Clinton Eastwood and the Problem of Consumer Sovereignty for the Elderly

When you see Clint Eastwood up onstage acting bizarre at the Republican National Convention, the thought is unavoidable—this guy is old.

We all know that some cognitive impairment tends to be a part of the aging process, just as nobody expects 7-year-olds to be incredibly wise decision-makers. That’s why elder fraud is a recognized problem. A great study by David Labison finds that about half of 80-somethings have “significant cognitive impairment, effectively rendering them incapable of making important financial choices.” As the elderly share of the population grows, this is a problem we’re going to have to confront as a society.

Unfortunately, we seem to be moving in the opposite direction. One example is the unfortunately named bipartisan Jumpstart Our Business Startups Act that passed this Congress. The JOBS Act does a few good things but is mostly dedicated to weakening paternalistic investor protections. That should make it marginally easier for legitimate entrepreneurs to raise capital but will also make it dramatically easier to get into the business of defrauding moderately confused middle-class senior citizens out of their savings.

A related problem arises with the Romney/Ryan plan to replace Medicare with a system of subsidies for the purchase of private health insurance on regulated exchanges. This is essentially the same idea as what ObamaCare will do for the non-elderly, but in the opposite direction. In the case of the Affordable Care Act, it’s not clear to me that there are sound non-political reasons for doing it this way rather than constructing a single public program. But in the case of a program targeted at the elderly, the case for consumer sovereignty is clearly weaker. Insurance forms are confusing, and calculating the real actuarial value of different offers is difficult. This is not an ideal task to assign to a 92-year-old. It’s impossible to make it work with adequate regulation, but you really are counting on building a very effective regulatory agency to manage the program. So why not just build an effective agency and manage Medicare?