Raising Medicare eligibility age would spike overall health spending

Shannon Muchmore and Harris Meyer | May 2, 2016

Raising the Medicare eligibility age would increase overall healthcare spending in the country because it would leave people on private insurance plans that pay more for the same services than Medicare, according to a recent Health Affairs study.

Costs for people who were insured before entering Medicare at age 65 decreased by $38.56, or 32.4%, per beneficiary per quarter, although they used the same amount of services, according to the study.

This suggests that providers did not see fewer Medicare patients despite the lower reimbursement. This could be because of Medicare’s size and purchasing power, the authors said.

“If this finding is generalizable to other health care services, populations, and payers, it suggests that insurers with market power can pay lower rates than insurers that lack market power without losing access to providers,” they said.

Raising the Medicare eligibility age, often suggested as a gradual move from 65 to 67, has been considered for many years as a way to cut federal spending. In March, the House Budget Committee included the measure as part of a 10-year budget plan that included several healthcare cuts.

The Congressional Budget Office estimates it would decrease costs by about 3% in the long run, but about two-thirds of that would be offset by higher Medicaid costs and more premium subsidies for people to buy coverage in the exchanges.

James Capretta, senior fellow at the Ethics and Public Policy Center and visiting fellow at the conservative American Enterprise Institute, said that while Medicare does pay lower rates to providers, it is through fiat, not negotiation. As they begin to apply to more people, these rates could prove to be below cost. That results not in cost savings, but in cost shifting to other populations.

Using the study’s analysis to determine that the eligibility age should not be increased also dodges the more important issue of whether taxpayers can continue to afford Medicare despite demographic changes and longer life spans, he said.

“Medicare has unfunded liabilities in the trillions and trillions of dollars, and it’s not funded by contributions by beneficiaries. What do we do about that in the coming years?” he said.

Capretta said he wouldn’t consider raising the eligibility age in isolation. It should be part of a broader package of reforms such as what the AEI rolled out in December. It suggested converting Medicare to a premium support model, along with numerous other changes to Medicaid and the private market.

Source:  Modern Healthcare