• Raising the Medicare Eligibility Age is a bad idea

    It’s one of those zombie ideas that never dies. We’ve covered it extensively at TIE. But in case you need more convincing, I argue in today’s WSJ that raising the Medicare eligibility is a bad idea:

    Maya MacGuinas argues for it. I’m against. You be the judge.


    • I often think our biggest problem is not having everyone in the same insurance system. If we were, your argument would be obvious. We would also have more uniform incentives, and less politics, involved in cutting spending.


      • The problem is Medicare dumps a lot of the administrative costs on the backs of the providers. Otherwise, Medicare’s costs would actually be higher. I think the retirement age, and the age of eligibiltiy for Medicare should be higher. The nation just can’t afford this stuff anymore.

        • Please describe exactly what administrative costs Medicare dumps on providers. And please describe how those costs are not similarly dumped on providers by private insurers.

          By all accounts, Medicare’s own administrative costs (as a percent of its revenues) are half or less the administrative costs (as percent of premiums) that private plans incur. It’s true that there are compliance costs. But if we had only private plans, we would still have compliance costs. As a matter of fact, if we were in single payer, providers would only have one set of claims and utilization review protocols to comply with and things would be a lot simpler.

          And bear in mind that Medicare’s total direct administrative costs are something like 3 percent of its outlays. Private insurers’ costs average around 14 percent of total outlays, probably declining to something like 8-10 for the largest private plans. There are some administrative activities like disease management that Medicare doesn’t do but private plans do, and there are some costs that Medicare doesn’t bear (e.g. prosecution of fraud by the DoJ, which is under the DoJ budget).

          However, Medicare certainly does not have higher administrative costs than private insurance. To the extent that it under-reimburses providers for certain activities, this is likely to be true of private insurers. And besides if your argument that Medicare under-reimburses administrative costs is valid, then the solution would be to eliminate Medicare, not to merely increase the retirement age.

        • It’s bad enough no one will engage my arguments over there, but at least try to engage them over here. Where am I wrong? This will disproportionately affect the poor, potentially hurt health, and cost Americans twice as much as it will save.

          Reform Medicare? Sure. But why is this not a bad idea?

          • Sorry, but your debate partner made the better points. One of your points includes that the lower income level patients aren’t as healthy, therefore they can’t wait until later years. I don’t have statistics, and maybe you do, but in my practice it tends to be the lower income patients who smoke, drink, and have risker lifestyles.

            • So you don’t have statistics, and I do… but I’m wrong?

              I’ll say it again. I said it disproportionately affects poor people (with data) that it potentially with hurt outcomes (with data) and that it will cost Americans twice as much as it will save the feds (with data).

              Where did I lose? Where am I wrong? Please feel free to tell me where my debate partner scored better.

          • I agree with you on this one Aaron, but I understand where the other side is coming from. Deficit hawks like McGuineas see reducing Medicare spending is so important that the potential harm (which you outlined here) caused by raising the eligibility age is an acceptable tradeoff. While it is true that overall health spending may increase (by shifting costs to the patient), the government likely spends less in thsi scenario (unless I’m misunderstanding the numbers).

            That’s why your argument is probably not gaining enough traction there. They see the choice as either maintaining an unacceptable status quo or raising the retirement age. To address those arguments, it is probably insufficient to point out the problems that raising the age of eligibility can cause. Instead, it is probably necessary to discuss alternative ways for controlling Medicare spending that would be less harmful. I’m not saying you don’t do that elsewhere )I know you have), but coming out in opposition to raising the age of eligibility could be interpreted as an argument in favor of the status quo.

            I am glad that you talked about the disparate longevity gains in different income groups, because this is usually glossed over when the topic of raising the eligibility age is discussed.

            • Here’s an alternative that saves the same amount: raise Medicare premiums by $9/month. Spare the lower income folks by raising it more for high income folks. Or, do it disproportionately for the younger beneficiaries. There are so many ways to save money in the program without denying people access to coverage.

        • “Medicare dumps a lot of the administrative costs on the backs of the providers”

          I would really like to see data on that. In my 30 plus years of private practice, our administrative costs for dealing with Medicare have consistently been significantly lower than the costs of dealing with private insurers. On the average, dealing with Medicare always cost us no more than half what dealing with private insurers cost, and in some periods, especially recently, as low as 25% as much.

          In fact, one of the billing services we used for a while told me that they actually lost money on average on billing private insurers, but since they charged us the same rates for all insurers the large profit margin they had in dealing with Medicare put them well into the black overall.

          • *80% of our patients are Medicare, 3/4th’s of those (60% of our total) are Medicare Advantage. There’s a lot more paperwork and prior authorization on Advantage than straight Medicare. And the insurer gets to keep the extra bucks from the feds, not the doctor.

            • So we are saying the same thing — private insurers, whether through commercial insurance or through MA, are much more expensive to deal with than general Medicare.

    • I’d like to see someone tell me what we do when medical inflation overtakes the meager savings of the age increase. Do we increase it again, and again?

      This is such a small fix, one that creates so many other problems, that it is hardly worth debating. http://theincidentaleconomist.com/wordpress/how-small-is-5-7-billion-very-small/