Five ways raising eligibility could change Medicare

December 10, 2012

The Medicare eligibility age is one entitlement policy on the table in a fiscal cliff deal. If it went through, the policy change would move about 5 million seniors out of the entitlement program and into the market that serves the non-elderly, with private insurance and Medicaid for low-income populations as the main options. 

The idea of raising Mediare's age has bounced around Washington for a few decades now, giving researchers a lot of time to figure out what this change would mean for the health care system. Here are five of their most important findings. 

1. The vast majority of young seniors would still be insured. In a 2003 Health Affairs paper, Amy J. Davidoff and Richard Johnson simulated the effects of raising the Medicare eligibility age up to 67, including data on how many seniors would have access to employer benefits (or their spouses) and the cost of buying coverage on the private market. They estimate that 91 percent of seniors would continue with insurance coverage through new sources.

It's worth keeping in mind the big difference between 2003 and 2012: The Affordable Care Act. Under the health reform law, seniors would have access to subsidized insurance if they earn below 400 percent of the federal poverty line ($44,680 for an individual, $60,520 for a couple). In theory, that should further increase the number who remain insured.

2. Minorities would see the greatest impact. One notable finding from the Davidson and Johnson paper is that raising the Medicare eligibility age would have a disproportionate impact on minorities and those without a college education, who would likely have higher uninsured rates. Here's their chart. The key two columns are those to the left, which break down the 65-66 population by education, income and race: 

3. The Affordable Care Act's subsidies would likely make a big difference. You can get a sense of that by looking at the above chart's very last column. It models the impact of an income-related plan, where seniors who earn less than 150 percent of the federal poverty line could buy into Medicare at a discounted rate. Davidson and Johnson estimate this would have a pretty significant impact; among those with no high school degree, for example, the uninsured rate would go from 27.7 percent to 9 percent. 

This isn't a perfect stand-in for the health law's insurance subsidies - which scale up to 400 percent of the poverty line - but it does suggest that some financial support would encourage some, but not all, low income seniors to enroll.

On the flip side, there are some seniors would would have no access to the law's insurance expansion: Those who earn less than 133 percent of the poverty line and live in states that do not participate in the Medicaid expansion (seven states, at this point in time). There, you'd probably see the uninsured rates modeled out in the second column.

4. Young seniors could face the highest out of pocket health care costs. In 2007, over one-third of of the 50 to 64-year-old population spent more than 10 percent of their income on health care costs, according to the Agency for Health Quality and Research. That number stands at 18 percent for the 18-to-49-year-old population.

This was especially true for the seniors who were buying health insurance in the individual market: 78 percent of them reported a "high burden" - 10 percent of income or more - going towards health care costs. 

Again, the Affordable Care Act will change some of the calculus here: It limits out-of-pocket spending for those earning below 400 percent of the federal poverty line. Still, the Kaiser Family Foundation projects that about two-thirds of affected seniors would face higher out of pocket costs if the Medicare age were moved up.

"I suspect that raising the Medicare eligibility age in coming years would lead to smaller increases in out-of-pocket spending for 65 and 66-year-olds than we projected 10 years ago," emails Richard Johnson, author of the Health Affairs paper and director of the Urban Institute's Program on Retirement Policy.

5. States and employers would spend more too. If seniors can't turn to the federal government for health insurance, they're likely to head to the places where the non-elderly go for insurance: Their employers and, for low income seniors, state-run Medicaid programs. So as the federal government saves $5.7 billion in 2014 by spending less on Medicare, other parts of the health care systems would spend $11.7 billion more providing the same health care benefits. A lot of that comes from Medicaid and employers, who would take on about 3 million of the 65 and 66-year-olds.

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