David R. Henderson  

Deaton on Medicare and Life Expectancy

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Thanks Texas... Closed borders and the liberty...

The recent Nobel Prize winner, Angus Deaton, in his book, The Great Escape, writes:

The very wealthy have little need for state-provided education or health care; they have every reason to support cuts in Medicare and to fight any increases in taxes. They have even less reason to support health insurance for everyone, or to worry about the low quality of public schools that plagues much of the country. They will oppose any regulation of banks that restricts profits, even if it helps those who cannot cover their mortgages or protects the public against predatory lending, deceptive advertising, or even a repetition of the financial crisis.

I challenged this view here. But even aside from whether he's right factually, would it be bad if the very wealthy did support cuts in Medicare?

Here's a segment from Russ Roberts's interview of Deaton on Econtalk:

Russ: You suggest that a girl today born, I think, you said in the United States, has a 50-50 chance of reaching 100 years old.
Deaton: Yeah. That's a guess but it's not an unreasonable guess. One of the things about projecting mortality like that is that it obviously depends if the girl is born today and she gets sick when she's 50, what sort of medical technology, what sort of things we know then which will help her get through that. And of course we don't know that because it's 50 years down the pike. But there's been a lot of progress over the last 50 years, and if that goes on, that's not an unreasonable supposition.

So . . . what are the implications of that much higher life expectancy for spending on Medicare, a program for which people qualify at age 65? Also, although Deaton did not complain about how he thinks rich people will or will not support Social Security cuts, I would guess he thinks that they would support cuts and I would guess that he thinks that's bad.

So if Deaton is even close to right on life expectancy, we will have even huger Social Security and Medicare spending problems than the federal government now projects. I don't have his confidence that rich people will support Medicare cuts. But if they were to do so, and if they were also to support cuts in Social Security, that strikes me as fiscally responsible and good rather than bad.


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COMMENTS (8 to date)
ThomasH writes:

Instead of supporting reductions in Medicare and Medicaid spending through cuts in eligibility or the covered ailments that they cover, perhaps from the incomes of rich people, either through private charity or through taxes to fund research, we can find lower cost ways of providing health care. Or if we can continue improving health, higher ages to switch from ACA insurance to Medicare will become appropriate. Finally, we can find better ways to pay for Medicare and Medicaid (and Social Security) than a capped tax on wages such as revenue from Pigou taxes on carbon dioxide emissions. Over the time span that Deaton is considering, a projected fiscal deficit is a pretty good kind of problem to have.

Michael Byrnes writes:
So if Deaton is even close to right on life expectancy, we will have even huger Social Security and Medicare spending problems than the federal government now projects. I don't have his confidence that rich people will support Medicare cuts. But if they were to do so, and if they were also to support cuts in Social Security, that strikes me as fiscally responsible and good rather than bad.

Are you making the assumption that all of this added lifespan is a net negative?

Phil writes:

Perhaps it is fiscally responsible for the rich to advocate cuts. They do, after all, enjoy a much longer life expectancy than the poor and do not need public assistance. But isn't this a much stronger argument for means testing of the programs than it is for across-the-board cuts?

David R. Henderson writes:

@Michael Byrnes,
Are you making the assumption that all of this added lifespan is a net negative?
No. I’m simply assuming that the longer you live, the higher are your Medicare and Social Security benefits. That’s necessarily the case with Social Security and likely the case with Medicare.
But isn't this a much stronger argument for means testing of the programs than it is for across-the-board cuts?
Yes. And I’ll take the cuts any way I can get them.

R Richard Schweitzer writes:

What are Medicare and Medicaid?

Are they not simply two processes to provide particular services to particular segments of our society; basically, delivery systems for distributing specific services?

Are not their functions determined by political means - THROUGH GOVERNMENTS?

Is either process anything more than that form (via governments) of the delivery of the actual techniques and science which produce the results discussed?

Do either of these processes originate or foment any advances in those beneficial things; or, does that system of delivery create any constraints on their availability and advances?

Should not the question be: Is this the optimum means of these deliveries? Is so, why? Are political means superior to other (even market and eleemosynary) processes? Have they been [50 years]?

Should we not look at these two programs for what they are rather than what they are involved with?

Harold Cockerill writes:

So increasing the age at which we become eligible for SS is a reasonable adjustment. I'm 65 and don't expect to retire soon anyways. I show up every day at work (except for that unfortunate period after I fell off the roof) and do whatever it takes to get the job done. I don't complain and know a lot about my job. I've never been out of work. There are a lot of people like me.

Given the wet blanket the administrative state is now there aren't enough new jobs being created for young people coming into the work force. If I keep working it means there isn't an opening for someone else, someone younger. Also I can afford to work for less money and know how to live on almost nothing. I'm very productive and can be really cheap. How does a new worker compete with that?

Unless we find a way to increase economic growth there will be a societal collision (which has probably already started). The administrative state's response will surely be more interference. Is there anything that can stop that from happening?

ThomasH writes:

There are lots of things that we could do to increase growth. First (in no particular order) would be to have prevented the huge loss in output and reduced investment that the Recession brought. Second would be to examine mainly urban policies to remove the subsidies to traffic congestion by charging for urban street use and remove the impediments to higher residential and business density in cities. Third would be to substitute pigou taxes for all the kludgy alternatives such as command and control regulation of pollution emissions and "clean energy" subsidies and set-asides. Fourth would be to eliminate business taxation, substituting a progressive income tax on owners. Fifth, remove taxes on wages, substituting a progressive consumption tax.

I don't think reducing SS and Medicare benefits would create much more growth, although finding cheaper ways to deliver those health benefits could.

R Richard Schweitzer writes:

Reading the comments here (and elsewhere) about "Growth" -

Possibly one of the better things that may be taken from Angus Deaton's studies and learning is the focus more on understanding what is happening in the compositions of individual lives - rather than on some amorphous aggregate statistic.

Would one ask, "Has there been Growth in the quality of life; in the quality of relationships, etc.?" Is there AN aggregate statistic?

Are we still stuck with what Robert Nozick called the "normative" study of trying to decide what should cause improvements; rather than learn what does?

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