Analysis: Lowering Medicare eligibility age would shift spending from employers to federal government
One KFF analysis shows that lowering the eligibility age could reduce costs for employers by as much as 15%.
Lowering the Medicare eligibility age from 65 to 60 could significantly reduce health spending for employers but shift costs to taxpayers and increase Medicare program expenditures overall, according to two new studies by KFF.
Medicare currently offers health insurance coverage to more than 60 million Americans ages 65 and older and younger adults with long-term disabilities. During the presidential campaign, President Biden proposed to lower Medicare’s eligibility age from 65 to 60, along with other policies to address health insurance coverage and affordability. Although many details are unknown, the proposal potentially would allow millions of adults to switch from non-group or employer plans to Medicare.
Related: Medicare buy-in: The right move for employers?
One KFF analysis shows that lowering the eligibility age could reduce costs for employer health plans by as much as 15% if all eligible employees shifted from employer plans to Medicare. Similarly, costs for employer plans could drop by as much as 30% if all people age 55 and over were no longer in employer-sponsored insurance, and by up to 43% if everyone 50 and older chose to enroll in Medicare.
The actual impact on health spending for employers would depend on how many older workers shifted from employer coverage to Medicare. The savings in employer plans would come from employers covering fewer older adults, who tend to have higher health care spending than younger enrollees.
A second analysis shows how 60- to 64-year-olds who move from employer plans to Medicare could be covered less expensively because Medicare payments to hospitals, physicians and other health care providers generally are lower than what private insurance pays. Average monthly health care spending per person for enrollees ages 60 to 64 in large employer plans is 38% higher than average monthly spending for traditional Medicare beneficiaries ages 65 to 69 ($1,061 vs. $770), despite the fact that health needs and service use tend to increase with age.
Lowering the age of Medicare eligibility could lower overall health care costs but also would shift costs from employer plans to the Medicare program. Such a shift also likely would lead to lower revenues for hospitals, physicians and providers that deliver care to older adults who choose Medicare over employer coverage.
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