Extending Medicare: Effects On Employers, Employees

The recently proposed expansion of Medicare to cover individuals between the ages of 55 and 64 if they purchase the coverage could forge a final compromise Democrats are seeking in the Patient Protection and Affordable Care Act (H.R. 3590). So let’s take a look at employees and employer-based plans in light of this proposal.

The proposal, whose details will not be fully known until the Congressional Budget Office reviews the budgetary impact, was agreed to by 10 Democratic Senators charged with finding a compromise for health reform. The ten senators involved in the discussions were Chuck Schumer (N.Y.), Mark Pryor (Ark.), Sherrod Brown (Ohio), Thomas Carper (Del.), Russ Feingold (Wis.), Tom Harkin (Iowa), Mary Landrieu (La.), Blanche Lincoln (Ark.), Ben Nelson (Neb.), and Jay Rockefeller IV (W.Va.).

The Employee Benefit Research Institute notes that those ages 55–64 represented 10.6% of the total U.S. population in 2006, and is expected to represent 13% of the population by 2020. According to EBRI, “With such a large projected growth in this population, and Medicare’s projected funding shortfall, the ability of the Medicare program to provide adequate coverage for these individuals and for future retirees is questionable. Also, if a portion of the population entering Medicare is less healthy as a result of being previously uninsured, pent-up demand for medical services may increase Medicare costs.”

EBRI also states that “past research shows a strong link between the availability of health insurance coverage and retirement decisions. In 1998, 74% of workers reported that they would not retire before becoming eligible for Medicare if their employer did not provide retiree health benefits.  In fact, some potential retirees have chosen to remain in the labor force longer than planned. The percentage of the population ages 55−64 that is working has increased significantly, from 63.4% to 68.4% between 1995 and 2007

And Todd Swim, a consultant with Mercer, recently said that "those 55 to 65 are the most expensive for employers to cover, and they pay the most if they have to buy coverage on their own….Access to medical care is one of the biggest inhibitors to retiring early, and a lot of people are going to be looking at that as an option."

Three-fourths of the U.S. adult population support offering Medicare-buy in to cover those uninsured aged 55-64, a September Health Tracking Poll by the Kaiser Family Foundation found.

A Kaiser Family Foundation report also concludes that “a Medicare buy-in has the potential to bridge the gap for those without access to other sources of affordable coverage, and the design of such a buy-in will affect the number of people likely to enroll and the impact on Medicare spending. Given modest incomes of many uninsured older adults, few would be able to purchase Medicare coverage without fairly substantial subsidies. In the context of the current debate, a Medicare buy-in could provide coverage in a relatively short period of time, as early as 2011, and target help to those who are most likely to have difficulty purchasing coverage on their own in the individual market. If implemented in conjunction with other health reforms, key considerations include the extent to which Medicare premiums are subsidized, whether Medicare premiums for older adults are higher or lower than those of private insurers, whether older adults are required to have health coverage through an individual mandate, and the relative generosity of Medicare benefits relative to benefits offered by private plans.”