A Healthy Debate on the Medicare Age
A column in The Wall Street Journal today asks "Should the Eligibility Age for Medicare Be Raised?" Taking the "yes" side is CRFB president Maya MacGuineas, arguing it is a fair and effective way to lower Medicare spending. MacGuineas says that because life expectancy at age 65 has increased significantly since Medicare was first enacted, the eligibility age should reflect this increase. Also, she argues that raising the eligibility age would better target federal health care spending to those who need it most.
Importantly, these savings would come without substantially increasing the rolls of the uninsured or hurting the most vulnerable. According to estimates from the nonpartisan CBO, 95% of those who would otherwise have been covered by Medicare will instead obtain coverage from employers, the ACA's Medicaid expansion or the health-insurance exchanges scheduled to be up and running in 2014. Many seniors making up to 400% of the poverty line would get direct government subsidies for this new coverage; those who earn more would still benefit from rules that will ban insurance companies from discriminating on the basis of pre-existing conditions and age.
And the low-income seniors we worry about most may even end up paying less overall than if they had gone on Medicare at the age of 65. According to a 2011 Kaiser Family Foundation study—which actually opposed raising the age—nearly one-third of those age 65 to 67 (and 60% of those without employer coverage) would see their out-of-pocket costs fall. Even those making up to 300% of the poverty line, about $70,000 per year for a family of four in 2014, would see a small reduction.
MacGuineas argues that in a time of mounting deficits, adjusting the program for an aging population would not only slow the growth of one of the biggest and fastest growing entitlement programs, but also promote economic growth by encouraging those who are able to work longer, creating a larger workforce.
On the other side of the debate is Aaron Carroll of the Indiana University School of Medicine and a blogger at The Incidental Economist. Carroll argues that raising the eligibility age would take into account longevity increases in a regressive manner, since those increases have been greater among higher income people, and many seniors would wind up uninsured. He also says that although raising the Medicare age would reduce Medicare spending, it would increase spending on other programs and would likely increase overall health care spending.
It's a bad idea because it's a regressive way to cut Medicare. Life expectancy at age 65 has gone up over the past four decades, but it hasn't gone up equally...
It's a bad idea because it will raise the number of uninsured dramatically. Stating the obvious, if the Affordable Care Act is repealed and nothing replaces it, then most of those 65- and 66-year-olds won't be able to get affordable insurance unless they're employed. Many aren't.
Even with the law, though, many will become uninsured. The Congressional Budget Office estimates that 95% of affected seniors will be able to get coverage from an employer or through the ACA. But some who qualify for Medicaid will fail to enroll. Some won't be able to buy health insurance, even with government subsidies...
It's a bad idea because it will cost America money, not save it. This is the hardest reason to swallow, but it's true. The CBO estimates that raising the eligibility age would save the federal government $148 billion through 2021. But that figure doesn't take into account all the new spending that would occur.
By now, our readers know what we have to say on this topic. In contrast to Carroll's argument, we believe raising the Medicare age will concentrate federal government spending on those who need it most, since lower and middle-income 65 and 66-year olds would be able to receive subsidized insurance through the new health insurance exchanges or Medicaid. CBO has confirmed that the policy would also save significant amounts both in Medicare and on net for the federal government. The fact that higher-income near-retirees would have to pay more for health care is part of the point: as Medicare grows with baby boomers reaching retirement, some seniors are going to have to pay more or receive less in benefits. Carroll himself points out that almost all seniors would be able to find other insurance; however, in contrast to what he claims, CBO's figures do account for those who would not enroll in Medicaid.
Carroll does have a point that total health spending may rise, and other steps must be taken to bend the cost curve in government health programs and the health care system as a whole. Raising Medicare's eligibility age is certainly not a silver bullet solution to our health spending problems, but at a time of limited government resources it is a targeted and effective option to rein in costs.
Raising the Medicare age would use the federal government's resources more wisely at a time when we really need it. Along with many other health care savings options, it should certainly be on the table for a deficit reduction plan.