While a debt deal has been signed, it is clear that much more work needs to be done to get the U.S. government’s debt crisis under control. A new Super Committee of Congress is now tasked with saving trillions more over time. The Super Committee will likely have to tackle entitlement reform and one proposal calls for increasing the Medicare eligibility age from 65 to 67 years to reduce costs. But new evidence suggests that savings are not all they are cooked up to be and would have far-ranging repercussions in the healthcare marketplace.
A recent study by Kaiser provides some interesting financial statistics that could result from this policy change. In terms of gross savings, the policy change purportedly would result in $31.1 billion in Medicare savings in 2014. But other federal spending would increase, other federal revenues would be foregone, and a major cost-shift would occur in the healthcare system. Consider the following:
- Medicare premium receipts from 65 and 66 year olds who are no longer in Medicare would result in a $7 billion loss to the program in 2014
- Many of those denied Medicare eligibility for two years would likely qualify for Medicaid due to income reasons. Estimates suggest that in 2014 this would cost the federal government $8.9 billion. States would be hit with billions in additional costs as well
- Other seniors over the Medicaid income eligibility limit would now roll to the new PPACA subsidized healthcare Exchanges, resulting in an additional $9.4 billion in spending for 2014
- An estimated $3.7 billion in increased out-of-pocket costs in 2014 would also occur for 65 and 66 year-olds who don’t fall into another subsidized federal program and 2014 employer retiree costs could rise by $4.5 billion
- Finally, the change could result in a rise in overall healthcare premiums in 2014 of about 3 percent, both for those who remain on Medicare and for those who obtain coverage through health reform’s new insurance Exchanges
We don’t think entitlements should be off the table in the debt debate. Given their size now and their future scope, it is an absolute necessity to reform them despite the political ramifications. (A recent survey by the Pew Research Center for the People & the Press found that around 60 percent of the American people said it is more important to keep Medicare programs benefits as they are, while just 32 percent said it is more important to take steps to reduce the budget deficit). But it seems clear that entitlement reform has multi-faceted implications, and in this case increasing the Medicare eligibility age is at best a zero-sum game.