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How Raising the Medicare Eligibility Age Will Cost America Billions

As legislators in Washington continue looking for ways to reduce federal spending, some have suggested raising the age at which Americans qualify for Medicare benefits from 65 to 67. On the surface, that makes sense. If Americans wait two more years before accessing Medicare benefits, that's two years of benefits the government doesn't have to provide. While that's true, it's not that simple.

In the same way the kitchen only gets cleaned if someone takes the time to scrub it, health bills only get paid if someone coughs up the money. And while Congress could change the eligibility age so that the federal government doesn't foot those two years' worth of bills, the fact remains that if Medicare doesn't pay, someone else has to.

"The fundamental purpose of deficit reduction is to strengthen the economy over the long term," writes Paul N. Van de Water, senior fellow at the Center on Budget and Policy Priorities, a widely-respected economic policy nonprofit. Given that goal, the question then is not whether we should raise the eligibility age by two years, but rather, how such a change would affect the overall economy.

According to a Kaiser Family Foundation report released in July, "raising Medicare's eligibility to 67 in 2014 would generate an estimated $5.7 billion in net savings to the federal government." Great news, but that's only half the story. The report goes on to say that it would also increase total health care spending by at least $11 billion. There are three reasons why:

First, the 65- and 66-year-olds no longer covered by Medicare would be responsible for roughly $3.7 billion in out-of-pocket costs. Surprisingly, middle class Americans would be among those hardest hit, according to Van de Water. "When health reform goes into effect in 2014, very low-income people will become eligible for Medicaid. Other 65- and 66-year-olds with low incomes wouldn't qualify for Medicaid but would be eligible for for subsidies to participate in the new health insurance exchanges. People with still higher incomes could participate in the health insurance exchanges but wouldn't get subsidies, and their premiums and other out-of-pocket costs would be higher than in Medicare."

In addition to an increase in individual health care costs, employers would also have to pay more. As Van de Water explains, many
retirees are eligible for health insurance coverage through their former employers. "Currently, once these people turn 65, Medicare becomes the 'primary payer' -- that is, Medicare pays first and retiree coverage may kick in something in addition. If Medicare is no longer available, that retiree coverage will become the only payer, and employers will get stuck with additional costs for retirees." The Kaiser Family Foundation estimates retiree health care costs to employers reaching as high as $4.5 billion, which raises concerns that some employers might choose to cut back on retiree coverage.

A third cause for the significant increase in health care spending would be that Medicare has negotiated rates that private insurers can't match. These rates have kept down the overall cost of health care. "
Medicare is a relatively efficient source of health insurance," says Van de Water. "Its administrative costs are quite low, and private insurers aren't able to negotiate as low payment rates as Medicare provides. So that means if we take people out of Medicare and move them into private coverage, it ends up costing the system more." How much more? According to the Kaiser Family Foundation, premiums would increase roughly 3%, which is a lot of money when multiplied across the entire American population of 65- and 66-year-olds.

All said and done, increasing the eligibility age would save the federal government $5.7 billion, and cost the country $11.4 billion as states, individuals, and employers picked up the bills. So even putting aside the question of whether or not the government should be in the business of providing health care -- and putting aside the partisan politics that have virtually paralyzed our legislature -- strictly going by the numbers, the hard data, the answer is appallingly clear: Raising the Medicare eligibility age will cost our country billions.

If the goal is to strengthen our economy -- and I hope we can all agree that this is, in fact, the goal -- then we have to be thoughtful in how we approach the question of health care spending. Yes, the rising cost of health care is a problem, a significant contributor to the country's long-term deficits. And yes, we need to address it. But the goal should be to reduce the real overall cost of health care. Otherwise, we're just wasting our time, and a whole lot of money.

Loren Berlin is a reporter with the AOL Huffington Post Media Group. She can be reached at loren.berlin@teamaol.com, on Twitter at @LorenBerlin, and on Facebook.

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We should be reducing the retirement age, not increasing it. Take the country to a standard 32 hour work week, maybe we will have less employees sitting or the internet and smart phones why their suppose to be working, bring back the old Sunday blue laws so you can force people to spend quality time with their families. Maybe the kids will act a little better in school? Make a minimum 100 year sentence of any Doctor's found guilty of overbilling medicaid or medicare. Abolish the billion page tax code and let everyone pay a straight up percentage (.) this would eliminate a lot of abuse. Fine every employer or give them jail time that pay their workers under the table (especially the ones already recieving SSI and disability payments) I could go on forever the my excentric ideas... But most of all, I want the pay, benefits and especially health insurance reduce by 75% for every Congressman, Senator and the Entire Whitehouse Staff, including the Cooks and the house keepers. When they start serving we the people instead of themselves maybe they can have a performace raise. People have said for decades to give them sob's the same thing they make up for us, and not a damn one of them will ever bring it up.

