The budget deadlock continues.
President Obama is clear: if we want to strengthen the economy, we can no longer afford President Bush’s tax cuts for the wealthiest 2% of all Americans. At the same time, he is equally firm that he will continue tax relief for the other 98%.
House Speaker John Boehner has responded by characterizing Obama’s proposal as coming from “La-la land.” Once again, Boehner has insisted that his party will not agree to let marginal tax rates for Americans earning over $200,000 ($250,000 for couples ) rise back to where they were in the 1990s.
Instead, Boehner proposes slicing social safety net programs. As part of the package, he continues to insist that we raise the age when Americans can apply for Medicare from 65 to 67. If we did this, the Congressional Budget Office says, Medicare spending would decline by about 5 percent.
“We Are Not Living Longer”
On the face of it, lifting the eligibility age for Medicare might sound like a reasonable idea. After all, longevity has increased. Can’t we wait a couple of years before we ask the government to cover our health benefits?
First, “We” are not living longer. “Some of us” are living longer. But low-income and median-income Americans (who most need these benefits) die sooner than the politicians who propose that we raise the age requirement for Medicare.
Research from the Social Security administration shows that increases in life expectancy have not been shared. In 1977, life expectancy at age 65 for a man who was in the bottom half of earners during his peak earning years was 79.8 years; a 65 year-old male who was in the top half of earners at the same point in his career, could assume that he would live roughly 10 years longer, to 80.5
Over the past 30 years, the gap has widened, During those three decades life expectancy grew dramatically for the top half of earners, while remaining nearly flat for the bottom half.
Education serves as another marker for life expectancy: According to the Center of Disease Control (CDC) between 1996-2006, the difference in life expectancy at age 25 between those with less than a high school education and those with a bachelor’s degree or higher increased by 1.9 years for men and 2.8 years for women. On average in 2006, 25-year-old men without a high school diploma had a life expectancy 9.3 years less than those with a Bachelor’s degree or higher. Women without a high school diploma had a life expectancy 8.6 years less than those with a bachelor’s degree or higher.
Race also plays a role. For example, a white male born in 2009 can expect to live to be 76.3 while an African-American male born that year is likely to die shortly after he turns 70. Lift the age when he becomes eligible for Medicare to 67, and he may be be suffering though the final stage of a chronic disease before he qualifies. Yet, he, like every other working American, will have contributed to Medicare for decades.
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.”
As a simple matter of fairness, asking those who have worked harder to wait another two years before receiving Medicare seems cruel.
The Bogus Financial Argument
Admittedly Republicans might not acknowledge the “fairness” argument. If you believe that a person’s health is a matter of “personal responsibility,” you might say that if the poor are aging faster than the rest of us, it is because they smoke, eat too many carbs, and generally “don’t take care of themselves.”
But, fairness aside, when you look at the numbers, it turns out that the claim that we can save billions by requiring that everyone wait until 67 before applying for Medicare is bogus.
The proposal simply shifts costs to employers, the states, everyone buying insurance in the Exchanges, other Medicare beneficiaries, and 65 and 66-year-olds themselves. As an August 2011 report by the Center for Budget Policy and Priorities’ (CBPP’s) Paul N. Van den Water explains, lifting the Medicare age to 67 would not lower the nation’s total healthcare bill.
Indeed, as the graph below reveals, if the eligibility age were raised in 2014, the GOP’s remedy would wind up costing us twice a much as we now spend providing Medicare benefits to people who are 65 and 66.
The CBPP report cites a July 2011 study by the Kaiser Family Foundation which assumes, for the sake of simplicity, that everyone who would lose Medicare coverage would obtain health insurance coverage elsewhere. As a result:
n Employers would pay an additional $4.5 billion. Kaiser estimates that 42 percent of 65- and 66-year-olds would obtain coverage from employer-sponsored plans (either as retirees or active workers).
n Medicare beneficiaries would face higher premiums because relatively healthy 65 and 66-year-olds would be removed from their risk pool, making Medicare more expensive. At present, these younger Medicare beneficiaries cost less than older beneficiaries but pay the same premiums, thereby holding down premiums for everyone else. Kaiser estimates that premiums for other Medicare beneficiaries would rise by about 3 percent, or a total of $1.8 billion.
n Everyone who purchases insurance in the Exchanges would have to pay more for coverage. According to Kaiser, 38 percent of 65 and 66-year-olds would buy coverage in the Exchanges, and this would raise premiums by about 3 percent, or $700 million in 2014. “The reason,” CBPP explains, “is that under the Affordable Care Act, insurers may not charge the oldest enrolees more than three times as much as the youngest, but the average cost of covering he oldest enrollees is over five times that of the youngest, so insurers would raise premiums for enrollees under age 65 to cover the difference.” In addition, many 65 to 66-year-olds in the Exchanges would qualify for government subsidies, and these tax credits would raise the cost of health care for the federal government
n State spending would increase by $0.7 billion in 2014, says Kaiser, because 20 percent of 65 and 66 year olds would be eligible for Medicaid. This state/federal program would cover all health care expenses for 65- and 66-year-olds who would otherwise have been fully eligible for both Medicaid and Medicare. In those cases, Medicare would have been their primary payer.
n Sixty-five and 66-year- olds themselves would pay more in premiums, co-pays and deductibles Kaiser’s numbers suggest that “two-thirds of 65 and 66-year-olds — 3.3 million people — would incur an average of $2,200 more in out-of-pocket health spending for premiums and cost-sharing if Medicare’s eligibility age were raised. The remaining one-third — 1.6 million people with incomes below 300 percent of the poverty level, who would be eligible for Medicaid (if everyone up to 138 percent of poverty was covered) or larger premium subsidies — would pay $2,300 less, on average. Overall, 65- and 66-year-olds would pay an average of $700 a year more, or $3.7 billion more in total in 2014.”
As the chart above shows, total spending on medical care would rise by $11.4 billion– roughly twice the $5.7 billion that Medicare would save.
The cost of healthcare threatens the economy because, as a percentage of GDP, it has been rising at a relentless pace, crowding out spending on education, the environment, and job creation. It doesn’t matter whether the government is spending the dollars, or whether employers, states and seniors are paying more for medical care.
Adding to the Ranks of the Uninsured
Meanwhile, many 65 to 66-year-olds would wind up uninsured. Some of those eligible for premium credits in the exchanges will not enroll because the amount that they would have to kick in for the premiums would seem more than they could afford .People with incomes between 300 and 400 percent of the poverty level (about $34,500 to $46,000 for an individual in 2014) will have to pay 9.5 percent of their income — $3,300 to $4,400 — for exchange coverage.
Some 65 and 66-year-olds would not be eligible for premium credits because their incomes exceed $46,000 –yet a fair number in that group might well find coverage in the exchange to be out of reach. As Van dan Water explains, Kaiser estimates that “half of 65- and 66-year-olds who would have to rely on the exchanges would have incomes too high” for subsidies Because exchange plans will be able to charge older workers three times as much as they would charge a younger workers. In 2014 premiums could reach $10,000 to $12,000 for 65- and 66-year-old individuals and twice that for couples.” (The good news is that the tax credits rise in tandem with premiums. If an older person’s income makes him eligible for a subsidy, it would make up for the fact that insurers can charge him so much more.)
Why Raising the Eligibility Age Fails On All Counts
Health care reform aims to slow the growth of medical costs nationwide, while extending coverage to all Americans. By contrast, this GOP proposal raises the nation’s health care bill–and at the same time, increases the ranks of the uninsured.
The goal of reducing the deficit is to strengthen the economy. Simply shifting costs within the economy does not achieve that goal.