Changes to Medicare would merely shift costs to the private sector or onto seniors.
One solution to nation’s deficit and debt problems, by reducing entitlement spending, is an increase in Medicare eligibility age. A recent analysis by the CBO found that raising Medicare eligibility to 67 would reduce federal expenditures by $125 billion between 2012 and 2021. This study analyzed the impact of this proposed change and the implications for employers, states, and individuals. The authors assumed alternate coverage through private plans in the Affordable Care Act’s insurance exchanges, through employer plans, or through an expanded Medicaid.
An estimated 5.0 million life-year equivalent beneficiaries ages 65-67 would be affected for one or more months by a policy that raises the age of eligibility to 67. 38% would be expected to gain coverage with private insurance purchased in the Exchange. Half of these persons would be eligible for subsidies due to their income being below 400% FPL. 42% would be expected to receive coverage from an employer as active workers (20%) or retirees (22%). The remaining 20% would be covered by Medicaid.
There would be a net increase of $3.7 billion in out-of-pocket costs for people who would otherwise have been covered by Medicare – affecting 2/3 of the 5 million beneficiaries. These beneficiaries are (1) those who enroll via an Exchange and have incomes above 300% FPL ($1200-$4300 more than traditional Medicare) and (2) those with employer-sponsored insurance, as retirees ($2200 more) or active workers ($500 more).
The remaining 1/3 of the 5 million affected beneficiaries would benefit, including new Medicaid and Exchange enrollees below 300% FPL. Both groups would pay $3200 less, on average, than under traditional Medicare.
Savings on federal spending would be offset by new costs, including the cost of covering new Medicaid enrollees and premium subsidies in the Exchanges. There would also be lower revenues associated with foregone Medicare premium benefits from those ages 65 and 66 who would no longer be eligible. State Medicaid spending would increase by $0.7 billion as states pay more for those who would have otherwise been on Medicare. Employer costs would increase by $4.5 billion as they become the primary payer for workers and retirees under 67. Remaining Medicare beneficiaries above age 67 would face $2.4 billion in premium increases once lower age enrollees are excluded. Adults under 65 in Exchanges would have a 3% increase in premiums due to the shift of older adults under 67 from Medicare.
A decrease in the federal deficit is only minimally achieved by decreasing the number of people served through Medicare. The redistribution of spending to either previously covered individuals or their current or former employers is not an adequate solution – it’s merely a quick fix amenable to talking points in a 24-hour news cycle. A portion of those people who need assistance are now covered by means of the reforms of the Affordable Care Act – redistributing spending to yet another federal program (Medicaid). The argument remains that any reform of current entitlements should not be to limit those who are eligible (by age, income, etc.) but instead to seek out increased efficiency in the delivery of and payment for care so that even more persons can receive assistance when truly necessary.
Kameron Matthews, MD, JD