Immigration Reform: Will It Help or Hurt Medicare?

As Congress grapples with immigration reform, questions are arising about the impact new Americans and legal residents could have on U.S. social programs, among them the health care system. For Medicare, which annually garners a large share of the U.S. budget, the jury is out on whether immigration expansion will stress the program.

Original Story: Jury is Out on the Impact Immigration Reform Will Have on Medicare

Policy experts, advocates and lawmakers have reached different conclusions about the impact of adding 11 million illegal immigrants on Medicare.

One thing they can agree on is that because most illegal immigrants in the U.S. are younger—and thus healthier—immigration reform would not have an immediate impact on Medicare spending.

About 55 percent of illegal immigrants are between 19 and 39 years old, according to the Pew Hispanic Center. Unauthorized immigrants are much less likely to be ages 65 and older, at about 1.2 percent of the estimated 11 million illegal immigrants. Disability is another avenue to Medicare, and what is unknown in the younger population is the number who may meet that qualification.

“Although it is difficult to provide a precise estimate, it seems likely that if (millions of) adult illegal immigrants…were granted amnesty, the net retirement cost to government (benefits minus taxes) could be over $2.6 trillion,” according to Robert Rector, senior research fellow at The Heritage Foundation.

However, other data on the health and medical expenditures of immigrants may undermine claims that immigrants would be a drag on the health care system, says Patrick J. Glen, then an adjunct professor at Georgetown University Law Center, in his 2012 report “Health Care and the Illegal Immigrant.”

“The economic and costs arguments for extending coverage to illegal immigrants carry far greater weight than the selective citation of expenditures for illegal immigrant health care,” says Glen, now an attorney at the Office of Immigration Litigation at the U.S. Department of Justice.

Congressional Budget Office Estimates of 2007 Reform Bill

Many of today’s illegal immigrants already contribute to Social Security and Medicare, and without being able to benefit when they retire.

Experts say illegal immigrants make up a majority—possibly up to 75 percent—of the Social Security Administration’s (SSA) “earning suspense file,” which is a record it keeps on W-2s where the names and Social Security numbers don’t match up in their system.

In 2010, the last year for which figures are available, employers reported wages of $70.3 billion from 7.3 million workers whose records were placed in the earnings suspense file, according to data provided by the SSA to The Medicare NewsGroup.

These payroll taxes go straight to their respective trust funds. This amounted to about $2 billion for Medicare and $8.7 billion for Social Security in 2010. It’s unknown what percentage of the estimated 11 million illegal immigrants pay payroll taxes.

Lawmakers from both sides of the political aisle have promised this year to put together a bill that would reform the country’s immigration policies, giving today’s illegal immigrants access to federal programs.

Robert Reich, professor of Public Policy at the University of California at Berkeley, said it’s “highly likely” that some form of immigration reform will happen during the Obama presidency.

“Republicans took note of the fact that 70 percent of Latino voters chose President Obama over Mitt Romney,” said Reich, a former Secretary of Labor under three administrations. “That fact alone has made many Republicans more willing to consider immigration reform.”

As of late March, though, lawmakers have yet to propose legislation, leaving advocates and experts to speculate on immigration reform’s impact on Medicare.

There is “no reliable figure regarding what amount of uncompensated health care costs are attributable to illegal immigrants,” according a 2007 New England Journal of Medicine report.

“It’s very tricky to comment on (how immigration reform will impact Medicare) without specific language on the legislation,” said Jack Martin, special projects director at the Federation for American Immigration Reform.

Nonetheless, according to a USA TODAY report, immigration reform proposals will likely mirror many provisions of a bipartisan 2007 bill that was spearhead by Sen. John McCain (R-Ariz.) and the late Sen. Ted Kennedy (D-Mass.). McCain is reported to be part of a bipartisan group of lawmakers working on pending immigration reform legislation.

At that time, the Congressional Budget Office (CBO) estimated the 2007 bill would increase federal revenues by $48 billion, with spending increasing only $23 billion over the first 10 years. Medicare spending would increase by $720 million over the first 10 years of implementation.

“The increase (in revenue) would stem largely from greater receipts of…payroll taxes, which are classified as off-budget,” according to the CBO. This estimate also takes into account that workers must still need to have worked for 40 quarters of their adult life to qualify for Medicare benefits. “The rules for calculating benefits do not make exceptions for immigrants who enter the United States in mid-career,” the CBO says.

