As the fiscal cliff talks progress, it’s looking more and more likely that any deal will include raising the Medicare eligibility age. As New York Magazine’s Jonathan Chait has pointed out, the idea has “weirdly disproportionate symbolic power” for Republicans in Congress, who (1) would need to feel like they’re getting something big in exchange for agreeing to a tax increase on the wealthy; and (2) don’t seem to have other ideas for reducing spending. Meanwhile, Democrats may be willing to let Republicans have this one, since Obamacare would provide coverage to many of the affected seniors.
Still, as we’ve said before, just because it’s doable doesn’t mean it’s a good idea. Here are five reasons why.
1. It would increase the number of uninsured seniors
Thanks to the Affordable Care Act, most 65 and 66-year old seniors would be able to find coverage, either through the exchanges or the Medicaid expansion. But just because Obamacare makes it easier to get affordable coverage, doesn’t mean it’s as easy as Medicare. According to a report from the Center for American Progress:
Even if the Affordable Care Act were fully implemented when the Medicare eligibility age is increased, the Congressional Budget Office estimates that about 5 percent of the seniors affected, or 270,000 individuals, would become uninsured.
However, the Affordable Care Act will not be fully implemented– a number of states have said they’ll reject the law’s Medicaid expansion, which would leave many people below the poverty line without coverage. And it gets worse:
Several of the states that may reject the Medicaid expansion already have some of the highest senior poverty rates in the country, as well as very high poverty rates for individuals who will reach retirement age in a few years. Case in point: Mississippi, which had the highest percentage of seniors (15 percent) living below the poverty level in 2009. Alabama, Florida, Georgia, Louisiana, Oklahoma, South Carolina, and Texas all have senior poverty rates higher than the national average.
A few of these states are also home to a disproportionately large number of elderly Americans. More than half of people ages 65 and older live in just 11 states, including Florida, Georgia, New Jersey, and Texas. Moreover, states that may reject the expansion are seeing some of the fastest growth rates among their elderly population.
According to CAP’s analysis, in states that may reject the Medicaid expansion, 164,000 seniors could lose coverage if the Medicare age is raised. Add that to the 270,000 seniors who would be uninsured even if every state accepts the Medicaid expansion, and that’s 435,000 seniors left without coverage.
2. The health of those seniors will suffer
The Incidental Economist reports on papers published in the New England Journal of Medicine and the Journal of the American Medical Association looking at health outcomes for those who were uninsured before being covered by Medicare:
The authors found that, relative to those with insurance before age 65, those without insurance prior to Medicare eligibility spent much more money on health care after they became Medicare eligible. In other words, people wait to get care until their Medicare kicks in. This is bad both for health and for the federal government’s bottom line.
Delaying Medicare even longer would likely make this worse. People would forego care longer, health would suffer, and Medicare would pay for the consequences later.
For example, the graph below shows the difference in the health of adults with chronic illnesses, between those who had insurance before turning 65 (the black circles) and those without insurance (white circles). Notice that once seniors without insurance get Medicare, the steep decline in their health status basically stops:
[The Incidental Economist has way more graphs on this subject here.]
3. It disproportionately harms minorities
A 2003 paper in Health Affairs showed that raising the Medicare age would cause a huge decrease in coverage rates among minorities and those without a college education (this was before Obamacare though). Similarly a paper in American Economics Review showed a big jump in coverage for those groups once they hit the Medicare eligibility age.
Again, Obamacare should provide coverage to many of these individuals, but more would be covered if the Medicare age was left where it is. Also, a higher percentages of minorities and those without college degrees are likely to have incomes below the federal poverty line– meaning they’re more likely to be screwed if they live in a state that doesn’t expand Medicaid.
4. It disproportionately harms poor people
One of the main rationales behind raising the eligibility age is that life expectancy has increased since Medicare was passed. With people living about eight years longer on average, and thus depending on Medicare longer, asking them to work a couple more years before retiring seems like a fair trade-off.
However, as Aaron Carroll, a health policy professor who blogs at The Incidental Economist, explains, that figure is life expectancy at birth. That includes babies who die during childbirth and fatal diseases that used to be more common among infants and small children. Carroll writes:
The meaningful question is, if you make it to 65, how many more years will you live? That’s how many years you could expect to be on Medicare, and that’s how much you could cost the rest of us.
In 1965, the life expectancy at age 65 was somewhere between 14.5 and 15 years. In other words, if you made it to 65, even in 1965, you could expect to live to about 80. That’s much older than you’d think given the rhetoric of today. In 2009, it was 19.2 years, meaning if you made it to 65, you could expect to live until you were just over 84. Think about that for a minute. People are actually living on average less than 5 years longer today on Medicare than when the program was passed.
Not everyone is living that much longer though– there’s been a huge disparity in life expectancy gains based on income. Carroll cites a paper in Social Security Bulletin showing that life expectancy for males in the top half of earners has increased by more than five years… but those in the bottom half gained less than a year.
By the way, people in the bottom half of earners often have jobs that are more physically demanding than those at the top– working another two years would be much more difficult, if not impossible.
5. Health care costs will go up for everyone
According to a study by the Kaiser Family Foundation, raising the Medicare eligibility age will save the federal government $5.7 billion, but it will cost the rest of us nearly twice that amount:
The AP reports on a Kaiser study, breaks down where that higher spending comes from:
- Higher monthly premiums for seniors on Medicare. Their costs would go up because keeping younger, healthier 65- and 66-year-olds out of Medicare’s insurance pool would raise costs for the rest. The increase would be about 3 percent when the higher eligibility age is fully phased in.
- Higher premiums for private coverage under Obama’s health overhaul. That’s because older adults would stick with private insurance for two extra years before moving into Medicare. Compared with younger adults, they are more expensive to insure.
- An increase in employer costs because older workers would try to stay on company insurance plans.
- Higher out-of-pocket health care costs for two out of three older adults whose entry into Medicare would be delayed.
If Congress really wants to save $5.7 billion a year, they could simply increase taxes by that amount– it would cost us taxpayers half as much as raising the retirement age.
