Changes to Medicare Looming

It is extremely likely that changes to Medicare are coming. The fiscal cliff is looming, the national debt is climbing, and spending on health entitlement programs such as Medicare, Medicaid, and Social Security are only foretasted to increase in the coming years.

With that in mind, many stakeholders and policymakers have different ideas on what to do with the programs, more especially Medicaid.

An idea that keeps surfacing from both sides of the political aisle is to raise the retirement and Medicare eligibility age from 65 to 67. Republican Senators Lindsey Graham (R-SC) and Bob Corker (R-TN) have both suggested the idea, and President Obama reportedly put the retirement age on the table in fiscal negotiations with Speaker of the House John Boehner (R-OH) last year.

The draw of raising the retirement age would be an immediate reduction in federal spending on Medicare, to the tune of 5% per year. A consequence, however, would likely be increased total spending on health care by consumers, according to a Kaiser Family Foundation (KFF) report.

Raising the retirement age would take 65 and 66 year olds, who are usually the healthiest in the Medicare participant pool, out of that pool. This would raise the risk, and therefore the premiums, for participants who are 67 and older in the program. In turn, the 65 and 66 year olds would be placed into the pool of citizens that can purchase insurance through the health insurance exchanges (HIX). When grouped with 18-64 year olds, these 65 and 66 year olds tend to be “sicker”, so their presence would also raise rates in the HIX pools.

The study from KFF found that federal government savings would be more than offset by costs to states, individuals, and employers with increased premiums.

Another part of Medicaid being considered are the reimbursement rates that doctors receive for the work done on patients. An NPR article explains that, if we go over the fiscal cliff, reimbursement rates would be cut by 30%. This number is the accumulation of annual 4% cuts in reimbursements that have been delayed for several years.

This means that, in an example given by the article, a doctor that treats a Medicare patient with an exam and a cardiogram would see their fees drop from $160 to about $120.

Find the full NPR article here.