Higher Health Costs From Raising Medicare Eligibility Age to 67 Would Consume Up to 45% of Social Security Check for Middle-Class Seniors


Higher Health Costs From Raising Medicare Eligibility Age to 67 Would Consume Up to 45% of Social Security Check for Middle-Class Seniors

(Click here for a pdf of the analysis below.)
 
Raising the Medicare eligibility age from 65 to 67 would substantially increase health care costs for 3.3 million people aged 65 and 66, according to a report by the Kaiser Family Foundation. As a result, out-of-pocket health care costs would take a larger bite out of affected seniors’ already modest Social Security checks, and hand more of seniors’ hard-earned income over to private insurance companies. For example, out-of-pocket health care costs’ claim on many 65- and 66-year-old Social Security beneficiaries with a history of middle-class earnings—$69,629 in 2011—would increase from 28 percent to 45 percent.
 
3.3 million people aged 65 and 66 would pay more out-of-pocket for health care if they were no longer eligible for Medicare. Among this population, the amount out-of-pocket costs would increase differs for each of the following four groups:
  • Out-of-pocket health care costs would increase, on average, by $4,300 in 2014 for 960,000 people aged 65 and 66 who purchase coverage through a health insurance exchange and have incomes exceeding 400 percent of the federal poverty level ($43,560), making them ineligible for subsidies available to exchange participants with lower incomes. Under current law, these 65- and 66-year-old retirees’ average out-of-pocket costs would be $6,800 in 2014, out of a total Social Security benefit of $24,469. If forced out of Medicare and onto the health insurance exchanges, their average out-of-pocket health care costs would grow to $11,100, out of a total Social Security benefit of $24,469. [Figure 1] As a result, if the Medicare eligibility age is raised, out-of-pocket health care costs would go from consuming 28 percent to 45 percent of those 65- and 66-year-old retirees’ Social Security check.
Source: Social Security Works analysis of estimates from Social Security Trustees, 2011, and Kaiser Family Foundation, 2011.
  • Out-of-pocket costs would increase, on average, by $1,200 for 240,000 people aged 65 and 66 who purchase coverage through a health insurance exchange and have incomes between 300 and 400 percent of the federal poverty level ($32,670-$43,560). Under current law, these 65- and 66-year-old retirees’ average out-of-pocket costs would be $4,800 in 2014, out of a total Social Security benefit of $18,464. If forced out of Medicare and onto the health insurance exchanges, their average out-of-pocket health care costs would grow to $6,000, out of a total Social Security benefit of $18,464. As a result, if the Medicare eligibility age is raised, out-of-pocket health care costs would go from consuming 26 percent to 32 percent of those 65- and 66-year-old retirees’ Social Security check.
  • Out-of-pocket costs would increase, on average, by $2,200 for 1.1 million retirees with employer-sponsored retiree health plans – assuming that the increased cost to employers did not cause them to terminate these plans.
  • Out-of-pocket costs would increase, on average, by $500 for 1 million retirees with employer-sponsored health plans assuming that the increased cost to employers did not cause them to terminate these plans.

Another group that would also be financially impacted by raising the Medicare eligibility age to 67 is existing Social Security beneficiaries, aged 67 and older. These beneficiaries would see their out-of-pocket health care costs increase, and consequently, their Social Security benefits effectively reduced. It is estimated that Part B premiums, which are automatically deducted from Social Security checks, would increase by 3 percent in 2014, or $46, on top of increases produced by rapidly rising health care costs. This would occur, because, on average, the healthiest, least expensive members of the Medicare risk pool, those aged 65 and 66, would be removed.

Costs to Social Security beneficiaries could be substantially higher than estimated here. The Kaiser Family Foundation report on which this analysis is based assumes the health insurance exchanges and subsidies enacted under the 2010 Patient Protection and Affordable Care Act (ACA) will be fully implemented by 2014, a prospect that is far from certain. If any or all of four key provisions of the ACA are scaled back or repealed—the expansion of Medicaid eligibility, the creation of health insurance exchanges, subsidies for individuals to purchase private insurance on the exchanges, and the individual health insurance mandate—the increase in out-of-pocket health care costs due to raising the Medicare eligibility age would be significantly higher and consume a much greater proportion of Social Security benefits as a result. Moreover, absent the ACA’s coverage expansions, many more 65- and 66-year-olds would be uninsured altogether.

In addition, the out-of-pocket costs discussed in this analysis do not include the cost of medical services that are not covered by Medicare at all, including dental care and most kinds of long-term care, such as permanent residency in a nursing home. Accounting for these medical services would not have any bearing on the amount that out-of-pocket costs would increase if the Medicare eligibility were raised to 67. It would, however, show average out-of-pocket costs to be considerably larger under both current law and if the Medicare eligibility were raised to 67.
 

 (Click here for a pdf of this analysis.)


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