Raising the Eligibility Age for Medicare: Is the President Serious?

You’ve heard the news: If Republicans will consider tax increases, President Obama is willing to raise the eligibility age for Medicare, from 65 to 67. Instead of Medicare for all, we would have Medicare for fewer.

This is such a bad idea that I would like to believe that the President was bluffing. Over at Hot Air, blogger Allahpundit suggests that “Obama has been floating these ‘grand bargain’ packages involving . . . entitlement reforms. . . knowing that the GOP will reject them on tax grounds and fall back to a smaller package of spending cuts only, which O will sign. Then he can turn around and sell himself next year not only as the guy who approved $2.5 trillion in cuts or whatever, but as the adult in the room who was willing to tackle entitlements before Republicans backed out of the deal to protect the rich.”

Maybe, but I don’t think the President is quite that Machiavellian (though sometimes I wish he were.) On the other hand, it’s hard to imagine that he thinks that raising the bar for Medicare is a clever idea. Lifting the eligibility age to 67 only shifts costs while punishing those who need Medicare most: low-income and middle-income Americans.

     Why Raising the Bar to 67 Would Hike the Nation’s Health Care Bill

Let’s start with the money. Not long ago the Kaiser Family Foundation released a report which projects that raising Medicare eligibility to 67 in 2014 would generate an estimated $7.6 billion in net savings to the federal government. But . . .

It also would lead to an estimated net increase of $5.6 billion in out-of-pocket costs for 65- and 66-year-olds, and $4.5 billion in employer retiree health-care costs. In other words, as a nation, we would spend $10 billion in order to save $7.6 billion. Moreover, the study projects that the change would raise premiums by about 3 percent both for those who remain on Medicare and for those who obtain coverage through health reform's new insurance exchanges.

Why would the change cost us so much? If 65 and 66- year olds are forced to buy private insurance, their average co-pays and deductibles will be higher than they are under Medicare. If their employer offers insurance, many will put off retirement until they are 67, hiking employers’ costs (and reducing the number of available jobs). If they don’t have employer-based insurance they will need government subsidies to help them buy private insurance in the Exchanges. That insurance will be more expensive than Medicare because in the private sector, administrative costs are higher. Kaiser estimates that subsidies would total $7.5 billion.

Meanwhile, as 65 and 66-year-olds who would have qualified for Medicare join the insurance exchanges, the pool becomes a little older, and so everyone in the exchange will pay more for insurance. Medicare Part B premiums also would climb, Kaiser explains, because “relatively healthy, lower-cost 65 and 66 year olds” who don’t need as much health care as the average 80-year-old will no longer be helping to lower Medicare’s costs.

         The Biggest Losers

Everyone loses, but the biggest losers would be low-income Americans. All of us contribute the same percentage of our paycheck to help fund Medicare, but the poorer you are, the less likely it is that you will live long enough to enjoy Medicare benefits for, say, ten or fifteen years. In recent decades, Social Security data shows, the “longevity gap” separating the rich from the poor has been widening. A male born in 1941  who was lucky to wind up on the top half of the national income ladder and who made it to 60 would be expected to live 5.8 more years than his counterpart on the bottom half of that ladder.

This was not always the case. Among men born in 1912 who survived to age 60, those perched on the top half of the earnings ladder would be expected to live only 1.2 years more than those in the bottom half. But since 1977, the life expectancy of male workers retiring at age 65 has risen 6 years if they live on the top half of the ladder, but only 1.3 years if they are clinging to one of the lower rungs. Meanwhile, over the past 35 years, inequality has been growing in this country, whether measured by education, nutrition or exposure to stress during childhood—all of which help determine health later in life.

Race also plays a role in life expectancy. For example, an African-American male born today can expect to live to be 69.7.  Lift the age when he becomes eligible for Medicare to 67, and he’ll probably be suffering though the final stage of a chronic disease before he qualifies. Finally, occupation helps determine how long you live. Low-income workers are more likely to be engaged in work that is physically grueling. By age 65, the body is wearing out. At that point, a person needs Medicare.

