As both parties haggle over how to avoid going over the "fiscal cliff" on Jan. 1, one of the ideas that has resurfaced is gradually raising the Medicare retirement age. There's a very clear rationale for doing this, and it may even sound appealing to conservatives. The problem is that once Obamacare is in place, it cannot be done without shifting costs to younger Americans.
The Centers for Disease Control and Prevention estimates that Americans who reach the Medicare retirement age of 65 can be expected to live an additional 19.2 years -- about five years, or 34 percent, longer than they did in 1960. Despite this, the retirement age has held steady at 65 since Medicare was created in 1965.
According to a Congressional Budget Office study, if the retirement age were raised by two months each year until it reached 67 in 2024, it would save about $125 billion over a decade and reduce Medicare spending by 0.4 percent of gross domestic product by 2035. It's worth keeping in mind that the national debt is projected to be 181 percent of GDP by that year, so tweaking the retirement age was never going to be a substitute for genuine entitlement reform. Still, in a pre-Obamacare world, it may have still been a common-sense idea that was at least a step in the right direction. But Obamacare changes this calculus.
In a floor speech this week, Sen. Dick Durbin, the Democratic majority whip, expressed openness to a Medicare age increase, but only after President Obama's national health care law is fully implemented. His rationale was that a senior who wants to retire at 65 but can't enroll in Medicare would otherwise have trouble finding affordable insurance on the private market. What he overlooked is how this would affect the young.
Obamacare limits the variation in the prices insurers can charge based on the age of their customers. This provision of Obamacare will make insurance relatively more affordable for older Americans, but those savings will have to be subsidized in the form of higher premiums for the young.
This effect will be exacerbated if the Medicare retirement age is raised and seniors stay on private insurance longer. Because insurers cannot charge seniors based on the actual risk of covering them, and if the market is flooded with people ages 65 and 66, young people will be forced to absorb the increased cost.
If you are under 30 years old, you would be wrong to think that a change in the Medicare age wouldn't affect you for decades. In fact, once Obamacare is implemented, such a change would boost your health insurance costs immediately.