bapifar01: Putting the proposed $5.7 billion Medicare savings in perspective

Monday 29 August 2011

Putting the proposed $5.7 billion Medicare savings in perspective

Raising the eligibility age for Medicare by two years would save the federal government and estimated $5.7 billion in 2014. We've already talked about how much it would actually cost individuals, states and private insurers: $11.4 billion.

But let's just focus again on what it saves the federal government. The Incidental Economist looks into the question, and it turns out that the savings are small. Very small.

[...] The Trustees of Medicare have estimated that the total spending by Medicare in that year will be $643.4 billion. Thus, the savings we might obtain by delaying eligibility until 67 is a mere 0.9% of total program spending. That s a small number.
As small as it is, it's even smaller than you might think.

The average annual rate of increase in Medicare spending is project to be 6% this decade. That means that between January 1 and March 1 of 2014, Medicare spending will have gone up more than would be saved if we denied coverage by the program to 65 and 66 year olds.

Saying it differently, we can increase the Medicare eligibility age to 67 in 2014, but what we save will be wiped out by predicted spending increases in the program in under two months.

They show us what the savings compared to the spending would look like. The "savings" is in blue.

Add the miniscule federal savings to the amplification of shifted costs to the very real hurt this would put on older people, and it's hard to come to any conclusion other than this is a dog of an idea.