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

John Commins, for HealthLeaders Media, March 29, 2011


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 senior editor with HealthLeaders Media.

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