How Increasing Medicare Age of Eligibility Saves Under Reform

One of the stopgaps in federal spending on healthcare proposed by the GOP-led House this session is the ongoing discussion of entitlement spending and the effect of redefining eligibility with respect to Medicare. It seems as though the issue of raising the age of eligibility as a minimum qualifier for Medicare has always been a well-worn consideration. But a new Kaiser study sheds some light on what lawmakers, accounting bodies, and Medicare itself may be in for, assuming full implementation of reform by 2014. Increasing the age of eligibility by two years would save the federal government over $7B, but the costs to beneficiaries would be shifted to those who would have previously been covered, employers, and state governments (as Medicaid would be left picking up the tab for those 65- and 66-year olds and those dually eligible).

The total out-of-pocket costs for 65- and 66-year-olds would increase by $5.6 billion while employer retiree health care costs would rise $4.5 billion, according to the report. The increase in Medicare eligibility also would increase premiums by 3 percent for beneficiaries who stay on the program because younger beneficiaries would be removed from the risk pool. In addition, that shift would also raise prices 3 percent for all individuals who purchased coverage through the law’s health insurance exchanges, according to the analysis.

The report gives an alternate take on if the proposed healthcare exchanges will be cost-effective in the short term — en route to an eventual savings of over $100B with respect to fed healthcare spending by 2020 as determined by the Budget Office.