Boehner's Medicare Proposal Is Sleight of Hand, Not Cost Control
Medicare eligibility changes wouldn't bring a savings, just a cost shift and cost increase
December 6, 2012
Denying Medicare to seniors until they reach age 67 will shift costs to seniors, states, and employers without reducing the actual cost of healthcare by one penny. It's a shell game, and it should not be an option in the fiscal showdown talks.
While it would reduce Medicare expenditures, those costs won't vanish. Yes, the federal government would save $5.7 billion in 2014, but that would be offset by an additional $11.4 billion spent by states, employers, and seniors, according to the Kaiser Family Foundation. That's a cost shift and a cost increase.
The Congressional Budget Office assumes that half of 65- and 66-year-old seniors would continue employer-sponsored coverage at a cost of about $4.5 billion in 2014. That would likely accelerate the long-term decline in corporate benefits for retirees.
States would also pay because low-income uninsured seniors would be eligible for Medicaid. Even if the federal government would pay 100 percent of the cost of the new beneficiaries, states would still be on the hook for an additional $700 million in 2014 alone.
And, of course, seniors lose in the deal. Two thirds of those ages 65 and 66 would each average $2,200 more in out-of-pocket costs ($3.7 billion total) in 2014, even when accounting for subsidies to buy a plan on a health insurance exchange.
There's another significant but less obvious cost shift through increased premiums in Medicare and in the exchange. Seniors ages 65 and 66 are the healthiest and least expensive Medicare beneficiaries, and they help lower premiums for all enrollees. Moving them to private coverage, where they would be the least healthy and most expensive health plan members, would drive up premiums for everyone else in the exchanges.
Boehner's proposal seems more sleight of hand than legitimate cost control. It's about weakening Medicare, not strengthening the program for future generations.
If we really want to think big about Medicare reform, let's consider lowering the age of eligibility. Letting people as young as 55 buy into Medicare would improve the risk pool for seniors and strengthen Medicare's bargaining power without raising program costs.