How Much Will We Save If We Raise the Age When Seniors Can Apply for Medicare to 67? Less than Zero

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.

CBPP Medicare eligibility

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.





18 thoughts on “How Much Will We Save If We Raise the Age When Seniors Can Apply for Medicare to 67? Less than Zero

  1. The notion that postponing needed medical care will save society money is silly from the start. And the idea that it would be an overall cost savings to our society is, as you well point out, as misplaced as the GOP talking point that the ACA will worsen the deficit.

  2. Chris–

    That’s a good way to put it. Particularly in that age group, people suffer from chronic diseases and need to stay on top of healthcare.

  3. In the November election, the voters said loud and clear, “Raise taxes on the rich.” The necessary corollary to this is, “Do not cut spending that benefits the middle class and the poor.” Why? Because cuts in that spending constitute a TAX on the middle class and the poor. Raising eligibility ages for Medicare and Social Security and reducing the cost of living calculator for Social Security take away income badly needed by the beneficiaries and the economy. So stand firm for NO cuts in benefits. Want to save $ in Medicare? – institute negotiated drug prices, now prohibited. Want to pay down the debt? – reinstate the STET tax, a tiny tax on Wall Street transactions. The best way to reduce the debt is to undo the things that caused it – tax cuts for the rich, 2 unpaid wars, the Medicare Rx giveaway to Pharma, and the economic collapse caused by Wall Street.

    • Mary Beth–

      Thank you. Yes, the best way to reduce the deficit is to undo the things that caused it. tax cuts for the rich, 2 unpaid wars, the Medicare Rx giveaway to Pharma, and the economic collapse caused by Wall Street. With Elizabeth Warren now on the Banking Committee, I suspect we’ll see better Wall Street regulation.

      And, as you say, the public is clear: Raise taxes on the rich. Do not cut benefits for seniors. I am hopeful that President Obama will stand firm. Meanwhile, “party discipline” on the Republican side of the aisle is crumbling. Perhaps Republicans are no so longer so afraid of standing up to extremist leaders.

  4. While there is a good argument that people live longer, and That was not considered when it set-up. We must also consider the impact this has on Businesses both large and Small. It might Kill retiree Coverage, especially early retiree and it shifts cost back to the employer. It would also have a significant impact on Small employers. We must decide as a nation whether or not we want to pay more for coverage or take action to reduce and Bend the cost curve . Bending the cost curve has always been the issue.

    • Donald–

      Exactly. Bending the Cost Curve–Slowing health care inflation that that is increasing no more than GDP growth– is what we have to do. Shifting costs does no good if our total health care bill continues to rise at recent rates.
      And we can bend the curve without lower the quality of care.
      Finally, as you say, raising the Medicare age to 57 could have a significant impact on small employers while also killing retiree benefits.

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  6. When Medicare began in 1965, it covered about 30 million people who lived on average about 12 years after turning age 65.

    Today it covers close to 50 million persons, who live on average almost 19 years after making it to age 65.

    And yet the Medicare payroll tax rate of 2.90% has not been increased for the last 20 years, except that it was recently extended to dividends and bumped up a tiny bit for the wealthy.

    Even Medicare Part A now must invade federal general revenue to cover its bills. Seniors were originally supposed to pay 50% of the cost of Part B, but they pay less than 25% today. And Part D invades general revenue to the tune of $50 billion a year.

    When so much of Medicare is paid from general revenue, this means less federal money for education, infrastructure, even national parks. Eugene Stuerle has a good piece about this.

    You are correct that chopping off Medicare benefit for 65 and 66 year olds is a bad idea. It won’t even save the government any money.

    However, I can sympathize with the desire to somehow push back on the way Medicare and Medicaid are gradually taking over the federal budget.

    • Bob:
      The push back comes within the PPACA and making Medicare more efficient. Medicare and Medicaid do not create the cost, they reflect what the healthcare industry charges in its services for fee cost model. Whacking either does nothing to solve the problem.

