Medicare at 60 Costs $155 Billion, According to CBO

Earlier this month, the Congressional Budget Office (CBO) released a report on the budgetary effects of lowering the Medicare eligibility age to 60. CBO estimates the policy would increase deficits by $155 billion over the six years from 2026 and 2031, while reducing the number of uninsured by about 400,000. This policy was proposed by President Biden during the 2020 Presidential campaign, and some lawmakers in Congress sought to include it in the early debates around the Build Back Better Act.

CBO’s deficit estimate of $155 billion between 2026 and 2031 is the net result of $390 billion in Medicare spending increases offset by $230 billion in reduced spending on other federal health care programs. Nearly $150 billion ($240 billion over 10 years) of the increased cost of lowering the eligibility age falls on the Medicare Part A Hospital Insurance trust fund, which is currently just six years from insolvency according to the latest Trustees' report. 

Cost of Lowering the Medicare Age to 60

  2026-2031 (CBO) 2023-2032 (CRFB)*
Increased Part A Costs $150 billion $240 billion
Increased Part B Costs $240 billion $400 billion
Increased Part D Costs $60 billion $100 billion
Premiums and DSH Savings -$80 billion -$130 billion
Increased Medicare Savings Program Costs $20 billion $30 billion
Subtotal, Increased Medicare Costs $390 billion $640 billion
Lower Medicaid Costs -$110 billion -$180 billion
Lower ACA Subsidy Costs -$100 billion -$160 billion
Lower Employer-Sponsored Insurance Exclusion Costs -$50 billion -$90 billion
Additional Effects  $30 billion $40 billion
Subtotal, Other Effects -$230 billion -$390 billion
Total Costs  $160 billion $250 billion

*Committee for a Responsible Federal Budget estimate assumes the policy is fully operational through the entire ten-year budget window. 

Sources: Congressional Budget Office and CRFB. Numbers rounded to the nearest $10 billion.

CBO estimates that over the 2026 to 2031 period, the increased costs for Medicare of $390 billion come from increases in spending for Parts A, B, and D, in addition to increased costs for the Medicare Savings Program and savings from premiums and Disproportionate Share Hospital payments. These increases are offset by $230 billion of lower federal spending from reduced subsidies for the individual insurance marketplace, less tax subsidy for employer-sponsored insurance, and lower Medicaid spending, as coverage shifts from those three sources to Medicare.

By 2031, the final year of CBO’s estimate, the policy will cost $30 billion. We estimate that if the program began in 2023, over the first fully operational ten-year period, the cost will be $250 billion. 

This is similar to our previous estimate that the policy would cost $200 billion from 2021 to 2030, which we published when analyzing the cost of President Biden’s 2020 health care plan.

CBO estimates that with the lower eligibility age, 7.3 million more Americans would be enrolled in Medicare Parts A and B. However, 2 million of those would have been enrolled in the individual market, 3.2 million would have previously had employer-sponsored insurance, and 1.8 million would have been enrolled in Medicaid. Only 400,000 people would have been uninsured.

Said another way, reducing the Medicare Age to 60 would reduce the uninsured population of the United States by only 1 percent. CBO did not specify whether total national health expenditures would increase or decrease under the policy, but they suggest mostly offsetting factors, "Medicare typically pays less for medical services than employment-based and nongroup coverage but more than uninsured patients and more than Medicaid for physicians’ services."

With the Medicare trust fund approaching insolvency and federal health spending rising rapidly, Congress should focus on lowering costs and improving trust fund solvency instead of expensive changes that do little to expand coverage.