With the election over, Washington types have quickly shifted their focus onto the so-called “fiscal cliff”—the blizzard of tax hikes and spending cuts that are set to go into law if Congress doesn’t act to change them. One thing that a lot of people aren’t talking about is how the election’s ratification of Obamacare creates a new set of options for Congress to avoid tax hikes and defense cuts. One such option is raising Medicare’s retirement age, something that even more sense now that low-income seniors will be able to gain coverage from Obamacare’s insurance exchanges.
Raising the retirement age has always been around as a policy option for entitlement reform. Last year, an NBC/Wall Street Journal poll found that 56 percent of Americans were okay with raising Social Security’s retirement age to 69, with only 42 percent opposed. Moderate Democrats have often expressed support for raising Medicare’s retirement age, most recently retiring Sen. Joe Lieberman (Conn.).
Raising Medicare eligibility to 67 would save $148 billion
“That’s a small sacrifice to ask,” wrote Lieberman in the Washington Post last year, “for the benefits you will receive from a healthy Medicare program for the rest of your life.” The Congressional Budget Office estimated that raising the retirement age to 67 would save Congress $148 billion from 2012 to 2021. It can be done; in 1983, Ronald Reagan and a Democratic Congress successfully worked to achieve the same reform for Social Security.
But the option to raise Medicare’s retirement age gains new resonance with the advent of Obamacare’s subsidized insurance exchanges, and the necessity of fiscal reform. The Budget Control Act of 2011 mandates $1.1 trillion in spending cuts from 2013 to 2022, half falling on the Department of Defense. Those cuts automatically kick in if Congress fails to find an alternative.
The predominant liberal critique of raising the retirement age is that it disproportionately affects those with lower incomes, because people with lower incomes often also have lower life expectancies. “It’s regressive, it’s unfair, it’s blunt, and it’s stupid,” says Mother Jones’ Kevin Drum.
But Obamacare provides near-universal coverage to Americans below 400 percent of the federal poverty level. Low-income Americans who aren’t eligible for Medicare will have access to Obamacare’s various programs. The law’s subsidized insurance exchanges provide coverage to those between 100 and 400 percent of the federal poverty level, and its Medicaid expansion provides coverage to those below 133 percent of FPL.
If it makes fiscal sense, raising Medicare’s retirement age could be combined with migrating low-income seniors onto the exchanges, so as to avoid adding more retirees onto the rolls of Medicaid, a program with serious problems of access and quality.
Raising the retirement age would boost tax revenue and economic growth
If it were up to me, we would raise Medicare’s retirement age by three months every year, and gradually migrate all seniors onto the exchanges. As I noted last week, this would be a way to achieve a premium-support-based reform of Medicare using a program that nearly every Democrat voted for.
Raising the retirement age would also have one extremely important economic effect. It would increase the incentive for older Americans to continue working, thereby increasing economic activity and tax revenue.
It’s an idea that makes too much sense. While sensibility has rarely been Washington’s strong suit, the unique confluence of Obamacare’s implementation and the fiscal cliff may make raising Medicare’s retirement age more realistic than ever. It’s a far better idea than giving up.
Original Source: http://www.forbes.com/sites/aroy/2012/11/12/how-obamacares-victory-makes-it-easier-to-raise-medicares-retirement-age/