As David A. Smith, Director, Public Policy Department, American Federation of Labor and Congress of Industrial Organizations (AFL–CIO) testified at a 1998 hearing on the Future of Social Security before the House Ways and Means Sub Committee on Social Security:  “It is clear that people who spend their work lives scrubbing floors in a nursing home, moving 5 liter engine blocks around a factory floor, pouring steel into a Bessemer mill, or hauling bricks around a construction site can count on a shorter life span and a shorter work life. They are more likely to experience work place injuries and to lack the continued physical endurance necessary to perform their jobs very far into their 60’s.”

Make them wait until they are 67 before they become eligible for Medicare, and most likely fewer of them will make it to 67.

Let me add that I very much doubt this will happen. Republicans are not going to accept tax increases. So perhaps Obama’s offer was simply a negotiating ploy. I would like to think so.

6 thoughts on “Raising the Eligibility Age for Medicare: Is the President Serious?

  1. It would have decreased MY medical insurance costs. Let me explain: I am a retired soldier, and to keep military Tricare benefits, I had to have Medicare Part B coverage. Since I worked at an engineering job with good pay, that cost me almost $200 per month. If Medicare eligibility age had tracked Social Securty full retirement, I would not have had to pay for a Medicare benefit I could not use. I did wait until SS FRA — 67 — to retire, so the Medicare age rule cost me $9600 over and above what I was paying for my share of employer medical coverage. Now,of course, I am finding that many doctors don’t take Medicare patients, as reimbursments aren’t enough to make money or, sometimes, even cover their costs.

  2. Cortland–
    The Medicare Payment Advisory Commission says that you are wrong about doctors not taking Medicare patients. In thier most recent (March 11) report they report that Medicare patients have no more trouble finding doctors than privately insured patients– sometimes they have less trouble.
    Certainly this is true among seniors who I know in Manhttan, but of course this is just one city.
    I’m afraid I don’t know enough about TriStar to comment on why it requires you to have Medicare Part B, but when you say that “MY medical insurance costs” would have been lower you acknowledge that you are just one person. The vast majority of 65 and 66 year olds would be hurt if the eligibility age was raised to 67.

  3. We are in so much debt that I am afraid that Medicare and other entitlements will have to go. The worry over raising the age to 67 is nothing. We should raise the age of Medicare and SS to 70.

  4. Tony–
    Social Security is not in any real financial trouble. A couple of very small fixes will put it in solid shape.
    As for Medicare, the health care reform bill goes a long way toward putting it on the road of financial solvency.
    And in the 12 months ending in March, Medicare spending was no longer rising faster than GDP.
    (It rose less than 3 percent.)
    Thanks to health reform, many doctors and hospitals are making an effort to reduce waste. Paul Levy, the former CEO of Deaconess hospital wrote about how his hospital suddenly noticed that they were doing far fewer MRIs.
    Doctors were stopping to think before ordering them.
    More and more newspaper articles are advising patients that they are exposing themselves to unncessary risks when they have unnecessary tests and procedures like back surgery (which is effective only for a certain type of back injury).
    A new, younger generation of doctors is also more aware of waste and medical errors (which cost us a fortune) and likely to practice safer, more conservative medicine.
    This is going to take time. But Medicare won’t be running into financial problems in the next 10 years (In their most recent report, Medicare’s very wary Trustees say reform legislation has bought Medicare more time– it is not longer facing immediate problems. ) And over 10 years, I think, that, thanks to the reform legislation, and piloit projects in that legislation, we’ll begin to get a real handle on Medicare spending.
    Finally, while you or I might be able to wait until 70 to retire, if I worked as a waitress–on my feet 8 hours a day six days a week– or you worked construction in all sorts of weather, you and I would need to retire at 65.

  5. Politicians, regulators, and all government employees are human. We must expect them to act in their personal self interest some or much of the time.
    Any plan that counts on people acting against their own self interest consistently is bound to fail.
    I like Obama, I really do, but he and all of the folks in government, no matter how well intentioned, will eventually dissapoint us.
    They are not superpeople.