's view, that will help build a larger constituency for yet another medical spending program. What a bargain for conservatives.

Tyler, I think you're right that less rigid programs are better in theory. However, as you note, customization of programs opens all sorts of doors for abuse, and I don't trust any of the politicians to leave the doors closed. As a result, I think simple rules, like Medicare age requirements or a flat tax with zero deductions, are better. Simple rules are easier to manage and less likely to be corrupted.

I remember a story about the phone company Sprint. They were trying to design a program to generate cell phone subscriber growth among low income customers. The program was a collaborative effort by finance, markets, and tech people. In the early stages the finance people included a prepaid feature (or some similar mechanism) for credit protection reasons. Just before the program was to be launched, one of the top marketing people removed the prepaid aspect of the plan because it would retard subscriber growth. Sprint lost a ton of money on the program. The point is that bureaucracies are difficult to manage. I think that the economic inefficiencies of simple rules are more than offset by their relative ease of implementation.

I infer that preconceived notions and biases are extremely difficult to overcome and people conform new information to their beliefs opposed to changing their beliefs to reflect changes caused by newly received information.

Tyler,

You are smarter by a large degree than the president. So, ironically, I think all your positive inferences are completely wrong.

OR: why is one of the proffered choices not (he said naively and simply) a lifetime cap on access to Medicare payments? If as we're told most Medicare expenditures are "end-of-life" costs, limit each participant/recipient to a lifetime cap of whatever arbitrary number we can agree on, say, $250,000. If you don't die the first time, your odds go up the second time, but that's life, and that's death. And sure, throw in means-testing, if necessary for this form of healthcare provision to function; but dispose of these mindless notions of biolatray sooner rather than later, please.

"It simply shifts expenditures from public books to private hands."

Do you assume these folks will retire at the same age and pay for private insurance while they wait for Medicare? I've never seen a poll on such things but I'd have assumed that the vast majority would just work a few extra years, which would seem to solve two of the three big problems: a) people living longer and b) fewer workers paying into the system for each one that draws from it. [It does nothing for problem c) increasing cost per beneficiary.] I'll also anger the true Libertarians here by saying that raising the age would benefit the people who had to wait longer for Medicare because retirement, while much coveted, basically kills most people. The stop being functional adults and begin the spiral toward death.

That last bit is obviously pure opinion, but I can't see how the first is not rationally true. Can someone explain how I'm misreading Tyler on this point?

Scoop, many people in the US retire not because they want to, but because they can no longer find employment. Raising the medicare age means that even though the "retired" people are drawing (reduced) social security benefits, they are having to purchase private insurance.

Retirement in America is not done by choice. So working a few extra years is not an option for most Americans.

I'm a software developer in my low 50s. The folks I know personally who are 5 years older than me have a much harder time getting employed than I do. They all mention hitting a brick wall (when it comes to getting past interviews) in the 54-55 timeframe.

Tangurena,

What you are also, in effect, are saying is that medicare is part of financial planning, as well as healthcare, and that it mitigates some risks, other than health, that are associated with workforce changes. At 50, you may be in good health, but be employed by someone that goes out of business, and it may take you a while to land, without benefits, having depleted savings in the interim.

Private health insurance costs much more than Medicare. Raising the age to 67 will increase total health care spending AND result in more people without health care insurance. We need to decide if reducing government expenditures will be worth the end result of having even more of our economy devoted to health care while we have increasing numbers of people w/o access to care.

Steve

Private insurance costs more only because it is a less efficient version of the politically ruled/dictated fee-for-service system of Medicare.

Many nations have private insurance systems that are overseen by technocrats within the framework for a universal system defined politically that knows only technocrats can run the system. Germany's system is private, insurance and delivery, with technocrats setting the rules, prices, etc. Israel is private HMOs with rules set by technocrats.

HMOs are still legal and available if people want them.

Private insurance costs more only because the hospitals shift costs to them because they cannot charge market prices to the govt. This cannot scale into 100% public health inurance as there would be no one left to milk.