Certain provisions, such as not allowing illegal immigrants who achieve legal status from counting work credits and taxes paid from previous years, could lower Medicare spending by $80 million over the first 10 years.

Costs of Amnesty

Despite potential increases in revenues, Martin said his organization would likely not support any law that would legalize 11 million illegal immigrants.

“Our approach would be the same as 2007. We are going to oppose it,” he said. “We support legal and moderate immigration…(but recent immigration reform proposals) jeopardize that process.”

Others’ opponents say the net retirement costs could reach trillions of dollars in the long run.

U.S. Sen. Jeff Sessions (R-Ala.) said, in a statement, amnesty is likely to add trillions of dollars to the federal debt and not help balance the budget.

Amnesty would also “accelerate Medicare’s and Social Security’s slide into insolvency, and put enormous strain on our public assistance programs,” he said.

Rector, of the Heritage Foundation, was more detailed in a 2007 report, saying the net retirement costs of illegal immigrants receiving amnesty could reach up to $2.6 trillion.

In his “rough estimate,” Rector says that because most illegal immigrants are “low-skilled,” they impose a net cost (benefits minus taxes) on taxpayers of about $17,000 a year, with most costs coming from Social Security, Medicare and Medicaid benefits.

Taking into account mortality rates, he estimates that only 8.5 million (down 15 percent from his report’s estimate of 10 million) illegal immigrants will reach retirement age. Of those individuals, he estimates their life expectancy to be another 18 years.

“Over 18 years, the cost would equal $306,000 per elderly amnesty recipient…(resulting) in a total net cost of $2.6 trillion,” he says in his report.

Rector, however, says that the costs would not occur immediately. Because most illegal immigrants are in their early thirties, “it will be 25 to 30 years before the bulk of amnesty recipients reaches retirement.” He suggested more research to be done on the impact of retiring immigrants affected by immigration reform.

Benefits of Amnesty

But not everyone agrees with Rector’s conclusion.

Glen, of the DOJ, says there are several reasons why immigration reform would actually help, rather than hurt, the entire U.S. population and the health care system.

For example, because most illegal immigrants come to the U.S. primarily for work, most are young and healthy, with better health outcomes.

According to Glen’s report, only 19 percent of recent immigrants have reported chronic diseases. That’s much lower than 27 percent of lawful immigrants and 38 percent of U.S.-born citizens.

“The inclusion of this healthy class of individuals has the potential to lower premiums and other medical costs,” he wrote in his report. He added that by bringing illegal immigrants within the fold of some insurance programs, it would eliminate the need to rely on emergency room treatments and all the costs related to such services and avoid costs of “late-stage treatments.”

Even if illegal immigrants are given access to nonemergency care, studies have found that the immigrant population uses fewer health care services.

According to an American Journal of Public Health report, while immigrants made up 10 percent of the total U.S. population, immigrant health care expenditures were $39.5 billion, or 7.9 percent of U.S. health care spending. U.S.-born individuals, 90 percent of the country’s population, accounted for 93 percent of private insurer expenditures and 92 percent of both government and out-of-pocket payments.

An Aging Population

Another factor why immigration reform may actually help Medicare is that it can counter the declining population trend as more American families have fewer children, Reich said.

Both the growing the number of baby boomers retiring and seniors living longer compound this problem.

Reich said 40 years ago there were five workers for every retiree. Now, there are just over three.

“By 2025, if present trends continue, there will be only two workers per retiree,” he said. “There’s no way just two workers will be able or willing to pay enough payroll taxes to keep benefits flowing to every retiree.”

Immigration reform, or even expanding legal immigration, is a direct way to reverse the trend of an aging population.

Martin, however, argues that illegal immigrants typically are low-income, and while they’re younger and healthier, they’re prone to work in hard labor, such as in the agricultural industry.

While low-paying jobs are often harder on the body, Reich said, that doesn’t necessarily translate to higher health care costs.

According to a Health Affairs study, much of the growth in Medicare spending has been attributable to chronic conditions such as diabetes and heart disease.

“(Chronic diseases are) often associated with poor lifestyle choices such as obesity or smoking rather than hard physical work,” Reich said.

Reich added that while illegal immigrants are low-income, immigrants and their children, for generations, have moved upward in American society, gaining more education over time and higher-paying jobs.

“There’s no reason to expect that today’s immigrants will follow a different trajectory,” he said.

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