• Monkeying with the Medicare eligibility age

    People are still talking about changing the Medicare eligibility age to help decrease deficits. What’s this all about? Does it make sense?

    Unless you qualify on the basis of disability or kidney failure, you won’t qualify for Medicare until you’re 65. What if you had to wait two more years, to age 67, before going on Medicare? Would that save money or not?

    The answer depends on whose money we’re talking about. If we’re talking about your money, we don’t have to think too hard. You’ll obviously spend more of your own money if you have to wait two years to go on Medicare. Collectively, 65 and 66 year olds who would have been on Medicare would spend about $3.7 billion of their own money (in 2014), according to the Kaiser Family Foundation.

    Will the federal government save money by not insuring you for those two years? Yes, it will, about $5.7 billion dollars. So, clearly costs would be shifted: a $5.7 billion federal savings is exchanged for $3.7 billion in would-be beneficiary spending. Maybe some people think that’s a worthwhile trade. However, consider that some 65 and 66 year olds who no longer qualify for Medicare would be uninsured. That might bother you. Maybe not.

    Even ignoring the effects on the uninsured and sticking to dollars and cents, we’re not even remotely done. What will also happen is that employers will spend an additional $4.5 billion to cover those who would otherwise be on Medicare. Premiums in the exchanges and for Medicare would go up because the average age of both groups would be higher causing the risk pool of both to be less healthy. The cost due to that would be $2.5 billion. States would also spend a little more.

    All told, the cost to the system of raising the Medicare age to 67 would be $11.4 billion in 2014, which is a high price to pay for $5.7 billion in federal savings. It’s exactly a factor of two too high. That’s a massive cost shift. Let’s put it this way, how much would you want to pay for the federal government to save $5.7 billion? I hope your answer is no greater than $5.7 billion. (If not, I’ve got a business proposition for you.) Paying $11.4 billion is a rip off.

    The trade off here isn’t even close to a good one unless you think we’re buying something exceptional for all that extra spending. That’s an argument I’d really like to see someone make.

    For more coverage of this issue and the above calculations see the following:

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    • What I want to know is how many of the people between 65 and 67 would die if they are putting off health care measures. Of course there is no way to measure that but that should be the real argument here. It has been proven Medicare saves lives.

      “A new study shows that Medicare indeed makes a difference for seriously ill patients—and that difference is the one between life and death. Following the fates of more than 400,000 people admitted to California hospitals through their emergency departments, a team of economists finds that patients who are just over 65 years old—and thus eligible for Medicare—are 20 percent less likely to die within a week of admission than are their slightly younger counterparts who do not yet qualify for the government insurance.”
      http://csi.gsb.stanford.edu/research-medicare-saves-lives

      So in the conversation about raising the eligibility age to age 67 there must be a count of those people age 65 to 67 and a statement that in passing this legislation we accept the possibility that 20 percent of you are likely to die. That’s just unacceptable.

      • Another great quote from, “Research: Medicare Saves Lives” from the Center for Social Innovation at Stanford.

        “To make sure that these two groups were equally sick, the researchers restricted their study to people who reported to hospital emergency departments with strokes, heart attacks, respiratory failure, and other life-threatening illnesses. “These events bring people to the ER regardless of their insurance coverage,” Card says. The team then examined which of these very sick people survived a day, a week, a month, and other time intervals up to two years. Their findings demonstrate that even nine months later, 20 percent more Medicareaged patients than younger patients were still alive.”
        http://csi.gsb.stanford.edu/research-medicare-saves-lives

    • I retired at age 66. I got medicare part A at age 65 while I was still working and had very good BC/BS insurance coverage. I did not take Medicare part B until 7 months after I retired because I didn’t need it and didn’t want to pay for it until I had to. If I had worked to age 67, I wouldn’t have wanted medicare till then, but would have had to take it earlier to avoid penalty. I am in good health, worked in an air conditioned office, and could still be working. People like me could stand to have a later retirement age and should get medicare at the time of retirement. Those who become disabled before the retirement age should be able to get medicare at the time of disability, IMO. I believe that both the retirement age and the medicare age should be increased a little over time by some agreeable formula that will keep both programs solvent in the coming decades. If that does not save enough, then the payroll and medicare taxes should be expanded to all income and not just the first $107,000.

      • The writer may or may not realize that federal law has long required that employer-based health insurance is primary to Medicare for working Americans over 65. This means that if Mr. Kizzia had needed an expensive hospitalization during his 66th year (while he was still working), it would have been paid for by Blue Cross/Blue Shield rather than Medicare.* In other words, for the not-yet-retired with decent employer-based health coverage, Medicare is already not paying for their health care. For them, there would be no savings from raising the Medicare eligibility age — because Medicare doesn’t pay for them now.

        As to the retired, the unemployed, the self-employed, and those without employer-based coverage, see the main article.
        ________________
        *Wonkish disclaimer — unless that plan paid the hospital less than Medicare would have, at which point Medicare would have made up the difference, up to what Medicare would otherwise have paid. (Sorry, I can’t help the wonkitude. I’m a lawyer.)

