Lowering Medicare’s Eligibility Could Lead To Reduced Costs For Employer Sponsored Plans: KFF

Lowering the Medicare eligibility age could also lower costs for employer-sponsored health plans as Democrats pressure President Joe Biden to fulfill his campaign promise to pursue the policy.

The Kaiser Family Foundation released two analyses Tuesday centering on lowering Medicare eligibility from 65 to 60. One analysis looked at the savings for employer plans and another the savings for those 60 to 64 that would be shifted onto Medicare.

Kaiser found that if people 60 to 64 were no longer enrolled in their employer-sponsored plan, the costs for those plans could drop by 15%. If people 55 and over were no longer enrolled, the costs drop again by as much as 30%.

The drops would occur as the higher costs for treating older Americans shift to Medicare.

“Health insurance premiums are largely determined by health spending,” Kaiser said. “Therefore, reductions in health spending for people with employer coverage would likely yield savings to employers, which could then also translate to lower employee premiums and/or higher wages.”

But there are some major caveats, chiefly how many older adults would leave their employer-sponsored plan for Medicare.

“Currently, many Medicare-eligible adults age 65 and older choose to maintain their employer coverage (Making Medicare the secondary payer),” Kaiser said.

Another analysis showed spending per person from ages 60 to 64 in large plans was $1,061 and 38% higher than the average spending of $770 per person of traditional Medicare beneficiaries.

“This comparison understates the savings that could be realized by shifting 60–64-year-olds to Medicare, since one would expect 65-to-69-year-olds to have roughly 20-25% higher spending, because health needs rise with age,” the analysis said.

Kaiser also found that average monthly spending for large plan enrollees of 60- to 64-year-olds resembled Medicare beneficiaries in their early 70s that use more services.

The analysis showed lowering the Medicare eligibility age could potentially save “money for people, employers and the federal government in the form of reduced tax subsidies for employer coverage.”

But a major downside to lowering the eligibility age could be the impact on providers as Medicare pays less than private insurance plans.

Large plans pay up to 2.5 times more than Medicare for the same inpatient admission, Kaiser said.

prior analysis from Kaiser said that if private plans paid the same rates as Medicare, their spending decreases by 41%, or over $350 billion, in 2021.

Kaiser’s analysis examined 2018 claims from 25.4 million beneficiaries in traditional Medicare. It also explored 2018 claims for nearly 18 million people in large employer plans, using data from IBM Health Analytics MarketScan Commercial Claims and Encounters Database.

It remains unclear whether lowering the eligibility age can make it through Congress, even though it was a priority for Biden during the campaign.

So far, Biden has not included the proposal in his massive infrastructure plan alongside several other healthcare items. He has also not detailed how lowering the eligibility age would be financed or administered.

However, Democrats in Congress appear keen to keep the policy issue at the forefront. A group of Democratic senators introduced legislation last week calling for people to have the option of buying into Medicare at age 50.

Another group of 80 House Democrats wrote to the White House on Monday calling for Biden to lower the eligibility age to 55. It calls for paying for the changes by giving Medicare the power to negotiate with drug companies to lower prices.

“Lowering the eligibility age and improving its benefits package would provide immediate and substantial relief for millions of individuals throughout the United States, as well as much-needed long-term security,” the letter said.


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