Lowering the Age of Medicare Eligibility Would Likely Reduce Health Spending for Employers, But Raise Costs for the Federal Government by Covering More People in Medicare

Two new KFF analyses find that lowering the age of Medicare eligibility from 65 to 60 could significantly reduce health spending for employers, who could potentially pass savings to employees in the form of lower premiums or higher wages.

Additionally, per person health spending for older adults who move from employer coverage on to Medicare would likely be lower, though such moves would shift costs to taxpayers and increase Medicare program expenditures overall.

President Biden proposed lowering the age of Medicare eligibility to 60 during the presidential campaign, with the goal of broadening coverage and making health coverage affordable for older adults.

To illustrate the potential for employer savings, one analysis shows that lowering the age of Medicare eligibility to 60 could reduce costs for employer health plans by as much as 15 percent if all eligible employees shifted from employer plans to Medicare. Similarly, costs for employer plans could drop by as much as 30 percent if all people age 55 and over were no longer in employer-sponsored insurance, the analysis finds, and by up to 43 percent if everyone 50 and older chose to enroll in Medicare. The actual impact on health spending for employers would depend on how many older workers shifted from employer coverage to Medicare.

The savings in employer plans would come from employers covering fewer older adults, who tend to have higher health care spending than younger enrollees.

A second analysis by KFF experts shows how 60- to 64-year-olds who move from employer plans to Medicare could be covered more cheaply because Medicare payments to hospitals, physicians and other health care providers are generally lower than what private insurance pays.

Average monthly health care spending (per person) for enrollees ages 60-64 in large employer plans is 38 percent higher than average monthly spending for traditional Medicare beneficiaries ages 65-69 ($1,061 vs. $770), despite the fact that health needs and service use tend to increase with age.

Lowering the age of Medicare eligibility could lower overall health care costs, but would also shift costs from employer plans to the Medicare program. Such a shift also would likely lead to lower revenues for hospitals, physicians, and providers who deliver care to older adults who choose Medicare over employer coverage.

The full analyses are available here:

• How Lowering the Medicare Eligibility Age Might Affect Employer Sponsored Insurance Costs
• Health Spending for 60-64 Year Olds Would Be Lower Under Medicare Than Under Large Employer Plans