CBO: Raising Medicare age would save far less than previously thought

Raising the Medicare eligibility age from 65 to 67 as a way to reduce the deficit would save far less money than previously thought, according to a new report from the Congressional Budget Office (CBO).

A 2012 CBO analysis found that a raise in the eligibility age would save $113 billion over the next 10 years. However, the new report says the savings would be far smaller--closer to $19 billion, with a $23 billion spending reduction offset by $4 billion less in revenue. As a percentage of gross domestic product, Medicare would represent 4.7 percent rather than 4.9 percent by 2038.

The reason for the smaller number is two-fold: First, many 65 and 66-year-olds, if they were to lose Medicare, would be eligible for federal subsidies under healthcare reform, according to Talking Points Memo. Second, according to the article, was a calculation error in the CBO's prior analysis.

"They were previously basing their estimates of the average costs of the 65-66 year olds who would no longer be on Medicare on the average costs of ALL 65 and 66-year-old Medicare beneficiaries," Loren Adler, the research director at the Committee for a Responsible Federal Budget, told TPM, "which includes disabled and end stage renal disease beneficiaries who are clearly far more expensive than your average 65 or 66-year-old."

Although the CBO report projected that most people who became ineligible would have the ability to switch to other forms of coverage, it said there would still be a slight drop in the number of insured people. Of the 5.5 million Americans affected by the change in 2023, approximately half would be insured through their employer or their spouse's employer, 15 percent would be eligible for Medicare disability benefits, 15 percent would purchase coverage through exchanges and 10 percent would be covered through Medicaid. The remaining 10 percent would be uninsured.

Although President Obama and senior Democrats expressed willingness to consider raising the eligibility age in the past, Talking Points Memo said, the idea has since lost popularity.

To learn more:
- here's the CBO report
- read the Talking Points Memo article