Coburn/Lieberman Plan To Raise Retirement Age Hits Lower-Income Workers Hardest
Senators Tom Coburn (R-OK) and Joe Lieberman (I-CT) have unveiled a plan to cut $600 billion in Medicare spending, $124 billion of which would come from raising the retirement age. In announcing their plan to make people work longer, Coburn and Lieberman employ a misleading argument about life expectancy and completely ignore the regressive nature of raising the retirement age, which hits lower-income workers and the sick much harder than the wealthy and healthy.
Coburn and Lieberman explain their desire to raise the Medicare retirement age:
Since the creation of the Medicare program in 1965, life expectancy and the average length of time that people are covered by Medicare has risen dramatically. According to the Centers for Disease Control, when Medicare was passed in 1965, the average lifespan for Americans was 70.2. In 2006, the average lifespan for Americans was 77.7 - an increase of 10.6%. This increase in the length of time an enrollee may be covered by Medicare has significantly raised the costs of the overall program.
Unfortunately, this is a specious argument. An increase in "average lifespan" is not the same thing as an increase in "the length of time an enrollee may be covered by Medicare." That's because the increase in average lifespan is in large part a result of fewer people dying before they reach retirement age, as opposed to living longer once they reach retirement age. Aaron Carroll, director of Indiana University's Center for Health Policy and Professionalism Research, explains:
General life expectancy, or life expectancy at birth, is mostly affected by early death. Whenever a child dies, it skews life expectancy from birth way down. [...] Therefore, many of the gains in overall life expectancy have nothing to do with how long an elderly person lives, but how well we do in treating childhood illnesses.
What we really should care about in this case is not life expectancy at birth, but life expectancy at age 65. In other words, if you make it to 65, how long will you be on Medicare? That's when things get tricky. [...]
In 1970, if you made it to 65 and qualified for Medicare, you could expect to live for about 15 years on the program. So a lot of people were making use of these programs, for a lot of years. In 1987, you could expect about 17 years on Medicare; by 2007, almost 19 years.
So the seven-year increase in life expectancy Coburn and Lieberman point to as a reason to raise the retirement age is badly misleading — it is not, as they claim, an "increase in the length of time an enrollee may be covered by Medicare." The increase in the length of time a typical enrollee is covered by Medicare is more like four years.
Perhaps more importantly, increasing the retirement age hits poorer workers hardest. That's in part because it's much easier for someone who is, for example, a wealthy United States senator to keep working for a few more years than it is for someone who is a middle-class carpenter. It's also in part because poorer workers don't live as long as the wealthy. According to Carroll, from 1977-2007, "earners in the top half have seen an increase of their life expectancy at 65 rise about five years over these three decades, the bottom half saw their life expectancy at 65 rise barely a year." Basically, Coburn and Lieberman are trying to raise the retirement age for manual laborers who aren't living longer because rich people are.
In short, the Coburn/Lieberman plan uses bad math to defend a proposal that hits the poor and sick the hardest.