Here is an interesting article and perspective on raising the Medicare eligibility age. The overall analysis may be correct, but the assumptions are wrong.
Medicare does not extract larger discounts from providers than other payers. Medicare simply sets the fees it will pay and thus pays less than market rates thereby shifting health care costs to the non-Medicare population.
In addition, tracking the spending on specific services is only part of the story. It’s not only the price of a given service that matters, but the use of those services as well. Medicare does virtually no utilization review or management. Thus any saving on a per service basis could be negated if Medicare pays for even a few more of that service than would be allowed by the private sector.
Indeed, seniors on Medicare are very likely to pay less than under their private insurance, especially if the have supplemental coverage as well. Why?
If you are age 64 today and age 65 tomorrow why does your deductible drop to $166 and your 20% coinsurance based on a lowered allowed fee, if not eliminated via supplemental coverage?
The purpose of raising the Medicare age is to save Medicare money. Why is it unreasonable to have Medicare coordinated with the normal Social Security retirement age (gradually moving to age 67) as it was at age 65?
Few employers provide retiree health benefits and even fewer after age 65. And, as required by law, a worker with health benefits does not use Medicare until they retire regardless of their age.
What is missing from this analysis is that pre Medicare retirees without employer health benefits (the great majority) will now enroll in an Obamacare exchange and most likely be eligible for federal premium subsidies. Over time that may offset a substantial portion of any Medicare savings from raising the eligibility age.
A May Health Affairs study examines how Medicare’s eligibility age affects spending and prices, as well as the volume of services used by patients.
Using the claims data of 200,870 retired people who transitioned to traditional Medicare from private insurance at age 65, researchers tracked healthcare spending on a per member, per quarter basis for two types of services, outpatient imaging and procedures. The study looked at claims paid for people between the ages of 62 and 68.
When people turned 65 and enrolled in Medicare, the amount that insurers and beneficiaries spent on those services dropped 32.4 percent on average, or $38.56.
The spending decline wasn’t tied to a reduction in beneficiaries’ use of health care services, the study found. Rather, once seniors enrolled in Medicare, doctors continued to see these patients, but at reduced rates.
“It crystallized for me that Medicare, due to its large market share, is able to extract larger discounts from providers than other payers,” Wallace said. “Medicare is able to pay physicians 30 percent less than other payers, without leading to a reduction in access.”
The impact on individual patients is less clear, since the change in their spending upon enrolling in Medicare would depend on the generosity of the private coverage they had before. But since Medicare generally pays less for services than private insurance, it’s fair to say that seniors might expect to pay less as well for services when they’re responsible for paying a percentage of the cost in the form of coinsurance, Wallace said.
As for raising the Medicare eligibility age to 67, the study’s findings are consistent with a 2011 analysis by the Kaiser Family Foundation, the study said. (KHN is an editorially independent program of the foundation.) That study estimated that raising the Medicare eligibility age would have saved the federal government $5.7 billion in 2014 but would also have increased the out-of-pocket costs of 65- and 66-year-olds by $3.7 billion and employer retiree health care costs by $4.5 billion.
“These findings, like ours, may seem counterintuitive but show the importance of looking at the total picture when trying to understand the effects of a seemingly straightforward proposal,” said Tricia Neuman, director of the program on Medicare Policy at the Kaiser Family Foundation who coauthored the analysis.