Tyler, thanks for adding your beloved Ezra Klein's comment. Despite its zero value-added, it shows the role that useful idiots play in the "debt ceiling" comedy. In Act 2,088 of the comedy it's time for the useful idiots to applaud their fraudulent clown for bringing food to the table --actually, for talking about bringing food to the table. Yes, the comedy started long ago and the guy had yet to bring some food, but now he talked about doing it! Wow, time for the useful idiots to cheer. Let us entertain the masses with a discussion of the economic and financial consequences of raising Medicare age-eligibility to 67 --this when we are expecting to live up to 100!
(see this video http://www.ted.com/talks/dan_buettner_how_to_live_to_be_100.html )

What's next? I'm looking forward to see all the acts of the "debt ceiling" comedy. Just to know on how many useful idiots President Obama can count.

I just realized who you remind me of with all your talk about idiots - Cobra Commander from the old GI Joe cartoon. Favorite quote (and the only one I can remember): "Why are great men always surrounded by lesser beings?!?!" Tell me, have you invented a machine which can control weather?

If Obama believe IPAB wouldn't work, he would sacrifice it for the unrestrained cost increases in both public and private health care the Republicans want. IPAB will affect both public and private health delivery structure.

The deal cut to pass Medicare was to do fee for service at a time when the Blues had a more shared cost model and HMOs were the rage and doctors feared they would be forced to become employees whose job was health care instead of doctors who were businessmen maximizing profits. Doctors have found being a businessman trying to minimize the profits of huge corporate insurers to boost their profits isn't any fun, so the have been choosing to be employees with an MBA fighting the insurers. With government doing the R&D and taking the risk on payment systems - IPAB will propose changes and they will be adopted without involving Congress only if the health care corporations think they can benefit.

If the IPAB structure for a treatment pays more for being more efficient, the hospitals and clinics will plead high costs while looking to cut overhead on each service or eliminating services. If a doctor is currently billing for a 15 minute visit and then for 15 individual blood tests, his employer looks at the data and automatically puts 20 blood tests and the 15 minutes in their standard visit saving $50 in internal overhead and $100 in costs billing the insurer or patient and in collection. If the IPAB payment is $50 less with more risk at $50, the provider corporation comes out ahead, but wants insurers to follow the government system, and the insurers will want the $50 savings as well.

HMOs as delivery systems collected statistics on delivery of care but didn't bill, but as they dealt with government and insurers they were forced to implement fee for service to bill, at which time the risk and delivery were separated and HMOs simply became employers billing insurers and government fee for service.

On the other hand, if Obama believes ACA will provide everyone with excellent health care no matter income because of subsidies to buy insurance, then raising the Medicare age merely shifts from one subsidized means tested insurance system to another means tested subsidy insurance system.

Obama agrees with "Right before your birthday you’re in one program and the day after your birthday you’re in a totally different program? Something has to be screwy, though you can debate whether that screwiness is ex ante or ex post. I usually think more in terms of smoothly sliding schedules and, when needed, changes in their slopes, with only gentle bumps in the relevant notches." ACA has smooth sliding schedules with a few big bumps, the one from Medicaid to private policies (demanded by conservatives who thought private insurance more costly than Medicaid) and the one from private policies to Medicare (demanded by conservatives and progressives who don't want to touch a third rail.

And anyone who knows anything about health care globally, and that includes Obama, sees this statement as a total misunderstanding of US health care:
"4. I infer he understands that Medicare truly is the budget-buster of our time and that its future will not ever be ruled by technocratic principles."

Medicare is ruled by politics, not technocrats. Japan's health care system is ruled by technocrats and costs half as much. Germany's health care system is ruled by technocrats and costs half as much. Taiwan's health care system is ruled by technocrats and costs much less even adjusting for age, etc. Go down the list of national health care systems and not one has a legislature voting on the amount doctors get paid or how they get paid.

IPAB takes away Congress' power to dictate politically how doctors get paid by preventing Congress dictating fee for service for lots and lots of discreet services and drugs with no price controls. Congress has voted every year for a decade on the fee schedule for doctors because the fee schedule price increases Congress dictated turned out to be unpopular with doctors, so doctors lobby Congress to get Congress to change hike the fees for a year, ensuring lots of campaign contributions from doctors who want the price hike next year.