      I believe Maggie has mentioned just such a pushback. To wit, allow Medicare and other programs the chance to negotiate:
      – “Ask Companies that Sell Medical Devices and Supplies to Medicare and Medicaid to Submit Competitive Bids” $38 Billion saved
      – “Apply Competitive Bidding to Medicare Advantage. ” $10 billion saved
      – “Require price transparency for medical devices.” Imagine not being able to get the cost for your Mercedes when you have already signed a confidentiality clause on the BMW you just saw.
      – “Promote shared decision-making in Medicare” Savings $3.8 billion
      – “Extend Medicaid drug rebates to low-income Medicare beneficiaries” Savings $137 billion
      – etc. The rest is found here:

    • Bob–

      We have more than two decades of research from Dartmouth ( showing that
      about 1/3 of Medicare dollars are squandred on over-priced drugs, devices and equipment, unnecessary tests and procedures that provide no benfit for the patient (and expose him to needless risk), preventable medical errors, and over-priced services.

      We don’t need to raise Medicare taxes, raise premiums for Medicare, lift the eligibility age or
      reduce benefits. We simply need to reduce the waste.

      As Run points out, this is what the Affordable Care Act sets out to do. And in its new report the Campaign for American Progress points to many other ways that we can reduce waste. (Some involve expanding programs that are already in place– like competitive bidding.

      It’s not yet 2014, but the growth in Medicare spending has already slowed as hospitals begin to do the things they know they must to because under the ACA their revenues will be trimmed.

      At the same time, many doctors are becomign more cost-conscious. Rather than ordering a “battery” of tests, they’re stopping to ask the patient more questions in order to decide which tests would be most useful.

  7. For some services right now, Medicare does not just negotiate, it actually sets the prices and frankly defies the industry.

    For dialysis, hip surgery, and numerous other procedures, Medicare is far from passive. It announces a price and the industry by and large accepts it.

    (Cancer drugs are a large exception to the above. The courts have ruled, baffling to me, that Medicare must pay the list price for anything the FDA approves.
    Medical equipment is also honeycombed with excess profits.)

    But in many instances, Medicare actually pays European-level fees to surgeons and for diagnostic tests.

    Yet our health insurance both public and private is much more expensive. Honestly I do not know all the reasons why. But I think that your post above exaggerates the power of the industry.

    • Bob–
      All true. Though the price we pay for dialysis is way too high– which is why so many people are on dialysis. (Lobbyists managed to get a separate law passed for dialysis, paying way too much for this service, and for-profit dialysis centers sprang up everywhere.) Some people benefit; some don’t.

      We let drug-makers set the price for cancer drugs because, as a nation, we’re terried of cancer and are convinced there must be a “cure” or a magic drug that will save us all. Many cancers cannot be cured. Many of these drugs give you only a few extra months of poor quality life.
      But only very honest oncologists will tell you this. Many argue that they “don’t want to take away hope!”

      During O’s second term, I’m pretty certain that the Obama administration will change the rules for Medicare & Medicaid so that they can negotiate for discounts on all drugs (including cancer
      drugs) and refusee to pay for drugs if the benfit does not justify the cost. (Note I’m not saying “if it’s too expensive” just that price increases must be justified by significantly greatr benefits and fewer risks.

  8. I have been saying for a long time that Medicare must pay less or nothing for treatments of small incremental value.

    But when you get into lifesaving heroic drugs and procedures, this is going to be darned hard to do.

    I can easily sit at my keyboard as a healthy man, and say that Medicare should refuse to pay anything for Avastin if it only extends the life of a cancer patient by five months.

    But could I run Medicare and do this in the face of newspaper articles about the inevitable death of a patient who had no alternatives besides Avastin? I could easily be fired from my job running Medicare.

    The same is true for dialysis on 90 year olds, feeding tubes, etc.

    And if Medicare stops paying for heart tests and cancer tests on otherwise healthy persons, some number of those persons are going to die earlier.

    Ironically Sarah Palin was right, though not because she was smart. Any economizing in Medicare will lead to some number of deaths. If we keep on judging medicine by how many lives it saves, we are in trouble.

    My overall judgement is that Medicare will have to do things that are unpopular if it is going to stay solvent. This is kind of a test of democracy.

