Raising the Medicare Eligibility Age: A Costly and Dangerous Proposal

Despite Medicare's remarkable success as a health and economic lifeline for American families, proposals to dramatically alter the program have resurfaced in the context of deficit reduction. While not a new idea, proponents of increasing Medicare's eligibility age from 65 to 67, or higher, have put the proposal in the spotlight recently as policymakers search for savings in federal programs to address the nation's deficit. This Alert discusses why raising Medicare's eligibility age is not only poor fiscal policy but also dangerous to the health and budgets of millions of families, including some of the most vulnerable people, who do, or will, depend on Medicare.

Fact: Raising the Medicare Eligibility Age Would Cost More Than It Saves

By increasing the age at which people can receive Medicare, and thereby shrinking the Medicare eligibility pool, the Congressional Budget Office estimates that the federal government would save $148 billion over the next ten years.[1]  However, higher federal spending in Medicaid in the same period as a result of those who would otherwise be Medicare eligible turning to Medicaid, would reduce that amount by a quarter to just  $113 billion over ten years.  In 2014 alone, a full raise in the eligibility age would save $5.7 billion dollars for the federal government, but it would also cost $11.4 billion – twice the federal net savings – in higher costs to other areas of the budget and economy.[2]  The across-the-board benefit cut would effectively raise total health care spending; for every dollar the federal government would save from raising the age, other costs would increase by $1.10.[3] Increasing overall health spending is the wrong approach and is already a problem facing payers across the private and public sectors.[4]

Fact: Raising the Medicare Eligibility Age Would Increase Costs for States, Employers, and Individuals

Without Medicare coverage to rely on, individuals would seek coverage from other sources including employers and states already grappling with strained resources and climbing health costs.  Insuring 65 and 66 year olds would cost employers $4.5 billion in retiree health care costs in 2014 alone. States would face $700 million in new spending for the same period.[5]

In addition, individuals and families with coverage in the state and federal health exchanges beginning in 2014 would see their premiums rise as a result of 65 and 66 year olds, an older and more costly population, seeking coverage through the exchanges.  Adding would-be Medicare beneficiaries into the exchanges would raise premiums for everyone else by 3% in 2014 because insurers who previously did not have to cover the more expensive population would likely have to make up the difference in cost by passing them onto the rest of the exchange enrollees.  Similarly, Medicare beneficiaries with coverage would face $1.8 billion in higher premiums because the younger and relatively healthier 65 and 66 year old beneficiaries would be taken out of the program's risk pool.  Medicare beneficiaries would also see their premiums rise by 3% if the eligibility age is raised.[6]

Raising the age may seem to yield federal savings, but those costs are not truly saved, merely shifted to states, employers, individuals and Medicare beneficiaries who already face high health costs and who cannot afford this added burden. 

Fact: Raising the Medicare Eligibility Age Would Leave Many People Uninsured, with Higher Out-of-Pocket Costs

Advocates of raising the age assume that 65 and 66 year olds would obtain health coverage elsewhere. The reality is that many of the 5.4 million older Americans potentially affected would be unable to find or afford such coverage and end up uninsured. Some who may be eligible for the health exchanges would not enroll due to the high costs – half of 65 and 66 year olds would have incomes deemed too high to be eligible for subsidized premium credits and would face premiums as high as $10,000 to $12,000 in 2014 for an individual (twice that for a couple) due to the ability of insurers in the exchanges to vary rates according to age[7] The majority – two-thirds – of those who do find coverage would incur an estimated $2,200 more in out-of-pocket costs per year including premiums and cost-sharing.[8] In addition, those who find coverage from Medicaid could face significant access issues in some areas due to low reimbursement rates and a shortage of health care providers. Those who go uninsured or face access issues are more likely to forego critical preventive care and end up in costlier emergency departments and institutions, straining state and community resources and driving up costs in the private market.  Leaving more people uninsured would force millions to delay needed care and services until they qualify for Medicare coverage, a problem many already face until reaching 65. Raising the age undermines growing efforts in the health care systems to invest in preventive care and home and community based services to avoid expensive emergency care, a key aim of the Affordable Care Act and local reforms.

Fact: Raising the Medicare Eligibility Age Would Disproportionately Harm Lower-Income Americans and Communities of Color

Among the hardest hit by the possibility of a rise in the Medicare age of eligibility would be communities of color, low-income Americans, and blue-collar workers.  People of color tend to be in poorer health at earlier ages and have not seen as dramatic an increase in life expectancy as non-Hispanic white Americans.  In fact, the life expectancy for African-American men is only 70.8 according to recent data.[9] Raising the age to 67 would seriously affect diverse communities: 34% of Hispanics and 26% of African-Americans aged 65 and 66 would become uninsured, rates over four times hgher than non-Hispanic white Americans in the same age group. In addition, 23% of Americans with incomes below 200% of the poverty line would become uninsured.[10] Blue-collar workers with physically demanding jobs who are unable to delay retirement would also be significantly harmed.[11]

Fact: A Clear Majority of Americans Oppose Raising the Medicare Eligibility Age

A new poll this week shows that 67% of Americans are opposed to raising the Medicare eligibility age to 67, with strong opposition surpassing strong support by a 3-1 margin.[12] The new data shows the opposition is shared by the majority of Democrats and Republicans, with at least 68% of each expressing opposition- a bipartisan consensus.

Fact: There Are Ways to Achieve Substantial Savings in Medicare That Don't Hurt Older or Disabled People and Their Families

There are real ways to save money in the Medicare program that would extend its solvency and lower costs for beneficiaries at the same time.[13] Just one of those proposals – allowing drug prices to be negotiated in the Medicare program – would save an estimated $156 billion over ten years; savings more significant than those gained by raising the eligibility age.[14] Policymakers who are serious about reducing overall health care costs, the real culprit driving high spending across the system, should consider proposals that work toward improving health coverage and outcomes while lowering costs for payers and beneficiaries.[15] Simply shifting costs onto beneficiaries while ignoring the real potential for savings in areas like pharmaceutical prices is both short-sighted and fails to address overall health spending.

The Bottom Line: American Families Can't Afford to Wait Longer or Pay More for Medicare

Asking older Americans and their families to bear the burden of deficit reduction by increasing the eligibility age would cause much more harm than is reflected in estimates of federal budget savings. States, employers, younger Americans not yet on Medicare, and Medicare beneficiaries simply cannot afford to have more costs shifted onto them, particularly as our economy slowly recovers.  The percentage of uninsured older and disabled people will increase, while those with Medicare and those in insurance exchanges will owe higher premiums.  Lower-income Americans and communities of color will face disproportionate harm at a time when health reform efforts aim to reduce health disparities among those communities.  Cutting Medicare, instead of investing in real solutions, is a dangerous proposal that would have real implications for millions of Americans and their families and would constitute a significant step backward in the effort to improve American's health and lower costs.