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Once Again: Raising the Medicare Eligibility Age Is A Terrible Idea

With continued uncertainty with the Super Committee and the future of the safety net, I feel compelled to once again explain why raising the Medicare eligibility age is a completely misguided idea. Here is Matt Tobias with yet another set of particulars:

A report by the Kaiser Family Foundation said that much of the cost savings from raising the age would be eaten up by the consequences. (The Kaiser study compresses the eligibility change to one year. Most proposals that have been floated in various deficit-cutting reports or negotiations would phase the change in over 10 years or longer.)

But Kaiser found that with the new health care law in place, gross savings would be $31.1 billion — but net savings would be one-sixth of that, about $5.7 billion in 2014. That reflects the higher costs of subsidizing some of the recipients in the exchanges or covering them under Medicaid, as well as other cost shifts. Seven million people would be affected, and costs would shift to them and their employers, and to state governments through Medicaid.

The Kaiser study also found that the effects would ripple through the private insurance market, affecting younger people. Taking older, more expensive people out of Medicare and putting them in the private insurance market would change the risk pools and raise premium costs by about 3 percent for adults in the private market.

And the 67-and-older Medicare recipients could see their costs increase, because the somewhat younger and healthier 65- and 66-year-olds would not be spreading the risk within Medicare.

So just to recap, this deficit reduction “solution” would not really reduce the deficit ($5.7 billion over four years is a rounding error), and would increase health insurance costs for everyone in Medicare over 65 and everyone outside Medicare under 65. In fact, whatever savings would come from the system from this change would be borne directly by individuals, who would see the costs shift to them, and at higher levels, because the system overall would be degraded.

That’s the practical effect of raising the eligibility age. You would have to be completely self-destructive to think it’s a good idea. If you want to do something that lowers overall health costs – and that reduction would be reflected in government payments over time – you would LOWER the Medicare eligibility age. For the best results you would open Medicare to everyone, and use the single-payer bargaining power to get costs to the level of the rest of the industrialized world.

Some provisions of the health care law will not be able to be undone once implemented, as the system conforms to them, and the costs of change rise. One can only hope that this dynamic saves Medicare from being crippled.

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David Dayen

David Dayen