Upper Income, Insured Americans Gain Under Biden Plan to Lower Medicare Eligibility Age

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By AnneMarie Schieber

Democratic presidential nominee Joe Biden’s plan to lower the Medicare eligibility age to 60 will only help a group of Americans with high income and health insurance coverage rates.

The income per household member for Americans ages 60-64 is $42,457, the fourth highest of 20 age brackets, according to the Current Population Survey for 2018 (CPS). The difference in net worth between age groups is even more striking. In 2017, the median wealth for individuals ages 65 -69 was $236,900, second behind those ages 70 to 74, at $302,300, the CPS reports.

In terms of insurance coverage, the CPS does not have a specific breakdown for those between ages 60 and 64, but for individuals between ages 55 and 64, the uninsured rate is 11.2 percent.

The Biden proposal raises a question of fairness, says John Goodman, co-publisher of Health Care News.

“It would tax people who are least likely to have health insurance and who can least afford the premiums and spend money on people who are already insured and don’t need any help from government,” Goodman said.

Medicare is funded predominantly by payroll taxes of working Americans and adding beneficiaries will surely put a strain on a system already under fiscal pressure, says Robert Moffit, senior fellow of health care studies at The Heritage Foundation.

“This would be like pouring gasoline on the fire,” Moffit said.

A “Progressive” Vision with Questions

The Biden plan, part of the candidate’s “progressive vision for the country,” allows individuals ages 60 to 64 to enroll in Medicare “if they choose.” Biden states that Americans age 60 would get the same benefits as they would when they turn 65.

“This would make Medicare available to a set of Americans who work hard and retire before they turn 65, or who would prefer to leave their employer plans, the public option [proposed], or other plans they access through the Affordable Care Act before they retire,” Biden stated.

Currently, Medicare is available to all Americans age 65 or older, younger people with disabilities, and people with end-stage kidney disease. The program covers hospitalization (Part A),  physician visits (Part B), and prescription drugs (Part D). As enrollees quickly learn, Medicare is not “free.” There are no premiums for Part A for most beneficiaries, but there are deductibles and co-insurance for hospital stays, and all enrollees pay premiums and fees for Parts B and D.

It is not clear if the plan is a “buy-in,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

“While [Biden] discusses that people can keep their employer coverage, he doesn’t say anything that suggests people will be paying ‘full-price,’” MacGuineas said. “Our assumption is that the Biden plan would offer Medicare as it currently is offered—with a partial premium for Parts B and D and nothing for Part A—though there is some ambiguity because there is no full plan yet.”

Another question is what is motivating the desire to lower the Medicare age.

“When Al Gore proposed a Medicare buy-in in 2000 when he was running for president, there really was a problem,” said Merrill Matthews, a resident scholar with the Institute for Policy Innovation. “A 62-year-old who had been downsized had to go to the individual health insurance market to buy coverage and it could be very expensive because of age and pre-existing conditions.

“So the question for Biden, which he never addresses, is why isn’t Obama-Biden-care working the way it was supposed to?” Matthews asked.

The Burden of Early Retirement

Biden states that Americans ages 60-65 are free to remain on an employer’s health plan and that employers would be prohibited from discriminating against this age group or pushing older workers into Medicare.

There is also the concern that a lower Medicare age would encourage people to take early retirement.

“That could weaken the economy,” MacGuineas said. “On the other hand, if lowering the age reduces the costs to employers for providing health coverage, that could actually lead to later retirement; so there will be some offsetting effects.”

Early retirement is bad social and bad economic policy, Moffitt says.

“What we ought to be doing is tapping into the extraordinary talents, abilities, and skills of people who are still very productive and have a huge amount to offer by not only their institutional knowledge but the fact that many are still very healthy,” Moffitt said. “And in terms of the economy, our workforce needs more people, not fewer.”

Putting Trust Fund in Jeopardy

Costs associated with the plan to lower the Medicare eligibility age to 60 would be financed “out of general revenues to protect the Medicare Trust Fund,” Biden states.

That suggests Medicare will be available to younger people under a “buy-in” program. Such an option, however, doesn’t make sense, Moffitt says.

“I don’t know anyone who would buy a Medicare Part A policy,” Moffitt said. “Unlike conventional insurance, you pay more, the more you use.”

Patients must pay $352 each day they are hospitalized between 61 and 90 days, and more per day for longer periods.

If Biden intends to offer Part A to younger enrollees, not as a “buy in” but premium-free, that would put pressure on the Medicare Trust Fund.

According to the Medicare Boards of Trustees’ 2020 Annual Report, expenses exceeded income by $5.8 billion. Deficits will deplete the trust fund for hospitalization by 2026.

“What that means is, under current law, Medicare will not be able to cover all the benefits that have been promised, not the short-term or long- term standards or what the trustees call ‘financial adequacy,” Moffitt said. “What they are really saying is we are going to see very big benefit cuts over time or big tax increases to keep the program solvent.”

The Medicare board report states that the President and Congress should work together urgently to fix the shortfalls.

“A plan to lower the eligibility age is directly incompatible with that recommendation. I defy any serious analyst to demonstrate that Medicare’s financial condition is anything but worsening,” Moffitt said. “I do not know where Biden’s head is on this.”

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