Raising the Medicare eligibility age to 67 saves far less than previously projected, a revelation that makes the policy far less attractive in upcoming deficit reduction negotiations in Congress.
The long-debated policy now cuts the deficit by just $19 billion over a decade, according to a report released Thursday by the nonpartisan Congressional Budget Office. Last year, the same policy — of gradually lifting the eligibility age by two months every year until it reached 67 — was found by the CBO to save $113 billion over the same time period.
The idea has been floated since 2011, when President Barack Obama and Speaker John Boehner nearly agreed to a broad debt deal that adopted it. But while conservatives still support the policy, along with deeper long-term cuts to retirement benefit programs, the White House and top Democrats have since cooled to it.
“This would have been a tough sell when it raised $100 billion. It’s hard to imagine making such a drastic change now that we know it saves far less,” said a senior Senate Democratic aide, in response to the CBO report.
A top House Republican budget aide declined to comment.
Top Democrats have come to be believe the idea is bad politics and bad policy. Progressives despise it — some liberal activist groups have threatened to go after any Democrat that votes for the idea. Slashing benefits for Medicare, which is cherished by seniors and seen as a crown jewel of liberal governance, is not something they’d do lightly.
Part of the reason for the low savings is Obamacare. Moving 66- and 65-year-olds off Medicare means they’ll likely be eligible for federal subsidies or the expanded Medicare program under the 2010 law. But a larger part of the reason for the dramatic drop since last year, according to one expert, is that the CBO appears to have fixed a technical error.
“They were previously basing their estimates of the average costs of the 65-66 year olds who would no longer be on Medicare on the average costs of ALL 65 and 66 year old Medicare beneficiaries,” said Loren Adler, the research director at the Committee for a Responsible Federal Budget, “which includes disabled and end stage renal disease beneficiaries who are clearly far more expensive than your average 65 or 66 year old.”
The new findings by the budget office reveal the eligibility age increase would cut federal spending by $23 billion while reducing revenues by $4 billion.
“The much smaller reduction in Medicare spending, combined with a similar increase in non-Medicare spending, results in a net change in projected outlays that is much smaller than previously estimated,” CBO concluded.
The budget conference committee, spearheaded by Senate Budget Chair Patty Murray (D-WA) and House Budget Chair Paul Ryan (R-WI), is scheduled to hold its first public hearing next Wednesday on Capitol Hill. Members of Congress are skeptical it will reach a deal, given the deep partisan divide over whether deficit reduction should include higher tax revenues.