Savings from raising Medicare eligibility age

Senator Joseph Lieberman has proposed saving money on Medicare by raising the age of eligibility from 65 to 67, and President Obama has indicated he is open to such a plan.

The red circle represents the annual Medicare budget.  The blue sliver represents the estimated saving to the federal government from Senator Lieberman’s proposal.

If the federal government raised the eligibility age for Medicare from 65 to 67, it would save $5.7 billion in 2014, the Kaiser Family Foundation estimates.  While that is a very large number, it is less than 1 percent of $643.4 billion, the Medicare trustees’ estimate of their budget for 2014.

There is more to the story.  Kaiser Family estimates that the 65-year-olds and 66-year-olds who are no longer eligible for Medicare would spend $3.7 billion of their own money on health insurance premiums and medical bills in 2014, and employers would spend an added $4.5 billion for employees and retirees who are no longer eligible for Medicare.  Since both Medicare and the health insurance exchanges would cover a slightly older and unhealthier population, premiums would go up an estimated $2.4 billion.

The total:  Private individuals and companies would have to spend an added $11.4 billion to offset the $5.7 billion reduction in the government’s Medicare budget.

There’s still more.  A study indicates that once you become eligible for Medicare, your chances of surviving a serious illness improve by 20 percent.

So the only thing that would be accomplished by Senator Lieberman’s proposal is to enable certain politicians to say they’re tough—tough, that is, on the old, sick and vulnerable, not the rich and powerful.

An article in the Fall 2009 issue of the Stanford Social Innovation Review explained the study that showed Medicare reduces the death rate from serious illness.  The original article is behind a pay wall, but I found a copy on an unrelated web site.

For decades, Americans have squabbled over whether the government should expand Medicare, maintain its current scope, or cut it altogether.  But their debates have suffered for lack of an answer to one vital question: Does Medicare make a difference?

A new study shows that Medicare indeed makes a difference for seriously ill patients–and that difference is the one between life and death.  Following the fates of more than 400,000 people admitted to California hospitals through their emergency departments, a team of economists finds that patients who are just over 65 years old–and thus eligible for Medicare–are 20 percent less likely to die within a week of admission than are their slightly younger counterparts who do not yet qualify for the government insurance.”

Until this paper, no one thought that health insurance of any kind affected something as straightforward as death rates,” says David Card, a professor of economics at the University of California, Berkeley, and the study’s lead author. “Fact is, if you show up at the hospital without insurance, they’ll take you in and give you fairly decent treatment.”

But the Medicare-eligible set seems to get somewhat better treatment, Card and his colleagues find.  Their study reveals that patients between 65 and 70 have more procedures and higher bills than do patients between 60 and 64, hinting that Medicare-aged patients are receiving more care.  This closer attention may give Medicare recipients an edge on surviving their trip to the ER, Card says.

Card’s study also suggests that Medicare recipients fare better than not only the uninsured, but also the privately insured.  “A lot of people do not have very good insurance,” he explains.  In addition, hospital staff must sometimes waste valuable time untangling what exactly a particular insurance company will cover for a particular patient before delivering aid. “But hospitals don’t have to call up to find out what Medicare can do,” he notes.

For their study, Card and his coauthors took advantage of the fact that some 80 percent of Americans enroll in Medicare within a few days of their 65th birthdays.  As a result, the researchers could apply a sophisticated statistical test that compares the outcomes of people on either side of the Medicare-age line–that is, people ages 60 to 64 vs. people ages 65 to 70.

To make sure that these two groups were equally sick, the researchers restricted their study to people who reported to hospital emergency departments with strokes, heart attacks, respiratory failure, and other life-threatening illnesses. “These events bring people to the ER regardless of their insurance coverage,” Card says. 

The team then examined which of these very sick people survived a day, a week, a month, and other time intervals up to two years.  Their findings demonstrate that even nine months later, 20 percent more Medicare-aged patients than younger patients were still alive.

via Unfogged.

Click on Does Medicare save lives? PDF for the text of the study.

Click on How small is $5.7 billion? Very small and Monkeying with the Medicare eligibility age on The Incidental Economist web log for the sources of my information.

Click on The Kaiser Family Foundation report for background information on Medicare costs and savings.

Click on Want to save lives and money? Strengthen Medicare for a physician’s testimony before Congress.

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