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Ruth Marcus: The eligibility age conundrum

BY RUTH MARCUS Published: December 8, 2012

Raising the eligibility age for Medicare sounds like a fiscal no-brainer.

After all, the Social Security retirement age is rising to 67. It would seem sensible for Medicare to have the same rule.

After all, life expectancy is growing. Today, the average 65-year-old can expect to live another 20 years — about five years longer than when Medicare started.

After all, federal health care spending is on an unsustainable course. Something's got to give.

Amid the entitlement mumbo jumbo, raising the eligibility age is attractive to politicians casting about for savings because it is tangible. Here's the wrinkle: This no-brainer turns out to be exceedingly complicated. The savings aren't as big as you might imagine, because costs to other government health programs would rise as a result. Meanwhile, the move could have an array of problematic effects, from leaving seniors uninsured to raising premium costs for many others.

The Congressional Budget Office estimates that gradually increasing the eligibility age to 67 would save $113 billion over the next decade; the savings in the second 10 years, with the cuts fully implemented, would be larger. By 2035, Medicare spending would be 7 percent lower than otherwise expected, or 5 percent taking into account higher spending on other programs. This isn't chump change.

The Kaiser Family Foundation, calculating the effect of an immediate change, came up with a much smaller number: less than $6 billion in 2014. Kaiser found that raising the eligibility age would reduce Medicare spending on those seniors by $31 billion that year. But then Medicare premium receipts would drop by $7 billion due to some seniors not paying into the program. Meanwhile, because some of the newly Medicare-less seniors would turn to the new health insurance exchanges to obtain insurance, federal spending on the exchanges (premium and cost-sharing subsidies for lower-income seniors) would increase by $9.4 billion.

And federal spending on Medicaid, the health care program for the poor, would increase by $8.3 billion as the poorest seniors enroll in Medicaid under the new expanded-coverage part of the health care law.

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