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Lowering the Medicare Eligibility Age—Simple Approach, Complex Decisions

  • 1American Institutes for Research (retired), Washington, DC
  • 2American Academy of Actuaries, Washington, DC

Joe Biden recently called for lowering the age of Medicare eligibility to 60 years as part of his plan to expand health insurance coverage in the US. We recently chaired an expert panel for the National Academy of Social Insurance that examined this and other options to use Medicare to expand coverage and lower the costs of health care.1 Attempting to achieve both goals raises complicated issues and requires difficult decisions—such as raising taxes or lowering incomes for health care professionals if Medicare’s lower payment rates are applied for this new population. That does not mean, however, that these are not worthy efforts; our hope is that policy makers will be realistic in their promises and thoughtful in the creation of new legislation. It is in that spirit that we offer some observations gleaned from our work with the panel.

Medicare remains one of the most popular government programs. It provides nearly universal coverage to those 65 years and older and to many people with disabilities. Despite covering an expensive group, Medicare’s costs have grown more slowly than costs for private insurers on a per-person basis.2 And once enrolled, individuals are covered for the remainder of their lifetimes. As a consequence, Medicare is a logical place to look for improvements in health coverage.

In addition to Medicare for all, 2 approaches often considered for expanding Medicare are lowering the age of eligibility (now 65 years) or allowing individuals to buy into the program (on an age-limited basis or across the board). The approaches are sometimes confused but in practice have quite different implications. A lower age of eligibility would cover everyone in the expanded age group, and unless people are receiving insurance through employers, their primary coverage source would be Medicare. In contrast, a buy-in would allow individuals to treat Medicare as one option among others from which to choose. We focus here on lowering the eligibility age.

Why offer greater access to Medicare? People aged 60 to 64 years have greater health care needs than younger Americans, and those who now buy insurance on their own would likely find Medicare a good source of coverage, potentially at a lower cost. Lowering the eligibility age would not, however, substantially lower the number of uninsured individuals because older Americans have higher rates of coverage compared with younger adults. Instead it would mainly shift where they get their insurance.

Compared with other Medicare expansion proposals, a lower age of eligibility would be a relatively simple expansion, especially if the age were set at 60 years or older. Many of the rules and characteristics of Medicare could remain the same. For example, Medicare is an individual benefit program, so there is no family coverage. Because covering dependents is less of an issue for those older than 60 years, this would not be as much of a disadvantage compared with an eligibility expansion to younger adults. Moreover, the general benefit structure of Medicare could remain unchanged, as people in their 60s are more like current beneficiaries in terms of their health care needs.

Most people 60 years and older would qualify for Medicare because the requirement is essentially 10 years of payroll contributions. But such an eligibility expansion would raise financing issues, as 18 million people would become newly eligible for Medicare.1 Assuming that the 12 million people aged 60 to 64 years with employer coverage retain that as primary coverage, with Medicare as secondary coverage, Medicare would become the primary payer for the 6 million newly eligible who are uninsured or who have Medicaid or individual market coverage. How much would payroll taxes need to rise, and would the source of financing change? New financing would likely be an important source of debate.

Other issues that would need to be addressed include that enrollment in Medicare would be more complicated for people in their early 60s than for current beneficiaries. Medicare enrollment is largely automatic when people become age eligible, as long as they are already receiving Social Security benefits. Those still in the labor force or not yet eligible to receive Social Security benefits would have to sign up—a process that would require substantially more administrative structure than at present, including enhanced notification processes. And with the inclusion of younger beneficiaries, would there need to be new ways of pooling risks—and new ways of calculating premiums—or would newly eligible beneficiaries be folded into the main Medicare program? Either way, changes to Medigap (insurance that supplements Medicare) rules would be needed to provide guaranteed access for enrollees younger than 65 years, and Medicare Advantage bid and risk adjustment processes might need to change to reflect the broader beneficiary population. These are not insurmountable challenges, but we raise them to illustrate the details that would need to be addressed.

Finally, lowering the eligibility age would make Medicare the primary source of coverage for those without employer-provided insurance. On one hand, this change would eliminate the availability of other options, such as coverage through the Affordable Care Act individual marketplaces. On the other hand, it would avoid some of the additional administrative complexities and adverse selection risks that are a by-product of more choice in policy options, such as a Medicare buy-in. In the end, lowering the eligibility age might help some (eg, uninsured older adults who newly gain Medicare coverage) and hurt others (eg, providers that are unable to reduce input costs to adapt to reductions in payment rates); any change of this sort runs the risk of creating winners and losers. Thus, even this “simple” option to increase access to affordable coverage creates a number of important policy choices to be layered onto our already complex health care system.

Article Information

Corresponding Author: Cori E. Uccello, MPP, American Academy of Actuaries, 1850 M St NW, Ste 300, Washington, DC 20036 (uccello@actuary.org).

Conflict of Interest Disclosures: None reported.

References
1.
Docteur  E, Landers  R, Cole  B, Moon  M, Uccello  C.  Examining Approaches to Expand Medicare Eligibility: Key Design Options and Implications. National Academy of Social Insurance; 2020.
2.
Hartman  M, Martin  AB, Benson  J, Catlin  A; National Health Expenditure Accounts Team.  National health care spending in 2018: growth driven by accelerations in Medicare and private insurance spending.   Health Aff. 2020;39(1):8-17. doi:10.1377/hlthaff.2019.01451Google ScholarCrossref
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