The Net Effect of Raising Medicare's Eligibility Age

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Over the past week, Congress and President Barack Obama's administration have continued their spar over the "fiscal cliff" — a series of spending cuts and tax hikes that will go into effect at the end of this year without a deal — and recently, groups have insisted raising the Medicare age should be part of the compromise.

Sam Baker of The Hill reported House Speaker John Boehner (R-Ohio) and other congressional Republicans are demanding $600 billion in healthcare cuts. Raising Medicare' eligibility age from 65 to 67 is a key proposal right now to help achieve those savings.

In the long term, raising the Medicare age would save the federal government roughly $86 billion over six years, according to the Congressional Budget Office. Essentially, seniors aged 65 and 66 would be phased into Medicare, and in the mean time, they would be responsible for their own healthcare coverage for an extra two years through employers, individual plans or other government plans. In July 2011, The Kaiser Family Foundation also conducted a study on raising the age of Medicare eligibility, finding that it would save the federal government an estimated $5.7 billion in 2014 alone.

However, with the savings, there would also be massive increases in out-of-pocket costs and employer retiree healthcare costs, according to the same Kaiser report. There could be new increased costs up to $11.7 billion for states, employers and individual seniors in 2014 through higher premiums on healthier, younger individuals and deferred treatment of chronic conditions.

John McDonough, professor of public health at the Harvard School of Public Health, and others have said raising the Medicare age may save somewhat in the very short term, but it is only a "cost shifting" maneuver — i.e., other people will be picking up those "saved" costs.

For example, the 65- and 66-year-olds may be more inclined to stay on employer insurance, meaning other workers and the employer would foot more of the bill.

"Yes, fewer people in Medicare would lower costs somewhat, but these 65/66-year-olds, while the most expensive part of a working adult population, are also the least expensive part of the Medicare population," Mr. McDonough wrote in a Boston Globe op-ed. "So the smaller number of Medicare enrollees left behind would have higher average costs per person, and those costs would increase Medicare premiums about 3 percent higher than they would otherwise be."

More Articles on Medicare:

Senator to Obama: Cut Costs in Healthcare Delivery, Not Medicare and Medicaid

House Republicans Propose Raising Medicare Eligibility Age to Avoid Fiscal Cliff

AHA Proposes 12 Deficit Reduction Strategies in Lieu of Medicare Cuts

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