Raising Medicare's eligibility age: How much money would it save?

Both these effects would increase government spending. Roll them into the equation, and increasing the Medicare eligibility age by two years would net a savings of $113 billion over the 2012-to-2021 period, according to the CBO’s numbers.

Some other studies predict that the government’s savings might be somewhat lower. Using different economic assumptions, a 2011 Kaiser Family Foundation study held that immediately raising the Medicare eligibility age to 67 would generate $5.7 billion in net savings to the federal government in the first year of savings.

And Kaiser points out an expensive side effect of the move. As noted above, many 65- and 66-year-olds would stay with private insurance, either by working longer and buying it on the open market. This would shift health-care costs onto their employers, or themselves.

Kaiser figures that employer retiree health-care costs would go up by $4.5 billion annually in an age-67 Medicare regime. Out-of-pocket costs for 65- and 66-year-olds would collectively increase by $3.7 billion a year.

“Given the magnitude of the changes that we estimate would occur by raising the Medicare eligibility age, this analysis underscores the importance of carefully assessing the distributional effects of various Medicare reforms and savings proposals to understand the likely impact on beneficiaries and other stakeholders,” concludes the Kaiser Foundation study.

Still, something must be done, say many Republicans and some Democrats. As the US budget is now structured, entitlement program costs will be huge drivers of future deficits.

“Medicare’s unfunded promises in current dollars reach into the many tens of trillions of dollars,” write the Heritage Foundation’s J.D. Foster and Alison Acosta Fraser in a November study of entitlement reforms.

Social Security is already slowly raising its eligibility age to 67, note Foster and Fraser. Waiting five years, then starting to gradually align Medicare’s and Social Security’s eligibility rules, would bring the government incentives for workers to retire into alignment.

“The long-term savings in Medicare would be profound,” they write.

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