Downsides To Raising The Medicare Eligibility Age

Hank Stern did an excellent job hosting the latest edition of the Health Wonk Review.  It’s a festival of lights edition, filled with outstanding articles from many of the best health wonks, along with plenty of pictures, quotes and stories from the Chanukah season.  Although there are plenty of fantastic articles included, my favorite is from Maggie Mahar, explaining very logically why it doesn’t make sense to raise the Medicare eligibility age to 67.

Downsides to Raising Medicare Eligibility AgeMaggie lays out a number of straightforward reasons for her claim.  Basically, it’s not going to save any money (in fact, it will cost a lot more, but the costs will be spread over other populations, including 65 and 66 year olds and employers).  And although the argument that life spans have increased (and thus so should the medicare eligibility age) might be technically true in aggregate, the numbers look quite a bit different when you break it down by income and education level.  Lower income Americans, especially those who work physically demanding jobs, are truly in need of Medicare by the time they reach 65.  And their lifespans have not enjoyed the large increases seen by white collar workers over the years.  In addition, the cost of Medicare for everyone 67 and older will increase if the 65 and 66 year olds are excluded: overall, health tends to decline with age, so the youngest members of the Medicare group tend to also be the healthiest.  That means that their premiums are currently subsidizing the cost of care for older, less healthy members.

Over the past few years, I’ve seen many of my friends’ parents anxiously awaiting the day when they can enroll in Medicare.  Some had retired a few years prior and were paying very high premiums for individual health insurance (the 60+ age group is very expensive to insure in the individual market), and others were continuing to work up until Medicare eligibility, sometimes because they were unable to afford and/or qualify for individual health insurance.  These are people who have paid into the Medicare system for their entire working lives, covering the cost of care for the generation that came before them.

The wealthiest older Americans can probably easily wait until 67 for Medicare.  In 2014, individual health insurance will be guaranteed issue, and if paying the premiums is not a problem, that’s a viable alternative for some people.  But most Americans are not wealthy enough for those premiums to be easily affordable, even with premium subsidies.  More than a few 65 and 66 year olds would likely opt to go uninsured until they reached the new Medicare age, and that brings it’s own host of problems – for the individuals and for taxpayers, hospitals and the entire healthcare system.  For people struggling to make ends meet, an extra two years of either being uninsured or stretching to pay health insurance premiums could be a very big deal indeed.  And as Maggie points out, it doesn’t even end up saving money.

The proposal to raise Medicare eligibility to 67 is short-sighted and based on the premise that Medicare is an “entitlement” (what about the fact that recipients have been paying into it for decades, to cover the cost of previous retirees’ care?).  I suppose it makes sense – at first glance – that we can reduce the amount spent by Medicare if we make people wait an extra two years to enroll.  But the practical realities would be a different story:  people putting off medical care until age 67 (at which point illnesses might be more progressed and more expensive to treat), people going uninsured, higher premiums within the Medicare system without the younger members enrolled, higher costs borne by employers who cover the cost of healthcare for workers and retirees, and the list goes on.

If you’ve heard of the proposal to raise the Medicare eligibility age and are wondering about the practical implications, I highly recommend you read Maggie’s article.

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