The case for raising the Medicare eligibility age, which Maya MacGuineas of the Committee for a Responsible Federal Budget made recently in the Wall Street Journal, was weak even before the Supreme Court’s health reform ruling, and it’s even weaker now.
Raising the Medicare age from 65 to 67 would save the federal government money only by shifting costs to the private sector, as we have previously written. Total health care costs would rise, not fall. The Kaiser Family Foundation, in the leading study of this issue, finds that:
The Kaiser study estimates that these increased costs would be twice as large as the net federal savings, so overall health care costs would go up.
MacGuineas contends that this fact “isn’t an argument for abandoning the [increase in the Medicare age], but instead for doing everything we can to control overall health-care cost growth.” To be sure, reducing system-wide health care costs is essential. But why should we start by taking a step that would actually raise costs?
Furthermore, by shrinking Medicare’s share of the health insurance market, increasing the eligibility age would weaken its ability to serve as a leader in controlling health care costs. And with a smaller pool of beneficiaries, doctors would have less incentive to see Medicare patients, as former White House Budget Director Peter Orszag has recently explained.
MacGuineas and other proponents assert that health reform would assure that all 65- and 66-year-olds who lost Medicare would have access to affordable health coverage, either through Medicaid or the new exchanges. But, since the Supreme Court decision, that’s no longer the case. Many poor 65- and 66-year-olds would likely end up uninsured.
Here’s why: When President Obama and House Speaker John Boehner considered raising the Medicare age to 67 during last year’s budget negotiations, the proposal under discussion assumed that policymakers would also require states to extend Medicaid coverage to everyone with incomes below 133 percent of the poverty line up to age 67; currently, health reform’s Medicaid expansion applies up to age 65. Low-income 65- and 66-year olds losing Medicare would have qualified for Medicaid.
But the Supreme Court’s June decision changes the situation. Now states can choose whether or not to expand Medicaid to cover all low-income adults. And even though the federal government will pick up nearly all of the costs of the expansion, many governors and state legislative leaders have expressed reluctance or outright opposition.
In states that decline the Medicaid expansion, raising the Medicare age would leave many low-income 65- and 66-year-olds without health coverage. That outcome is surely unacceptable.
Moreover, if adopting the Medicaid expansion meant that a state would have to bear a share of the costs for many 65- and 66-year-olds — who have substantially higher health care costs than younger adults — more states would likely decline the Medicaid expansion. That, in turn, would also leave more poor working-age adults uninsured.
It would be extremely difficult to design a proposal that raises the Medicare age and produces substantial federal budget savings without discouraging states from taking up the Medicaid expansion and without leaving significant numbers of poor 65- and 66-year-olds uninsured. Insurance for millions of vulnerable low-income people is at stake.