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Effects Of Increasing Medicare Eligibility Age

By June 9, 2016Commentary

The age of social security eligibility has been gradually increased, both in recognition of much great average longevity and the intense fiscal pressure facing the federal government.  Medicare’s eligibility age has been unchanged, but some policymakers have also suggested increasing it, since Medicare will become and even greater portion of federal spending in future years.  A study in Health Affairs projects what the effect of such an increase in eligibility age might be.   (HA Article)    The Congressional Budget Office estimated that if Medicare eligibility were raised to age 67, most people would stay in private coverage til that age, so basically there would be a shift in spending from Medicare to private insurance.  The change in overall national health spending would basically depend on whether there are differences in utilization and/or prices paid to providers between Medicare and private coverage.  The researchers used a commercial database to identify use and cost for people with private health coverage around the age of 65 and for those who went to traditional Medicare at age 65.

Spending for the study cohort averaged $119 per quarter prior to entry into Medicare, and $89 per quarter during their first year on Medicare.  The trend in health spending (the rate of growth) was the same before and after becoming Medicare eligible.   When adjusted, the spending difference was about $39 per quarter, or 32%.  Much of the savings was in imaging, and some in procedures.  It might be theorized that some of difference in spending was related to utilization–since Medicare pays providers less, they might offer fewer services to Medicare patients that to commercial ones.  The study, however, found only a very small lowering in utilization.  All the spending difference is basically due to Medicare’s much lower provider prices.  This price difference accounted for over 90% of the total decline in spending after going into Medicare.  If the Medicare eligibility age were raised, this suggests that national health spending would likely increase.  Federal spending for Medicare would decline, but might be offset by increased Medicaid spending or spending on insurance exchange subsidies.  The other enlightening implication is that if we had a national fee schedule like Medicare or even 10% above Medicare, we might save a lot of money, although provider incomes would take a hit.

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