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Summary

New Avalere analysis finds that lowering the Medicare eligibility age from 65 to 60 could expand access to Medicare coverage for an additional 24.5 million individuals, but Medicare premiums may be less affordable in some cases than subsidized exchange coverage.

As part of the continued debate about major legislative healthcare reforms in 2021, lowering the Medicare eligibility age to 60 has consistently been among the top Congressional Democratic priorities. Under an expansion of the Medicare program, individuals who turn 60 would be eligible to enroll in Medicare and forgo their existing forms of coverage or, in the case of the uninsured, newly enroll in health insurance. An expansion of Medicare eligibility, depending on the exact parameters of the policy, could lead to as many as 24.5M additional individuals receiving Medicare coverage (additional details available in Appendix B), primarily shifting from some form of commercial market coverage.

Importantly, simply expanding Medicare eligibility does not guarantee premium affordability. The current design of the Medicare program could lead to some low-income beneficiaries—particularly those who switch from subsidized exchange coverage—spending more on premiums in Medicare than they currently spend. For lower-income individuals (e.g., those at 138% of the federal poverty level [FPL]), current exchange subsidies1 are consistently more generous than the subsidies available to Medicare beneficiaries. For higher income individuals above 400% FPL, Medicare can offer significant premiums savings relative to exchange subsidies.

“Under an expansion, the intricacies of the Medicare program will create winners and losers,” said Massey Whorley, Associate Principal at Avalere. “Policymakers need to consider all the potential impacts to ensure that patients benefit from better coverage and lower premiums under a Medicare expansion, regardless of their income.”

Medicare Compared to Exchange Premiums

In order to determine the expected difference in premium spending for individuals on subsidized exchange coverage compared to Medicare—both fee-for-service (FFS) with Medigap and Medicare Advantage (MA)—Avalere conducted an analysis of 4 major cities in the US. For each, Avalere estimated exchange premiums, after subsidies, for a 60-year, non-smoker and compared them to Medicare premiums for a 65-year-old at 3 different income levels. Importantly, this analysis relies on the current exchange subsidy structure that is available through the end of 2022 under the American Rescue Plan Act. President Biden has proposed making these enhanced subsidies permanent.

For very low-income individuals making ~$18,000 (138% FPL) and ~$32,000 (250% FPL), subsidized silver coverage is always lower than Medicare FFS with Medigap and MA premiums. In Houston, TX and Los Angeles, CA, this is true for both silver plans and gold plans. For higher income individuals making ~$52,000 (400% FPL) or more, however, subsidized exchange coverage is significantly more expensive than Medicare FFS + Medigap and MA.

Table 1. Comparing Premiums in Medicare and Subsidized Exchange Coverage, by Income, by City, 2021
Annual Income Subsidized Exchange Coverage: Silver Total Medicare FFS + Medigap Total MA
Houston, TX
138% $0 $277 $149
250% $88 $284 $149
400% $344 $284 $149
Miami, FL
138% $0 $391 $149
250% $101 $398 $149
400% $356 $398 $149
Los Angeles, CA
138% $1 $277 $149
250% $98 $284 $149
400% $354 $284 $149
Chicago, IL
138% $1 $268 $149
250% $93 $275 $149
400% $348 $275 $149
Average
138% $1 $303 $149
250% $95 $310 $149
400% $350 $310 $149

Medicare coverage and commercial coverage are not perfectly comparable. For instance, Medicare FFS does not include a maximum out-of-pocket limit (OOP), which prompts the vast majority of beneficiaries to have supplemental Medigap coverage to reduce their OOP burden. However, coverage with Medicare FFS plus the most common Medigap plan is more generous than a silver or gold exchange plan. Similarly, MA includes a maximum OOP limit which, when combined with lower deductibles and cost sharing than most exchange plans, can lead to patients paying less OOP for services than in an exchange plan. In addition, Medicare FFS includes a nationwide, open network, while exchange coverage is offered with narrower, more restrictive networks.

As such, while these results are illustrative, cost sharing and network breadth are important additional considerations when comparing forms of coverage between exchanges and Medicare.

Appendix A

Table 2. Detailed Comparison of Premiums in Medicare and Subsidized Exchange Coverage, by Income, by City, 2021
Subsidized Exchange Coverage Medicare Coverage
Annual Income in FPL Bronze Silver Gold Platinum Part B Premium Standalone PDP Medigap Plan G MA Total Medicare FFS + Medigap Total MA
Houston, TX
138% $0 $0 $0 N/A $149 $0 $128 $0 $277 $149
250% $0 $88 $62 N/A $149 $7 $128 $0 $284 $149
400% $78 $344 $317 N/A $149 $7 $128 $0 $284 $149
Miami, FL
138% $0 $0 $83 $662 $149 $0 $242 $0 $391 $149
250% $0 $101 $193 $772 $149 $7 $242 $0 $398 $149
400% $125 $356 $448 $1,027 $149 $7 $242 $0 $398 $149
Los Angeles, CA
138% $1 $1 $13 $131 $149 $0 $128 $0 $277 $149
250% $1 $98 $123 $241 $149 $7 $128 $0 $284 $149
400% $200 $354 $378 $496 $149 $7 $128 $0 $284 $149
Chicago, IL
138% $1 $1 $143 N/A $149 $0 $119 $0 $268 $149
250% $4 $93 $253 N/A $149 $7 $119 $0 $275 $149
400% $203 $348 $508 N/A $149 $7 $119 $0 $275 $149
Average
138% $1 $1 $60 $396 $149 $0 $154 $0 $303 $149
250% $1 $95 $158 $506 $149 $7 $154 $0 $310 $149
400% $151 $350 $413 $761 $149 $7 $154 $0 $310 $149

Note: PDP – Prescription Drug Plan

Appendix B

By extending Medicare eligibility to individuals aged 60 and older, Medicare expansion could shift enrollment into Medicare from a variety of existing health insurance coverage sources. If no other restrictions were put in place, this includes up to 14.9 million from employer-sponsored insurance, 4.1 million from the individual market, 2.7 million from Medicaid, and 700 thousand from other government insurance programs.2 Notably, Medicare expansion could also increase health insurance coverage for up to 2 million previously uninsured individuals ages 60–64. While it is unclear whether Medicare expansion would necessarily shift patients from all other forms of coverage, like Medicaid or employer coverage, it could significantly alter the coverage of these 24.5 million individuals were they to switch to Medicare.

Figure 1. Current Insurance Coverage of Individuals Newly Eligible for Medicare Under Expansion, Ages 60–64, 20193
Figure 1. Current Insurance Coverage of Individuals Newly Eligible for Medicare Under Expansion, Ages 60–64, 20193
Figure 2. Newly Eligible Medicare Beneficiaries by State, Ages 60–64, 20193
Figure 2. Newly Eligible Medicare Beneficiaries by State, Ages 60–64, 20193

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Notes

  1. Current subsidies include the American Rescue Plan Act subsidy enhancements.
  2. TRICARE, Veterans Affairs, Indian Health Services.
  3. Avalere analysis of 2019 American Community Survey data.

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