Proposed Schedule for Increasing the Eligibility to 67 and 70
I. Rationale for Increasing the Eligibility Age
A. Seniors' life expectancies are longer today than when Medicare started.
When Medicare was established by the Social Security Amendments of 1965, men's life expectancy was approximately 67 years and women's life expectancy was approximately 73 years. By 1996, men's life expectancy had increased to 73 years and women's had increased to 79 years. 1 (See attached chart. )
Additionally, research shows that individuals' periods of disabilities are increasingly delayed and compressed making it possible for them to work longer. According to one study, disability rates among the elderly fell from 24.9 percent in 1982 to 21.3 percent in 1994, a decline of about 1.5 percent per year or 1.2 million disabled persons in total (out of 8.3 million). 2 In addition, a recent RAND study found that the proportion of older Americans who can perform the simple tasks of everyday life has risen significantly. For example, from 1984 to 1993 there was a 3.5 percentage point decline in the difficulty walking a quarter mile (about three city blocks) from 25.8 percent to 22.3 percent. 3
It should be noted that at the inception of the Medicare program, a single eligibility age for all people inherently meant that subgroups that tend to live longer (e.g. white women) would receive more Medicare benefits than subgroups with lower life expectancy (e.g. African American men). Increasing the eligibility age does not alter that relationship.
B. Policies that encourage workers to remain in the workforce longer would alleviate budget constraints and would likely lead to increased economic growth.
By 2030, Medicare is projected to be between 28 and 33 percent of the budget, and will grow from about 2 percent of GDP to 6-8 percent of GDP. Raising the eligibility age to 67 is estimated to save $21 billion over ten years, $120 billion over 20 and $620 billion over 30 years, which is estimated by CBO to reduce Medicare spending as a percent of GDP by 0.06 percent in 2020 and by 0.2 percent by 2030. Increasing the eligibility age to 70 would save $62 billion over 10 years, $354 billion over 20 years, and $1.8 trillion over 30 years.
In addition to resulting in budget savings, raising the Medicare eligibility age would also help address the financing issues of Medicare. Currently Medicare has four workers supporting each Medicare beneficiary; however by 2020, there will be only about two workers supporting each Medicare beneficiary. This changing ratio creates public financing challenges and inter-generational transfer issues. If workers remained in the workforce longer, this imbalance would be improved.
While evidence is varied on the extent to which health considerations contribute to the decision to retire early, most agree that they are a factor in the decision to retire. According to SSA researchers, health coverage is a factor, but the decision to retire is based primarily on financial considerations. Another study by RAND researchers concludes that the presence of health benefits increases the probability of retiring by 50 percent. 4
Delaying retirement could increase the nation's economic output, assuming that the elderly could obtain employment. While there is some concern that older workers are not attractive to employers because of the risk of higher health care costs, the economy has absorbed large influxes of workers in the past and employers' negative perceptions of older workers seem to have dissipated. 5
C. Many vulnerable beneficiaries, e.g. the disabled, will continue to be eligible for Medicare; others may qualify for Medicaid or state assistance programs. According to one estimate, approximately 348,000 beneficiaries age 65-66 in 1992 would also have been eligible for Medicare due to disability or end-stage renal disease. 6
II. The Problem
A. Increased Number of Uninsured.There is consensus that some people aged 65-66 would be uninsured if the eligibility age were increased, although experts acknowledge the uncertainty in these estimates attributable to labor force
fluctuations and the impact of other policy changes, such as the increase in the Social Security age.
- Tim Waidmann of the Urban Institute estimates 527,000 people aged 65-66 would be uninsured if he assumes that people who have no supplemental coverage and incomes below $12,500 would be uninsured. If he assumes that all people who earn less than $25,000 and now have only Medigap coverage would also be uninsured, the number of newly uninsured would be 1.75 million. The middle point of these estimates would be approximately 1.14 million uninsured people, or about 22 percent of that age group.
A study by Loprest and Uccello of the Urban Institute found that about 400,000 beneficiaries would be uninsured if the age were increased to 67 immediately.
In Context. If these estimates are accurate, this would mean that about 11-22 percent of people aged 65-66 would be uninsured. This range is comparable to the percentage uninsured in other age groups. For example, according to the 1998 Current Population Survey (CPS), in 1997, 14.1 percent of people age 45-64 were uninsured and 17.3 percent of people aged 35-44 were uninsured. Younger people had even higher rates of being uninsured--about 30 percent for people between 18-24. 7These estimates may not adequately consider the following :
- The policy would be phased-in, allowing beneficiaries the opportunity to plan for the increase in eligibility age.
Several studies suggest that older Americans' income and assets are expected to increase. Reports by 1991 Advisory Council on Social Security and The Lewin Group estimate that fewer beneficiaries will have low-incomes in the future than in the past. 8 The Lewin Group projects that baby-boomers would have a median family income of $47,198 (1990 dollars) in 2010, the year before the first boomers turn 65. The median income for elderly households in 1996 was $19,448.
Since 1985, Americans have begun to stay in the workforce longer (See attached paper "Why Individuals Retire Early" by the Social Security Administration). Because early retirement is often associated with reduced levels of health insurance coverage, this change in retirement trend may mean that more near-elderly will be insured. 83 percent of full-time workers aged 61-64 have coverage, and this rate is only slightly lower than younger full-time workers. 9 On the other hand, there is evidence that employers are increasingly less likely to provide health insurance benefits.
Evidence suggests that the baby-boom generation may be more inclined to continue working as they age. A recent AARP survey of 2,000 baby-boomers aged 34-52 found that 80 percent said they expected to keep working at least part time after age 65. 10 B. Evidence suggests that some workers would have more difficulty extending their careers due to health conditions.
- According to a SSA analysis of the early-1990s Survey of Income and Program Participation (SIPP) data, among employed persons aged 62-64, 16.1 percent of men and 14.7 percent of women report a severe disability.
According to GAO, using SIPP data, 22-31 percent of men age 62-67 indicate that a disability limits their ability to work.
A GAO report found that older blue-collar workers may be disproportionately affected by changes that postpone retirement benefits because they may be less attractive to employers. They are at greater risk for having several health problems compared with older white-collar workers. 11 (See GAO chart below.)
According to GAO's analysis, blue-collar workers are more likely to have musculo-skeletal problems, respiratory diseases, diabetes and emotional disorders than white-collar workers. For example, blue-collar workers are 58 percent more likely to have arthritis, 42 percent more likely to have chronic lung disease, and 25 percent more likely to have emotional disorders. Moreover, blue-collar workers are 80 percent more likely than white-collar workers to experience pain that affects their ability to perform their jobs.
Older Blue-Collar Workers' Earnings, Retirement Rates and Unemployment
Rates, by Health Status (aged 53-63)