Raising the age of eligibility for Medicare is a key proposal in the fiscal cliff negotiations. Unhappily, it’s a smoke screen, because it won’t save the federal government much money and will seriously impact at least 90 percent of Americans (people earning less than $135,000). Let’s think about it. A little reflection without going too much into the weeds reveals why this is a very bad idea.
The retirement age for Social Security is scheduled to complete a graduated rise from the original age of 65 to 67 in 2022. It’s assumed that the Medicare eligibility age will rise with it. Currently, raising the age to 70 has also been suggested. A study by the Kaiser Family Foundation found that raising the age to 67 would save the federal government $5.7 billion in 2014. But there are costs to consider as well.
Raising the Medicare eligibility age is a terrible idea because:
1. At ages 65 and 66 seniors are healthier than they will ever be again, so their medical care costs less than it will when they are older. By raising the eligibility age to 67, the healthier 65- and 66-year-olds won’t be contributing to Medicare. Their medical expenses are the most expensive of the working population, but they also have the lowest medical expenses of the retired population. The higher medical costs of older seniors would be funded by a smaller base. No insurance company that wants to stay in business would refuse coverage to healthy people and take only the ones with a greater risk of incurring high expenses. John McDonough, professor of public health at the Harvard School of Public Health, estimates that the “higher average costs per person … would increase Medicare premiums about 3 percent higher than they would otherwise be.”
2. One of the arguments being advanced in favor of raising the age limit is the increased life expectancy of Americans. The problem is that life expectancy (as well as health) is closely related to income, education and class. White men without a high school diploma are expected to live to be 67.5, but white men with a college diploma have a life expectancy of 80.4 years.
In 2006, a 65-year-old would have had 16.1 years left to live if his income was in the bottom half of the income distribution, but he would have 21.5 years more if he was in the top half. The bottom half gained one year of life expectancy in 20 years, but the top half gained 5.4 years in the same period. Of course, the people in the bottom half are the ones who most need Social Security and Medicare.
3. People in the bottom half of income distribution are much more likely to perform manual labor than are people in the top half, who tend to work at desks. The 65-year-old body of someone who’s worked with his hands all his life would have a lot more wear and tear than that of his white-collar contemporary.
4. The 65- to 66-year-old cohort without Medicare would have to fend for itself without Medicare, resorting to private insurers, employers and other government agencies. The out-of-pocket costs for the employer and the individual would skyrocket. According to the Kaiser report, states, employers and individual seniors would have new increased costs of up to $11.7 billion in 2014 through higher premiums on healthier, younger individuals and deferred treatment of chronic conditions. The short-term Medicare savings would become much greater expenses shifted onto others— not eliminated.
Yet, despite all this, both Republicans and Democrats involved in the fiscal cliff negotiations believe raising the Medicare eligibility age would be a good thing. The insurance companies would be the big winners, not the public.