Fiscal Cliffnotes: What Are the Trade-offs in Raising Medicare’s Eligibility Age?

(Patrick/Flickr)

(Patrick/Flickr)

It seems seductively easy: people are living longer, so why not raise the Medicare eligibility age from 65 to 67? This kind of entitlement reform is key to Republican strategies to pull the federal government back from the so-called Fiscal Cliff.

The problem is that while raising the Medicare eligibility age looks great in the short run, longterm it could actually cost money.

First, the short run: the non-partisan Kaiser Family Foundation says the federal government would save an estimated $5.7 billion in 2014 if the eligibility age were raised. Using a slightly different analysis, the nonpartisan Congressional Budget Office says savings could total $113 billion over the next decade.

But, those 65 and 66-year-olds are the youngest and presumably healthiest people in the Medicare program — meaning that if they leave Medicare, they would then be the oldest and presumably sickest people in any other insurance pool.

What would happen to those people?

Some or many might stay in the workforce, and their presence would likely drive up costs to their employers or the new health insurance exchanges.

Some might find themselves eligible for Medicaid, the government sponsored health plan for the poor.

In its analysis, the Kaiser Family Foundation estimates that two-thirds of the five million affected 65 and 66-year-olds “would pay an average of $2,200 more for their health care in 2014 than they would have paid if covered under Medicare.”

And what about those still in Medicare? Without those younger, healthier 65 and 66-year-olds, Medicare premiums for the people left would rise by 3 percent, according to the Kaiser Family Foundation analysis.

A recent Associated Press-GfK poll found that many Americans — 40 percent — are willing to consider raising Medicare’s eligibility age, but 48 percent are opposed. The poll showed a pretty big division by age, as the AP indicated in its report:

Those under age 30 were most supportive, while a clear majority of those between the ages of 30 and 64 were opposed. Seniors were split. Surprisingly, there were no significant differences by political party. Overall, foes of the idea were more adamant, with strong opponents outnumbering strong supporters by 2-1.

U.S. life expectancy has risen by about eight years since Medicare was created in 1965. During the 1980s, Republican President Ronald Reagan and Democratic congressional leaders agreed to gradually increase the age for receiving full Social Security benefits from 65 to 67. But they didn’t touch Medicare eligibility.

Since then, some policy experts have advocated aligning the Medicare and Social Security eligibility ages through a gradual phase-in that would spare those close to retirement.

Related