Raising the Eligibility Age for Medicare: Is the President Serious?
by Maggie Mahar
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.