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Lawmakers Consider Raising Medicare Age of Eligibility as Budget Compromise

December 13, 2012 at 12:00 AM EST
Attempting to find a compromise for a budget deal, President Obama indicated he would be open to a GOP proposal to raise the Medicare eligibility age for future retirees from 65 to 67. Ray Suarez talks to Center for American Progress president Neera Tanden and Tevi Troy of the Hudson Institute, who debate the potential impact.
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RAY SUAREZ: And that brings us to a big part of the Medicare debate. Should the eligibility age for future retirees be raised from 65 to 67?

Many Democrats have pressured the president this week to oppose any attempt to do so. But in an interview with ABC News, President Obama indicated he may be open to the idea as part of a compromise.

We have our own debate about this and its potential impact.

Neera Tanden is president of the Center for American progress. She previously worked for the Obama administration working on health care reform. And Tevi Troy is a senior fellow at the Hudson Institute and a former deputy secretary of health and human services in the George W. Bush administration. He served as Mitt Romney’s health care policy adviser during the just completed presidential campaign.

And, Tevi Troy, if we phase in a higher age for Medicare eligibility, do you really save much money?

TEVI TROY, Hudson Institute: Well, yes. Over a 10-year period, we’re looking at $125 billion in savings. Over a 75-year period, we’re looking at about a trillion dollars off Medicaid — Medicare’s long-term liability. So this is real money. It makes a real difference, over 20 years, a 5 percent savings.

Look, the Kohut argument is that people want cuts, but they don’t want to specify the cuts. Policy-makers have to make choices about what the best cuts are.

RAY SUAREZ: Are there any countervailing costs we have to worry about? If you move the bar from 65 to 67, don’t people arrive at the threshold after years of uninsurance or underinsurance sicker, and thus more expensive than they would have been had they entered the program earlier?

TEVI TROY: Well, there are certainly problems. And it’s not perfect. And Neera’s study talked a little bit about this. But what you have is, first of all, it’s phased in over a long period of time.

Second of all, people are living a lot longer. When Social Security first came around, people were living to 62. Medicare, they were living to 70. Now people are living until 80 years old. People retiring now are spending 30 percent of their time in retirement.

So, we really need some kind of alternative, because we can’t pay for these beneficiaries for such a long period.

RAY SUAREZ: Neera Tanden, it’s widely agreed cuts have to come from somewhere. The government writ large has to spend less money. Why not save money this way?

NEERA TANDEN, Center for American Progress: Well, we agree. And at the Center for American Progress, we have put forward savings in the Medicare program of $385 billion. We believe there needs to be savings.

But we can do savings, we can have savings that actually don’t affect beneficiaries this way. And what I would disagree with Tevi about is really this is a way that just simply shifts costs from the federal government to employers, states, and seniors themselves.

And, in fact, because Medicare is a program that is extremely efficient, it’s actually cheaper for a beneficiary than private insurance, what ends up happening is that really for the amount of money you save at the federal level, people at the state level, employers, they spend more money per beneficiary.

So what will happen is, we will have 400,000 seniors, we estimate 400,000 seniors without health insurance. And for those who do have health insurance, their costs will rise an average of $2,000. So this is really a poor idea of how to save money, because what it’s doing is increasing what we spend as a country on health care just to simply lower the federal budget. That makes no sense.

RAY SUAREZ: Didn’t we do something similar with Social Security? By changing the eligibility date, people had to over time change their plans. They worked longer. They realized they were going to retire at 67, not at 65. Will people make similar adjustments in the face of a new Medicare eligibility age?

NEERA TANDEN: I’m so glad you asked about this, Ray, because this has been a very poor analogy that people have used on both sides, because we don’t believe — no one believes — Democrats don’t believe and Republicans don’t believe — in universal retirement.

We all recognize retirement is for a certain age. But, as Democrats and progressives — and the president himself has believed in universal health care. We have the Affordable Care Act because we believe people should have insurance. We have systems of private insurance because we think people should have insurance.

We don’t think that people should just not have insurance below a certain age. So, really, what we’re saying and because of the Affordable Care Act we have a system where a lot of these seniors who were cut off Medicare will move to — be moved to private insurance or the Affordable Care Act, but it will just cost more money when we do so.

And for us, that makes no sense. And for conservatives, who argue about competitiveness and the need to get our economy going, the idea that we’re going to take seniors 65, 66, 67 years old out of the Medicare pool, where they’re the cheapest group in that pool and they bring the cost of that pool down, and put the them in the pool of employers, you are going to raise the cost of insurance for everybody in the private insurance system and for employers, you make it more expensive to provide insurance.

So this is really a bad idea for companies, for states who are — who have big costs. And that’s what — why we think it’s a poor idea.

RAY SUAREZ: Tevi Troy, what about Neera Tanden’s point?

TEVI TROY: Well, sure there’s cost-shifting. The whole point of this is that you’re reducing Medicare’s cost. And somebody has to apparently.

That’s why those polls earlier show that people don’t want to do this. But the fact is that you will be reducing Medicare costs by $125 billion. If you’re making this argument that the Affordable Care Act gives people opportunities to get insurance elsewhere, then that’s what we’re doing here. And, in addition, this is effectively a form of means-testing.

It’s saying that the wealthiest seniors will have to pay more. They will have to either get insurance privately or work longer, and that the poorest seniors will be more likely to go on Medicaid, may work longer, or they may also go on the exchanges. So there are other options out there, but this is it. And this is the point, is we’re trying to force people to make choices.

RAY SUAREZ: As we’re phasing in the Affordable Care Act as a nation, many states are, as they were allowed by the Supreme Court decision, opting out of that new Medicaid plan.

Can Medicaid really pick up the slack if the poorest seniors are going to get less services in the states where they’re living?

TEVI TROY: Well, sure.

First of all, we don’t know how many states are going to take up the Medicaid expansion. And we don’t know how many states are going to take up the exchanges. I suspect that more states will do the Medicaid expansion than will do the exchanges. And that’s what we’re seeing so far.

But the fact is that there will be a number of options. Medicaid is one of them. The exchange is one of them. Working longer is one of them. And, again, for the wealthier seniors, they’re the ones who are going to have to bear the biggest brunt of this. The poorer seniors have more options.

RAY SUAREZ: Neera Tanden, you just heard Tevi Troy submits that there are places in the design of current health care policy to pick up some of the slack for those 65-to-67-year-olds. Why wouldn’t it work?

NEERA TANDEN: Sure. Sure.

Many will be picked up in the slack, but many won’t be. And, again, we put out a report this week that shows we will have 400,000 seniors that won’t have health insurance. And a lot of those seniors will come from states where they’re not doing Medicaid expansion, so they will be lost in the cracks, if you will.

And those are working — those are people who would be working poor today. And so we’re talking about making those seniors the most vulnerable. And when Tevi discusses the $125 billion this would save, we recognize that there’s a need for savings.

But we can have savings in the Medicare program that doesn’t hit beneficiaries, that doesn’t break the promise of Medicare, the promise that’s been made to seniors, and that really looks at things like competitive bidding, other ways that you can derive savings in the health care system by making it more effective and more efficient, and to drive down national health expenditures, because that should be all our goal.

Instead of simply making seniors pay more for their health care, we should actually reduce those expenditures.

RAY SUAREZ: Neera Tanden and Tevi Troy, thank you both.

TEVI TROY: Thank you.

MARGARET WARNER: Our reporting partners at Kaiser Health News asked policy experts how they would control Medicare costs. Read their responses online.

And you can see the full PewResearchCenter poll as well.