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December 7, 2012

Q&A: What would it mean to raise Medicare’s eligibility age?

Raising the age for starting Medicare is among the leading proposals to slow the program’s spending — key to a federal budget deal. But how would it work?

By Noam N. Levey, Washington Bureau
December 7, 2012

WASHINGTON — As they debate ways to control the federal deficit, President Obama and congressional Republicans have both acknowledged the need to rein in federal spending on healthcare programs such as Medicare, which provides health insurance to about 50 million elderly and disabled Americans. Among the leading proposals to slow Medicare spending — a key ingredient of a budget deal — is to raise the eligibility age for the program, an option frequently championed by conservatives. Here are answers to some basic questions about the concept and its potential effects:

How would raising the Medicare eligibility age work?

Most proposals envision gradually raising the eligibility age from 65 to 67 over a decade or longer. Lawmakers agreed in the 1980s to a similar phase-in to raise the Social Security eligibility age, a process that is still underway.\

This idea was discussed during the 2011 budget negotiations between the president and congressional Republicans and was championed by former Massachusetts Gov. Mitt Romney, the 2012 GOP presidential nominee.

How much money would that save?

That depends on how the shift is structured. Last year, the nonpartisan Congressional Budget Office estimated that a proposal to phase in the rise in eligibility over 13 years starting in 2014 would save the federal government about $113 billion over the next decade.

That makes the proposal one of the single biggest money savers at a time when Medicare spending is projected to rise from $600 billion a year to more than $1 trillion a year by 2021, driven in large part by retiring baby boomers who will join Medicare in coming years.

Proponents of raising the eligibility age also note that it would encourage more Americans to continue working through their mid- to late 60s, adding to economic growth, though the CBO concluded the effects of this would be modest.

What would happen to these seniors?

If the new healthcare law is fully implemented in 2014, all Americans will be guaranteed health coverage, so seniors who do not qualify for Medicare when they are 65 would still be able to get health insurance.

They would just have to purchase it on their own or get it from an employer, much like younger workers today. The law limits how much more insurers can charge older consumers and prohibits insurance companies from charging more to people with preexisting medical conditions.

Those new protections mark a major change from today, when it can be difficult for consumers in their 60s to get a health insurance plan on their own.

Nonetheless, some seniors would probably end up paying more for health insurance than they do with Medicare, because private health plans are often more expensive, the CBO says. Budget analysts also estimated that about 5% would become uninsured.

What would raising the eligibility age mean for everyone else?

It could mean higher costs.

Younger Medicare beneficiaries are typically healthier and less expensive than older people on the program. That spreads risk and helps control Medicare premiums.

If healthier beneficiaries leave the program as the eligibility age is raised, that would leave a sicker population behind, necessitating higher premiums for beneficiaries to cover the higher medical costs.

Are there other proposals to control Medicare spending?

Yes. Some policymakers favor cutting Medicare payments to hospitals and other providers. Lawmakers have also discussed charging higher premiums to wealthy seniors. And many Republicans would like to overhaul Medicare by giving beneficiaries vouchers to shop for private health insurance.

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Copyright © 2012, Los Angeles Times