Cutting Medicare Age to 60 Could Add $155B to U.S. Debt Over 6 Years

Offering ordinary Medicare coverage to all U.S. residents starting at age 60 could add about $155 billion to federal budget deficits from 2026 through 2031.

Analysts at the Congressional Budget Office and the Joint Committee on Taxation have given that estimate in a new review of the possible budget impact of lowering the standard Medicare eligibility age by five years.

The CBO has predicted in a separate budget and economic outlook report, for the period running from 2021 through 2031, that the federal government will generate about $33 trillion in revenue, and spend about $41 trillion, from 2026 through 2031.

The federal debt impact of lowering the Medicare eligibility age would amount to about 0.5% of baseline federal revenue over that six-year period and about 0.4% of baseline federal spending.

Expanding access to Medicare could decrease the number of uninsured people by 600,000, at a cost of about $43,056 in additional federal debt per year per additional Medicare enrollee who would otherwise be uninsured, according to the analysts’ forecasts.

Expansion could add $3,539 in debt per year for every newly eligible American who used Medicare as a primary source of coverage.

What It Means

Many members of Congress and other policymakers have suggested that expanding access to ordinary Medicare coverage could be a simple, relatively affordable way to get more people covered and reduce U.S. spending on health care.

The new analysis suggests that expanding access to the current Medicare program could reduce spending by employers, individuals and state Medicaid programs, and could improve the well-being for people in their 60s who otherwise would be uninsured, but could be expensive for the federal government.

The Background

Older people tend to have higher average health care costs than younger people.

Employers pay more to cover older workers, whether through insured group health plans or through their own self-insured health plans.

The federal Affordable Care Act lets health insurers charge the oldest adult users of individual and family major medical coverage up to three times more than they charge the youngest adult insureds.

Consumers ages 60 through 64 tend to have higher take-up rates for health coverage than younger people, in spite of the higher costs, but the result is that many consumers in their 60s who have no access to Medicare or to employer-sponsored coverage view individual and family coverage as unaffordable, even when they can use ACA premium tax credit subsidies to pay part of the bill.

Some consumers under age 65 already qualify for early access to Medicare coverage due to serious disability or severe kidney disease, but the rules for qualifying for Medicare on this basis are strict.

Some other consumers ages 60 through 64 qualify for Medicaid — a program that uses a combination of state and federal money to provide health coverage for low-income people, and for some others who meet state eligibility criteria.

The Medicare at 60 Coverage Impact

The CBO and JCT budget analysts say the United States could have about 20 million residents ages 60 through 64 in 2031.

Setting the ordinary Medicare eligibility age at 60 could affect 10 million people who would have health coverage from employers; 2.3 million people with Medicaid coverage; 2 million people who have bought their own individual or family major medical coverage; and 1.3 million uninsured people.

Medicare eligibility expansion could also affect about 2.6 million people ages 60 through 64 who would qualify for early access to Medicare in 2031 because they were disabled or had severe kidney disease.

The analysts note that the expansion proposal they reviewed would provide Medicare Part A hospitalization coverage for all, for free, at age 60, but that consumers would still have to pay for Medicare Part B physician and outpatient services coverage.

Some people who ended up with Medicare Part A coverage might decline to pay for Medicare Part B coverage, the analysts warn.

“Because Part A alone does not provide comprehensive medical coverage, CBO would categorize anyone enrolled in only Part A without any other form of coverage (such as Medicare Part B, employment-based coverage, or Medicaid) as uninsured,” the analysts write.

The analysts predict that, in the real world, Medicare eligibility expansion would increase the number of people with Medicare coverage as their primary source of health insurance by 7.3 million.

The analysts estimate that 4.8 million extra people would combine Medicare Part A with other primary coverage; 900,000 people would use Medicare Part A and Medicare Part B coverage as secondary coverage; and 500,000 people would have only Medicare Part A coverage and be classified as uninsured.

Spending

The CBO and JCT analysts focus mainly on the net impact of Medicare eligibility expansion on federal budget deficits, and the overall federal debt.

But they also provide separate figures for outlays and receipts.

Medicare eligibility expansion could increase total Medicare outlays by $449 billion over the six-year period analyzed, but enrollees and state Medicaid programs could increase the amounts they send to the federal government by $74 billion, the analysts predict.

Other expansion effects could decrease federal spending and increase revenue and narrow the six-year impact on the budget debt to $155 billion, the analysts report.

Sources of Uncertainty

The analysts emphasize that it’s hard to know how many people ages 60 through 64 would sign up for Medicare Part B coverage or use Medicare Part A coverage as a primary payer.

“It is unclear how newly eligible people would weigh several factors when deciding whether to enroll in Medicare, including ease of enrollment, premiums, cost sharing, late-enrollment penalties, and perceived coverage quality,” the analysts say. “Additionally, the health care utilization of new Medicare enrollees is uncertain. Those new enrollees might be more or less healthy than CBO anticipates, resulting in lower or higher health care utilization.”

The Role of Live Humans

The analysts’ comments about eligible people’s decision-making process suggests that Medicare eligibility expansion could increase the Medicare program’s need to use live-human agents, enrollers or navigators, as well as automated systems, to educate people ages 60 through 64 about any new coverage options created.

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