A better way to raise the eligibility age for retirement benefits

December 10, 2012

Over the last few days, I've reported that raising the age for Medicare eligibility is very much on the table in the fiscal cliff talks. That has led some to believe that I support the idea as part of a deal. I don't.


Alex Wong

I'll be clear: Raising the Medicare eligibility age makes no sense. It cuts federal health-care spending but raises national health spending, which is what really matters. It doesn't modernize the system or bend the cost curve. It doesn't connect to any coherent theory of health reform, like increasing Medicare's bargaining power, increasing competition in Medicare, ending fee-for-service medicine, or learning which treatments work and which don't. I'm not opposed to cutting Medicare -- quite the opposite, actually -- but this is a particularly brain-dead way to do it.

Its importance in the negotiations is attributable to the fact that raising the age at which Americans can receive Medicare and Social Security has a weird, symbolic power in Washington. As House Minority Leader Nancy Pelosi puts it, the eligibility age is "a trophy" that Republicans can bring back to their base. Though the policy is deeply unpopular with voters, it's quite popular among Republican elites.

If it's age increases that the political system wants, there's a better way to do it. Ezekiel Emanuel, who advised the Obama administration on health care and now works with the Center for American Progress, calls it "graduated eligibility," and it would link the age of eligibility with lifetime earnings:

Here’s how it would work. People in the bottom half of the lifetime earnings distribution would become eligible for normal retirement benefits at age 65 for Medicare and 66 for Social Security, just as they are today. But people in the next quarter of the lifetime earnings distribution would become eligible for the respective programs at 67 and 68, and those in the top quarter would become eligible at 70 and 71. All eligibility ages would increase over time, as they are scheduled to now.

This makes sense on a few different levels. For one thing, a favorite argument for raising the age at which benefits begin is that seniors live longer today than they did when these programs began. But those gains aren't equal: Richer seniors live six years longer than poorer seniors, on average. "Graduated eligibility" accounts for that fact.

For another, poorer seniors are likelier to have physically intensive jobs, and to be in poorer health, than richer seniors. It makes sense to help them leave their jobs earlier, if they so choose.

Then, of course, there's the obvious: Richer seniors have more money than poorer seniors. As such, they need the benefits less and, if they want to retire sooner, can support themselves until their benefits kick in.

As a general point, I dislike almost all policies that use age as an excuse for making cuts. I think they trade on a kind of elite blindness about the lives of people who don't enjoy their jobs and don't want to stay in them until they drop dead. As you might notice, members of the Senate, the House and the nation's op-ed pages don't tend to retire very early, and, in my experience, they lose sight of how exceptional their feelings on the subject are.

But if age-related cuts are going to be part of the fiscal deal, "graduated eligibility" makes vastly more sense than a blunt rise in the retirement age for those who are ready to receive entitlement benefits.

 

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