Increasing Medicare Age Increases American Health Care Spending

Aaron Carroll explains why raising the Medicare eligibility age will increase, not decrease, American’s health care spending. The government share of the spending goes down, but the private share goes up. It will cost you more, it will cost people on Medicare more. Nobody is better off if we do this:

If we drop 65 and 66-year-olds from Medicare, obviously that will mean the federal government is going to spend less on the program overall. They’ll save something to the tune of about $33.1 billion. But, they’ll be losing the premiums that those people paid for Medicare (about $9 billion), so that means the overall federal Medicare savings is $24.1 billion.

So far so good, right? Sounds like a winner. That is, of course, if you ignore all the extra spending we’d need to do because of this. Here we go.

Lots of those 65 and 66-year-olds will need Medicaid. That will cost the federal government about $8.9 billion. Lots of those seniors will go to the exchanges for insurance. That will cost the federal government about $9.4 billion in subsidies. Oh, that Medicaid will cost states too, about $700 million. The 65 and 66 year olds getting insurance from their employers will cost them about $4.5 billion (they’re expensive). As I’ve reported before, Medicare premiums will go up ($1.8 billion), and exchange premiums will go up ($700 million). And, there will be increased out-of-pocket spending by the 65 and 66-year-olds themselves for premiums, deductibles, co-pays, etc. Add it all up. To save the federal government $24.1 billion, we need to spend $29.8 billion.

In other words, this will cost us $5.7 billion. Here it is in chart form (click to enlarge):

Comments

  1. John says:

    About a million assumptions go into these kinds of charts. For example, it assumes that there will be no price improvement in the private market even with a flood of new customers. Given that has never happened in the history of mankind (flood of new customers into this type of industry not resulting in pricing improvement), the entire basis of the chart is flawed.

    Then your assumption that the Federal Government is the most efficient method here lacks historical presidence. You’re also ignoring the billions in additional Federal spending on the bureaucracy necessary to run this undertaking into your equation.

    Sorry, another chart with major flaws.

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