The twists and turns of recent political conversations over the federal deficit have explored a variety of changes to Medicare. The most likely ones are raising the eligibility age for benefits to 67 from 65 and changing the law so that more seniors will have to pay higher Part B premiums. (Part B pays for doctor visits, hospital outpatient care, and lab visits.) In this column, I'll discuss raising the Medicare eligibility age, which, if changed, will affect seniors in the future.
The rationale goes something like this: people are living longer, healthier lives and can work longer so why should they get Medicare benefits earlier. That's the same argument used to justify further raising the age to collect Social Security benefits. It is now 67 for those born after 1959.
But there's more to the story than what the public hears in the glib TV sound bites. While in general people are living longer thanks to medical advances, those gains are not evenly distributed in the population. Improvement in life expectancy has accrued mostly to those with college educations. The Medicare Rights Center, a New York City advocacy group, says 'older adults, people of color, blue-collar workers and employers would be among those hardest hit.' And just because people live longer doesn't mean they won't get sick. In fact, many new Medicare beneficiaries have put off needed care until they reach Medicare age. So why is this an attractive option?
lt shifts money from the government's budget to the budget of seniors who would have to pay more out-of-pocket. According to the Kaiser Family Foundation, the cost savings for the federal government amounts to $11.4 billion. But seniors as a group would pay $5.7 billion more for their health care. Many seniors would look to their employer coverage for help'some even staying in the workforce longer to keep their insurance until they turn 67. That, of course, means employers will have to pay more too.
'We don't save money in overall health care spending,' says Joe Baker who heads the Medicare Rights Center. 'The government gets to shift its costs to others, and those others have to pay more for their coverage. The reality is Medicare is the cheapest option because it controls its costs better than other insurers.'
Even though insurance may cost more, supporters of raising the eligibility age argue that those losing early Medicare coverage could simply turn to the new insurance exchanges that will be up and running in 2014. That causes other headaches, though. Kaiser estimated that premiums for younger people'those under 65'seeking coverage in the exchanges in 2014 would rise by about three percent, or about $141 a person on average. That's because older and sicker people would now be part of the exchange risk pools.
Medicare operates as one giant risk pool with premiums from current seniors who are healthy helping to subsidize those seniors'mostly older ones'who do have large health expenses. If younger healthy seniors are taken out of Medicare's risk pool, there's a danger that the pool will deteriorate, making it harder in the long run to cover the costs of those who need care.
Can seniors afford to pay more? When you consider that half of all people with Medicare live on incomes less than $22,000 a year and have less than $53,000 in savings, the answer is maybe not. Advocates for the elderly point out that seniors already pay a great deal for their health care. In 2009, health care expenses accounted for about 15 percent of their household expenses compared to five percent for those not on Medicare.
The proposal to raise the eligibility age, of course, will not affect current retirees, but most proposals being discussed would impact those who will be eligible for Medicare in the next 5 to 10 years. Because of job losses, diminished home values and retirement accounts, the Medicare Rights Center says that half will have incomes less than $27,000. Says Baker: 'It's a lose, lose, lose proposition all around.'