Changing Medicare Eligibility Age Will Reduce Federal Health Spending: CBO

Increasing the eligibility age for Medicare and Social Security would decrease federal spending on health care, increase gross domestic product, and decrease the federal budget deficit, according to a report from the Congressional Budget Office (CBO). The downside for individuals is that it would likely lead to an increase in the number of people who are uninsured in the year or so before they are eligible for Medicare.

The report–Raising the Ages of Eligibility for Medicare and Social Security–examined possible changes to:

  • the Medicare eligibility age (MEA), currently 65;
  • the early eligibility age (EEA) under Social Security, at which participants may first claim retirement benefits, currently 62; and
  • the full retirement age (FRA) under Social Security, at which participants are eligible to receive full benefits, currently 66 but scheduled to increase to 67 for people who were born after 1959.

 The CBO noted that if the MEA was increased to 67, annual federal spending on Medicare would decrease by about 5 percent per year. Most people affected by an increase in the Medicare eligibility age would health insurance coverage other ways, although there would be a slight increase in the number of uninsured people. CBO estimated the impact of increasing the MEA by two months every year, beginning in 2014 for people who were born in 1949, until the MEA reached 67 in 2027 for people born in 1960. “Of the 5.4 million people who would be affected by the higher MEA in 2021,  about 5 percent would become uninsured, and approximately half of the group would obtain insurance from their or their spouses’ employers or former employers. The remainder (about 2.3 million people in 2021) would…receive coverage through Medicaid, receive coverage through Medicare because they would qualify for [disability insurance] benefits, or purchase insurance either through the health insurance exchanges that will become available in 2014″ under the health reform law.

Increasing the MEA this way also would reduce Medicare spending by $148 billion from 2012 through 2021. By 2035, net Medicare spending would be about 5 percent less than it would be if the MEA was not changed.

As noted above, some people would react to having to wait an extra year or so to qualify for Medicare by receiving coverage under Medicaid. The CBO estimated that “the effects of changes in federal spending on Medicaid, exchanges, federal retirees, and Social Security retirement would be to offset about one-quarter of the Medicare savings, reducing net federal savings to $113 billion over the next decade.”