The need for long-term reforms to Medicare has been repeatedly raised. One is to raise the eligibility age from 65 to the Social Security full retirement age of 67, then tie it to increases in longevity. This and other reform proposals are made because the cost of Medicare is a large driver of record US budget deficits and debt. The Congressional Budget Office projects the US debt will reach $52.1 trillion in 2035, even before the passage of the One Big Beautiful Bill Act, which they project will add another $3.4 trillion over 2025–34. In this paper, we estimate the coverage and spending effects of eliminating Medicare coverage for those ages 65 to 66, except for people who qualify for Medicare through disability. We estimate how federal spending would change as well as the financial impacts on households, states, and employers.

Why It Matters  

The results matter because of large federal deficits and the impacts on people in those age groups. Net mandatory outlays for Medicare are projected to be $910 billion in 2025 and $1.75 trillion in 2035. Thus, Medicare is a potentially large target for cost savings. The full retirement age for Social Security has already been increased to 67, and increasing the age of Medicare eligibility would be consistent with this.

What We Found

We found that if Medicare’s eligibility age were increased to age 67, Medicare coverage would decline by 5.4 million, while 1.5 million people would remain on Medicare because they would have eligibility through disability. The number of people ages 65 and 66 with coverage other than Medicare would increase from 1.2 million to 6.2 million. Most of this increase, 2.7 million, would take up employer coverage; another 0.9 million would obtain nongroup coverage subsidized with Marketplace tax credits, while another 0.3 million would pay the full premium for nongroup insurance. There would also be a shift of 1.0 million people to Medicaid. Finally, we estimate that the number of uninsured would increase to 0.5 million from 0.1 million, with 6 percent of the population ages 65 and 66 lacking any health coverage, compared with 2 percent under the current law.

For the 1.5 million who remain on Medicare, spending would be $29,600 both before and after reform; because of disability, this is a very expensive group of individuals. The 5.4 million who would lose Medicare have average spending under current law of $9,500. After changing coverage under reform, the 2.7 million who have employer coverage would have average spending of $15,500. The 1.2 million with nongroup coverage would have average spending of $11,600. Those who would become uninsured would see average spending fall to $6,700 largely because of lower utilization. On balance, those who change coverage obtain employer and nongroup coverage, and spending increases relative to current coverage.

Overall health spending on those ages 65 and 66 would increase from $115.7 billion to $133.1 billion. The federal government would save $24.1 billion, which is a relatively small portion of the $80.0 billion it currently spends on Medicare for this group. Federal savings are limited because Medicare continues to cover a relatively expensive disabled population, and spending on Marketplace premium tax credits and Medicaid increases as people shift to those programs. Employers would see spending on premiums increase from $11.1 billion to $37.7 billion because of the influx of 2.7 million people to employer coverage. Household spending would increase from $20.1 billion to $32.2 billion because they would be responsible for higher premium payments and cost sharing than under Medicare. State spending, mostly for Medicaid, would increase from $1.7 billion to $3.9 billion.

How We Did It

We estimated the impacts of increasing the Medicare eligibility age using data from the American Community Survey and the Medicare Current Beneficiary Survey, augmented by two models developed at the Urban Institute: HIPSM and MCARE-SIM. HIPSM, the Health Insurance Policy Simulation Model, is designed to simulate the impact of policies affecting the under-65 population, and MCARE-SIM, the Medicare Policy Simulation Model, simulates policies affecting the Medicare population, such as a cap on out-of-pocket spending or the addition of a dental benefit. MCARE-SIM provided data on current coverage and spending. HIPSM was used to estimate coverage and spending when Medicare was no longer available.