  9. Bob–

    When Medicare pays for questionable treatments, people die because all medical procedures carry risks.
    Someone has an angioplasty even though he won’t benefit (only half of patients benefit). While the procedure is being done someone isn’t as careful as they should be, he acquires an infection. . . . and ultimately, it kills him.
    So less medical care doesn’t necessarily mean more deaths . . .
    As for end-of- life care that gives someone an extra 5 months: as health reform rolls forward more and more patients will receive palliative care. Unlike oncologists, palliative care specialists are trained to talk to patients about dying–and to listen to the patients. The palliative care specialist ask them what they most fear–and what they hope for. They use the word “die”–as in “you are dying -we don’t know how much time you have left. We know this medication gives the average cancer patient another 5 months. We don’t know whether it will give you 2 months, 5 months, or 8 months. We do know that while we can control your pain, you won’t be feeling well during those final months, and the medication may add to your discomfort. These are the most common side effects. It’s up to you to decide if you want the medication.”
    Of course a palliative care specialist wouldn’t tell the patient all of this in one 5 minute conversation. But in a series of conversations he or she would try to draw the patient out, to find out what her or she really feels. (Some people are most afraid of dying; others are more afraid of being in pain. Some just want to go home and die surrounded by family. They’re terrified of dying in an ICU.)
    Sometimes family members, or other doctors pressure patients to “keep on fighting” when they don’t want to.
    On the other hand, some people are, by temperament, fighters, and will want to fight to the end. One goal of palliative and hospice care is to let people die “in character.”
    With more hospice and palliative care, we’ll almost certainly wind up spending less on that heroic end-of-life care because at a certain age, many people are simply tired–and ready to accept death.
    Palliative care may even gradually change how we think about death in this country. As we see people die peacefully, we may begin to recognize what a “good death” means.

  10. That is an intelligent and caring presentation………however, can we still spend $100,000 or more on the patient who does decide to fight to the end?

    American medicare has been open-ended in fiscal terms for all of its 47 years. We have never had to face a fiscal environment where money that is spent on one patient cannot be spent on 100 others.

    Medicare has had a soft budget…..if paid claims exceed revenue, Medicare just dips into general revenue. We may be coming to a place where claims and revenue have to balance. If so, then paying $100,000 for one person may seem irresponsible, no matter how much they want to fight their illness

    . I still say that we must slap price controls on the few drugs which have no substitutes. The company that charges $10,000 a month for a drug can probably charge $500 a month and break even.

    When a drug costs only $500 a month, you do not need to make a wrenching rationing decision.

    • Bob–

      I definitely think that Medicare will begin to refuse to pay those exorbitant prices for drugs.
      Just like every other government in the developed world, it will say: the drug isn’t worth that price—
      unless you slice the pric, we won’t include it in our formulary. Instead we’ll only cover drug B which
      medical resarch says provids nearly equal benefits for 1/10 the cost.
      Drugmakers will have to compete on price.
      They will scream bloody murder, saying they won’t have enough money for reserach to develop new drugs.
      In fact, they haven’t developed many useful new drugs in years. They just produce “me-too” drugs–new versions of drugs we already have at a higher price
      NIH does most of the ground-breaking reserach.

      A little over a year ago, Obama made it clear that letting Medicare neogtiate with drugmakrs for lower prices
      was still on the table. He couldn’t do anything about it at the time– pharma lobbyists are powerful, and he wanted to get the ACA through Congress. Now, he has been re-elected. He can stand up to Pharma — and I think he will. Pharma knows this– this is why Pharma’s PACS gave most of their money to Romney. They didn’t want to see Obabma re-electd.

      On end-of-life care: Hospice and pallaitive care are relatively new in this country. Many older doctors are opposed to it.But as they retire, younger doctors will be embracing palliative and hospice care. Also, as we move away from fee-for-service doctors and hospitals won’t have a financial incentive to “do more and more and more” at the end of life.

  11. I say if we can kick 65 year olds off Medicare, then we can kick 85 year olds off too!

    • Beware Bliss–

      This is true. And this is why conservatives would like to raise the eligibility age to 67.
      Their next step will be to raise it to 69 or 70. Ultimately, their goal is to get rid of Medicare altogether.
      They don’t like “entitlement programs.” (a.k.a. “safety nets.”)