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Raising Medicare Age Achieves Savings; Shifts Costs to Younger Seniors, Medicaid

March 29, 2011
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Raising Medicare’s eligibility age from 65 to 67 in 2014 would generate an estimated $7.6 billion in net savings to the federal government, but also result in an estimated net increase of $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 new Kaiser Family Foundation projection of the potential change suggested by several deficit-reduction plans.

The study also estimates that the change in Medicare eligibility would raise premiums by 3% for those who remain on Medicare and for those who obtain coverage through health reform’s new insurance exchanges. The study assumes both full implementation of the health reform law and the higher eligibility age in 2014 in order to estimate the full effect of both the law and the policy proposal.

Among the estimated 5 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 estimates. Nearly one in four, however, are expected to have lower out-of-pocket spending, mainly due to the health reform law’s coverage expansions through Medicaid and the premium tax credits available to low- and moderate-income Americans, according to Kaiser Family Foundation.

“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 Tricia Neuman, vice president of Kaiser Family Foundation, who leads the new Kaiser Project on Medicare’s Future.

The study projects that raising the age of 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 gross savings are estimated to 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 finds that health-care 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 costs to states would increase by an estimated $0.7 billion overall. This reflects higher state Medicaid costs associated with 65- and 66-year-olds who would otherwise be dual eligibles (covered by both Medicare and Medicaid) and also from higher costs associated with higher Medicare premiums for remaining dual eligible beneficiaries for whom Medicaid pays the Medicare premiums.

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Full study: Raising the Age of Medicare Eligibility: A Fresh Look Following Implementation of Health Reform(PDF format)

Raising Age For Medicare Would Save Feds Dough, Cost Everyone Else

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