If technocrats were involved, they would modulate the price controls to serve Congress' pressure to cut costs while moderating the pain on doctors to prevent doctors going to Congress. Technocrats would listen to the docs who have cut costs, and set the prices a bit higher than the evangelical docs and cite their work as justification, and incrementally reduce price increases. The doc fix is correcting for a fee schedule plan that was based on budget balancing, not on how doctors operate - a political rule of the payment system.

Occam's razor supports the "Obama is a lying, posturing, weasel" hypothesis.

Observing Obama also supports this hypothesis.

Barack Obama is campaigning for reelection. All of your inferences should flow from that fairly transparent empirical fact, and I'm not sure any of them. On monday, he cancelled a day of fundraising events to focus on the debt ceiling negotiations, but that was just a shift in his days activity and did not alter what he was trying to maximize on monday (votes in 2012).

The structure of your inferences maps pretty closely onto a lot articles that used to appear in more left-leaning places. They would general posit that: (a) Obama knows perfectly well what the first-best policy is in this situation; (b) He knows perfectly well this is unachievable and is doing a perfect job navigating the political environment to get the practically achievable second-best policy. But even his base as foresaken these assumptions by now.

Also, as others have pointed out:

1. Stating that you are uncomfortable with benefits being conditional on reaching a certain age is not an argument against raising or lowering the retirement age; it is an argument against having a retirement age. Not sure what the substitute criterion would be.

2. Shifting expenditures from public to private hands is not neutral and affects how efficiently society allocates its resources. Isn't this THE teaching of a "depressing education in public choice"? It also holds true on the right and the left, with left wing people thinking shifting from private to public can create welfare gains. No one considers whether costs are public or private to be a neutral choice.

"And in part I am suspicious of such a discrete “notch” in how we treat individuals. Right before your birthday you’re in one program and the day after your birthday you’re in a totally different program? Something has to be screwy, though you can debate whether that screwiness is ex ante or ex post."

Then you should check this out:

http://www.armytimes.com/news/2011/07/military-dod-panel-calls-for-radical-retirement-overhaul-072511

"This has never seemed like a good fiscal solution to me. In part it simply shifts expenditures from the public books to private hands."

It would force old people to pay for medical care with money they don't have. The "expenditure" is really a shift in social resources (money) from old people to the holders of government bonds. This is known as "austerity," aka the Greece solution, the Jeffrey Sachs-Shock Doctrine solution.

"And in part I am suspicious of such a discrete “notch” in how we treat individuals. Right before your birthday you’re in one program and the day after your birthday you’re in a totally different program? Something has to be screwy, though you can debate whether that screwiness is ex ante or ex post. I usually think more in terms of smoothly sliding schedules and, when needed, changes in their slopes, with only gentle bumps in the relevant notches."

That's the way it works with social security. When you're 62 (or 65) you immediately get your social security. When you're 65 you get an extra tax exemption. On the date you're born your parents get an extra exemption. If you don't pay your rent on time you will get a not so gentle bump into the street.

"If the choice is “cut all payments by ?? percent” or “raise the retirement age by two years” I would opt for the former." This is also known as starting a revolution, and it would not be a marginal revolution, it would be the real thing.

I work in insurance coverage. Insurance companies hate to spend money. If given an opportunity, they will exclude coverage for an elderly person's ailments, or simply not sell the policy. I doubt many old people could get meaningful health insurance coverage even if they had the money.

US life expectancy in 1965; 70 years. US life expectancy in 2011: 78.

Increasing the Medicare eligibility age by a whopping 2 years would be courageous, radical, serious, deep thinking, true and generally politically awesome?

I see a few possible issues:

1. It may just shift people from one form of gov't help to another (ie, from Medicare to Medicaid)

2. It may reduce health care utilization rates. If such care is preventative, this may increase the costs of future care (as the preventive measures didn't happen.

3. We're talking about the youngest of all Medicare users, who are likely also the least expensive users. Savings might not be as much.

4. If it is a shift from public to private, what happens if the person does not have and/or cannot afford private insurance? Point 1 is one possibility, so is point 2. working longer to keep employer sponsored plans is another. But, undoubtedly, for some, the result may be bankruptcy or death.

5. In general, Medicare is cheaper that private plans for people in that age group. It may not be just a cost shift, but also a cost increase, just an increase that isn't the governments problem, which leads back to point 4.

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