How Old Should We Be to Be Eligible for Medicare?

Well, you respond, 65, of course.  That’s true, but as we all know, there is some discussion about raising the age of eligibility for Medicare, perhaps because we are living longer, but perhaps for budgetary reasons. The Congressional Budget Office added some helpful information to the discussion with its October, 2013 report, Raising the Age of Eligibility for Medicare to 67: An Updated Estimate of the Budgetary Effects.  As the report notes on page 1:

Outlays for Medicare are projected to increase rapidly in coming decades because of the retirement of the baby-boom generation and because growth in per capita spending for health care is expected to continue to exceed growth in per capita gross domestic product over the long term. Moreover, increases in life expectancy mean that the average length of time that people are covered by Medicare has risen significantly since the program began in 1965. That trend, which increases the program’s costs, will almost certainly continue.

Since, as the title notes, this report is an update of the CBO’s earlier analysis, it was interesting to see that “[t]he agency’s new estimate of the net budgetary savings from that option is much lower than its earlier estimates for proposals to raise Medicare’s eligibility age.” (page 1, citations omitted).  The report explains which option the CBO looked at (raising by 2 months/year the age, similar to what is being done with Social Security (see pp. 1-2), the updated estimate, an explanation of the estimate and an explanation for the change in the estimate. Why the lower estimate? Because

ages 65 and 66, beneficiaries who enrolled in Medicare when they turned 65 tend to be in much better health—and thus are substantially less expensive, on average—than beneficiaries who were already enrolled upon turning 65 (because of disability or end-stage renal disease). Second, the many 65- and 66-year-old beneficiaries who are workers (or workers’ elderly spouses) with employment-based health insurance are less costly to Medicare, on average, than other beneficiaries at those ages.

Since Medicare is typically secondary coverage for working individuals who are covered by employer health insurance, “Medicare’s payments are limited to the cost-sharing obligations that beneficiaries face under their employment-based health insurance.” Those beneficiaries typically don’t enroll in Parts B and D until retirement, so Medicare outlays for them for Part A is less. (see report at pp. 4-5).

Although this is helpful information, we all know that the debate on this issue as well as other issues about Social Security and Medicare will continue. It gives us an opportunity for an interesting discussion with our students, both about proposals and policies.