President-elect Joe Biden wants Congress to lower the Medicare eligibility age from 65 to 60. That’s long been a goal of Democrats. But even 7 in 10 Republicans have expressed support for expanding Medicare in the direction Biden has suggested, according to polling from the Kaiser Family Foundation.
Opening up Medicare to more people is a bad idea. It would waste scarce taxpayer dollars on millions of disproportionately affluent Americans who already have health insurance—and would do so at a time when the entitlement program faces imminent insolvency.
Medicare can ill afford to cover its current recipients, much less those between the ages of 60 and 65. It’s already in dire financial straits, and according to an analysis from a public health expert at Harvard, expanding it would cost up to another $100 billion. Job losses induced by COVID-19, meanwhile, have strained the program’s balance sheet by causing payroll tax receipts to plummet. A September report from the Congressional Budget Office predicted Medicare Part A’s Hospital Insurance Trust Fund—which covers in-patient care for nearly 60 million people—will run dry by 2024. That’s two years earlier than the program’s trustees had forecast before the pandemic struck.
If that trust fund is depleted, it’s unclear whether Medicare would be able to pay hospitals and other health care providers. The Medicare Payment Advisory Commission has estimated that Congress would need to hike payroll taxes from 2.9 percent to 3.7 percent or permanently slash reimbursements for in-patient care by roughly 17 percent in order to stave off insolvency.
Neither approach would be popular. Increasing the payroll tax by 0.8 percentage points might not sound like much. But it would take roughly $700 billion out of workers’ pockets over the next decade.
Cutting Medicare’s payment rates, on the other hand, would cripple our health care system. The program already underpays hospitals, relative to what private insurers pay. For every dollar spent caring for Medicare beneficiaries, hospitals receive just 87 cents in reimbursement.
Hospitals respond by charging private insurers more. Private health insurers reimbursed hospitals 247 percent more than Medicare did in 2018, according to a recent study from the RAND Corporation.
If Medicare reduced its reimbursements any further, many hospitals may go under. The fiscal outlook for rural hospitals in particular has been bad for years, with more than 170 closing since 2005. In recent months, by forcing people to stay home and postpone care, the pandemic has further damaged health care systems’ finances. The American Hospital Association estimates that hospitals will lose more than $320 billion in 2020.
Adding the roughly 23 million Americans between the ages of 60 and 64 to Medicare’s rolls would hasten the entitlement program’s day of reckoning, all for the sake of covering the age group that needs government help the least. The vast majority of 60-to-64-year-olds already have coverage, either through their employers, Medicaid or Obamacare’s exchanges. Only 8 percent lack insurance—a lower uninsured rate than that of any other age group.
These Americans are also wealthier than average, since older workers tend to be more senior and command higher wages. Americans aged 55 to 65 have median incomes of $57,000 a year, compared to $43,000 for those between the ages of 25 and 34. Americans over 65 make under $50,000 annually.
In other words, the president-elect wants to offer taxpayer-funded health coverage to a group that is wealthier and better insured than the average American.
Medicare is already facing financial trouble. If we want to preserve it for the elderly, retired folks who truly need it, raising the eligibility age is the better option.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.
Don’t Lower the Medicare Eligibility Age
Sally C. Pipes
President-elect Joe Biden wants Congress to lower the Medicare eligibility age from 65 to 60. That’s long been a goal of Democrats. But even 7 in 10 Republicans have expressed support for expanding Medicare in the direction Biden has suggested, according to polling from the Kaiser Family Foundation.
Opening up Medicare to more people is a bad idea. It would waste scarce taxpayer dollars on millions of disproportionately affluent Americans who already have health insurance—and would do so at a time when the entitlement program faces imminent insolvency.
Medicare can ill afford to cover its current recipients, much less those between the ages of 60 and 65. It’s already in dire financial straits, and according to an analysis from a public health expert at Harvard, expanding it would cost up to another $100 billion. Job losses induced by COVID-19, meanwhile, have strained the program’s balance sheet by causing payroll tax receipts to plummet. A September report from the Congressional Budget Office predicted Medicare Part A’s Hospital Insurance Trust Fund—which covers in-patient care for nearly 60 million people—will run dry by 2024. That’s two years earlier than the program’s trustees had forecast before the pandemic struck.
If that trust fund is depleted, it’s unclear whether Medicare would be able to pay hospitals and other health care providers. The Medicare Payment Advisory Commission has estimated that Congress would need to hike payroll taxes from 2.9 percent to 3.7 percent or permanently slash reimbursements for in-patient care by roughly 17 percent in order to stave off insolvency.
Neither approach would be popular. Increasing the payroll tax by 0.8 percentage points might not sound like much. But it would take roughly $700 billion out of workers’ pockets over the next decade.
Cutting Medicare’s payment rates, on the other hand, would cripple our health care system. The program already underpays hospitals, relative to what private insurers pay. For every dollar spent caring for Medicare beneficiaries, hospitals receive just 87 cents in reimbursement.
Hospitals respond by charging private insurers more. Private health insurers reimbursed hospitals 247 percent more than Medicare did in 2018, according to a recent study from the RAND Corporation.
If Medicare reduced its reimbursements any further, many hospitals may go under. The fiscal outlook for rural hospitals in particular has been bad for years, with more than 170 closing since 2005. In recent months, by forcing people to stay home and postpone care, the pandemic has further damaged health care systems’ finances. The American Hospital Association estimates that hospitals will lose more than $320 billion in 2020.
Adding the roughly 23 million Americans between the ages of 60 and 64 to Medicare’s rolls would hasten the entitlement program’s day of reckoning, all for the sake of covering the age group that needs government help the least. The vast majority of 60-to-64-year-olds already have coverage, either through their employers, Medicaid or Obamacare’s exchanges. Only 8 percent lack insurance—a lower uninsured rate than that of any other age group.
These Americans are also wealthier than average, since older workers tend to be more senior and command higher wages. Americans aged 55 to 65 have median incomes of $57,000 a year, compared to $43,000 for those between the ages of 25 and 34. Americans over 65 make under $50,000 annually.
In other words, the president-elect wants to offer taxpayer-funded health coverage to a group that is wealthier and better insured than the average American.
Medicare is already facing financial trouble. If we want to preserve it for the elderly, retired folks who truly need it, raising the eligibility age is the better option.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.