Posts Tagged ‘Medicare cost savings’

Savings from raising Medicare eligibility age

August 27, 2011

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.