Why the US health industry wants to raise the Medicare eligibility age: Profit

By Joan McCarter
Daily Kos
September 12, 2011

Last week the American Hospital Association's lobbying for a hike in the Medicare eligibility age made news. The primary motivation expressed then was to attempt to stave off deeper provider cuts that would hurt them in exchange for benefits cuts. That's a big part of it, but of course the larger issue is much more straightforward: profit.

The Health Leadership Council, a consortium of 47 health industry leaders including Aetna, Pfizer and the Cleveland Clinic, endorsed today to raise Medicare’s eligibility age from 65 to 67, phasing in the change by two months annually. Raising Medicare's eligibility age is one proposal in a four-part package of Medicare reforms up for vote, including creating a new exchange-like marketplace and increasing the cost-sharing for seniors who earn more than $150,000. You can read the full proposal HERE.

There's a pretty simple explanation for why hospitals and some insurers would favor raising the eligibility age: Hospitals receive higher payments from private insurance than they do from Medicare. The payments that hospitals receive from private insurers are 28 percent above the break-even point for providing treatment, according to a recent report from the Blue Cross Blue Shield Association. Medicare pays only 91 percent of what it costs a hospital to provide care.[...]

"At this point we're dealing with a situation where, if something raises money and it's not raising money from me, than its not a bad thing," says Ian Spatz, a senior adviser on the health care industry at the law firm Manatt. "If it's something that's not directly cutting you, that's better."

The pushback on the policy proposal, rather, is likely to come from other stakeholders. States, employers and seniors would all suffer if the Medicare eligibility rules were changed. It would shift about $11.4 billion in new costs to those parties while saving the federal government only $5.7 billion, according to the Center on Budget Priorities and Policy.

Since it's always worth repeating, yes, the on-paper savings for the federal government are $5.7 billion. And the costs for everybody else, $11.4 billion. But that's money in the providers' and insurers' pockets, so no wonder they're cheering this idea.