Upping the eligibility age has been a key deficit reduction proposal by Republicans and other deficit reduction advocates. The CBO's new projection may weaken their case for this politically volatile change.
The dramatic difference in the new CBO estimate is in large part due to revised projections about how much it will cost to provide Medicare coverage for 65- and 66-year-old enrollees. Those individuals are much cheaper to cover because they have fewer medical problems and often still have some form of employer coverage through a spouse.
“Taking into account both of those factors—differences in health status between beneficiaries who enroll in Medicare at age 65 and those already enrolled by 65, and the effect of secondary-payer status—caused a significant reduction in CBO's estimate of Medicare spending under current law for beneficiaries who would be affected by the increase in the eligibility age,” the report states.
The revised report also reflects increased spending that would be triggered by raising the Medicare eligibility age. Under the Patient Protection and Affordable Care Act, many of those individuals would be eligible for Medicaid or subsidies to purchase coverage through the health insurance exchanges.
The CBO report assumed that the eligibility age for Medicare would be raised by two months each year, beginning with individuals who were born in 1951. Under that scenario, the eligibility age would top out at 67 in 2029 and remain fixed.
Looking out further, CBO estimates that the change in eligibility would reduce Medicare spending by 3% in 2038. That would represent 4.7% of gross domestic product, down from 4.9% under the current system.
Other studies have said raising the eligibility age would increase costs not just for 65- and 66-year-olds but also for employers and state Medicaid programs and potentially make it more difficult for older Americans to find and keep a job.
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