Charging higher premiums to seniors who have fully contributed to the Medicare program during their working lives, just because their labors now bring them higher incomes, seems unfair, especially when those who – by their continuing conduct will cost Medicare alone more than $300 billion over the next ten years – are not asked to pay even a small portion of those totally unnecessary health care costs, he argues.
That's in addition to other unnecessary health care expenses caused by smoking; for example, almost $10 billion in VA medical expenses annually.
As legislators wrestle with avoiding the fiscal cliff and reining in the deficit by a variety of means – including means testing Medicare benefits, raising the age for Medicare eligibility, etc. – they seem to be ignoring a savings which dwarfs all the others combined, and the only one which will actually reduce costs rather than simply shift them, suggests Banzhaf.
Raising the age of eligibility for Medicare from 65 to 67 is projected to save about $150 billion over the next ten years, whereas smoking by Medicare beneficiaries costs Medicare and taxpayers about twice as much.
Moreover, raising the age of eligibility doesn't reduce the costs, as a higher premium on smokers would do by encouraging quitting, but rather simply reallocates them to the elderly and to taxpayers.
Means testing Medicare benefits, although it varies depending on the specifics of the plan, likewise raises far less revenue than smoking imposes, and does nothing to reduce health care costs.
Also, as the AARP and others have argued, it could drive wealthier beneficiaries into private health plans, thereby making the patient pool poorer, sicker and lacking the political clout needed to keep the program viable in the future.
Already more than 60% of major companies, and about a dozen states, charge smokers more than nonsmokers for health insurance, and virtually all insurance companies charge smokers more for their life insurance.
This simply recognizes that smoking imposes huge costs on our economic system – more than $3 trillion, or $120,000 per smoking worker – over a ten year period; many times more than smokers pay in excise taxes on cigarettes.
In contrast, the fiscal cliff stalemate is largely over some $1.4 trillion over 10 years, about half the amount smoking imposes on Americans, and mostly on nonsmokers.
Charging higher premiums because the insured engages in conduct which raises costs is a firmly established principle, with bad drivers paying more for their automobile insurance, and homeowners who refuse to install smoke detectors paying more for their home insurance. Indeed, several court decisions have ruled that insurers should charge more to those who impose higher costs on the group.
Under Obamacare, smokers may be charged 50% more than nonsmokers, even in the absence of a wellness program. Although this is expected to provide a very strong incentive to help smokers quit, the proceeds from the Obama smoker surcharge, which Prof. Banzhaf helped get inserted into the law, go to the insurance companies and not to help reduce the federal deficit.
"Before charging Medicare beneficiaries more simply because they have more money, isn't it fairer to impose those burdens on those who inflate the cost of Medicare to all taxpayers by imposing responsibility testing rather than means testing.”
“Instead of simply shifting the costs to people who have done nothing wrong and can't reduce the costs of Medicare, why not impose them on the causes of the problem – those who can help reduce the costs and avoid the added expense simply by quitting," asks Banzhaf.
JOHN F. BANZHAF III, B.S.E.E., J.D., Sc.D.
Professor of Public Interest Law
George Washington University Law School,
FAMRI Dr. William Cahan Distinguished Professor,
Fellow, World Technology Network,
Founder, Action on Smoking and Health (ASH)
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