CBO: Raising Medicare Age Would Reduce Medicare Spending By 5 Percent, But Increase Costs To Seniors

A new Congressional Budget Office (CBO) analysis finds that raising the Medicare eligibility age (MEA), a popular conservative entitlement reform proposal that has also received limited support from President Obama and Democrats in Congress, could reduce Medicare spending by about 5 percent over the long-term:

CBO expects that most people affected by the change would obtain health insurance from other sources, primarily employers or other government programs, although some would have no health insurance. Federal spending on those other programs would increase, partially offsetting the Medicare savings. Many of the people who would otherwise have enrolled in Medicare would face higher premiums for health insurance, higher out-of-pocket costs for health care, or both.

CBO estimates that raising the MEA would reduce Medicare outlays, net of premiums and other offsetting receipts, by $148 billion from 2012 through 2021. By 2035, Medicare’s net spending would be about 5 percent below what it otherwise would be—4.7 percent of GDP rather than 5.0 percent under current law. A rise in the MEA would cut by a larger percentage the number of years during which the average person would receive Medicare benefits, but the percentage reduction in outlays would be smaller because the people affected would be the youngest beneficiaries, who tend to be the healthiest and thus to require the least costly health care.

But this is just one small part of the cost picture. CBO isn’t calculating how raising the age would actually increase overall system spending “by shifting costs to most of the 65- and 66-year-olds who would lose Medicare coverage, to employers that provide health coverage for their retirees, to Medicare beneficiaries, to younger people who buy insurance through the new health insurance exchanges, and to states.” As the Center On Budget and Policy Priorities’ (CBPP) Paul N. Van de Water has concluded, that estimated increase in costs could “total $11.4 billion — twice the net savings to the federal government” in 2014 alone.

And then of course there is the human cost of essentially privatizing Medicare for the youngest beneficiaries (those between the ages of 65 to 67). As the CBO’s own brief concedes, “Some people would end up without health insurance. People without health insurance are likely to receive lower quality care and pay more than insured people do.” Much more on that point here.