Hiking Medicare age would trim outlays: CBO

Raising the eligibility age for Medicare would reduce the federal healthcare program's outlays by about $148 billion from 2012 through 2021, according to estimates released Tuesday by the Congressional Budget Office.

The estimate does not include the effect of changes in people's decisions about work and retirement, according to the 12-page issue brief, which also examined increasing both the early retirement age and full retirement age under the Social Security program. It does account for offsetting receipts, which the CBO describes as premiums, amounts paid to providers and later recovered, and phased-down contribution from the states to Medicare Part D.

“By 2035, Medicare's net spending would be about 5% below what it otherwise would be—4.7% of GDP rather than 5% under current law,” the issue brief noted. “A rise in the MEA (Medicare eligibility age) would cut by a larger percentage the number of years during which the average person would receive Medicare benefits, but the reduction in outlays would be less than proportionate because the youngest beneficiaries tend to be the healthiest,” and, therefore, require the least costly healthcare.

The CBO expects that most people affected by an increase in the Medicare eligibility age would move to other forms of healthcare insurance, but there also would be a “slight” increase in the number of uninsured. For instance, analysts estimated the effects of raising the eligibility age by two months every year—starting in 2014 for people born in 1949—until the eligibility age reached 67 in 2027 for people born in 1960. Of the 5.4 million people affected by the higher eligibility age in 2021, about 5% would become uninsured, and about half of the group would obtain insurance from either their employers or former employers, or their spouses' employers or former employers.