Mitt Romney has the right idea in his proposal to gradually raise the Medicare eligibility age. Too bad he’s afraid to start the process rolling for another 10 years.
Life expectancy has increased by roughly a decade since Medicare was enacted almost 50 years ago, yet the eligibility age hasn’t budged from 65. Medicare spending has ballooned and is the biggest driver of the federal deficit that Republicans profess to care so much about. Common sense suggests that increasing the eligibility age is one lever that should be pulled, even if gently. Romney proposes raising the eligibility age by one month per year. That pace is too slow, since it will take 24 years to boost the eligibility age by two years. But even worse, Romney wouldn’t even start the plan until 2022, so as not to disturb anyone’s retirement plans.
The Medicare funding crisis is upon us now; the time to act is not 10 years from now. A person who is 55 years old now doesn’t need 10 years’ notice to make arrangements for an extra month of health insurance! A more reasonable approach would be to start the process immediately and to raise the eligibility age at roughly double or triple the pace Romney intends.
By the way, that tweak won’t be nearly enough to make Medicare self-funding. Even now, the Medicare payroll tax and recipient premiums cover only about half of program expenditures (see figure 5). There will need to be plenty of additional reforms that impact costs and revenue if there is any hope of taming the beast. A good place to start would be repeal of the unfunded, Republican-driven Medicare Part D drug benefit.
Romney performs a serious disservice by making identical eligibility age proposals for Social Security and Medicare. Notwithstanding GOP presidential primary hysteria about Social Security (remember Rick Perry’s Ponzi scheme claims?), that program is actually quite fiscally sound and can be sustained over the long term with minor tweaks to age limits and benefit growth rates. The payroll tax is sufficient to cover expenses into the indefinite future without resorting to big doses of general funding.
I know everyone’s pleased about the bipartisan agreement to extend the temporary 2% Social Security payroll tax reduction. However, I think it’s a really bad idea because it undermines the self-sufficiency of one of the few properly funded federal programs.