More than 150 House Democrats are pushing President Joe Biden to lower Medicare’s eligibility age as part of his American Families Plan. It was one of Biden’s campaign promises.
They want to allow all Americans age 60 and older to sign up for the program — a reform that would add roughly 23 million patients to the program’s rolls. Not only is this idea incredibly expensive — it targets those least in need of help securing health insurance.
The central problem facing Medicare in the years ahead isn’t too few enrollees. It’s too many. Medicare is funded by payroll taxes. And the share of the population that is working is declining.
The number of Medicare beneficiaries, meanwhile, is surging. Between 2010 and 2019, enrollment grew by 29%, or more than 13 million. Today there are three workers per beneficiary. Within 10 years, there will be 2.5 workers per Medicare enrollee.
Many retirees believe they “paid into” Medicare throughout their working lives and so expect the program to be there for them in their golden years. But Medicare’s trust fund is running out of money. The Congressional Budget Office now projects that the program’s Part A hospital insurance fund will be exhausted in three years.
It will take big cuts in services or big tax hikes to get that trust fund back on sound financial footing. The Medicare Payment Advisory Commission recently concluded that keeping Part A solvent for the next 25 years would require a 17% cut in the program’s hospital spending. That amounts to roughly $1,000 in cuts per beneficiary per year.
So it’s hard to imagine a less opportune moment to make 23 million new patients eligible for the program.
Lowering Medicare’s eligibility age isn’t just bad for its long-term sustainability. It would also be outrageously costly — as much as $100 billion a year, according to an estimate from Harvard Medical School. That’s on top of the roughly $800 billion a year the program currently consumes, as of 2019.
All that money would pay for the coverage of a group of people who generally don’t need a hand. Six in ten people between the ages of 60 and 64 have employer-sponsored coverage. Another 11% of people in this age group have individual market coverage. It makes little sense to essentially compel these folks to drop their private coverage so the government can pick up the tab.
People between the ages of 60 and 64 are among the most likely to have insurance. Just 8% of those who would be newly eligible for an expanded version of Medicare are currently uninsured. That’s about two-thirds the uninsured rate for all adults.
Amazingly, enrolling in Medicare may not be in the financial interests of the older adults Democrats are targeting. According to a study from Avalere, a consultancy, many older adults, especially those with low incomes, would pay more in premiums under Medicare than they would for private coverage through Obamacare’s exchanges.
That same study found that lowering the eligibility age could be a boon to many wealthier older adults. They’d pay less in premiums under Medicare than they currently do for private exchange coverage.
In other words, Democrats are asking the president to get behind a push to give relatively well-off, relatively well-insured people taxpayer-funded coverage — and put Medicare’s financial future at risk in the process.