April 23, 2014

Smaller Savings Seen For Option to Raise Medicare’s Eligibility Age

  • The American health care system is a patchwork of public and private programs that serve citizens in different ways, depending on their age, military...

The Congressional Budget Office (CBO) now estimates that gradually increasing the eligibility age for Medicare to 67 would reduce deficits by $19 billion through 2023, significantly less than the $113 billion CBO estimated in January 2012.

The new estimate is based on the assumption that starting in 2016 Medicare’s eligibility age would be raised by two months every year for people who were born in 1951 or later. The eligibility age for full Social Security benefits is already rising to 67, and this proposal would eventually match the Medicare eligibility age to the full Social Security age. By 2029 they would both be age 67 for people born in 1962 or later.

The reduced savings for this option reflects CBO’s view that some of the beneficiaries whose eligibility age would be changed would not be as expensive for Medicare to cover under current law as had been previously assumed.

This estimated reduction in costs is mainly because people who enroll in Medicare at the regular eligibility age are healthier than those who enroll early due to illness or injury. In addition, some beneficiaries who are still working use Medicare only as secondary coverage.

The new CBO report also included -- for the first time -- the effects that raising the eligibility age would have on federal revenue. The budget office projected that this change would decrease revenues by $4 billion over the next 10 years, mainly due to an increase in refundable tax credits to purchase health insurance on exchanges under the Affordable Care Act.

By 2038, the increased eligibility age would reduce Medicare spending by 3 percent relative to current law, declining from 4.9 percent of GDP to 4.7 percent. The number of uninsured people would increase by about 10 percent, CBO estimated.

CBO’s report serves as a reminder that there is no silver bullet for holding down Medicare costs. It will take multiple reforms, including changes in payment systems and care delivery, to sufficiently curb future spending on health care.