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Raising Medicare's eligibility age: How much money would it save?

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But you’ll notice that we said “in isolation." That’s because the government can’t change Medicare in such a profound way without producing a spillover effect on other expensive government programs. This reduces the amount of cash the move would actually produce for Uncle Sam.

The CBO estimates that the move would end up cutting off about 5.4 million people. Of these, some would retain private health insurance by working longer. Others would switch to a spouse’s insurance. Some would simply do without.

But those who could would likely switch to Medicaid. After all, Obama’s Affordable Care Act aims to include those who make up to 133 percent of the federal poverty rate in this program for lower-income Americans. Others would buy private insurance through the ACA’s new state exchanges, where they might be eligible for government subsidies, depending on their income.

Both these effects would increase government spending. Roll them into the equation, and increasing the Medicare eligibility age by two years would net a savings of $113 billion over the 2012-to-2021 period, according to the CBO’s numbers.

Some other studies predict that the government’s savings might be somewhat lower. Using different economic assumptions, a 2011 Kaiser Family Foundation study held that immediately raising the Medicare eligibility age to 67 would generate $5.7 billion in net savings to the federal government in the first year of savings.

And Kaiser points out an expensive side effect of the move. As noted above, many 65- and 66-year-olds would stay with private insurance, either by working longer and buying it on the open market. This would shift health-care costs onto their employers, or themselves.

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