NCHC Writer
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For Immediate Release: June 19, 1998

Pat Schoeni, NCHC
John Shiels, Lewin Group
(202) 637- 6839
(703) 218- 5500Raising the Medicare Eligibility Age CouldLeave Many Seniors Without Health Insurance

Raising the Medicare eligibility age to 67 by the year 2020 would leave many 65 and 66 year olds without health insurance each year unless Congress allows these individuals to buy into the program and provides federal subsidies to help low-income seniors pay for the coverage, finds a study by The Lewin Group. The study was sponsored by the National Coalition on Health Care.

The Senate last year passed a measure raising the Medicare eligibility age to 67, but the House rejected it. The idea is being closely examined this year by the National Bipartisan Commission on the Future of Medicare. The Commission must report to Congress in March 1999.

While most 65 and 66-year olds would probably continue to work to maintain their health coverage, many would be left without any or without adequate coverage ñ absent a buy-in and federal subsidies ñ because:

  1. Affordable, comprehensive health insurance is simply not available in the private individual insurance marketplace to the vast majority of people in this age bracket. Policies can cost $4,000 or more a year even for a healthy 65 or 66 year old. And many 65 and 66 year olds would face having to pay significant portions of their annual income for health insurance. Only 5% to 10% of previously eligible Medicare beneficiaries would qualify for Medicaid. Another 10% of 65 and 66 year olds would retain Medicare because they are disabled. Those with pre-existing conditions would likely only be able to get policies that exclude coverage of those conditions.
  2. Seniors leaving jobs at 65 or 66 may be able to get less costly and more comprehensive “COBRA” coverage through their employer for 18 months. But theyíd still have to pay the full premium, which may be $2,000 to $4,000 a year.
  3. Employer-sponsored retiree coverage is already eroding. An increase in the Medicare eligibility age could increase this unfavorable trend by inducing more employers to discontinue or cut back on health benefits for retirees. Employers would do so because they will be bearing a new burden of additional costs to cover 65 and 66 year olds either as active employees or as retirees with no Medicare coverage.

The impetus to raise the Medicare eligibility age is to reduce spending in the program (now projected to rise at 7.4% a year over the next decade) and preserve it for future generations. But the Lewin analysis, led by John Sheils, says the magnitude of the savings is uncertain. Medical costs for 65 and 66 year olds are a relatively small portion of total Medicare spending because people this age are healthier than older beneficiaries. In addition, many 65 and 66 year olds may put off costly care until they qualify, resulting in a spurt of costs among 67 year olds. An increase in Medicaid spending (for 65 and 66 year olds who qualify) would also offset some of the Medicare savings, the study concludes.

Still, an increase in the eligibility age would reduce projected Medicare costs by up to 6% a year, and billions of dollars over many years, by (1) reducing the number of beneficiaries and (2) inducing later retirement resulting in an increase in payroll tax revenue, Sheils says.

The report, Rethinking the Medicare Eligibility Age, also examines the pros and cons of President Clintonís recent proposal to allow some 55 to 61 year olds and all 62 to 64 year olds to buy into the Medicare program. It concludes that, as structured, the buy-in would have little impact on reducing the number of uninsured in this “near-elderly” population, now around 3 million. The main reasons: (1) the plan limits 55 to 61 year olds who could buy-in to only those displaced from jobs because of corporate downsizing or forced early retirement; (2) it requires such ex-workers to pay a premium of around $400 a month; and (3) it requires 62 to 64 year olds to pay a premium of $300 a month. Few seniors could afford the premiums, the study concludes. The Congressional Budget Office has estimated that only 400,000 55 to 64 year olds would buy into the program.

The Presidentís plan could also lead some large employers to drop their health benefit plans for early retirees, the study concludes. They would do so on the assumption that the early retirees would have access to the Medicare buy-in. Some companies, however, would choose to give their retirees an increased pension payment to pay a portion of the costs for the Medicare buy-in.

The Presidentís plan also requires companies that currently offer retiree health benefits to allow retirees aged 55 to 64 to obtain COBRA coverage until they qualify for Medicare ñ if the company reduces or eliminates their retiree benefit. The report says this element of the Presidentís plan could reduce employersí incentive to drop their early retiree coverage if a Medicare buy-in were enacted because retirees likely would choose COBRA coverage since that coverage generally would be less expensive than the Medicare buy-in premium. Expanded COBRA benefits could add to an employerís health care costs. Companies already spend, on average, 42% more on health care for people aged 55 to 64 than for younger, active employees.

“We absolutely should not try to save Medicare by increasing the number of uninsured Americans,” said Dr. Henry Simmons, president of the National Coalition on Health Care. “And we wonít help many people with a buy-in program or COBRA expansion unless the government subsidizes those who canít afford coverage. The Medicare Commission and Congress must deal with the realities this report points to. We think the American people as concerned citizens and taxpayers are ready to consider paying for such assistance,” he added.

Rethinking the Medicare Eligibility Age is the first of five studies the National Coalition on Health Care is funding this year to analyze problems in and challenges facing the Medicare program. All are being conducted by The Lewin Group, a private health care research firm based in Fairfax, Virginia.

The National Coalition on Health Care is the nationís most broadly representative non-partisan alliance working to improve Americaís health and health care system. Itís nearly 100 member organizations include small and large businesses, labor unions, consumer groups, religious organizations, and academic health centers. These organizations represent or employ 100 million Americans.

Copies of the report are available by contacting the National Coalition on Health Care at (202) 637-6830 or through the Coalition web site at http://www.americashealth.org.###

For more information, contact the Coalition at [email protected] or call (202) 637-6830.

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