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Study: Raising Medicare eligibility age would actually boost healthcare spending

Employers would face an increase of $4.5 billion in medical costs for retirees.

Susan Morse, Senior Editor

Changing the Medicare eligibility age from 65 to 67 would actually increase the nation's total healthcare spend since that two-year gap would be covered by private insurers that charge more for services than the federal government, according to a new report in Health Affairs.

Raising the eligibility age has been suggested for years as a way to slow the growth of Medicare spending, though there are no proposed bills to move the policy forward.

Some of the cost would be shifted to consumers aged 65 and 66 years old, who would spend another $3.7 billion in out-of-pocket expenses, and to employers, who would face an increase of $4.5 billion in medical costs for retirees, according to a Kaiser Family Foundation study cited by the authors.

[Also: The future of Medicare tied to Medicare Advantage growth, experts say]

For the previously insured, entry into Medicare led to a 32 percent  drop in healthcare spending, which is defined by authors as the sum of insurer-paid amounts and enrollee cost sharing.

The decrease in spending was not due to lower utilization, nor from providers turning down Medicare coverage due to its lower payment rates, the authors said.

"One possible explanation for this is providers' willingness to contract with Medicare despite its lower rates, which may be a result of Medicare's purchasing power as a large insurer," the authors said.

The Congressional Budget Office has estimated that if the age of Medicare eligibility were raised from 65 to 67 years old, Medicare spending would be $17.1 billion lower than projected in 2023. However subsidies and other revenue losses would offset the gains by $10.4 billion, resulting in a net decrease of $6.7 billion.

The authors examined how spending differed between Medicare and private insurance using Truven Health Analytics data on outpatient imaging and medical procedures for individuals who switched from private insurance to Medicare at 65 years old.

[Also: CMS pitches smaller increase for Medicare Advantage payment rate]

The average price across all services decreased sharply after entry into Medicare, from $193.69 to $146.42, the report found. The price decline was greater for imaging than for procedures.

Their research found that healthcare spending fell by $38.56 per beneficiary per quarter, or 32.4 percent, upon entry into Medicare at age 65.

The study did not include Medicare Advantage plans, which cover about 30 percent of Medicare beneficiaries.

This is believed to be the first study to measure differences in healthcare spending and use between private insurance and traditional Medicare using claims data from a national sample of continuously enrolled adults, said authors Jacob Wallace, a doctoral candidate in health policy at Harvard University, and Zirui Song, a resident physician in the Department of Medicine at Massachusetts General Hospital and a clinical fellow at Harvard Medical School.

Twitter: @SusanJMorse