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Should We Raise the Medicare Eligibility Age to 67?

Is raising the age of eligibility for Medicare to 67 from 65 an effective way to help improve the program’s finances? And would you be able to wait two additional years for coverage?

That’s just one of the many proposals currently being discussed in Washington as part of the debate about the future of the health insurance program. There’s certainly precedent for changing the rules: The age when individuals qualify for full retirement benefits from Social Security is climbing gradually to 67 after decades of standing at 65.


On its face, changing Medicare eligibility to age 67 would likely reduce growth in the program’s spending and, ideally, yield significant savings in Washington. At the same time, the change could encourage some employees to delay retirement and work beyond age 65. That, in turn, would increase payroll taxes and general revenues and bolster the Medicare and Social Security trust funds.

But a recent study from the Kaiser Family Foundation, a nonprofit group in Menlo Park, Calif., indicates that the savings could be much smaller than anticipated – and that the change could shift significant costs onto the shoulders of adults ages 65 and 66 as well as other government programs.

Indeed, the findings illustrate the “tough policy choices that lie ahead when Washington gets serious about reducing the federal deficit,” says Tricia Neuman, vice president at Kaiser who heads the organization’s research into proposed changes to Medicare.

The Kaiser study begins by assuming both full implementation of the 2010 health reform law and the higher eligibility age in 2014. As such, gross federal savings in 2014 would total about $31.1 billion. Net savings, though, would total only about one-quarter of that figure, or about $7.6 billion. That’s because Uncle Sam would end up spending more money on people covered by Medicaid ($8.9 billion) and on federal premium and cost-sharing subsidies ($7.5 billion) that are part of health-care reform.

At the same time, the federal government would end up forgoing $7 billion in Medicare premiums from individuals ages 65 and 66 who wouldn’t be enrolled in the program.

The study also found that health-care costs for employers would jump about $4.5 billion, if corporate medical plans – rather than Medicare – became the primary insurance coverage for 65- and 66-year-olds.

Workers, of course, also would feel the pinch. Kaiser estimates that – among the five million people ages 65 and 66 who would initially be affected by the change – about 75% would end up spending an average of $2,400 more for health care in 2014 than they would with coverage under Medicare.

In all, increasing the eligibility age to 67, Kaiser estimates, would result in a net increase of $5.6 billion in out-of-pocket costs for individuals who otherwise would have been covered by Medicare.


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About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.