The Hidden Costs Of Raising The Medicare Age : Shots - Health News By delaying the age at which people can join Medicare, the federal government could save millions of dollars. But if 65- and 66-year-olds have to find health insurance on the open market, states, employers and individuals of all ages will end up paying a lot more.

The Hidden Costs Of Raising The Medicare Age

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It's MORNING EDITION from NPR News. Good morning. I'm David Greene.


And I'm Renee Montagne.

In Washington, the shadowboxing over how to avoid the fiscal cliff continues. President Obama said yesterday he's confident the issue can be resolved. If Congress and the White House failed to act by January 1, a series of tax increases and deep spending cuts kick in.

GREENE: Now, to reach a deal, Senate Republican Leader Mitch McConnell says Republicans would consider increased revenues by closing tax loopholes, but only if Democrats accept entitlement reforms. And one popular proposal for that is to raise the age when seniors become eligible for Medicare - from 65 to 67.

MONTAGNE: That increase is already being phased in for Social Security. It sounds easy and it would cut the federal deficit. But as NPR's Julie Rovner reports, it would come with an unexpected cost.

JULIE ROVNER, BYLINE: Whenever the discussion turns to saving money in Medicare, it seems the idea of raising the eligibility age comes up. Here's South Carolina Republican Senator Lindsey Graham on ABC's "This Week" last Sunday.


SENATOR LINDSEY GRAHAM: I don't think you can look at entitlement reform without adjusting the age for retirement. Let it float up another year or so over the next 30 years, adjust Medicare from 65 to 67 over the next 30 years.

ROVNER: Even President Obama reportedly had the idea on the table during his informal negotiations with House Speaker John Boehner during the summer of 2011. And why not?

TRICIA NEUMAN: It's clear that it would reduce federal spending and it can do so in a very immediate sense, depending on how it's phased in.

ROVNER: Tricia Neuman is vice president for Medicare at the non-partisan Kaiser Family Foundation.

NEUMAN: However, while federal spending will go down, costs to others will go up, and in fact total spending will rise.

ROVNER: How's that? Well, like everything in health care, if you lower costs for one group, another group almost always ends up paying more. And it's a little bit complicated. Let's focus on those 65 and 66-year-olds. In Medicare, they're currently the youngest and healthiest people. So by delaying their entry into the program, says Neuman, you raise costs for everyone else already there.

NEUMAN: People on Medicare pay higher premiums; that's because you're taking the healthiest people out of the Medicare risk pool, leaving sicker people to pay higher premiums.

ROVNER: At the same time, those same 65 and 66-year-olds would be the oldest and likely among the sickest people remaining in the insurance pools of the working-age population, particularly in the new health insurance exchanges.

NEUMAN: That means that they are raising the average risk of people in the exchanges, so that younger people in the exchanges, everybody in the exchanges, will see premiums rise, but especially so for those who are younger.

ROVNER: That's because under the federal health law for the first time, insurance companies won't be able to charge older people many times more than younger people for the same insurance coverage.

Topher Spiro, who heads health policy at the liberal think tank the Center for American Progress, says it's one more reason not to change Medicare's eligibility age, at least not right now.

TOPHER SPIRO: We think it's the absolute wrong approach when, you know, you're first implementing health care reform.

ROVNER: Now, to be clear, raising Medicare's eligibility age would save money for the half trillion dollar a year Medicare program - and for the federal government as a whole. The Congressional Budget Office estimates that Medicare spending would drop about five percent. And at the same time federal tax revenues would increase slightly because some of those 65 and 66-year-olds would remain in the workforce and continue to pay taxes.

But overall, according to a separate study done by the Kaiser Family Foundation, the savings to the federal government would be more than offset by additional costs to states, individuals, and employers by about a billion dollars in 2014 alone.

Again, Kaiser's Tricia Neuman.

NEUMAN: This is a very good example of how something that seems very straightforward in terms of reducing federal spending actually is a very direct way of shifting costs to other payers.

ROVNER: And how nothing in health care is ever as straightforward as it might seem.

Julie Rovner, NPR News, Washington.

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