Expert's View

Whether you are an employee or a retiree, you know that the current age when you become eligible for Medicare is 65. Since 1965 when the program began, the life expectancy of men and women in the U.S. has been on a steady rise. So has the number of people who will be eligible for Medicare benefits. Using rough averages, the life expectancy of a man in 1950 was 65. By 2010 it was up to 70. For a woman it was 70 and 74.

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Since the number of years during which someone would be covered by Medicare has increased so significantly, the Congressional Budget Office has suggested that the eligibility age for Medicare be raised beginning with those who were born in 1949 until it reaches 67 for those born in 2027. As it points out, “These increases are similar to those already underway for Social Security’s full retirement age (FRA)―that is, the age at which workers become eligible for full retirement benefits―except that scheduled increases in the FRA include a 12-year period during which the FRA remains at 66.”

CBO estimates that implementing this option would reduce federal spending by about $18 billion over the 2012-2016 period and as much as $125 billion over the 2012-2021 period. Part of the savings come from simply increasing the age of eligibility; however, other savings may come from people delaying their application for Social Security and applying for both benefits as a package.

Not everything in this proposal works to reduce the deficit. For example, CBO predicts that there would be increases in Medicaid costs. And, not surprisingly, “it would shift costs that are now paid by Medicare to individuals and to employers that offer health insurance to their retirees.”

Next time I’ll talk about CBO’s proposal to increase the premiums for Medicare Part B.

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