Why Insurance Companies Are Opposed to Raising Medicare Age Eligibility

People are living longer. They are more aware of health risks like smoking, eating the wrong foods, drinking too much. And they are doing something about it. Exercising, making healthier meals, reassessing their lifestyles.

So it makes theoretical sense to increase the age of Medicare eligibility. If people are healthier, they will probably not need as much health care as soon. And while this specific example refers to US health care, the broader questions about age and eligibility are global.

It may then come as no surprise that the health insurance industry is wary of raising eligibility standards and prepared to oppose the concept. The reason, as the following article explains, is that they fear it will increase their exposure. While the general trend is longer life in the US and other developed countries, those who are sick, are very, very sick. And, as a result, need intensive, expensive long term care. Which the insurers believe is economically disadvantageous. They are particularly nervous following the recent spate of elections in the US, France and China, where governments more sympathetic to the plight of their people are in power.

The countervailing force that drives this opposition is that the great wave of Baby Boomers are about to enter the declining years of their lives. A tidal wave of the old and sick may bankrupt insurers, hospitals and other health care providers. And if those people are also living longer, it means that the cost of their care will increase as the likelihood is it will be required for longer periods of time.

If the meds dont get you, the demographics will. JL

Sahil Kapur reports in TPM:

It may seem counter-intuitive: why would an industry threatened by government insurance not want it to shrink? The reason: hiking the Medicare eligibility age would throw seniors aged 65 and 66 off Medicare and into the private market, forcing insurers, who will soon be required to cover all consumers regardless of health status, to care for a sicker, more expensive crop of patients.

The possibility that Democratic and Republican leaders will agree to slowly increase the Medicare eligibility age to 67 is creating strange bedfellows: liberals — both in and out of Congress — and the health insurance industry.

A well-placed industry source tells TPM insurers haven’t taken a public position but are skeptical of the idea, particularly those insurers that don’t cover elderly patients via Medicare Advantage, supplemental Medigap coverage or prescription drug coverage.

House Republican leaders want to avoid the fiscal cliff with a proposal that would gradually raise the Medicare eligibility age to 67. Democrats are reluctant to cut benefits, but President Obama was willing to accept the policy last year in failed negotiations with House Speaker John Boehner, and top Democrats have left the door open to including that measure in a large deficit reduction deal.

“The risk pool issue is important,” the insurance industry source said. “[I]f you add more older and sicker people to the pool, that’s definitely going to have an impact on premiums.”

The policy would save the federal government $113 billion over a decade, according to the Congressional Budget Office. But it achieves that by raising the cost of private insurance: the Kaiser Family Foundation projected that a Medicare age of 67 would raise costs for under-65 patients by an average of $141 in 2014. (In practice it would be phased in.)

Starting in 2014, the Affordable Care Act will forbid insurers from turning people away or charging them different prices on the basis of age or health status. So for the first time in about half a century, they’d be chiefly responsible for patients aged 65 and 66. The specter of rising costs worries insurers, who see the ongoing spiral as an existential threat to their industry.

The age hike would have other ripple effects. Businesses that provide insurance would have to pay for two more years of coverage for elderly employees when their medical expenses tend to be highest. The higher overall costs would be borne by individuals who purchase insurance on the exchanges as well as employers who provide it.

In short, raising the Medicare age would save the government money by shifting costs to the less efficient private market — that is, businesses and consumers who buy coverage and the insurers who would have to provide it. And they won’t necessarily take that reform lying down.