CBO Updates Estimate of Budgetary Effects of Raising Medicare Eligibility Age

The Congressional Budget Office (CBO) recently released a revised estimate of the budgetary effects of increasing the Medicare eligibility age from 65 to 67. Its original estimate, released in January 2012, estimated that increasing the eligibility age for Medicare would create a net savings of $113 billion. The revised report drastically reduces the projected savings to $19 billion. The CBO considered a variety of factors in its analysis. It calculated the savings that would be created by increasing the Medicare eligibility age by two months every year starting with people born in 1951 until the eligibility age has reached 67 for people born in 1962 (who turn 67 in 2029).This change would create some savings for Medicare, since fewer people would be eligible. It would also slightly decrease Social Security payments because some people would either delay applying for benefits until they are eligible for Medicare or continue working until they are eligible for Medicare. Yet, increasing the eligibility age will also increase government costs by: • Increasing Medicaid spending for: o People who would have been dually eligible for Medicare and Medicaid under current law will become solely be covered by Medicaid for an additional two years; and o People who would not have qualified for Medicaid when they turned 65, will have Medicaid for an additional two years (assuming Medicaid changes its age guidelines along with Medicare). • Increasing spending for subsidies though the Marketplaces (insurance exchanges) for people who currently do not qualify for subsidies due to Medicare eligibility. The CBO’s new estimate is much lower for a few reasons. First, the population that would no longer qualify for Medicare (people age 65 to 66) is relatively healthy, compared to the rest of the Medicare population. Their coverage would not cost as much as originally projected. Second, many people who are 65 to 66 years of age are still working, or have a spouse who is still working. They are usually covered by employer insurance. If the employer is considered a large employer, its insurance pays primary to Medicare, and their employees can delay enrollment into Medicare Part B until retirement. This means that they add very little coverage costs to Medicare. The CBO’s inclusion of a more complete analysis provides a more accurate picture of the financial effect of increasing Medicare’s eligibility age. The analysis also estimates that this change would cause an additional 550,000 seniors to become uninsured. The CBO’s modified estimates provide further evidence that increasing the Medicare eligibility age would not benefit seniors or significantly reduce government costs. Medicare Rights urges Congress and advocates to seek responsible adjustments to secure Medicare savings, not proposals that merely shift costs to people with Medicare or to states or to employers.