Health insurance can be highly costly for the near-elderly who retire or are forced to retire before they are eligible for Medicare at age 65 -- hence access to health insurance becomes a key issue in deciding whether to retire early. To address the situation, proposals have been made to create a way for retired persons under 65 to "buy into" the Medicare program early by paying premiums that are lower than in the private market.

In studies by the Urban Institute, researchers found:

• The number of employers who provide health insurance for retired employees prior to their eligibility for Medicare has declined.

• Among those retiring early, the uninsured rate increases from 7 percent to 13 percent.

• Workers facing steep increases in insurance premiums were significantly less likely to retire early than those who faced only modest increases; thus a 50 percent increase in insurance costs would reduce retirement rates by 7 percent for men and 10 percent for women.

A Medicare "buy in" program for the near-elderly in which participants' premiums covered all of the costs would increase the early retirement rate by 6 percent. If the program is means-tested and fully subsidized for the bottom 20 percent, early retirement rates would increase between 17 and 18 percent.

Experts have argued that promoting early retirement will exacerbate the problems of Social Security by shrinking the number of workers supporting the growing number of retirees.

Source: Tanya T. Alteras, "Availability of Retiree Health Insurance Important Factor as Near Elderly Consider Leaving Work Force," Findings Brief, November 1999, Changes in Health Care Financing and Organization, Alpha Center, 1350 Connecticut Avenue N.W., Suite 1100, Washington D.C., 20036, (202) 296-1818.

For Urban Institue study "Health Insurance Coverage Transitions of Older Americans"