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Medicare Disability Spending

By August 18, 2016Commentary

After railing about the Medicaid program yesterday, I have a new target today, and one equally worthy of skepticism–the part of the Medicare program that covers disabled Americans under age 65.  The Kaiser foundation has issued a report updating data on the health use of disabled under 65 adults covered by Medicare.  (KFF Report)   Disabled adults can receive social security disability income payments and after they do so for two years, they are eligible for Medicare coverage.  The underlying problem is that getting social security disability has become a racket and people who are perfectly capable of working are using the program for early retirement benefits when they lose a job or just get tired of working.  This is undermining the solvency of the disability program and also impacting Medicare’s fiscal condition, which is unfair to those truly disabled as well as to taxpayers.  A particular area of abuse is people who claim to be too depressed or to have other mental conditions that make it hard for them to work.  It is absurd to give these people income subsidies and even more absurd to give them health care on top of that.

Since 1973, the number of under 65 disabled Medicare recipients has gone from 1.7 million (7.3% of all beneficiaries) to 9.1 million, or 16% of all beneficiaries note that some ESRD patients are in these numbers and they should be viewed differently).  Two-thirds of the under 65 disabled report a cognitive or mental impairment, compared to only 29% of the over 65 population.  The majority report fair or poor health status and claim at least one limitation on an activity of daily living.  Despite being younger, the disabled population has higher per capita spending than the over-65 group, largely due to higher drug costs.  The cost for the disabled was $13,098 per person per year, versus $9,972 for the senior beneficiaries.  We can assume that much of the drug cost difference is due to mental health medications.  And since average spending on services like hospitalization and physician care isn’t higher, it appears unlikely that most of these disabled beneficiaries have significantly worse physical health.  Once the disabled become 65, they also have much higher costs than beneficiaries who only entered the program at age 65.  Those who originally got coverage because of disability have almost twice the average level of spending than those who just aged in.

I don’t mean to sound hard-hearted in any way, quite the opposite.  My concern is that those who really don’t need the program are jeopardizing its ability to care for those who do; as well as the social message we send when we allow people to behave irresponsibly and be rewarded.  The best way to resolve the problem is to end the federal disability income subsidies–there is absolutely no reason this need can’t be handled at the state level and having it a federal program just obfuscates its cost and hinders responsible administration.  With greater visibility at the state level, tighter eligibility and enforcement can occur.  Access to Medicare coverage should also be eliminated, the state can decide if and to the extent people claiming a disability should be eligible for Medicaid or other similar programs.  We are going to be forced to deal with these issues sooner or later; $20 trillion in federal debt and annual $500 billion plus deficits are not sustainable.

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