December 7, 2012

Is it time to increase the Medicare age? Weighing pros and cons

Daily Briefing

As "fiscal cliff" negotiations heat up, lawmakers are considering proposals that would increase the Medicare eligibility age from 65 to 67—but research suggests that the move would have a wide-reaching effect on costs for seniors, employers, and private insurers.

According to the Los Angeles Times, raising the eligibility age for the program is among the leading proposals being considered to curb Medicare spending, as part of a larger deal to avoid the looming mandated spending cuts under sequestration. Paul Van de Water of the Center on Budget and Policy Priorities notes that the Affordable Care Act made raising the eligibility age a viable option by creating health insurance exchanges that would provide U.S. residents ages 65 and 66 with an alternate source of coverage.

Some experts are pointing to a 2011 report from the Kaiser Family Foundation (KFF), which found that adding two years to the eligibility age would generate $5.7 billion in net savings for Medicare in 2014, but create new costs within the health system. 

For example, the study found that raising the eligibility age would boost insurance costs for individuals age 65 and older by $2,200 in 2014. Overall, the move would increase out-of-pocket costs for 65- and 66-year-old residents by $3.7 billion in 2014.

KFF also found that the move would increase national spending on health care by raising the age of populations in every insurance pool, including employer-based coverage, private insurance, and Medicaid, as well as in the remaining Medicare pool. Employers' retiree health costs would grow by $4.5 billion in 2014, for example.

Furthermore, the study notes that the proposal would eliminate many of Medicare's least-costly beneficiaries without addressing more costly beneficiaries. According to the study, Medicare in 2006 spent an average of $5,887 on beneficiaries between ages 65 and 75, while spending $12,059 on average for beneficiaries age 85 and older.

"This analysis drives home the tough policy choices that lie ahead when Washington gets serious about reducing the federal deficit," says Kaiser Family Foundation Vice President Tricia Neuma (Faler/Wayne, Bloomberg Businessweek, 12/6; Levey, Los Angeles Times, 12/7; Sanger-Katz, National Journal, 12/6; KFF release, 11/18/2011).

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