Why Hiking The Age For Medicare Eligibility Wouldn't Save Much

By Scott Hensley

Published October 25, 2013 at 12:08 PM EDT

Americans are living and working longer than ever. And Medicare, the health plan that's supposed to help senior citizens, is facing budget problems sooner rather than later.

By 2023, about 70 million people will get health care paid for by Medicare, and their tab is expected to hit about $1.1 trillion in that year.

So it's no surprise that the idea of raising the eligibility age for Medicare to 67 from 65 keeps getting floated as a way to trim federal spending. "I don't think you can look at entitlement reform without adjusting the age for retirement," Republican Sen. Lindsey Graham of South Carolina, said late last year on ABC's This Week. "Let it float up another year or so over the next 30 years, adjust Medicare from 65 to 67."

And the Congressional Budget Office, the scorekeeper for federal finances, had said in early 2012 that raising the eligibility age to 67 would trim about 5 percent from Medicare spending over the long haul.

Well, there is a problem, it turns out. Thursday, the CBO said the overall savings wouldn't amount to as much as it had previously estimated. Instead of saving the federal government about $113 billion over a decade, CBO now figures it's more like $19 billion over eight years starting in 2016.

What changed? Mostly it reflects a new analysis of how much 65- and 66-year- olds cost Medicare. To a lesser extent, CBO said, the federal government could be liable for more costs for those near-retirees under the federal health law.

The estimate is an important one, according to NPR's Julie Rovner, because Republicans and some Democrats have long eyed the Medicare age change as a way to pay for deficit reduction. Now it's a much less attractive target.

That's an understatement, according to health economists Aaron Carroll and Austin Frakt, who blasted the idea — again. Writing on The Incidental Economist blog, they called the change to save what amounts to less $3 billion a year "insane."

Why is it so little? "Well, once again, the more people you kick [out] of Medicare, the more you get on Medicaid," they wrote. "That increases federal expenditures. More people will also need exchange insurance, too, which means more people needing subsidies. That will also increase federal expenditures."

In case you weren't sure where Carroll and Frakt come out on this, the title of their post bears mentioning, "Raising the Medicare eligibility age is now a REALLY bad idea."