Bowles-Simpson 2.0, Medicare age and the ACA

I said yesterday that the key to evaluating Bowles-Simpson 2.0 was its stance on the Affordable Care Act. Their initial report (lets say Bowles-Simpson 1.0; release Dec. 2010) assumed full implementation of the ACA, and did not suggest an increase in the Medicare age. Most writing on version 2.0 has focused on the shift from a roughly $1cuts/$1tax increase mix of 1.0, to the ~$3cuts/$1 tax increase nature of 2.0. For me, the key is clarity on the ACA and then laying out next health policy steps, in large part because health care costs are the biggest long run issue.

After the June 2012 Supreme Court ruling and the past election in which the ability to get rid of the ACA was readily available to the country and not taken, I find the lack of a clear statement of the ACA as the law of the land and “the only horse we have to ride” in the Bowles-Simpson 2.0 document to be both surprising and disappointing. I think they assume this, but they need to do more than that if the document is designed to produce an actual deal. Further, version 2.0 seems to embrace an increase in the Medicare age:

Reduce Medicare and Medicaid spending by improving provider and beneficiary incentives throughout the health care system, reducing provider payments, reforming cost-sharing, increasing premiums for higher earners, adjusting benefits to account for population aging, reducing drug costs, and getting better value for our health care dollars (Feb-Dec 2013) [emphasis mine]

This doesn’t surprise me, as I have written many times that while it is basically a bad policy that just shifts costs and doesn’t address them, I also believe it to be roughly inevitable, in large part because it sounds like it must be consequential. With the ACA in place it is a bad policy because, you are basically shifting costs from Medicare to exchange subsidies and therefore moving the healthiest slice of the biggest risk pool into a smaller risk pool where the same folks will be the sickest slice (actuarially speaking). If it takes raising the Medicare age to get to the point where the questions about the ACA are what is next to improve it, then sign me up warts and all. If anyone is talking about raising the Medicare age and doing away with the ACA, that is a truly horrific policy;count me out. Further, in states like mine that say we will not do the Medicaid expansion, by raising the Medicare age you are going to create groups of people who are very likely to be uninsured and to have relatively high costs (too young for Medicare, not poor enough for Medicaid) or who will stay on employer-based policies and making their insurance pool sicker (actuarially speaking), keeping their costs higher.

Here is a post on Bowles-Simpson 2.0 and Medicare assuming that raising of the Medicare age is a part of the new package, and further assuming that the age increase is the primary Medicare savings difference from the version 1.0 policy. If that is true, it (version 2.0) is not accounting for the shifting of cost from Medicare to exchange subsidies and Medicaid expansions, or it doesn’t assume its implementation. In fairness, their 2.0 plan is an outline and they say they are filling in the blanks after listening.

My bottom line is that I actually share their (Bowles and Simpson) rough desire of moving the debt-to-GDP ratio a bit lower in the next decade and putting it on a path down to ~50% or so over the next few decades. I think that Bowles-Simpson 2.0 is imagined by the authors as an attempt to find what could potentially pass in the current or an imaginable Congress, to bring this goal about. If the passage of such a plan is their goal, then Erskine Bowles and Alan Simpson should use whatever influence they have to make clear that moving ahead with the ACA, and finding the next steps that could get both political parties on board with health reform is actually the KEY to addressing our long range budget issues because we have got to have a framework through which to address coverage, cost and quality. Of course it can be modified; we will never be done with health reform, but turning back to some undefined health reform that the Republican party will show us later is a fantasy. Erskine Bowles and Alan Simpson should say so.

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

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