To those watching and participating in the Medicare reform debate, raising the Medicare eligibility age is the devil they know.

On the one hand, there are plenty of estimates on how much ratcheting the age from 65 to 67 will save: as much as $148 billion over 10 years.  

What these estimates don’t take into the account are the collateral costs. Those who don't qualify for Medicare will either need to buy a private plan, which can cost more than $2,000 annually, or hope that their employer covers them until they qualify for Medicare. In either case someone else pays, yet raising the eligibility age may become a bridge to reform since it's a compromise between the more radical benefit cuts or partial privatization—currently opposed by the Obama administration—and the White House's milder "systemic" reforms rejected as inadequate by conservative Republicans.

The eligibility issue gained new traction recently when Sen. Johnny Isakson (R-Georgia), told Politico on April 3 that he (and other Republicans) would consider a transition plan that would allow 65- and 66-year-olds to "buy into" standard Medicare until they qualify. “I think the idea has merit to it,” said Sen. Isakson. “You are shifting two years of cost from the government and allowing the buy-in makes it easier to do that. It’s a different way to get to where people want to go and something that ought to be considered.”

The proposal didn't gain any immediate attention as Congress moved to work on gun control and immigration measures, then was halted by the bombings in Boston. But it may resurface as a possible middle ground in resolving the budget and sequester conflicts.

Potent Opposition

Will the buy-in proposal have the legs to act as a compromise? Liberals in Congress and several key players will have to sign on if the age proposal is to move forward.

Along with several progressive groups, the 37-million-member AARP took a strong stance against the plan late last year, claiming it will needlessly raise costs for those caught in the new eligibility squeeze. In a statement made by AARP Executive Vice President Nancy LeaMond on Dec. 12, 2012:

"Proposals to increase the Medicare eligibility age simply shift costs onto beneficiaries and do nothing to lower health care costs. In fact, this idea would dramatically increase costs for younger seniors, drive up premiums for those in Medicare, increase costs to businesses and states, and raise health care costs overall. At the same time, removing the youngest and generally healthiest older Americans from Medicare [65- and 66-year-olds] would result in higher premiums for those remaining in the program. Adding older Americans to private insurance risk pools will drive up employer-health care costs and premiums for those in the private market. And many low-income seniors would turn to Medicaid, increasing costs to the states."

Because it has been an issue that's been on the table for years, raising the eligibility age has been studied by a number of research organizations. The AARP's contention that it will cost younger beneficiaries more in out-of-pocket costs is fairly well documented.

For example, in a study conducted by the Kaiser Family Foundation in 2011, the group found that:

"Raising Medicare’s eligibility to 67 in 2014 would generate an estimated $5.7 billion in net savings to the federal government, but also result in an estimated net increase of $3.7 billion in out-of-pocket costs for 65- and 66-year-olds, and $4.5 billion in employer retiree health-care costs. In addition, the study projects that the change would raise premiums by about 3 percent both for those who remain on Medicare and for those who obtain coverage through health reform's new insurance exchanges."  

The Medicare buy-in proposal, in theory, would allow seniors to obtain coverage at Medicare's cost, but that’s a number that has yet to be determined. It's not a new idea, either; the Urban Institute profiled such a plan in 2005, noting that it had been first proposed by the Clinton administration in 1998. In the study, written by Richard Johnson, there are several advantages that would extend the buy-in to those as young as age 62. The buy-in plan could:

  • potentially elicit more labor supply from older adults; that means workers could stay in the workforce longer;
  • reduce Medicare costs and improve insurance coverage among senior adults younger than age 65;
  • bring it back in line with Social Security's full retirement age, which slowly began rising from age 65 to 67 in 2000;
  • reinforce other signals in society that old age does not begin until after age 65;
  • give participants full Medicare coverage by paying monthly premiums equal to the expected cost of their benefits;
  • offer subsidized premiums for low-income adults.

 Of course, doing the math on this kind of approach raises a number of questions. How much would it cost to expand the dual-eligible population (low-income beneficiaries who qualify for Medicaid and Medicare)? How would their care be subsidized? Where would those subsidies come from: taxes on current beneficiaries or general federal tax revenues? Would those subsidies offset the expected savings from raising the eligibility age? How would premiums be priced for those falling in the eligibility gap? Would incentives be offered to employers to keep those aged 62 to 67 in the workforce? If so, how would they be applied?

 Much of the philosophy behind raising the eligibility age rests on increased longevity in the general population. Those living longer are presumed to be healthier, so they may want to—or have to—work beyond age 65. While this is true when increases in life expectancy over the past century are considered, it may not be true for certain groups such as the chronically ill; those suffering from auto-immune diseases, heart disease or cancer; or the permanently or partially disabled. Would those people gain an exemption to the eligibility requirements or simply gain permission for a Medicare buy-in?

While none of this has not been openly discussed, it needs to be before the eligibility proposal can advance. 

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