By Mark Miller
CHICAGO (Reuters) - President Donald Trump has vowed repeatedly that he “wouldn’t touch” Medicare or Social Security, but someone forgot to tell House Republicans.
While U.S. senators debate the future of the Affordable Care Act (ACA) this week, their colleagues in the House are preparing for the Republicans’ next big move on health reform. A 2018 budget resolution that the House Budget Committee approved last week calls for major Medicare reforms, along with some changes to Social Security. The most dramatic changes would raise Medicare’s eligibility age, and shift the program to a flat premium-support payment, or voucher, that beneficiaries would use to help buy either private health insurance or a form of traditional Medicare.
The budget recommends raising the Medicare eligibility age - gradually - from 65 to 67. Conservative policy experts have been calling for this shift for years, arguing it is needed to protect Medicare’s solvency in light of rising American longevity.
But the recent longevity gains are not spread evenly across the U.S. population, so higher eligibility ages would hit some people harder than others in terms of lost years of Medicare coverage. Along with the gender gap, other factors playing important roles in determining longevity are income, educational attainment and race.
And left unanswered is this question: where will these folks get health insurance while they contemplate the blessings of longer lifespans? Some might be covered by employers if they can hang on to their jobs. Medicaid might be an option for lower-income retirees, if Republicans fail in their efforts to shrink it beyond recognition.
Others could buy private policies on the ACA insurance exchanges, if they survive Republican efforts to kill them. But their cost of coverage would be much higher than under Medicare.
Most Medicare enrollees pay no premium for Part A (hospitalization), which is funded through payroll tax contributions; they pay a maximum of 25 percent through premiums for Part B (outpatient services) and Part D (prescription drugs).
This year, monthly premiums average $109 for Part B, and $43 for Part D. By contrast, low-cost silver plans in the ACA marketplace average $554 per month this year, according to Avalere Health, a research and consulting firm. “Middle income people who aren’t eligible for premium subsidies under the ACA would pay a lot more,” said Paul Van de Water, senior fellow at the Center for Budget and Policy Priorities.
RISKY EXPERIMENT
Premium support, a longtime dream of House Speaker Paul Ryan, would replace today’s defined set of promised Medicare benefits with an annual voucher that enrollees would use to buy health insurance. Starting in 2024, Medicare enrollees would buy health insurance from among various competing plans, which could include both traditional Medicare and plans offered by commercial insurance companies. The federal government would pay part of the cost of the coverage through an annual payment, or voucher.
The big proposition is that injecting more private health insurance competition will solve what ails healthcare. Yet over the past three decades, the per-capita cost of Medicare rose at just a 5.6 percent pace, compared with 6.9 percent among private plans, according to government data.
This would be a big, risky experiment, conducted in real time on our largest healthcare payment system - and on an elderly population with the most intensive healthcare needs. The impact on premiums and total out-of-pocket costs would depend on the specifics of the plan, which are not known at this point.
Medicare does face financial pressure - due to the retirement of the baby boomer generation. The number of enrollees is projected to rise from 57 million in 2016 to nearly 90 million by 2040, according to the National Academy of Social Insurance. And the size of the workforce paying Part A payroll taxes is growing more slowly.
But Medicare’s trustees reported earlier this month that Part A will have resources to meet 100 percent of its obligations through 2029; reforms contained in the ACA have extended that date by 11 years. (http://reut.rs/2tMGI95) Van de Water notes that the current projected funding gap could be closed with a modest increase in the payroll tax that supports it, from 2.9 percent currently split between employers and employees — to about 3.6 percent.
The House Medicare plan does not stop with higher eligibility ages and premium support. It includes a grab bag of recent “modernization” proposals, including a cap on hospitalization out-of-pocket costs, streamlined deductible structure and limits on the richest Medigap supplemental plan. It also would expand means testing of Part B and Part D premiums for high-income seniors. Meanwhile, the Social Security proposal echoes a White House plan to move more people off disability and back into the workforce (http://reut.rs/2uTFusf).
But a higher Medicare eligibility age? That would not be just a touch - it would be a very hard shove.
(The opinions expressed here are those of the author, a columnist for Reuters)