Economics of Medicare vs. Private Insurance
Paul Krugman’s column in the New York Times this morning argues that having more people enrolled in Medicare will save money. And that, horrors, all the ideas being floated to “save Medicare”, are misplaced, indeed the ideas should be to “save health-care for Americans”.
The idea of Medicare as a money-saving program may seem hard to grasp. After all, hasn’t Medicare spending risen dramatically over time? Yes, it has: adjusting for overall inflation, Medicare spending per beneficiary rose more than 400 percent from 1969 to 2009.
But inflation-adjusted premiums on private health insurance rose more than 700 percent over the same period. So while it’s true that Medicare has done an inadequate job of controlling costs, the private sector has done much worse. And if we deny Medicare to 65- and 66-year-olds, we’ll be forcing them to get private insurance — if they can — that will cost much more than it would have cost to provide the same coverage through Medicare.
