Medicare At 60 Would Have Harmful Unintended Consequences

Unintended Consequences Of Medicare-for-All

Source: STAT News, by Tom Church and Daniel L. Heil

In an era of rising inflation and trillion-dollar deficits, there appears to be growing bipartisan support for fiscal restraint. President Biden’s recent budget proposal featured more than $1 trillion in deficit-reducing policies. And his administration is now promising that the proposals once comprising the president’s Build Back Better agenda will be, at worst, deficit neutral.

But despite the changing fiscal environment, many in Congress are still eager to enact a costly and risky expansion of Medicare.

This idea seems simple: lower the eligibility age of Medicare from 65 to 60 to make out-of-pocket health care costs and premiums more affordable for millions of Americans. Supporters of the idea point to Medicare’s popularity among the elderly and argue that the policy would extend coverage at the stage of life when health care costs begin to rise.

This seemingly simple idea, however, would come with significant downsides and unintentional consequences. With support from the Partnership for America’s Health Care Future, we scored the distributional and fiscal impacts of lowering Medicare’s eligibility age on both the newly eligible population and on health care providers.

Expanding coverage wouldn’t be cheap. We estimate that the federal deficit would rise by as much as $42.6 billion in the first year of the program and $452 billion over its first 10 years — not counting increased interest costs to the federal government.

But the fiscal costs are only part of the story. Medicare at 60 poorly targets those in need and relies on cost-shifting to hide its true cost.

One of the justifications for lowering the eligibility age for Medicare is to help those in need of purchasing health insurance. Yet our analysis finds that compared to the 18- to 59-year-olds who would remain ineligible, the newly eligible population would be less likely to be uninsured and more likely to have incomes above 400% of the federal poverty line.

And even among the newly eligible, it is far from clear whether the policy would help low-income Americans. Many of these individuals are already receiving health care subsidies through the Affordable Care Act, so shifting them to Medicare could mean higher premiums and increased out-of-pocket spending. We estimate that 36% of Affordable Care Act enrollees would see their combined premiums plus out-of-pocket spending rise under Medicare at 60. Even worse, the group most likely to see their combined costs rise are those with incomes between 150% to 250% of the federal poverty line. Conversely, 90% of ACA recipients with incomes above 400% of the poverty line would see their combined costs fall under Medicare at 60.

There’s one other group that would be financially affected by Medicare at 60: doctors, hospitals, and other health care providers. Previous efforts to rein in growing costs have focused on paying physicians and hospitals less for their services, and Medicare at 60 is no different.

The issue is that physicians and hospitals receive less for providing the exact services to patients covered by Medicare or Medicaid than they receive for those who are privately insured. Medicare at 60 would shift more reimbursements from private rates to government-mandated Medicare rates, resulting in revenue cuts for health care providers.

Actuaries at the Centers for Medicare & Medicaid Services project that, under current law, reimbursement rates for Medicare services relative to private insurers will continue to fall. In the absence of cost-cutting measures or large increases in utilizations, reductions in inpatient hospital service payments from Medicare at 60 would reduce annual profits by about 25% for the median hospital and by even larger amounts for hospitals with below-average margins. Physicians would be less affected in the short term, but face steeper growth in cuts in the long term.

These cuts would have significant financial effects on hospitals and providers. Congress’s past behavior suggests these cuts may not come to fruition. From 2003 to 2014, Congress repeatedly overrode scheduled cuts to providers as part of the near-annual legislation that came to be known as the “doc fix.” But if Congress succumbs to political pressures and prevents reimbursement rates from falling any further, we estimate the fiscal cost of Medicare at 60 would rise by $72 billion during the 10-year budget window. The trade-off is inevitable: either Medicare at 60 will mean steep revenue cuts for physicians and hospitals, or much higher costs for taxpayers.

Lawmakers are now admitting that the federal government faces a genuine budget constraint. That makes it an odd time to think about expanding Medicare to 60-to 64-year-olds. Even under optimistic fiscal assumptions, the proposal would add billions to federal deficits, while poorly targeting those in need and straining the finances of hospitals and physicians.

Patients Denied Mental Health Care in Non-Medicaid Expansion States

Nearly 570,000 people diagnosed with a serious mental health condition were denied affordable mental health treatments because several states have refused to participate in the new Medicaid Expansion Program, according to a study from the American Mental Health Counselors Association (AMHCA). The federal government would have paid 100% of the treatment costs for these patients. Also, 458,000 fewer people would have avoided a depressive disorder by securing health insurance through the Medicaid Expansion Program.

Many of the eligible people in the 24 non-Medicaid Expansion states had severe mental health conditions and did not have any health insurance coverage through public or private health plans. But they were denied the opportunity to get affordable coverage and treatments in those states due to ideological differences with the Obama Administration. The 26 states (and DC) that did participate in the expansion in 2014 helped 351,000 people with mental illness get affordable, needed services, and another 348,000 people did not develop a depressive disorder due to securing health insurance coverage. “If several states continue to opt out of the new Medicaid Expansion Program, thousands of state residents with a mental illness will see their hopes of a healthier and better life denied since they cannot get affordable health insurance and needed treatments due to political ideology. That is a very high price that seriously ill and vulnerable people have to pay for political differences,” said Dr. Steve Giunta, President of AMHCA. For more information, visit amhca.org.

CHCF Explains Medi-Cal Estate Recovery

The California Health Care Foundation issued a brief explaining estate recovery rules for people with traditional Medi-Cal and people with expansion Medi-Cal under the Affordable Care Act (ACA). The tables below provide an overview:

Estate recovery for people under 55
• Under expansion Medi-Cal, never.
• Under traditional Medi-Cal, yes for all Medi-Cal costs if the beneficiary institutionalized and not expected to return home.

Estate recovery for people over 55
• Under expansion Medi-Cal, yes for all Medi-Cal costs except personal care services provided under the In-Home Supportive Services program (IHSS).
• Under Traditional Medi-Cal, yes for all Medi-Cal costs except personal care services provided under IHSS.

Home Liens During the Life of the Beneficiary
• Under Expansion Med-Cal, never.
• Under Traditional Medi-Cal, yes for all Medi-Cal costs if the beneficiary is institutionalized and not expected to return home.

Most Medi-Cal beneficiaries get care through Medi-Cal managed care, with the state paying a capitated payment to a health plan. California calculates recovery amounts based on the state’s capitation payments for those in traditional or expansion Medi-Cal. In most cases, the actual costs of services are not part of the calculation. So a person who rarely visits a doctor would be liable for the capitation amount for all months of Medi-Cal enrollment.

State and federal policymakers are reviewing the rules due to concerns that estate recovery is hindering expansion Medicaid enrollment. What is is unlikely to change soon is the federal requirement that states must attempt to recover Long-term Support Service costs for people 55 and older . However, CMS has signaled its desire stop allowing states to recoup all Medicaid expenses for this population, not just those for Long-term Support Service costs. In the meantime, the agency is encouraging states like California to consider collecting only Long-term Support Service costs for the newly eligible population. Washington and Oregon have already agreed to do so. California Senate Bill 1124 proposes to limit estate recovery for expansion Medi-Cal and traditional Medi-Cal to Long-term Support Service costs. The measure also would require California to collect the lesser of the managed care capitation payment or actual costs of services and would prohibit any recovery from the estate of a surviving spouse, even after the surviving spouse’s death. For more information, visit http://www.chcf.org/publications/2014/05/estate-recovery-medical#ixzz32wCXOueb

Last Updated 05/25/2022

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