The Corner

Re: Nancy Pelosi Has Written an Op-Ed on Medicare

Dan Foster highlights the new Nancy Pelosi op-ed in USA Today arguing that raising Medicare’s retirement age will increase the cost of health insurance for young people. In it, Representative Pelosi writes that raising the retirement age “raises premiums for younger Americans who don’t receive insurance through their jobs and who are set to purchase coverage through the new insurance exchanges. It asks them to foot the bill to cover the cost of insuring the many 65- and 66-year-olds who would enter the system at the same time.”

She neglects to note the reason why premiums for younger people would go up in such a scenario, because it’s her fault.

Obamacare includes a provision called “community rating,” which forces insurers to charge their costliest beneficiaries no more than three times as much as their least costly beneficiaries. Because 64-year-olds typically consume six times more health care than 18-year-olds, Obamacare’s community rating provision has the effect of increasing the cost of insurance by 75 percent for 18-year-olds, in order to subsidize premiums by 13 percent for 64-year-olds. If half of the young people drop out because they rightly see this as a raw deal, everyone’s premiums go up, and the insurance market fails. This is indeed what has happened in states like Washington, which imposed community rating in 1993.

So it takes a lot of brass, to borrow a phrase, for Nancy Pelosi to complain that raising the retirement age will affect young people on the exchanges. And if she’s that concerned about the problem, I have an easy solution: Raise Medicare’s retirement age, and repeal community rating along with it.

Because the vast majority of people who are uninsured are in their 20s and 30s, that’s where the vast majority of Obamacare’s insurance subsidies will go. So community rating is actually one of the biggest drivers of Obamacare’s fiscal cost, because it artificially drives up the price of insuring young people. It would be interesting to see how the CBO would score a measure that repealed community rating. My guess is that you could shave tens of billions, if not more, off of Obamacare’s future spending.

I rebut the remainder of Pelosi’s arguments here.

— Avik Roy is a senior fellow at the Manhattan Institute and the author of The Apothecary, the Forbes blog on health-care and entitlement reform. You can follow him on Twitter at @aviksaroy.

Avik RoyMr. Roy, the president of the Foundation for Research on Equal Opportunity, is a former policy adviser to Mitt Romney, Rick Perry, and Marco Rubio.


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