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“The Austerity Trap”: What Raising The Medicare Eligibility Age Really Means

After a campaign in which Republicans attempted to pillory Barack Obama for finding $716 billion in savings from Medicare (via cuts in payments to insurance companies and providers but not cuts to benefits), those same Republicans now seem to be demanding that Obama agree to cuts in Medicare benefits as the price of saving the country from the Austerity Trap, a.k.a. fiscal cliff. Oh, the irony! You’d almost think that they weren’t really the stalwart defenders of Medicare they pretended to be.

And there are some hints that the Obama administration is seriously considering agreeing to raise the Medicare eligibility age from 65 to 67 as part of this deal. It’s a dreadful idea, and as we discuss this possibility, there’s one really important thing to keep in mind: Medicare is the least expensive way to insure these people. Or anybody, for that matter. In all this talk of the bloated entitlement system, you’d be forgiven for thinking Medicare was some kind of inefficient, overpriced big government program. But the opposite is true, and that’s why raising the eligibility age is such a dreadful idea.

Raising the eligibility age saves very little money, on the order of a few billion dollars a year. That’s because the 65 and 66-year-olds will have to get insurance somewhere, and many of them are going to get it with the help of the federal government, either through Medicaid or through the insurance exchanges, where they’ll be eligible for subsidies. However, since many Republican-run states are refusing to expand Medicaid in accordance with the Affordable Care Act, lots of seniors who live in those states will just end up uninsured, which will end up leading to plenty of financial misery and more than a few premature deaths. Put this all together, and the Center on Budget and Policy Priorities estimates that while the federal government would save $5.7 billion a year from raising the eligibility age, costs would increase by more than twice in other parts of the system—for the seniors themselves, employers, other enrollees in exchanges who would pay higher premiums, and state governments.

What we’d be doing is taking people off Medicare, the most efficient and inexpensive option for them to have insurance, and putting them into the individual market, which works less well and costs more. When we start talking about this in more detail, that’s what Republicans should really be forced to address.

If you want more details on the implications of raising the eligibility age, you should be reading Jonathan Cohn and Sarah Kliff. But it’s important that we keep the big picture in view as the Austerity Trap deal takes shape. If anything, we should be putting more people on Medicare—that would save money and improve health in the system overall (you may recall that when the ACA was being debated one of the proposals was to allow people over 50 to buy in to Medicare, an idea we should bring back). There’s an argument being made that raising the eligibility age may not be a good idea, but the administration has to give Republicans something, and it’s not that big a deal. If that’s the case that wins the day, we should be clear about exactly what it means: a more expensive health care system, exactly the opposite of what everybody says they want.

 

By: Paul Waldman, Contributing Editor, The American Prospect, December 10, 2012

December 11, 2012 Posted by | Health Care | , , , , , , , , | 1 Comment

New Study: Raising Medicare Eligibility Age Erodes Social Security Benefits

A proposal to increase the Medicare eligibility age, which the Super Committee is considering, would drive up health care costs to the point where they would consume almost half of the Social Security check of a middle-class retiree, according to a new analysis by Social Security Works.

In his testimony before the Super Committee yesterday, Erskine Bowles, a Morgan Stanley executive and co-chair of the President’s Fiscal Commission, recommended raising the Medicare eligibility age to 67 as a way to bridge the differences between Democrats and Republicans on the Super Committee.

Bowles explained his support for the policy on the grounds that the Affordable Care Act (ACA) made “other coverage available” to 65- and 66-year-olds, by providing subsidies to purchase health care in the private sector.

Bowles’ testimony in favor of raising the age comes on the heels of public endorsements by the American Hospital Association, the leading trade association for the nation’s for-profit hospitals, and the Healthcare Leadership Consortium, a consortium of health insurance companies, pharmaceutical companies, and other medical providers.

The Center on Budget & Policy Priorities, a center-left think tank, criticized Bowles’ compromise for being “to the right of Boehner’s offer to Obama in July.” They dismissed, in particular, Bowles’ reliance on the ACA to justify raising the Medicare eligibility age. Robert Greenstein, the Center’s President, wrote that without assurance that ACA will withstand overwhelming Republican political and legal opposition, Bowles’ proposal to raise the Medicare eligibility age “would risk leaving many 65- and 66-year-olds with no insurance at all at the very time of life when they are developing more medical conditions and problems due to their age.”

Even if ACA is successfully implemented, however, many experts believe raising the Medicare eligibility age would be poor policy. A study by the Kaiser Family Foundation found that raising the Medicare eligibility age to 67 would increase health care costs across the economy, saving the government little money. What money the government would save, the Kaiser study found, would come from shifting the costs of care onto patients — especially, but not only, individuals aged 65 and 66, who would no longer be eligible for Medicare.

A new analysis of the Kaiser study by Social Security Works shows that the increase in out-of-pocket costs for 3.3 million people aged 65 and 66 would take a large bite out of affected seniors’ already modest Social Security checks.

From Social Security Works’ analysis:

Of the 3.3 million people aged 65 and 66 who would pay more out-of-pocket for health care if they were no longer eligible for Medicare, the following two groups would be hit especially hard:

    • Out-of-pocket health care costs would increase, on average, by $4,300 in 2014 for 960,000 people aged 65 and 66 who purchase coverage through a health insurance exchange and have incomes exceeding 400 percent of the federal poverty level ($43,560), making them ineligible for subsidies available to exchange participants with lower incomes.
    • Under current law, these 65- and 66-year-old retirees’ average out-of-pocket costs would be $6,800 in 2014, out of a total Social Security benefit of $24,469. If forced out of Medicare and onto the health insurance exchanges, their average out-of-pocket health care costs would grow to $11,100, out of a total Social Security benefit of $24,469. [Figure 1] As a result, if the Medicare eligibility age is raised, out-of-pocket health care costs would go from consuming 28 percent to 45 percent of those 65- and 66-year-old retirees’ Social Security check.

      Sources: Social Security Works analysis of estimates from Social Security Trustees, 2011, and Kaiser Family Foundation, 2011.
  • Out-of-pocket costs would increase, on average, by $1,200 for 240,000 people aged 65 and 66 who purchase coverage through a health insurance exchange and have incomes between 300 and 400 percent of the federal poverty level ($32,670-$43,560). Under current law, these 65- and 66-year-old retirees’ average out-of-pocket costs would be $4,800 in 2014, out of a total Social Security benefit of $18,464. If forced out of Medicare and onto the health insurance exchanges, their average out-of-pocket health care costs would grow to $6,000, out of a total Social Security benefit of $18,464. As a result, if the Medicare eligibility age is raised, out-of-pocket health care costs would go from consuming 26 percent to 32 percent of those 65- and 66-year-old retirees’ Social Security check.

Costs to Social Security beneficiaries could be substantially higher than estimated here. The out-of-pocket costs discussed in Social Security Works’ analysis do not include the cost of medical services that are not covered by Medicare at all, including dental care and most kinds of long-term care, such as permanent residency in a nursing home. Accounting for these medical services would not have any bearing on the amount that out-of-pocket costs would increase if the Medicare eligibility were raised to 67. It would, however, show average out-of-pocket costs to be considerably larger under both current law and if the Medicare eligibility were raised to 67.

By: Daniel Marans, Policy Director, Social Security Works, Published in Huffington Post, November 4, 2011

November 7, 2011 Posted by | Affordable Care Act, Health Care, Health Reform | , , , , | Leave a comment

   

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