Earlier this spring, Democratic presidential candidate and former Vice President Joe Biden announced a proposal to lower the Medicare eligibility age from 65 to 60 years. This idea aims in part to protect older workers whose jobs may be affected by the COVID-19 pandemic.
Making Medicare available to those between 60-64 years old would invite up to 20 million new beneficiaries into the program. In addition to its effects on individuals, this policy would have meaningful effects on the federal budget, private insurers, employers, and providers.
To the extent that privately insured individuals choose to enter Medicare earlier, a main effect would be public spending in large part replacing private spending for their health care. However, other more nuanced effects would also arise. As relatively older and higher-spending enrollees leave private insurance for Medicare, insurer and employer medical costs, as well as employee premiums, would decline. Similarly, government subsidies for the ACA Marketplace would decrease if a healthier risk pool remains.
A lower Medicare eligibility age would shift some Medicaid enrollees into Medicare, which has implications for the federal government and states, including relieving financial stress on states facing increased Medicaid enrollment with lower revenues during this time of fiscal uncertainty.
The proposal could also have labor market effects. Some older individuals may feel encouraged to retire early, while others who continue to work may choose to stay with private insurance. These changes affect Social Security spending and personal and employer tax receipts for the federal government. To what extent Medicare will serve as primary or supplemental coverage for people who are still working in this age range has yet to be clarified.
Provider reimbursement would be affected as well. Because Medicare pays lower prices than private insurers, enrollees who shift from private insurance into Medicare would bring lower prices to providers. However, enrollees who shift from Medicaid or no insurance would bring effectively higher prices.
Considered together, the various effects of such a policy could increase Medicare spending by about $40 billion to as high as $100 billion a year. During an era of economic uncertainty for the nation, providing coverage for a substantial portion of the population with relief for states and employers at a somewhat modest cost may garner broad appeal across stakeholders.