The GOP’s $4.5 Billion Hidden Tax On Businesses

One of the most underreported provisions of the House Republican budget — one which House Budget Committee Chairman Paul Ryan (R-WI) himself routinely eschewed during his town halls across Wisconsin — is the fact that the plan gradually raises the Medicare eligibility age to 67 beginning in 2022. Ryan wasn’t too enthusiastic about discussing this portion of the blueprint and regularly replied to constituents’ questions about eligibility by using the phrase “when you become eligible” rather than any numerical age.

It’s easy to see why Ryan would be so hesitant to get into actual specifics: keeping seniors out of Medicare longer does reduce federal expenditures, but it also increases out-of-pocket expenses for 65 and 66 year-olds and raises the health care costs of employers. As a recent Kaiser Family Foundation report concluded:

Employers’ costs are estimated to increase by $4.5 billion in 2014 if the Medicare eligibility age is raised to 67. This increase results from employer plans becoming primary rather than secondary payer (wrapping around Medicare) when Medicare is no longer the primary payer. We estimate that total premiums would increase as a result, increasing costs for employers and retirees, each of whom are estimated to pay half of the higher premium. The increase in retiree health costs would also be reflected in the long-term liability of employers for their retiree health obligations.

Moreover, if the Affordable Care Act is not repealed, “premiums for people younger than 65 purchasing coverage through health reform’s insurance exchanges would rise by an estimated 3 percent.” Medicare Part B premiums would increase by a similar amount, as the youngest seniors are removed from the Medicare risk pool.

But the employer piece is particularly overlooked even though it clashes with the GOP’s “no new taxes on the organ of job creation” rhetoric and business agenda. It’s worth taking this up with the National Federation of Independent Businesses (NFIB) — which calls itself the “voice of small business” — given that organization’s endorsement of Ryan in 2010.