Congressional Budget Office’s estimate on budgetary effects of raising Medicare eligibility age to 67

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On October 24, 2013, the Congressional Budget Office (CBO) released an updated estimate on the potential impact of raising Medicare’s eligibility age.  Medicare costs are expected to rapidly increase in coming years due to aging “baby boomers,” increases in per capita healthcare spending, and increases in life expectancy because of medical advances.  To combat that trend, politicians have proposed raising the eligibility age for Medicare benefits.  Currently, the majority of people become eligible for Medicare at age 65.  The proposed option would increase the eligibility age to 67 through incremental increases from 2016 to 2029.

The CBO estimated that implementing this option would reduce federal budget deficits by $19 billion between 2016 and 2023.  However, roughly two-thirds of the long-term savings would be offset by corresponding increases in federal spending for Medicaid and health insurance exchange subsidies.  Overall, the CBO estimates that by 2038 Medicare spending would be roughly 3 percent less under the proposed option than under current law.

Previous CBO reports have also evaluated proposals to increase Medicare’s eligibility age.  However, earlier estimates valued the potential savings much higher.  A January 2012 CBO report concluded that a policy change would produce budgetary savings of approximately $113 billion over 10 years.  The current, much lower estimate reflects a new assessment by the CBO as to the cost of 65 and 66 year-old Medicare beneficiaries.  Beneficiaries who enroll in Medicare at age 65 tend to be in better health, and therefore less costly, than those who were already enrolled prior to turning 65 (because of disabilities or end-stage renal disease).  Beneficiaries who are 65 and 66 also are more likely to have employment-based health insurance, which reduces the cost on Medicare.  Thus, compared to previous reports, the new CBO report portrays an eligibility age increase in a significantly less favorable light.

To view the CBO report, click here

Reporter, Isabella Edmundson, Atlanta, +1 404 572 3527, iedmundson@kslaw.com.