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For all the public wrangling we are seeing over the super committee mostly centered on tax reform and revenues as a key component of a compromise the big issue facing policymakers in the coming years is health care costs.
The biggest driver of public spending is health, both because health inflation has historically been considerably higher than other inflation and because of the relentless demographics of an aging population.
The health insurance and delivery system is half public and half private but with a huge intersection between the two. As we cut the growth of Medicare and Medicaid, the shifting of costs to the private sector adds to insurance costs for consumers and businesses. And because insurance plans for most people are tax-subsidized, the subsidy costs are added to the burdens of taxpayers. Changes in one part of the system have to be synced with changes in the other.
I raise this issue now because a key element of the super committee negotiations put on the table during the private talks between President Barack Obama and Speaker John Boehner (R-Ohio) during the debt limit negotiations and in the plan floated by Sen. Max Baucus (Mont.) and other super committee Democrats is to raise the Medicare eligibility age from 65 to 67.
The fact is that Obama and Baucus could put the age issue on the table for one reason: The Affordable Care Act and its combination of insurance exchanges and universal coverage with income-related subsidies, with a removal of pre-existing conditions, opens up other insurance options to the 60-somethings.
Since the downturn in 2007 and the economic shockwave in 2008, unemployment among those older than 55 has burgeoned. While the unemployment rate in this group is lower than for the young, the persistence of unemployment among the older group is much longer.
It has always been true that workers over 55 who lose their jobs have immense difficulty finding something comparable, even in boom times. Now, it is far more difficult. We have many stories of firms refusing to consider hiring anyone who has been out of work for six months or more. For a large share of people who are over 55 and out of work, there is reason to believe they may never find another good job. What do they do for health insurance?
Under the current system, if you lose your job, you can continue your employer-provided insurance for 18 months under COBRA while losing your employer subsidy and paying a touch over 100 percent of the entire cost.
This usually means rates four times more than you paid as an employee, all at a time when you have lost your income. So what happens to 60-year-olds who are unemployed and go past COBRA?
Now, for the most part, they have to try to find insurance in the individual market; you can imagine how much insurance companies will charge 63-year-olds, almost all of whom have some pre-existing conditions. So many gamble and go without insurance, and without medications, hoping to limp by to 65 to get Medicare.
If Congress eliminates key elements of the Affordable Care Act, raising the Medicare age to 67 will leave more older Americans in insurance limbo for longer periods. The costs to the society, besides the cruelty to the individuals, will be high people putting off treatment or medications or tests until treatable cancers or other ailments become untreatable and much more costly.
That brings us back to the super committee. Last week, we had conflicting signals, to say the least. First was the letter signed by 40 House Republicans and 60 House Democrats urging the panel to go big and keep everything including revenues on the table. Bless you, Reps. Mike Simpson (Idaho) and Steven LaTourette (Ohio), for stepping up to the plate and organizing the 40 GOP signatures no easy task these days.
But the next day came a letter from 33 Senate Republicans taking revenues off the table. Shame on you, Sens. Tom Coburn (Okla.), Mike Crapo (Idaho) and Saxby Chambliss (Ga.), for stepping away from the gang of six plate you had so courageously set just months ago.
Perhaps the Senate letter is just another bargaining ploy in the intense endgame negotiations that always accompany these deliberations.
At the same time, I am hearing from super committee sources that panel Republicans are telling their Democratic counterparts that the price for putting revenues on the table is to commit to gutting most of the Affordable Care Act, while making major modifications to Medicare.
If that is real, and not just a negotiating ploy, I am dismayed because it means that any serious bargain, falling along the lines of Simpson-Bowles, Rivlin-Domenici and the gang of six, is out of reach.
It certainly means that the idea of raising the Medicare age would and should be a non-starter Medicare eligibility and the availability of exchanges and coverage options are directly linked.
At this point, I will choose to believe it is not real. The stakes are too high, and the rewards for reaching a major deal too great for otherwise rational people such as Rep. Dave Camp (R-Mich.) and Sen. Rob Portman (R-Ohio) to deliberately foreclose a grand bargain by offering a non-deal as the last word. I hope.
Norman Ornstein is a resident fellow at the American Enterprise Institute.