As lawmakers prepare to negotiate a package of revenue increases and spending cuts that could stave off the impending fiscal cliff, changes to Medicare and Medicaid seem inevitable. In addition to the $716 billion in savings included in the Affordable Care Act, President Obama has identified $360 billion from systematic reforms like modernizing provider payments to achieve greater efficiencies and securing more favorable drug rebates for low-income beneficiaries.
But some Democrats are now floating more drastic cuts to the health care program and are potentially considering raising the Medicare eligibility age as part of a larger compromise with Republicans. Obama expressed support for the idea during 2011’s debt talks with House Speaker John Boehner (R-OH) and the policy is included in Rep. Paul Ryan’s (R-WI) budget. The idea is receiving renewed attention as lawmakers seek common ground:
On Capitol Hill, it isn’t clear how strenuously Democrats will resist cutting entitlements. Rep. Chris Van Hollen (D., Md.) said he and others were open to changes as long as they were done in a measured way and were part of deal that included tax increases. Mr. Van Hollen also said changing Social Security and increasing the Medicare eligibility age above 65 should be part of negotiations.
“I’m willing to consider all of these ideas as part of an overall plan,” Mr. Van Hollen said Tuesday at the Journal’s CEO Council.
White House officials in 2011 were in advanced talks with Mr. Boehner that would have agreed to some of these changes, notably raising Medicare’s eligibility age. That is one cause of liberals’ anxiety about how the coming talks may unfold. […]
In his meeting with leaders from liberal and labor groups, Mr. Obama fielded questions about whether a final budget deal would hurt recipients of Medicare and Medicaid. He made no assurances, one attendee said, and instead pointed to his budget to explain his stance on such changes. The president said, “You know where I am on this,” the attendee said. The budget includes some modest Medicare changes but no big cuts to the program.
But the reform would only save Medicare money by shifting the cost burden onto older Americans who find themselves between the old eligibility age and the new, as well as onto employers and states. Seniors between the ages of 65 and 67 could “end up uninsured,” while individuals “with incomes too high for premium subsidies in the exchange and those who qualify for only modest subsidies” could be priced out of affordable coverage altogether.
According to the Kaiser Family Foundation, raising the eligibility age to 67 would cause an estimated net increase of $5.6 billion in out-of-pocket health insurance costs for beneficiaries who would have been otherwise covered by Medicare. Seniors in Medicare Part B would also face a 3 percent premium increase, the study found, since younger and healthier enrollees would be routed out of Medicare and into private insurance. Beneficiaries in health care reform’s exchanges would see a similar spike in premiums with the addition of the older population.
Federal cost savings, meanwhile, would be slim. The Congressional Budget Office studied the proposal when it was part of the House GOP’s budget plan and found it “would have little effect on the trajectory of Medicare’s long-term spending…because younger beneficiaries are healthier and thus less costly than the program’s average beneficiary.”
The WSJ quoted Rep. Van Hollen out of context. While he did say that increasing the age “should be part of the conversation,” he also explained why the idea is problematic. From the interview:
One of the wrinkles – it’s more than a wrinkle – one of the provisions in there was to say that people on Medicaid, additional people came into the Affordable Care Act on Medicaid did not have to be covered by states that chose to opt out on that. And frankly, that creates a problem, because the Affordable Care Act would have otherwise provided a potentially feasible option for people between 65 and 67 who are not knocked out. But now you have people who are at relatively low incomes at the age of 66 – even if you took the retirement age – at 66 years old, someone’s who has busted their back as a construction worker – they retire and where are they going to get their health insurance if they are between 65 and 67, if they can’t’ go on the exchange and they happen to live in a state that now says they are not going to participate because in Medicaid, which about nine governors have said? Now maybe that will turn out to be different. But these are really practical concerns.