Medicare Expansion: The Wrong Track

President Clinton joined congressional Democrats recently to push his plan to pry open Medicare so the “near elderly” can buy into the program. They claim that only 300,000 to 400,000 Americans will take advantage of the offer and say the plan will be fully paid for by the premiums charged to participants. Brookings Institution Fellow Jacob Hacker says the proposal is “modest.” 

But much more important than these unlikely numbers or the White House’s fantasized estimates of the cost of this new entitlement is the fundamental redefinition of Medicare it entails. Medicare buy-in will dramatically change the program so it could become the vehicle to further socialize the American health insurance system, one constituency at a time. 

The proposal would allow anyone age 62 to 64 to buy into Medicare for $300 a month and let displaced workers (and spouses) who are over age 55 buy in for $400 a month. But why should a healthy, energetic 55-year-old man who is starting a new business qualify for this government entitlement when a 53-year-old diabetic widow can’t? Or a 32-year-old garage mechanic with three young children whose wife has multiple sclerosis? Guess who will be next. Unless conservatives muster a principled defense, the liberals will have achieved their goal of implementing national health insurance, one group at a time. 

Defenders of individual freedom will not win by putting on their green eye shades. The battles can only be won on principle by having a genuine debate about whether or not the American people want to receive their health insurance through a government-run system or through a revitalized, consumer-driven private marketplace. 

The marketplace for individual health insurance policies is crushed by bureaucracy and sapped of strength by the lack of consumer-driven competition. The more people that the government peels into its programs, the more the market for private insurance dries up. Politicians on both sides of the aisle, at the state and federal levels, are joining the mandate-a-month club to micro-manage access to health services. And the more regulation and restrictions that federal and state legislatures impose on the industry, the higher the price of health insurance, further drying up the market. 

With his Medicare scheme, President Clinton is trying to further open up government health insurance programs to the near elderly, without a meaningful debate over what it all means. 

Revitalize the marketplace

The battle cry of conservatives should be: Free the market! Let the consumer decide! The only way the market for health insurance will be revitalized is for consumers to begin to purchase their own health insurance in a competitive marketplace. Right now, 85 percent of Americans with job-based health insurance are in managed care. And more and more of them are unhappy with health plans that force them to run through a maze of pathways that get narrower and more convoluted the sicker they are. And consumers without health insurance are left to a fragile health insurance market that is twisted by state regulations, industry mandates, regulation, and premiums that are priced so high that only the sickest apply. 

Conservatives must side with the American people as consumers, not as beneficiaries of yet another government entitlement. 

The Right Track 

House Budget Chairman John Kasich is on the right track. “First, we should remove the distortions in the health care system caused by the federal tax code,” he says. “The current tax system ties health insurance to employment. Americans should have the freedom to buy health coverage that moves with them – no matter where or whether they are employed – through tax credits provided directly to individuals.” 

Bill Thomas, chairman of the House Ways and Means Committee’s Health Subcommittee, is on the same track, writing in a recent issue of Health Underwriter: “Replacing the current tax structure with a health insurance tax credit that lets individuals buy what they want would … create an environment where competition and individual choice would flourish. This year, Representative Jim McCrery and I intend to introduce legislation which does just that. Our legislation would give individuals and families the opportunity to purchase health insurance coverage regardless of their income or employment status” – or, for early retirees, their age. 

The Consensus Group, composed of the leading health experts from the market-oriented health policy community, agrees that reform of the tax code is the proper course. Sensible solutions require steps that will revitalize the marketplace for private health insurance to give everyone a chance to get the health coverage they need – rather than having political leaders pick and choose new groups to receive entitlements from government programs which already are sinking. 

“By addressing the underlying causes of health care market distortions, making health coverage truly portable, and empowering individual consumers through increased choice and competition, we can address many of the problems in the current system without resorting to burdensome government rules and regulations,” Chairman Thomas correctly concludes. 

Individual ownership of health insurance is the right way to go – not expansion of Medicare to lure more and more Americans into a government-run health insurance program that is heading toward bankruptcy. 



Grace-Marie Arnett is president of Galen Institute, a public policy research organization based in Alexandria, Virginia. She is the editor of Empowering Health Care Consumers through Tax Reform, published in 1999 by the University of Michigan Press.

