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Increasing Medicare Age Could Lead To Higher Costs

Filed by KOSU News in Health.
November 9, 2011

Congress’ so-called deficit reduction “supercommittee” is down to the final weeks of deliberations in its efforts to come up with $1.2 trillion in budget savings. And one proposal that keeps cropping up is the idea of raising the eligibility age for Medicare.

GOP presidential candidate Mitt Romney became just the latest to propose it in his speech to the Americans for Prosperity Foundation on Friday.

“As with Social Security, the eligibility age should slowly increase to keep pace with increases in longevity,” Romney said. Social Security’s “normal” retirement age is gradually rising from 65 to 67 thanks to a change instituted in 1983.

Many health care providers, including major hospital groups, have also been urging members of the supercommittee — formally the Joint Select Committee on Deficit Reduction — to consider raising Medicare’s eligibility age rather than cutting their payments.

It’s a proposal that makes sense, says Joseph Antos of the American Enterprise Institute, a conservative Washington, D.C., think tank. “People are just healthier when they hit 65 than they were 40 years ago,” shortly after Medicare began.

“In 1965, there were a lot more jobs that required real physical effort,” Antos says. “Whereas these days, for a lot of people turning 65, the physical effort is getting out of their desk chair at 5 o’clock.”

Another reason raising Medicare’s eligibility age has gotten more politically palatable is the passage of last year’s health law. Right now, it’s almost impossible for older people to buy their own health insurance due to pre-existing health conditions. And even if they can find coverage, it’s usually unaffordably expensive.

But starting in 2014, assuming all goes as scheduled, all that will change.

“No matter what age you are,” says Antos, “you can apply for insurance, and no matter what your physical condition is, you will be eligible” for insurance coverage.

Shifting Costs Around

So, problem solved, right?

Well, not so fast, says Tricia Neuman of the Kaiser Family Foundation. She and some colleagues did an analysis of what the change would mean earlier this year.

Neuman says if raising the eligibility age is looked at purely as a mechanism to reduce the federal deficit, then it’s definitely a winner.

“This proposal will save money for the federal government and save money for Medicare,” Neuman says. And the downside? “It would do so by shifting costs to other payers.”

Specifically, some costs would shift to employers because they’d have to continue to cover many of those people who’d continue to work. Some costs would also shift to those 65- and 66-year-olds themselves, if they’re no longer working. They’d have to pay for their own insurance.

And states might have to pay more, too. If those people have low incomes, they might end up on Medicaid, rather than Medicare.

But it’s not even a dollar-for-dollar shift. It turns out that moving 65- and 66-year-olds out of Medicare would actually raise costs for the health system as a whole, according to the Kaiser analysis.

“So even though this proposal would save money for Medicare, costs overall will increase,” Neuman says.

That’s because taking the youngest, healthiest people out of Medicare would leave behind the sicker, older people and thus raise Medicare premiums for everyone left behind.

Meanwhile, those same people who are young by Medicare standards are old compared to the working population, so those 65- and 66-year-olds would cause overall premiums to rise by staying in that insurance pool, too.

In the end, while the federal government would save a net of about $6 billion in 2014 from such a switch, overall health spending would grow by nearly $8 billion, illustrating, yet again, that nothing in health care is ever as simple as it appears. [Copyright 2011 National Public Radio]

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