No one ever said tinkering with Medicare would be easy, especially if you're trying to save money without ticking people off.
That's pretty much the bottom line of a new Medicare analysis from the Kaiser Family Foundation.
With the eligibility age for full Social Security benefits on its way from 65 to 67, it seemed to make sense to have Medicare follow, right? Particularly if the health law takes effect as written, meaning those 65- and 66-year-olds will still be guaranteed insurance.
Well, not so fast.
Indeed, raising Medicare's eligibility age would save the feds a fairly pretty penny. Try $7.6 billion in 2014 alone, the folks at Kaiser calculate.
The only problem is that it would end up costing those 65- and 66-year-olds, their employers (and former employers) and the rest of the health care system several billion dollars more than it would save Medicare. So while it would be a win for the federal budget, it would be a loss for health care spending overall.
Why?
Well, first of all, of the estimated five million 65- and 66-year-olds whose Medicare eligibility would be delayed, three-quarters wouldl have to pay more for their health care than they would have if they got on the federal health program. How much more? On average, $2,400.
The remaining one-quarter of that population have incomes low enough to qualify for either Medicaid or federal health insurance subsidies. Costs of that coverage would increase spending by about $5.6 billion.
Another added cost comes to employers who are providing insurance, particularly retiree health insurance for those 65- and 66-year-olds. If they join Medicare, that insurance becomes the secondary payer, picking up only the costs that Medicare doesn't. That adds another $4.5 billion.
Then there's a policy quirk of what happens to the risk pools in both Medicare and the health insurance exchanges where insurance will be available under the health law. Medicare premiums would likely rise, by roughly 3 percent, the researchers found, because the youngest and healthiest beneficiaries would no longer be part of the Medicare program.
At the same time, premiums for younger people would rise, also by about 3 percent, because those 65- and 66-year-olds will be older and sicker than the remainder of the risk pool they will be staying in, at least temporarily.
Finally, costs for states will rise as well, by about $700 million, to cover those low-income seniors, part of whose costs would have been picked up by both Medicare and Medicaid, and part due to the higher Medicare premiums noted above (which states have to pay for some people).
So in all, an increase in total health spending in the neighborhood of $13 billion to save the federal government $7.6 billion. A good trade-off? Depends whose budget you have to balance.
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