Raising Medicare’s Eligibility Age Could Actually Increase Costs

Should we have to wait longer to get Medicare? Senators Joe Lieberman (I-Conn.) and Tom Coburn (R-Okla.) think so. They have proposed raising the age of eligibility from 65 to 67 to shore up the program’s finances.

 The proposal is part of a package of reforms the two senators have put forward. Others include higher premiums for the wealthy and cuts in payments to hospitals. (Follow this link for a summary of the full plan.) However, the eligibility change is the most controversial.

It seems like a clear money-saver. If we are covered for two fewer years, Medicare will spend less overall on our care. Congress has already increased the eligibility age for Social Security to 67, so why not do it for Medicare, too? No one is happy when their benefits are reduced, but if we are going to sustain the program, something has to give.

But what if it wouldn’t actually save money? What if it would end up costing the government more?

The proposal leaves a big question unanswered. How would we get health coverage between ages 65 and 67?

Those still working might delay retirement for a couple of years. If they are fortunate enough to work for a company that provides health benefits, they could stay on their employer’s policy.

That might save some Medicare costs, but the health care expenses of these older workers wouldn’t go away. They would simply be shifted to private businesses. Is this much different than imposing new business taxes?

And what about people who can’t continue to work? Many must leave the workforce for health reasons, and many are forced to take early retirement. Where would they turn?

People without employer health coverage and no access to Medicare would thank their lucky stars for Obamacare. It will guarantee them access to individual policies along with subsidies if their income is low. Without this law, a 65-year-old would find it next to impossible to find health insurance.

But, as its critics are quick to point out, Obamacare is not cheap. Those subsidies will cost the government billions of dollars. Adding people to the rolls will only increase that cost.

So, many of the people cut out of Medicare by the Lieberman-Coburn plan would still receive health coverage at government expense. Once again, the plan just shifts the cost, in this case from one government pocket to another.

What’s more, long-term government spending could actually be higher under the plan. Many 65-year-olds might delay needed treatments and preventive care until Medicare finally kicks in. At that point, they could be sicker and likely to run up higher health care bills.

The economics of Medicare are complex. Unlike Social Security which just sends a monthly check to everyone, Medicare must address a range of unpredictable elements like rising health care costs and the health status of its beneficiaries. In fact, by sustaining seniors and keeping many health care providers afloat, Medicare may contribute more to the overall economy than it spends.

Reformers should beware. Simple cost-cutting solutions that neglect broader consequences could backfire.

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