I recently returned from a blissful two weeks in the United Kingdom. My wife and I visited Edinburgh for the first time, London for the third, and spent a week in-between hiking around the intensely beautiful Lake District. Our hiking companions were truly remarkable. Our guide was in his mid-60s and could not have been fitter. For fun, he likes to walk across England from the North Sea to the Irish Sea. As this involves crossing both the Pennine Range and the Fells of the Lake District, this is no Sunday walk in the park! Our other hiking mates were an Australian in his mid 60s and a Californian in her late 70s. We hiked 3-5 hours daily with average elevation changes of nearly 1000 feet. My wife and I are in pretty good shape but our mates often walked circles around us.
We prepared for our trip by reading up on Scottish history and on Shakespeare (in preparation for seeing Richard III at the Globe Theatre.) It seems that nearly all Scottish Kings died when they were young, sometimes in battle but mainly from disease. Mankind is fortunate that Shakespeare reached the ripe old age of 52, although he had not written a great play for many years before his passing.
All of which brings me to the subject of this blog – the crisis in Medicare. When Congress enacted Medicare in 1965, it was embraced by nearly all Americans as a sort of intergenerational social contract. (If you prefer, think of it as a contract between our younger selves and our older selves.) The terms of the contract read something like this: Work until you reach old age and retire; after that, younger Americans will pay for your medical care. In this way, Medicare mirrored the Social Security social contract enacted in 1935.
For the purposes of these social contracts, “old age” was defined to be age 65; this became our de facto retirement age. This was a reasonable choice at the time. When Social Security was enacted in 1935, life expectancy was just 62 years. In 1965, life expectancy was 70. But this is no longer reasonable. By 2020, life expectancy is expected to surpass 80, and most Americans will enjoy good health during these additional years. “Retirement” is no longer the last phase of our lives; it is the start of our extended “second lives.”
Today’s Medicare social contract has new language: Work until your health insurance is guaranteed and paid for by younger Americans, and then feel free to begin your second life. When you finally do reach old age, pray that there is enough money to pay for your medical care. But does anyone believe that this new social contract makes good social policy? Would our younger selves and our older selves be reconciled to this deal? I doubt it.
My point isn’t just the obvious one that the number of retirees is swamping the number of working Americans, and in the process is overwhelming the Medicare budget. My point is that extended life expectancies have redefined the Medicare social contract, so that Medicare is not the program that Congress ratified in 1965. Working Americans still subsidize medical care for the elderly. But they also subsidize medical care for “seniors”, a vibrant group of individuals enjoying their second lives, a group that scarcely existed when Social Security and Medicare were enacted.
Every year that passes, we live a little bit longer and a little bit healthier. As we do so we dig a deeper hole for Medicare and further distance ourselves from the program’s original purpose. Congress could have prevented these problems by pegging the age of eligibility to life expectancies. It is not too late to correct this mistake. The age of eligibility for Social Security is set to increase to 67 in 2022, but that probably won’t keep up with continued increases in life expectancy. And there is no similar increase planned for Medicare. The hole keeps getting deeper.
It is time to return Medicare to its initial social contract. Working Americans should subsidize the elderly. I am willing to postpone starting my second life for a few more years; I hope all working Americans are prepared to do the same.