In Tuesday's New York Times former Obama health care advisers Ezekiel J. Emanuel and Jeffrey B. Liebman argue cogently for politically difficult but smart policy choices in what seem to be the inevitable cuts coming to Medicare. Their entire argument is worth the read, but I want to focus on just one part:
Cost-shifting cuts don’t actually reduce health care spending; they just shift costs from the government to the private sector. Increasing Medicare’s eligibility age from 65 to 67, as Senators Tom Coburn and Joseph Lieberman have proposed and as the Obama administration reportedly floated during the debt ceiling negotiations, is a classic example. While raising the eligibility age would reduce government spending on Medicare, it would shift the costs to individuals and businesses. It would also increase the number of uninsured 65- and 66-year-olds, leading to worse health outcomes and making it harder for older Americans to find work.
Cost-shifting in the form of raising the eligibility age is probably going to be raised either in the Super Congress, or in a plan put forward by the administration, and it's bad policy. Not just because it's shifting costs to the private sector rather than actually cutting costs, but because doing so would actually raise overall costs, including costs to state governments.
That's according to a new study completed by the Center on Budget and Policy Priorities.
Raising Medicare’s eligibility would save the federal government money by shifting costs to individuals, employers, and states. These increased costs would be twice as large as the net federal savings, according to a study by the Kaiser Family Foundation. (See figure.)
- 65- and 66-year-olds losing Medicare coverage would face higher out-of-pocket health care costs, on average. Two-thirds of this group—3.3 million people—would face an average of $2,200 more each year in premiums and cost-sharing charges.
- Employers that provide health coverage to their retirees would face higher costs as more 65- and 66-year-olds received primary coverage through their employer rather than Medicare.
- Medicare beneficiaries, as well as people under age 65 who buy insurance through the new health insurance exchanges, would face higher premiums as 65- and 66-year-olds left Medicare and many of them bought coverage through the exchanges.
- State Medicaid costs would rise as some of the people who lost Medicare coverage would shift to Medicaid.
That's not all. By shrinking Medicare's share of the health insurance market, raising the eligibility age would reduce Medicare's market power and weaken its ability to serve as a leader in controlling health care costs.
It's a disastrously bad idea. It was terrible when Lieberman and Coburn proposed it and when it was floated in the debt ceiling negotiations, and it hasn't gotten any better in the interim. It might be "bipartisan" and it might be politically easier than other, real reforms, but it's still a stinker.