Fact/Fiction: Raising the Medicare Eligibility Age Would Save the Program Money
by Donald Sjoerdsma / The Medicare Newsgroup
The Sound Bite:
Deficit hawks have long argued that raising the Medicare eligibility age is a good way to reduce entitlement spending. It has routinely been part of Republican, and sometimes bipartisan, proposals to reform the program.
Rep. Paul Ryan’s (R-Wis.) fiscal year 2013 budget proposal would raise the eligibility age from 65 to 67 years by two months a year starting in 2022, until it reaches 67 in 2033; and the bipartisan Burr-Coburn deficit reduction plan would gradually raise the age to 67 by 2027.
The federal government would spend less on the Medicare program because costs primarily would be shifted to individuals, employers and state government programs. They would, collectively, pay more for health care services than Medicare would pay to cover the same group of people.
Federal spending would be reduced by a net $5.7 billion if the eligibility age increase were fully implemented by 2014, according to a Kaiser Family Foundation report last updated July 2011. The Congressional Budget Office estimated that raising the eligibility age by two months per year starting in 2014 until it hits 67 in 2027—which is closer to plans that have been put forward in Congress—would save the federal government about $148 billion from 2012 to 2021. By 2035, Medicare spending would be 5 percent lower annually that it would without such measures.
That said, if the Medicare eligibility age is raised by two years, 65- and 66-year-olds will either have to find insurance from another source or go without it.
Forty-two percent would get insurance coverage through their employers, 38 percent would purchase private insurance in a state exchange and 20 percent would be covered under Medicaid, Kaiser estimated.
This will become more complicated depending on the number of states that opt out of the Medicaid expansion, which, set to go into effect in January 2014, extends Medicaid coverage to anyone with income up to 133 percent of the Federal Poverty Line (FPL), up from 100 percent of FPL. If no additional states opt in to the expansion, The Center for American Progress estimated that 435,000 seniors would be at risk of going without insurance. That number will decrease if additional states opt into the Medicaid expansion.
This cost-cutting tactic would also increase out-of-pocket health care expenses for the majority of people ages 65 and 66. Two-thirds would pay more in cost-sharing and premiums, on average, than they would have paid under Medicare. The other one-third would actually have lower out-of-pocket costs than they would otherwise because of subsidies made available to low-income populations through Medicaid and the state exchanges.
For enrollees that remain in the program in 2014, Medicare Medical Insurance (Part B) premiums would rise by an aggregate $2.2 billion. Employers and states would take a hit as well. Employer spending on health care would rise by $4.5 billion and costs to states by $0.7 billion.