Mercer Experts on the Broader Impact of Biden’s Plan to Expand Medicare 

The Biden proposal to expand Medicare eligibility to age 60 is a concept that appeals to many voters. David Crow blogged about the implications of Medicare expansion on employer-sponsored health insurance, but we thought it also would be interesting to consider the broader impact of such a change -- on the workforce, retirement, and financial planning. We asked several of our experts to weigh in. Here is what they said.

On the workforce 

Lowering Medicare eligibility to age 60 will not induce people to retire. Rather, it will give individuals age 60 and over more freedom to keep working with the sorts of alternative work arrangements -- part-time, irregular hours, breaks in service, contractor work – that older workers might prefer if they didn’t have to worry about losing eligibility for employer-sponsored coverage. The ability to pursue alternative work arrangements can be good for both employer and individual. – Rick Guzzo, co-leader Mercer Workforce Sciences Institute

In face of increasing longevity, the weakening of pension plans and growing income inequality, many American workers need -- and many want -- to extend their working lives. Maintaining good health and access to quality healthcare is essential to making that possible. Access to health insurance that is independent of workers’ current employers should make it easier for those between 60 and 65 to continue working in jobs for which they are best suited. It will also be easier for employers to continue to offer employment opportunities to this cadre of workers if they are relieved of responsibility for health coverage cost and liability. – Haig Nalbantian, co-leader Mercer Workforce Sciences Institute

On retirement planning

The EBRI 2020 Retirement Confidence Survey found that the median retirement age is 62, as do other surveys. Since many people are willing to retire before turning 65, it does not appear that the Medicare eligibility age is the most critical retirement decision point. This would suggest that lowering eligibility to age 60 would not necessarily result in big shift in retirement patterns. But there is little doubt that having Medicare available from 60 would have helped those early retirees cope with the financial strain of health costs. – Neil Lloyd, US Defined Contribution & Financial Wellness Research Leader

On financial planning

While the key financial issue for those considering moving to Medicare before age 65 will be how the cost compares to what they would otherwise pay for coverage – one of the many unknowns at this point – there will be another, less obvious, financial impact for those using health savings accounts. Under current law, an individual who becomes entitled to Medicare (actually covered, not simply eligible) is no longer eligible to contribute to an HSA. Assuming no change to HSA contribution eligibility under the Biden proposal, individuals who opt for “early Medicare” coverage would no longer be able to contribute to an HSA or receive employer contributions to it. They could use HSA funds they’ve previously accumulated to pay for out-of-pocket expenses, but wouldn’t be able to contribute more to the account. And if income taxes rise under a Biden administration, as seems likely, the loss of this tax shelter would hit that much harder. – Jay Savan, Expert on HSA plans

These are just some early musings on how a change in Medicare eligibility age might play out. This proposal is of particular interest because Mercer is working with the World Economic Forum on an initiative to “reinvent retirement.” Our goal is to imagine a more flexible retirement journey, in which people typically retire later – and employers are more oriented (i.e., friendlier) towards older employees. Being able to access and engage older employees with skills and expertise could add material value to some organizations, particularly those experiencing a skills shortage. As with any new policy, there will be pros and cons to consider as the proposal takes shape. But, at first view, we see some intriguing possibilities -- for employers and employees -- in earlier access to Medicare.

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