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Medicare Could Save $7.6B by Raising Eligibility Age to 67

 |  By John Commins  
   March 29, 2011

Raising the Medicare eligibility age from 65 to 67 in 2014 would generate about $7.6 billion in net savings to the federal government, but it would add $5.6 billion in out-of-pocket costs for 65- and 66-year-olds, and $4.5 billion in employer retiree healthcare costs, according to a Kaiser Family Foundation study.

The study – Raising the Age of Medicare Eligibility: A Fresh Look Following Implementation of Health Reform  – examines the potential changes suggested in several deficit reduction plans.

The study also estimates that raising the Medicare eligibility age would raise premiums by 3% for those who remain on Medicare and for those who get coverage through health reform's new insurance exchanges. The study assumes both full implementation of the Affordable Care Act and the higher eligibility age in 2014.

Among the estimated five million affected 65- and 66-year-olds, about three in four would pay an average of $2,400 more for their healthcare in 2014 than they would have paid if covered under Medicare, the study said. Nearly one in four are expected to have lower out-of-pocket spending, mainly due to the ACA's coverage expansions through Medicaid and the premium tax credits available to low- and middle-income Americans.

"Raising Medicare's age of eligibility would obviously reduce Medicare spending, but would also shift costs onto seniors and employers, and increase costs elsewhere on the federal ledger," said Kaiser Family Foundation Vice President Tricia Neuman. "This analysis drives home the tough policy choices that lie ahead when Washington gets serious about reducing the federal deficit."

In the absence of the health reform law, raising Medicare eligibility age would create more uninsured, according to other studies, as many older Americans would have difficulty finding affordable coverage in the individual market.


Under health reform, virtually all 65- and 66-year-olds would be expected to obtain alternative sources of coverage. According to the study, 42% are projected to obtain coverage through employer-sponsored plans, 38% through plans offered via health insurance exchanges, and 20% through the expansion of Medicaid for low-income adults.

Raising Medicare eligibility to age 67 in 2014 would result in $31.1 billion in gross Medicare savings in 2014 because Medicare would no longer be covering 65- and 66-year-olds, the study said. The gross savings would be partially offset by increases in federal spending for individuals who would be covered by Medicaid ($8.9 billion) and for individuals receiving premium tax credits in the exchanges ($7.5 billion). The gross savings also would be offset by a $7 billion reduction in Medicare premium receipts from 65- and 66-year-olds who would no longer be enrolled in the program.

In addition, the study said healthcare costs for employers would increase by an estimated $4.5 billion in 2014 as employer plans become the primary payer for 65- and 66-year-olds who would no longer be eligible for Medicare, rather than provide supplemental coverage that wraps around Medicare.
The study also found that:

 

  • Premiums for people younger than 65 purchasing coverage through health reform's insurance exchanges would rise by 3% as a result of adding 65- and 66-year-olds to the exchanges.  
  • Medicare Part B premiums would rise by an estimated 3%, as the youngest seniors are removed from the Medicare risk pool, resulting in higher per-beneficiary costs for those remaining.
  • Costs to states would increase by an estimated $700 million overall. This reflects higher state Medicaid costs associated with 65- and 66-year-olds who would otherwise be dual eligibles and also from higher costs associated with higher Medicare premiums for remaining dual eligible beneficiaries for whom Medicaid pays the Medicare premiums. Those higher costs are offset in part by some affected beneficiaries qualifying for full federal funding under health reform's Medicaid expansion.

The study may be viewed here.

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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