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Raising Medicare Age Won't Save What Supporters Expect, Liberal Policy Analysts Say

By Dena Bunis, CQ HealthBeat Managing Editor

September 12, 2011 -- As recommendations for the deficit committee about how to cut Medicare build, two liberal-leaning health policy analysts urged lawmakers to reject proposals to raise the eligibility age, saying doing so would shift costs and raise overhaul health care spending.

President Obama is expected to outline exactly how he would cut costs from the entitlement program as part of his long-term deficit reduction strategy. And raising the age is a possible option given wide reports that such a possibility was floated during the debt ceiling negotiations.

"The higher costs to individuals, employers and state would be twice as large as the savings to the federal government,'' Paul Van deWater, senior fellow at the Center on Budget and Policy Priorities (CBPP) said. He said raising eligibility age would increase "the burden health care costs places on the economy."

Van deWater referenced an analysis by the Kaiser Family Foundation that said if 65- and 66-year-olds were no longer eligible for Medicare, federal spending would be reduced by $24 billion in 2014. But he said, the net federal savings would be far less than that because in 2014 the health overhaul law (PL 111-148, PL 111-152) will be in full force in 2014 and those seniors losing Medicare would be eligible for Medicaid and the insurance subsidies under the new law. And that, he said, would reduce that $24 billion savings figure to $5.7 billion for 2014.

Besides the impact on the federal government, Van deWater said, raising the age would mean 65- and 66-year-olds would pay an estimated $2,200 more a year in premiums and co-pays. Medicaid costs would also rise because some of those 65- and 66-year-olds would qualify for that health program for the poor. And employers would face higher costs for some retirees who otherwise would have had Medicare as their primary insurer. Medicare beneficiaries, he said, would end up with higher premiums because the 65- and 66-year-olds who are usually the healthiest Medicare beneficiaries would no longer be in the program's risk pool. But many in the age group no longer eligible for Medicare would seek coverage in the exchanges and that would likely increase premiums in that marketplace, he said.

An even greater number of seniors citizens could also wind up uninsured, Van deWater said, if the health care law is either repealed or found unconstitutional by the courts.

Henry Aaron, senior fellow at The Brookings Institution, commented on one justification often made for raising the Medicare age: that the eligibility age for Social Security is already increasing and it would make sense for the threshold ages for both programs to be the same.

"That justification as it happens doesn't withstand scrutiny'' Aaron said. "It reflects a fundamental misunderstanding of how Social Security works.''

Aaron said because two-thirds of pensioners routinely claim Social Security benefits before they turn age 65 and only five percent wait until they are 67, that even now the typical beneficiary waits up to three years to get into Medicare.

Raising the Medicare eligibility age, Aaron said, would "simply increases an already quite problematic gap between the time people retire and when they are eligible for Medicare."

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