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President Clinton joined congressional Democrats recently to push his plan to pry open Medicare so the “near elderly” can buy into the program. They claim that only 300,000 to 400,000 Americans will take advantage of the offer and say the plan will be fully paid for by the premiums charged to participants. Brookings Institution Fellow Jacob Hacker says the proposal is “modest.” 

But much more important than these unlikely numbers or the White House’s fantasized estimates of the cost of this new entitlement is the fundamental redefinition of Medicare it entails. Medicare buy-in will dramatically change the program so it could become the vehicle to further socialize the American health insurance system, one constituency at a time. 

The proposal would allow anyone age 62 to 64 to buy into Medicare for $300 a month and let displaced workers (and spouses) who are over age 55 buy in for $400 a month. But why should a healthy, energetic 55-year-old man who is starting a new business qualify for this government entitlement when a 53-year-old diabetic widow can’t? Or a 32-year-old garage mechanic with three young children whose wife has multiple sclerosis? Guess who will be next. Unless conservatives muster a principled defense, the liberals will have achieved their goal of implementing national health insurance, one group at a time. 

Defenders of individual freedom will not win by putting on their green eye shades. The battles can only be won on principle by having a genuine debate about whether or not the American people want to receive their health insurance through a government-run system or through a revitalized, consumer-driven private marketplace. 

The marketplace for individual health insurance policies is crushed by bureaucracy and sapped of strength by the lack of consumer-driven competition. The more people that the government peels into its programs, the more the market for private insurance dries up. Politicians on both sides of the aisle, at the state and federal levels, are joining the mandate-a-month club to micro-manage access to health services. And the more regulation and restrictions that federal and state legislatures impose on the industry, the higher the price of health insurance, further drying up the market. 

With his Medicare scheme, President Clinton is trying to further open up government health insurance programs to the near elderly, without a meaningful debate over what it all means. 

Revitalize the marketplace

The battle cry of conservatives should be: Free the market! Let the consumer decide! The only way the market for health insurance will be revitalized is for consumers to begin to purchase their own health insurance in a competitive marketplace. Right now, 85 percent of Americans with job-based health insurance are in managed care. And more and more of them are unhappy with health plans that force them to run through a maze of pathways that get narrower and more convoluted the sicker they are. And consumers without health insurance are left to a fragile health insurance market that is twisted by state regulations, industry mandates, regulation, and premiums that are priced so high that only the sickest apply. 

Conservatives must side with the American people as consumers, not as beneficiaries of yet another government entitlement. 

The Right Track 

House Budget Chairman John Kasich is on the right track. “First, we should remove the distortions in the health care system caused by the federal tax code,” he says. “The current tax system ties health insurance to employment. Americans should have the freedom to buy health coverage that moves with them – no matter where or whether they are employed – through tax credits provided directly to individuals.” 

Bill Thomas, chairman of the House Ways and Means Committee’s Health Subcommittee, is on the same track, writing in a recent issue of Health Underwriter: “Replacing the current tax structure with a health insurance tax credit that lets individuals buy what they want would … create an environment where competition and individual choice would flourish. This year, Representative Jim McCrery and I intend to introduce legislation which does just that. Our legislation would give individuals and families the opportunity to purchase health insurance coverage regardless of their income or employment status” – or, for early retirees, their age. 

The Consensus Group, composed of the leading health experts from the market-oriented health policy community, agrees that reform of the tax code is the proper course. Sensible solutions require steps that will revitalize the marketplace for private health insurance to give everyone a chance to get the health coverage they need – rather than having political leaders pick and choose new groups to receive entitlements from government programs which already are sinking. 

“By addressing the underlying causes of health care market distortions, making health coverage truly portable, and empowering individual consumers through increased choice and competition, we can address many of the problems in the current system without resorting to burdensome government rules and regulations,” Chairman Thomas correctly concludes. 

Individual ownership of health insurance is the right way to go – not expansion of Medicare to lure more and more Americans into a government-run health insurance program that is heading toward bankruptcy. 



Grace-Marie Arnett is president of Galen Institute, a public policy research organization based in Alexandria, Virginia. She is the editor of Empowering Health Care Consumers through Tax Reform, published in 1999 by the University of Michigan Press.

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About the author