Stop The Bid To Expand Medicare – Pacific Research Institute

Stop The Bid To Expand Medicare

Progressives in Congress are laying the groundwork to expand Medicare by the slimmest of margins later this year.

Sen. Bernie Sanders, I-Vt., the head of the Senate Budget Committee, is teeing up a $6 trillion legislative package that would, among other things, lower the age at which older adults become eligible for Medicare to 60 from 65. And they’d use budget reconciliation—the complicated Senate procedure that requires only a simple majority to advance legislation—to expand the entitlement.

Medicare is already under historic financial strain. Adding even more people to the program will only accelerate its demise while doing little to reduce the number of uninsured Americans.

More than 61 million Americans are currently enrolled in Medicare. That figure has grown significantly in recent years. The program has added nearly 15 million people in the past decade alone.

Rising enrollment has accelerated the program’s insolvency. In early 2020, the program’s trustees estimated that the Medicare hospital insurance trust fund—which covers hospital services and serves as a primary indicator of the program’s financial health—would be exhausted by 2026. A September analysis from the Congressional Budget Office projected that the fund would run dry in 2024.

Averting this fiscal disaster will require raising revenue or cutting spending.

Payroll tax revenue, which funds Medicare, will likely increase somewhat as the economic recovery continues. But the U.S. economy still employs 6.8 million fewer workers than it did pre-pandemic. The population is aging, and many older Americans took the pandemic as an opportunity to retire early.

On the outflows side of the ledger, lowering the Medicare eligibility age would of course raise spending, not cut it. Over 20 million Americans would be newly eligible for Medicare if Congress reduced the age limit to 60. Providing them coverage would cost an additional $100 billion every year, according to an estimate from one Harvard professor.

That money would largely socialize currently private expenditures. Adults between the ages of 60 and 64 have among the most rate of insurance coverage of any group in the United States. Less than 10% are uninsured. Nearly three-quarters currently receive coverage through their jobs or purchase it on the individual market.

Expanding Medicare may also be a bad deal for those it’s supposed to help—lower-income older adults. That’s because many lower-income Americans who already qualify for subsidized insurance through Obamacare’s exchanges would actually pay more under an expanded version of Medicare, according to research from the health consultancy Avalere.

At the same time, wealthier individuals who earn more than 400% of the federal poverty level could secure huge savings on their coverage.

Expanding Medicare could also make it more difficult for older Americans to secure timely access to care. The program’s reimbursement rates are already considerably lower than those from private insurance. According to an analysis from the American Hospital Association, hospitals receive just 87 cents for every dollar spent on Medicare services. Even absent expansion, Medicare’s trustees project that the program’s reimbursement rates aren’t “expected to keep pace with the average rate of physician cost increases.”

Facing an influx of new, low-paying Medicare beneficiaries, many doctors may choose to limit the number they’ll see—or retire early. The country can ill afford to see the supply of care dwindle further. The Association of American Medical Colleges projects that the United States will face a shortage of up to 124,000 doctors by 2034. Expanding Medicare could exacerbate that shortage.

Medicare needs drastic reforms just to survive this decade. Instead, lawmakers appear poised to slam the gas and drive it right off a fiscal cliff.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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