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Monday, July 25, 2011

Paul Krugman: Messing With Medicare

Why is the president proposing such a bad trade in the negotiations over deficit reduction?:

Messing With Medicare, by Paul Krugman, Commentary, NY Times: At the time of writing, President Obama’s hoped-for “Grand Bargain” with Republicans is apparently dead. And I say good riddance. I’m no more eager than other rational people (a category that fails to include many Congressional Republicans) to see what happens if the debt limit isn’t raised. But what the president was offering to the G.O.P., especially on Medicare, was a very bad deal for America.
Specifically, according to many reports, the president offered both means-testing of Medicare benefits and a rise in the age of Medicare eligibility. The first would be bad policy; the second would be terrible policy. And it would almost surely be terrible politics, too. ...
For Medicare, with all its flaws, works better than private insurance. It has less bureaucracy and,... has been more successful in controlling costs. ... And ... Medicare-type systems in other advanced countries have much lower costs than the uniquely privatized U.S. system...
Republicans are doing all they can to undermine health care reform ... and may eventually succeed... If they do, many of those losing Medicare coverage would find themselves unable to replace it.
So raising the Medicare age is a terrible idea. Means-testing — reducing benefits for wealthier Americans — isn’t equally bad, but it’s still poor policy.
It’s true that Medicare expenses could be reduced by requiring high-income Americans to pay higher premiums, higher co-payments, etc. But why not simply raise taxes on high incomes instead? This would have the great virtue of not adding another layer of bureaucracy...
But, you may say, raising taxes would reduce incentives to work and create wealth. Well, so would means-testing..., the truly rich would prefer means-testing, since they would end up sacrificing no more than the merely well-off. But everyone else should prefer a tax-based solution. ...
The G.O.P.’s most potent political weapon last year — the weapon that caused a large swing in the votes of older Americans — was the claim that Mr. Obama was cutting Medicare. Why give Republicans a chance to do it all over again?
Of course, it’s possible that the reason the president is offering to undermine Medicare is that he genuinely believes that this would be a good idea. And that possibility, I have to say, is what really scares me.

    Posted by on Monday, July 25, 2011 at 12:24 AM in Budget Deficit, Economics, Politics, Social Insurance | Permalink  Comments (42)



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