Growing Fiscal Cliff Worries Zero in on Medicare

In Washington D.C. growing worries about the fiscal cliff has led to debates on raising Medicare’s eligibility age to reduce the government’s huge deficits.

For years numerous ideas about controlling the exploding cost of entitlement programs, such as Medicare, have passed between party members but growing concerns about Fiscal Cliff have brought them in to perspective. Medicare, a $590 billion annual program is one of the most expensive and popular federal programs, that has long been untouchable and rarely trimmed. A change in age eligibility would not alter traditional benefits, but would not be available to all senior citizens 65 and older. Medicare’s popularity makes proposed changes a much harder sell amongst voters.

The most frequently discussed proposals that would affect Medicare’s 52 million beneficiaries are more means-testing, meaning higher costs for wealthier retirees, and raising the Medicare eligibility age by two years to 67 years old.

Regardless, of increasing age eligibility both the White House’s deficit reduction proposal and the Republican counter offer, submitted on Monday, propose trimming Medicare.

Republicans and Democrats disagree on what, where, and how to cut the program. Many Republicans, notably, House Speaker John Boehner, R-Ohio, openly support hiking the eligibility age to 67. It is estimated that increasing the age would reduce Medicare’s spending up to 5 percent annually, which would save hundreds of billions of dollars over time. These proposed cuts, in addition to others to additional healthcare programs including the Medicaid, could result in $400 billion to $600 billion in savings over a decade as part of a deficit-cutting agreement Congress and the White House must reach to avoid the so-called fiscal cliff.

Not everyone supports the proposed changes, people like Senator Dick Durbin, D-Ill., says that increasing the age would create numerous oversights and could make the program too expensive for some seniors.

A recent study by the AARP identified more negative windfalls if Medicare’s age eligibility is upped to age 67. There is a possibility that this could lead to higher monthly premiums for those on Medicare. Not allowing younger and healthier 65 and 66-year olds would raise the others’ costs, but the increase would only be around 3 percent. This would also lead to more expensive premiums for private coverage as well. This is because older adults would have to remain using private insurance for an additional two years before using Medicare. This older age group, compared to younger adults, is also more costly to insure. In total, this would lead to higher healthcare costs for two out of three adults whose entry into the Medicare program would be delayed. Medicare age eligibility wouldn’t just affect people, but also businesses. This would lead to an increase in employer costs as senior workers would stay on company insurance plans.

The Congressional Budget Office estimates that raising the eligibility age could save $148 billion in Medicare spending over the next decade, but there are drawbacks. It has also been estimated that the number of uninsured citizens would also increase. Highly populated states like Texas that won’t accept Obama’s Medicaid expansion in his health overhaul would create millions of uninsured citizens. Critics claim that these cutbacks would hurt business by placing the burden of these costs onto employers. This would lead to an increase in employer costs as senior workers would stay on company insurance plans.

The threat of this country toppling over the fiscal cliff has enabled Republican’s campaign to cut Medicare to perhaps have its first success. But, it remains to be seen if these changes will take affect and if the positive outcomes will outweigh the negative ones.

-Suzanne Bernard

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