The phase-out of Medicare, which is built into the latest federal budget actions, is bad news for people who are planning on retiring. It is far from certain that the insurance market will have any interest in filling the resulting health care coverage gap. At best, health insurance for retirees will cover routine medical care but won’t touch the extraordinary medical costs that people worry about. For an American planning a comfortable middle-class retirement, then, the price tag just jumped up from $3 million to $4 million — the extra million set aside to cover the large medical expenses that you hope you never have to face.
If people have to save more for retirement, there will be less money to spend now. This will tend to slow down the economy — an ill-timed effect from a Congress that insists it is trying to boost the economy. In general, though, you can’t give a national economy a boost by shifting uncertainty from the government to the already over-stressed consumer sector.