September 09 2011 at 12:25 PM Report abuse rate up rate down Reply

what else is new take the drug additics off the system and hold them accountable for there own distruction case solved no one is held accountable for the actions even in my own family there is scumb sorry not sympathic to there weakness we all have a choice good thing we are on the right track so why should we get punished for doing the right thing i will be working till i am 67 so that i will provide my own health ins from my employee but still have to pay my share which is ok grateful i planned and good work ethics take care of your family and yourself that is how i was raised

September 09 2011 at 6:54 AM Report abuse +1 rate up rate down Reply
1 reply to hugobernie's comment

There may have been some good points in your comment but I was distracted by your inability to use punctuation or spell basic words correctly.

September 09 2011 at 8:39 AM Report abuse -1 rate up rate down Reply

What smart guys came up with this, Medicare eligibility at 67? I know a lot of people that at the age of 50 to 55 that want to stop working but can't because of health insurance, more like they can't qualify for a private plan so they keep on working. I, for one, set up a plan when I was 49 and with always living Below my means, I retired at 50. If they reduce the age for Medicare, say to 50 to 55, and let people buy in to it, at the rate of private insurance, more people would retire, opening up more jobs for people looking for them, and would also bring in more money, right now I pay $5,600 this year for insurance and all my total health care cost so far this year have been less then $200, so for the 8 years I have been retired, I spent around $23,000 total on insurance and had about $1,800 total in health care cost. If I was able to buy into Medicare, they would have made about $21,200 on me. Maybe if the Smart Guys did a little research they would find a lot more people, like me, that want to retire and are willing to buy into Medicare to do so, at the age of 50/55.

September 09 2011 at 6:15 AM Report abuse +1 rate up rate down Reply
1 reply to mrbjaw's comment

It's even easier than that. You paid 5600 for healthcare for the year, but elsewhere around the world you can get far better healthcare for a much lower price. Spain manages to run a healthcare system that costs 700 dollars a year and they have a higher life expectancy than we do! France has the best healthcare in the world (ranked by the World Health Organization) for less than 4k per person. There are easy fixes to reduce health care costs but our politicians are not willing to alienate lobbyists.

September 09 2011 at 8:41 AM Report abuse rate up rate down Reply
1 reply to Liz's comment

Thats because the have siestas and are allowed to drink wine :)

September 09 2011 at 12:28 PM Report abuse rate up rate down

Health Care costs are the problem. Its one thing to make money and another to gouge. Fifty dollar asprin. Bring Cancer into the picture and its a free for all.

September 09 2011 at 6:00 AM Report abuse +1 rate up rate down Reply

Actually they should lower the age for this medicare benifit. And for tetirement. It would vreat many jobs. When Americans get to vote soon we should make it a point to not vote for anyone who wants to raise our retirement age yet again or reduce any benifit that is owned to Americans. 67 is far too long. Raiseing the retirement age solves nothing.

September 09 2011 at 5:50 AM Report abuse +2 rate up rate down Reply

Those crooks in Washington want to make the country poorer than it already is!

September 09 2011 at 5:50 AM Report abuse +1 rate up rate down Reply

Anybody out there that thinks retirement age should be 67 is full of crap, and that includes our congressmen! It should be left where it is.

September 09 2011 at 5:47 AM Report abuse +1 rate up rate down Reply

"Surprisingly, middle class Americans would be among those hardest hit, according to Van de Water."

Surprisingly? Here's the definition of middle class: "Those who earn a little too much to qualify for any aid or subsidies, but do not earn nearly enough to cover their own health care without gouging into their life savings and/or the assets of the home they worked hard to own and, therefore, live in a constant threat of financial ruin."

If you are poor and have no assets (i.e., home), then society must pick up the tab--you're covered. If you're wealthy, you'll be paying more out of your slush fund--no major life changer. But If you're neither rich nor poor and are a homeowner, that's where they gotcha---"pay up or we'll take everything you own." If you're fortunate enough to work for a company that has a decent health-care plan, the risk is lower, but God forbid if you lose your job.

The current scenario is dangerous ground for this country---when it makes more sense to NOT work hard to own your own home, finance your own retirement, or own a small business--then the only way to go is down. The same is true for our welfare system--why get a job and lose your Medicaid when you'll end up not much better than you were on welfare?

Doesn't look good.

September 09 2011 at 5:47 AM Report abuse +4 rate up rate down Reply

Lets quit giving it to people who come hear from other countrys who have never worked hear. That is why its out of money.

September 09 2011 at 5:38 AM Report abuse +4 rate up rate down Reply

Lets have cut backs on congressmans health costs to make it fair. We pay for there costs of health care and we pay for our also, but they call ours entitlments.

September 09 2011 at 5:33 AM Report abuse +3 rate up rate down Reply