        • While I was working, BC/BS was primary and any medicare benefit would be secondary and might have paid my co pay. Now that is reversed. Medicare is primary and pays first. BC/BS pays second except for Rx, for which it pays since I don’t have a medicare drug plan.

      • BTW, Medicare payroll taxes are already levied on all income. But Mr. Kizzia is correct that there is room for additional revenue in lifting the income cap on Social Security payroll taxes.

      • Mr. Kizzea,

        As a healthy individual, you presumably wouldn’t have cost Medicare much money if you started at age 65 versus 67. So allowing sick people who are unable to work to go on Medicare probably doesn’t result in large cost savings.

        Another thing – unlike in Medicare, in which what you pay is relative to income, in employer provided coverage, your premiums are being subsidized by younger co-workers to a greater extent – and these workers are most likely earning less than you do. So the longer older Americans stay with their employer based coverage, the greater the cost is to younger workers. We all know that healthcare costs in the private sector are rising, and I have often wondered if this is due in part to an aging workforce (the baby boomer bump).

        Why does anybody think it’s a better idea to have the private sector insuring older Americans?

      • I contract with SSA. It takes months to get a hearing for disability and if awarded, there is a 2 year waiting period from onset date to receive Medicare. Your suggestion to get the 65-66 year old people who are ill on SSDI will not work.

    • My understanding is that when Medicare began the poverty rate among the elderly dropped from 26% to 9%. I would expect the poverty rate among the elderly to increase if the eligibility age were increased. After all, that many more people would fall back into the medical bankruptcy pool.
      What I’d really like to know is, if the eligibility age were dropped to 55, what would it cost and what would it save?
      Last I looked, single payer would save all of us about $450 Billion a year.

    • Questions: How is the $3.7 billion that 65 and 66 years calculated? Does that assume that they all will purchase insurance outside of through their employers? Or do we need to partially offset that amount by part of the $4.5 billion that employers will pay?

    • One problem lost in current medicare discussions is this: Medicare doesn’t pay doctors very much. Many of them don’t even accept medicare now. My wife has 3 doctors none of whom take medicare. Good thing for us, we have federal BC/BS coverage which I was allowed to continue into retirement. What should we do to make medicare coverage better?

      • Ideally, we get everyone into the same kind of health care system. One of the big problems in health care is the politicization that results from different age groups in different systems. Failing that, we need to find some way to bring down the costs on the private side.

        Steve

    • If it really costs twice as much to cover people through existing plans from 65 to 67, why doesn’t it make financial sense to have Medicare insure them even earlier? And if it does, then I am confused, because everything I read tends to lead me to believe that the government run health plans are driving costs up for everyone.

    • Austin,

      Two questions —

      1) Does the $5.7B number include copays/cost-sharing? If not, it would seem you’re comparing cost of care to federal govt. savings. Not that it would change your conclusion, one is clearly larger than the other.

      2) Would you support a cost-shift if the cost to the system = federal spending? i.e. both amounts were $5.7B?

      If your answer to #2 is no, how much lower would the costs to the system need to be in order to make the trade-off?

      Many thanks for the thoughtful post.

      Best,
      Andrew

      • My head isn’t in this right now, as it is a year-old post. Can I encourage you to check the links and sources? If one or another should address your question but doesn’t, you might ask the authors (and let me know!).

        I would not support a cost-shift as it doesn’t seem to have a worthwhile upside. The savings are too small given the potential costs in morbidity and mortality.

        What I would support is more income-based cost sharing, either for that age group or in Medicare more broadly. I know this would potentially weaken support for the program, but I think it is a more just way to allocate scarce resources.

    • This argument is specious on its face. If true, then we should put 64 year olds on Medicare and that would save money -correct! What about 63 year olds. What about the entire American population?
      Does anyone think that at some point if we all start living to be 100 that our entire living, working, vacationing , savings, 401k, etc etc etc will change. We have to start somewhere. This argutment is going to look pretty silly when men are 65 and still in the special forces or Seal team 6, but this man wants to argue that keeping the person off Medicare will “Cost” the country too much. He probably works for the DNC. Bye

    • The idea that it’s not cost-effective to raise anyone’s Medicare age is not quite accurate. The costs in the system are what they are and changing the source of payment would not change those total costs.

      If the eligibility age were increased, government spending would decrease, the average premiums paid by those under private plans would decrease, and the total costs paid by private insurers would increase. But the increase in the private sector would be funded by a reduction in taxes in an amount equal to the Medicare savings.

      I won’t attempt to go into details in this comment. But I’ve just posted an analysis on my blog that questions the increasingly popular view that raising the eligibility age would cause costs to increase (see http://alsanblog.com/2013/03/06/raising-the-medicare-eligibility-age-would-not-increase-costs/). Any feedback would be appreciated.