‘Cliff’ Wranglers Weigh Medicare Age


The fiscal cliff has revived an old idea that long seemed unfeasible: gradually raising the Medicare eligibility age to 67 from 65.

Proponents of the idea point out that the health-overhaul law makes it easier, beginning in 2014, for seniors to buy private insurance, by banning insurance denials based on pre-existing conditions. Opponents caution that the change could raise premiums for younger people who buy private plans alongside these seniors in the law’s new marketplaces, and on large employers who would be required to cover seniors in company plans.

President Barack Obama indicated in previous negotiations over spending cuts that he might be open to the notion. It has been floated by Republicans, including Rep. Paul Ryan of Wisconsin, the House Budget Committee leader and the party’s vice-presidential nominee. North Dakota Democrat Kent Conrad, the retiring chairman of the Senate Budget Committee, has said a compromise involving such a change is “something we could accomplish.”

Mr. Conrad was one of 12 Democratic senators who voted with Republicans in 1997 in favor of a measure that would have slowly increased Medicare’s eligibility age. Among the dozen, Max Baucus of Montana, Dianne Feinstein of California, Herb Kohl of Wisconsin and Joe Lieberman of Connecticut are still in Congress.

At the time, they faced criticism for potentially leaving many people in their mid-60s without access to insurance. Now, proponents of raising the eligibility age can point to the 2010 health law, which includes requirements that insurance companies sell policies to everyone, regardless of their medical history, and charge older customers only three times as much as younger ones.

“It is an option that should be on the table,” because of the health law, said Erskine Bowles, the Democrat who co-chaired a presidential deficit-reduction commission in 2010.

Under most proposals, the age increase would be incremental and would be phased in over several years, so people who turned 65 soon after it took effect would likely wait only a few more months to enroll in the program.

The Medicare program is a key focus in negotiations to avert the so-called fiscal cliff—a package of tax increases and spending cuts—that looms next year. Last year, the program’s net expenditures totaled $486 billion, according to the Congressional Budget Office, or 13.5% of all federal spending.

Proponents of raising the eligibility age point out that life expectancies have increased since Medicare was set up in 1965, though the eligibility age hasn’t. That year, a woman turning 65 could expect to live another 18 years on average, and a man another 13 years and six months. By 2010, that average had climbed to almost 21 years for women, and 19 for men, according to data compiled by Social Security Administration actuaries.

They also point to CBO findings that Medicare spending would go down by $148 billion if the change were phased in between 2012 and 2021, and that some people might also choose to work longer, increasing revenue to the program from payroll taxes.

But those findings also noted that the health law’s federal subsidies for older people who purchased insurance through the exchanges, and enrollment of some of the lowest-income seniors onto the law’s expanded Medicaid program, would reduce the savings to the federal government by around a quarter, to $113 billion.

The CBO estimated that if the Medicare age increased, around half of 65- and 66-year-olds would get insurance from their employers, and that another 5% would go uninsured.

Of the rest, roughly one-third would buy plans through new insurance exchanges, where some of them would get federal tax credits toward the cost of premiums, and another third would enroll in the law’s expanded Medicaid program, which will mostly be funded by the federal government. The remainder would still qualify for the Medicare program because of disability.

Large companies that offer insurance to their employees would likely face higher costs because of the additional older people they were covering. This could come in at $4.5 billion for 2014 if the policy were fully implemented, according to a study by the Kaiser Family Foundation, a nonpartisan think tank.

The study found that because of the health law’s restrictions on how much prices can vary by age, having older, sicker people participating in the insurance exchanges could drive up premiums for everyone in those exchanges by 3%, or $141 for each enrollee in 2014. Young adults in the exchange under the age of 30 would see 8% increases in their premiums.

“There are real trade-offs involved in a policy that sounds pretty straightforward at first blush,” said Tricia Neuman, a study author.

The proposal has drawn criticism from AARP, an advocacy group for older Americans. AARP says the change also would lead to higher premiums for seniors who remain on Medicare, because they pay part of the program’s costs, and compared with them the 65- and 66-year-olds who wouldn’t join until later are relatively younger and healthier.

A version of this article appeared November 27, 2012, on page A4 in the U.S. edition of The Wall Street Journal, with the headline: ‘Cliff’ Wranglers Weigh Medicare Age.

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