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Roll cuts won’t aid Medicare

By Jonathan D. Walker, M.D.
The Journal Gazette (Fort Wayne, Ind.), Oct. 30, 2011

When it comes to our health care system, sometimes the obvious thing is the wrong thing. For instance, it seems obvious that if Medicare is a big part of government spending, we simply need to reduce the number of people on Medicare to save money. Unfortunately, what seems obvious on the surface can backfire in practice.

There is a proposal to raise the Medicare eligibility from 65 to 67 years of age. Sen. Dan Coats discussed it just last week at the Chamber of Commerce. That sounds like it would save a lot of money, but it doesn’t. The Kaiser Family Foundation, a nonpartisan organization that evaluates health care issues, estimated that raising the age will save about $5.7 billion. Medicare pays out more than $500 billion a year, so it saves only about 1 percent.

Plus, someone else will have to cover the cost of caring for those people. It is estimated that those 65- and 66-year-olds will end up with an additional $3.7 billion in out-of-pocket costs when they lose Medicare. In addition, their employers will need to get them insurance, and people in that age range are expensive to insure – for-profit insurers are reluctant to cover them. Employers would have to pay an additional $4.5 billion for their insurance, and that means higher costs for the rest of us.

This next problem shows how complex our health care system is. Compared to other patients on Medicare, 65- and 66-year-old patients are relatively healthy. When they are taken out of Medicare, the result is that Medicare has to cover a risk pool that is sicker. Those younger and healthier 65- and 66-year-olds are no longer paying premiums into Medicare, so it costs us more to insure everyone over 67.

But those same 65- and 66-year-olds are sicker compared to younger people, so when they are added to the risk pool of people below 65, they drive up the cost of insuring everyone below that age. All this means that both private insurance and Medicare costs would be driven up, estimated to cost the rest of us about $2.5 billion. Finally, some of them will end up on Medicaid, costing states about $700 million.

In other words, in order to save the government $5.7 billion, we have to pay at least $11.4 billion, mostly because it is so much cheaper to cover people with Medicare than with private insurance. Furthermore, a lot of those 65- and 66-year-olds would no longer be able to afford insurance at all, so their health would suffer.

Raising the Medicare age is one of those things that seems like a great idea, but we would be paying at least $2 to save the government $1. There are far more effective ways for Medicare to save money without compromising care, but politicians and lobbyists don’t want to go there.

Dr. Jonathan D. Walker is a member of Hoosiers for a Commonsense Health Plan. He wrote this for The Journal Gazette.

http://www.journalgazette.net/article/20111030/EDIT05/310309977/1144/EDIT05