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Study Models Three Big Changes To Medicare

By Ankita Rao

May 7th, 2013, 3:52 PM

Lawmakers are looking for ways to tackle the growth of Medicare spending, which the Congressional Budget Office estimates will account for 24 percent of the federal budget by 2037. But some strategies to cut program costs could leave millions of beneficiaries without coverage.

A study from the Rand Corporation, a nonprofit research organization, compared the impact of three proposals that have been discussed by Congress or the White House toĀ  curb the costs of the government health care program for seniors and the disabled. The study is published in the May issue of Health Affairs.

Here are the three policy changes the study modeled.

Means testing Part A: Medicare Part A includes coverage of care in hospitals and nursing homes, and unlike Part B (which covers doctor visits, labs and equipment), the Part A premium is the same no matter how much a beneficiary earns. The idea of making wealthier seniors pay more for Part A has been around for a long time: It was suggested by the bipartisan Kerrey-Danforth commission back in the mid-1990s.

Premium support: Premium support would give seniors a set amount of money to purchase a private or Medicare-like health insurance plan. It’s a proposal similar to the one championed by House Budget Committee Chairman Paul Ryan (R-Wis.).

Raising the eligibility age: If Medicare mirrored Social Security, the eligibility age would be 67. This proposal has been floated by both parties andĀ has stoked heated debate. Medicare’s age requirement has not changed since the programā€™s inception in 1965, though life expectancy has increased by eight years in that time.

ā€œThe magnitude of savings can vary quite substantially,ā€ said author Christine Eibner, a senior economist at RAND, about the results of the comparative study.

The researchers found that premium support and raising the eligibility age were the most effective changes to curb costs. Increasing the eligibility age, for example, reduced federal spending by 7.2 percent through 2036, compared to 2.4 percent if a premium for Part A was added. And the premium support plan resulted in the most savings after 2019 of all three options.

TheĀ savings fromĀ raising the eligibility age in the RAND study wasĀ different from earlier Congressional Budget Office estimates because the Rand authors modeled the outcome with the idea of raising the age in 2014. The government office instead assumed theĀ age would gradually be raised and not be in full effect until 2027.

But all three scenarios had downsides and the two scenarios that produced the greatest potential savings also produced the greatest possible burden for Medicare enrollees both financially and in terms of access to health care.

In the means-tested strategy, somewhere between 2 and 20 percent of eligible beneficiaries may choose not to enroll in Medicare Part A, researchers found. For the premium support plan, the authors estimate 13 percent of seniors would forgo coverage. And raising the eligibility age to 67 also would reduce enrollment by approximately 13 percent, according to the study.

This article was produced by Kaiser Health News with support from The SCAN Foundation.

4 Responses to “Study Models Three Big Changes To Medicare”

  1. “Premium support,” AKA the end of Medicare as we know it. doesn’t REDUCE costs, it merely TRANSFERS costs from the Medicare system to some of the most financially challenged citizens.

    Also, did the researchers consider higher costs in later years after raising the eligibility age, due to people putting off checkups and care?

  2. Charles Hubbard says:

    Until some of the cost is transferred to patients, whether Medicare or private pay, healthcare costs will NOT be contained. Requiring patients to bear at least some of the burden of their medical decisions is the only way costs will be constrained. HSAs change patients’ demand for services. Our current “top-down” system of containment is equivalent to pushing down harder on the lid to keep a pot from boiling over. And about as effective.

  3. Friend of the Aged says:

    It’s always shocking to hear people casually toss around ideas like raising the age of Medicare as though seniors would just have to grin and bear it for a couple of extra years.
    But that’s not how it works. When you get old, your body starts to fall apart, no matter how good care you take of it, and it doesn’t care when Medicare starts.

    I watched my mother in law and her husband struggle with $3,000 a month health insurance payments for the five years between the time he became disabled and when Medicare kicked in. Even though we tried to help them, they had to move to smaller and smaller places because they could no longer afford rent, they cut back on everything including leaving the house; at the end they were down to nothing but the clothes on their backs. It was like something out of Dickens, healthcare costs had stripped them of everything.

    Is that what we want as a country, to drive our seniors into poverty just because insurers and giant for-profit healthcare companies expect obscene ROI?

  4. Alain Enthoven says:

    A National Academy of Sciences report estimated that some 30-40% of health care spending is waste, that is, does not benefit the health of patients. To reduce such waste, it is necessary to create powerful incentives for all providers to find ways to make high quality health care less costly. This happens when integrated delivery systems face real competition to attract and keep value conscious consumers. In the few places where this model has been tried, it has worked well (e.g. Sacramento, CA and Madison, WI). Premium Support would end Medicare’s commitment to open-ended uncoordinated fee-for-service which is inflationary and which rewards poor quality. At the same time, we must end the open-ended tax subsidy to employer-sponsored health insurance, and open the employment sector to value for money competition among delivery systems. Medicare cannot reform our whole delivery system by itself.