NCPA - National Center for Policy Analysis


December 15, 2009

A proposal to allow 55- to 64-year-olds to buy Medicare coverage is gaining traction in the Senate deliberations on health care reform.  However, there will be many unintended consequences if Medicare is extended to include the 55- to 64-year-old population, say Andrew J. Rettenmaier and Thomas R. Saving, the executive associate director and director, respectively, of the Private Enterprise Research Center at Texas A&M University and senior fellows with the National Center for Policy Analysis.

The uninsured among the 55- to 64-year-old population is the target of the proposed Medicare extension.  Those who are less healthy may not be able to find affordable health insurance.  How does the health status of this age group compare by insurance coverage, ask Rettenmaier and Saving?

  • Individuals with employer-provided or self-purchased health insurance report the best health, while 64 percent of those covered by Medicare and/or Medicaid report fair or poor health.
  • By contrast, 76 percent of the uninsured people in this age group report that their health is good, very good or excellent, and 24 percent report fair or poor health.

Thus, the evidence suggests that uninsured older Americans are not uniformly in low-income families nor are they uniformly in poor health, say Rettenmaier and Saving. 

Another unintended consequence of the proposed change is its impact on the labor force participation of the 23 million baby boomers between 55 and 64 who currently work.  While health insurance coverage should be portable from job to job, the lack of portability because of the present tax treatment of health insurance appears to influence the timing of retirement, say Rettenmaier and Saving: 

  • Social Security's early retirement age is 62 and 40 percent start claiming benefits at this age.
  • But there is a second spike at 65, the age of eligibility for Medicare, when 34 percent join the Social Security rolls.

This suggests that many older Americans continue to work until they are eligible for Medicare benefits, say Rettenmaier and Saving.

Source: Andrew J. Rettenmaier and Thomas R. Saving, "Medicare at 55," National Center for Policy Analysis, December 15, 2009.

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