Ever wondered why you can’t get Medicare at 62 but you can get Social Security at 62?
You would think that these two critical systems for retirees (and those who will soon stop working) would be coordinated to the same age of initial eligibility.
Sadly, that’s not how the current rules are written. You can’t get Medicare at 62 today, but that could change in the near future if a group of lawmakers gets their way.
How Medicare Works Under the Current Law
Under current law, absent certain exceptions, age 65 is the earliest age you can sign up for Medicare. This age has been set since the inception of Medicare in 1965.
The discussion of lowering the age of initial eligibility has come up in the past, but it never had the necessary support to advance through the legislative process.
In 2021, however, there are several proposals gaining traction in Congress which could lower the Medicare age to 62… or even younger.
Proposed Changes to Allow People to Qualify for Medicare at 62 (or Even Earlier)
The most prominent proposal is the Medicare at 50 Act sponsored by Senator Sherrod Brown. Asking for the age to be lowered by 15 years may be too much of a stretch; other proposals call for a more moderate age 60 or 62 as the age of eligibility.
The basic premise of all of these plans is simple: Instead of being able to access Medicare at 65, individuals would have the option of buying into Medicare at an earlier age.
The Benefits of Lowering the Age of Eligibility for Medicare
From 10,000 feet up, the idea of lowering the age is good news for some. I’ve had clients who were able to save large sums and could financially afford to retire… but felt like they had to keep working until they could get guaranteed health coverage at age 65 through Medicare.
And then there are those who are forced into early retirement. If you lose your job and are over 55, finding a new job isn’t always easy. So what do you do for healthcare at that point?
The plans you can buy on the healthcare exchange plans are very expensive for older Americans. This is where access to Medicare at 62 or even younger ages could help.
According to one study, a typical 60-year-old could buy into Medicare for about $8,000 less per year as compared to a gold-level plan on the insurance exchanges, and $3,700 less than buying a bronze-level plan.
A 2019 Kaiser Family Foundation poll also found most Americans support expanding Medicare coverage. 77% of respondents support the idea of introducing a Medicare buy-in for people as young as 50. This support seems bipartisan; 85% of Democrats and 69% of Republicans polled approved of the idea.
At face value, it seems that lowering the eligibility age could be the perfect solution that provides the most options for individuals who are nearing retirement age.
But despite the broad idea of this proposal having public support, there are a few roadblocks that any of these proposals to lower the age will likely meet.
The Challenges of Changing Medicare’s Age of Eligibility
First, there are the funding issues. If lowering the age to access increased the cost to administer the Medicare program, the chances of proposed changes passing will drop.
The Part A account that funds the hospitalization and related services faces insolvency by 2026. Insolvency means that Medicare wouldn’t be able to fully reimburse hospitals, nursing homes, and home health agencies for promised benefits.
If this happens, Medicare patients would be hit hard. There’s no way around this. You cannot cut provider payments for medical services without impacting the beneficiaries of those services.
In response to the funding concerns, the Democrats who are sponsoring this bill say that Medicare’s funding wouldn’t be touched under the proposed legislation since those buying the coverage would be required to pay the entire cost.
That means whatever the cost is to the government, would also be the cost to the individual.
Second, you’re going to get lots of pushback from healthcare and health insurance companies. They’ll spend millions to lobby against this, which could impact the outcome of the law changes.
From the hospital’s perspective, they’ll be losing millions of Americans from their most profitable group of patients: Those who are 50 and up and covered by private healthcare. There is a big difference between the reimbursement rate between a Medicare patient and a patient with private health insurance.
There was another Kaiser study that found that private insurers paid nearly double the Medicare rates for the same hospital services. So a proposal like this could be catastrophic for the bottom line of hospitals, and they’ll likely go to war to keep this from happening.
The health insurance companies are going to push back as well because not only will they lose the revenue from this enormous group of the population, but they see this as a slippery slope to a single-payer system where insurance companies are no longer needed.
Some of the lawmakers backing these bills to lower the Medicare age have even said that their eventual goal will be to eventually get to the point where literally everyone is covered by Medicare, but it has to be completed in incremental steps.
Insurance companies are likely to see the proposal of lowering the Medicare age of eligibility as a first and very dangerous step towards becoming obsolete.
The third issue facing this proposed change is that insurance and healthcare costs to everyone under 50 would likely increase.
The big hospitals aren’t going to just lay down and accept a lower profit margin. They’ll likely increase costs to make up for lost revenues, which will be passed down to insurance companies – which will then be passed down to consumers in the form of higher insurance premiums.
Weigh In: What Do You Think of Proposals to Lower Medicare’s Age Requirement to 62 or Less?
So now I’d like to hear from you. Do you think lowering the initial age of Medicare eligibility is a good idea? Would you be more apt to support Medicare at 62 so it would line up with Social Security’s eligibility age? I’d like to hear your thoughts in the comments below.
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