Increasing Medicare's eligibility age from 65 to 67 would lead to a 30 percent spike in healthcare spending across the country thanks to wide price discrepancies between Medicare and private insurers, according to a new study published in Health Affairs.
By analyzing claims for individuals transitioning from commercial insurance to Medicare, researchers at Harvard University discovered that even though beneficiaries' healthcare utilization remained the same as they entered Medicare, their healthcare costs decreased by one-third from $119.12 per quarter to $89.28. Costs for imaging services such as electrocardiograms, CT scans and MRIs were as much as 42 percent lower in Medicare compared to private plans, which the researchers say speaks to Medicare's purchasing power as the country's largest insurer.
Based on these statistics, the researchers estimated that adding two years to Medicare eligibility would increase overall healthcare spending by 30 percent since private insurers would continue to pay for healthcare services at an elevated rate.
In addition, "if this finding is generalizable to other healthcare services, populations, and payers, it suggests that insurers with market power can pay lower rates than insurers that lack market power without losing access to providers," the researchers write.
Increasing the age of Medicare eligibility was a once-popular idea among lawmakers and healthcare CEOs concerned about the financial sustainability of the federal program. However, recent research indicates that federal subsidies would negate much of the cost savings previously reported, and changing the eligibility age to 67 would shift millions of dollars to state Medicaid programs each year.
- read the Health Affairs abstract
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