Raising Medicare eligibility age may save $100B as costs shift
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A Republican proposal to raise the eligibility age for Medicare may save the federal government more than $100 billion while increasing health-care costs to senior citizens, states and employers.
People age 65 and older could pay an extra $2,000 for health insurance if they're excluded from Medicare, the federal health-care program for the elderly, according to the nonpartisan Kaiser Family Foundation. Other government and private health plans would see costs rise as would-be Medicare recipients seek care elsewhere.
The proposal, which President Barack Obama in a Bloomberg interview signaled a willingness to consider in talks over a deficit-reduction deal, would fail to address Medicare's more-pressing fiscal issues. These include the high cost of providing end-of-life care, said Paul Keckley, executive director of the Deloitte Center for Health Solutions in Washington.
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Raising the eligibility age is "math that works very well for reducing the federal outlay for Medicare," Keckley said. "It doesn't mean costs will go away. It'll be someone else's problem."
House Speaker John Boehner, an Ohio Republican, proposed the increase as part of a potential accord to stave off more than $600 billion in tax increases and spending cuts slated to begin next month. Obama said in the Dec. 4 interview with Bloomberg Television that while he has his own ideas on reducing entitlement spending, "I'm happy to entertain other ideas Republicans may present."
The Boehner proposal is only viable because the elderly have alternative sources of insurance under Obama's 2010 health care overhaul, said economist Paul Van de Water of the nonprofit Center on Budget and Policy Priorities in Washington.
"It's clear no Democrat would be even willing to think about this idea without health reform," Van de Water said.
Medicare's eligibility age -- 65 -- hasn't been increased since the program began in 1966. That's fueled complaints that it hasn't kept pace with increases in longevity. People turning 65 in 1940 could expect to live another 14 years, according to the Congressional Budget Office. They can expect an additional 20 years Thursday.
"We're living longer, right?" said Representative Trey Gowdy, a South Carolina Republican. "We haven't updated the law to reflect that." Social Security Congress agreed in 1983 to increase the retirement age for full Social Security benefits to 67, a change that doesn't take complete effect until 2022. Seniors would accept a similar gradual alteration to Medicare, Republicans say.
The savings to the federal budget would depend on how much the age is lifted and how quickly. While Boehner's proposal doesn't offer specifics, House Republicans called for increasing eligibility to age 67 in their fiscal 2013 budget. Medicare spending would be cut $148 billion over a decade if eligibility increased two months each year to age 67 in 2027.
Savings to the government would accumulate slowly as Medicare began paying benefits to fewer people. The Treasury would collect more in Medicare payroll taxes because many seniors previously eligible for the program would keep working instead, to retain their health insurance. By 2035, the change would reduce projected Medicare spending by 5 percent, according to the CBO.
Government spending would increase elsewhere as many erstwhile Medicare beneficiaries became eligible for other health-care programs. Some would join Medicaid, the federal- state insurance program for the poor. Others would receive subsidies to buy private coverage under Obama's health-care overhaul, the Affordable Care Act. That would reduce the federal government's net savings to $113 billion, the CBO said.
The number of uninsured people would rise, Keckley said, because some seniors would forgo purchasing insurance and wouldn't be eligible for Medicaid, particularly in states that decline to expand that program.
Two-thirds of seniors would see their health-care bills climb by $2,200 if lawmakers immediately raised the age to 67, according to a study last year by the Kaiser Family Foundation of Menlo Park, California. Employers' costs would grow by about $4.5 billion, Kaiser said, because their health plans would cover more elderly workers with health problems.
Former Congressional Budget Office Director Douglas Holtz- Eakin said that shouldn't be a concern.
"I don't see why it's a presumption that the federal government should pay for everyone's health care," said Holtz-Eakin, a one-time adviser to President George W. Bush. "The real cost shift is when people go on Medicare and make everybody else pay for their health care."
Older Recipients The proposal would squeeze spending on some of Medicare's cheapest beneficiaries -- younger recipients tend to be healthier so they place fewer demands on the program -- without addressing older, more expensive seniors.
Average Medicare spending among those between the ages of 65 and 75 amounted to $5,887 in 2006, according to Kaiser. The program spent more than twice that, $12,059, on those ages 85 and over. Spending on those in their last year of life represented 28 percent of all Medicare costs in 1999, according to the program's actuaries.
AARP, the advocacy group for the elderly, sent volunteers Wednesday to warn lawmakers of the additional costs.
"There are lots of other things we can do to reduce health-care costs without passing the buck onto beneficiaries," said Representative Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee.