Monday, November 23, 2009

Stealing from the young

Young people trying to make it in the world today have every reason to be depressed. They're graduating into one of the worst economies in several lifetimes. They may get jobs, but research shows that their lifetime earnings will be depressed due to the lower salaries they can expect for whatever jobs they find. They're facing an unfunded debt on all the entitlement spending in our budget that goes for the elderly generations. And now they're going to be stuck with this health care bill that plans to pay for health care for the older generations on the backs of the young. Robert Samuelson outlines the assault on the young in the Democrats' health care plans.
Comes now the House-passed health care "reform" bill that, amazingly, would extract more subsidies from the young. It mandates that health insurance premiums for older Americans be no more than twice the level of younger Americans. That's much less than the actual health spending gap between young and old. Spending for those aged 60-64 is four to five times greater than those 18-24. So, the young would overpay for insurance which -- under the House bill -- people must buy: 20- and 30-somethings would subsidize premiums for 50- and 60-somethings. (Those 65 and over receive Medicare.)

Not surprisingly, the 40-million member AARP, the major lobby for Americans over 50, was a big force behind this provision. AARP's cynicism is breathtaking. On the one hand, it sponsors a high-minded campaign called "Divided We Fail" and runs sentimental TV ads featuring children pleading for a better tomorrow. "Join us in championing your future and the future of every generation," ended one AARP ad.

Meanwhile, AARP lobbyists scramble to shift their members' costs onto younger generations. For example, the House health legislation improves Medicare's drug benefit. That would help the half of AARP members who are over 65. The other half, those between 50 and 64, could benefit from the skewed insurance premiums.

Although premium changes would apply mainly to people using insurance "exchanges," the differences would be substantial. A single person 55-64 might save $3,490, estimates an Urban Institute study. By contrast, single people in their 20s and early 30s might pay from about $600 to $1,100 more. For the young, the extra cost might be larger, says economist Diana Furchtgott-Roth of the Hudson Institute, because the House bill would require them to purchase fairly generous insurance plans rather than cheaper catastrophic coverage that might better suit their needs.

Whatever the added burden, it would darken the young's already poor economic prospects. Unemployment among 16- to 24-year-olds is 19 percent. Peter Orszag, director of the Office of Management and Budget, notes on his blog that high joblessness depresses young workers' wages and that the adverse effect -- though diminishing -- "is still statistically significant 15 years later." Lost wages over 20 years could total $100,000. Orszag doesn't mention that health care "reform" might compound the loss.
AARP might talk piously about ending age discrimination. But shouldn't a 50 or 60-year-old pay more for health insurance than a twenty-something?
This is unconvincing. All insurance aims to protect against risk -- but within groups facing similar risks. Put differently, most insurance is risk-adjusted. Auto insurance premiums vary by age; younger drivers pay higher rates because they have more accidents. Homeowners' policies for similar houses cost more in high-crime areas. This is not "discrimination"; it's a reflection of risk and cost differences. Insurers that ignored these differences would soon vanish, because they'd suffer heavy losses and lose customers.

On health insurance, we may choose to override some risk adjustments (say, for pre-existing medical conditions) for public policy reasons. But the case for making age one of these exceptions is weak. Working Americans -- the young and middle-aged -- already pay a huge part of the health costs of the elderly through Medicare and Medicaid. These will grow with an aging population and surging health spending. Either taxes will rise or other public services will fall. Already, all governments spend 2.4 times as much per capita on the elderly as on children, reports Julia Isaacs of the Brookings Institution. Why increase the imbalance?
If only young voters understood how these bills going through Congress will affect them for the rest of their lives. They might have thought a bit more carefully about the change that they were voting for.