Raising the Medicare Eligibility Age: How Much Would It Save?

Raising the Medicare Eligibility Age: How Much Would It Save?

Raising the eligibility age for Medicare from 65 to 67 is a leading option under discussion to cut government spending on Medicare.  With the Social Security retirement age rising to 67, proponents say that having a similar rule for Medicare is a sensible solution.

The Congressional Budget Office (CBO) estimates that gradually increasing the eligibility age by two months every year, until age 67, would save $113 billion in Medicare spending over the next decade, cutting Medicare spending about 7 percent.

But raising the Medicare eligibility age would involve trade-offs.  It would also increase costs for many seniors — even seniors already receiving Medicare.  A study by the nonpartisan Kaiser Family Foundation calculated the effect of an immediate change assuming full implementation in 2014.  The analysis projected that 42 percent of 65 and 66 - year  olds would have health coverage through employer plans, 38 percent by plans offered through health reform's new insurance exchanges and 20 percent through Medicaid.

Here's a closer look at the costs identified by the study:

  • Higher premiums:  Keeping younger, healthier, 65 - and 66 - year olds out of Medicare’s risk pool would raise costs for the rest.  Premiums would be about 3 percent higher for Medicare beneficiaries.  That would increase monthly Medicare Part B premiums — currently $104.90 — by about $3.15.
  • Higher and lower out-of-pocket costs:  The study estimated that about two-in-three 65 - and 66 - year olds would pay an average of $2,200 more for their healthcare in 2014 than they would under Medicare.  Nearly one-in-three would have lower costs, mainly due to the health reform law expansion of Medicaid and premium tax credits available to low and moderate - income Americans.
  • Higher employer costs:  Employer plans would become the primary payer for 65 - and 66 - year olds who would no longer be eligible for Medicare.  Those costs would increase about $4.5 billion in 2014 and would likely be passed along to beneficiaries in higher premiums and out-of-pocket costs.
  • Higher state Medicaid costs and some seniors uninsured:  Costs to states would increase by about $8.3 billion in 2014 as the lowest-income 65 - and 66 - year olds enroll in Medicaid.  That cost may not materialize if states decide not to participate in the Medicaid expansion, leaving those seniors uninsured.

TSCL believes that Congress must ensure that Medicare remains the strong program that more that than 50 million seniors and disabled adults rely on today.  Costs should not simply be shifted to beneficiaries, but Congress should look first into measures that would more efficiently deliver services and rid the system of fraud and waste.


Sources:  Raising Medicare Age of Eligibility to 67, Kaiser Family Foundation, July 18, 2011.