CBO raised red flags on Medicare expansion last year; Lieberman not buying the “compromise”

Plus, Cato’s 7 Reasons Why This Isn’t Reform.

(By Ed Morrissey, Hot Air) - Earlier, I wrote about the obvious issues in proposing an expansion of an entitlement already hurtling towards massive insolvency mainly because of a large expansion of beneficiaries. The Senate says they want the CBO to score the idea of expanding Medicare, with tens of trillions of dollars in unfunded liabilities, to cover more uninsured at ages 55 and above. But as Verum Serum reminds us, the CBO already analyzed that idea last year — and found it to be a great way to go broke faster:

A disadvantage of this option is that the ability to buy Medicare coverage at age 62 would encourage some people to retire earlier than they otherwise would have. Some of those early retirees could face financial hardship in later years because many people underestimate the financial resources needed for retirement. In addition, because the cost of the coverage would not be subsidized, many low-income near-elderly people would continue to be uninsured. A potential problem with this option is that the amount of adverse selection that the program experienced could be greater than anticipated, which would put upward pressure on premiums and in turn reduce participation. (The potential for adverse selection would be limited in that the program would be offered only to individuals ages 62 to 64, who are more similar to each other in their health status and attitudes toward insurance than are individuals in the general population.)

So what will be the outcomes here? People will retire earlier, which will reduce tax revenues as they earn less and draw pensions instead of produce. Many of them will retire too early and won’t have the resources to maintain a sustainable lifestyle, which means that they will either have to go back to work or receive government assistance. People who already have insurance or are healthy won’t need to get the Medicare option, which will create a selection bias that gives the pool a much higher risk factor than the general population. That will either drive up premiums, or more likely, will pressure Congress to further subsidize Medicare.

Note, too, that this analysis applied to simply moving the eligibility age back 'three' years, not 'ten'. That would create even more selection bias, further heightening the risk, as well as the payouts and cost of coverage.