Raising the Ages of Eligibility for 

Medicare and Social Security

Raising the ages at which people can begin to collect 

Medicare and Social Security benefits would be one way 

to reduce long-term fiscal imbalances. The Congressional 

Budget Office (CBO) projects that, under current policies, federal outlays will significantly exceed federal 

revenues during the coming decade and beyond. Outlays 

for the government’s two largest domestic programs, 

Social Security and Medicare, provide benefits primarily 

to the elderly. Those outlays are projected to increase 

rapidly because of the retirement of the baby-boom generation and growth in per capita spending for health care 

that is expected to continue to exceed growth in per capita gross domestic product (GDP) over the long term. 

Unless policymakers decrease spending from projected 

amounts, increase revenues well above their historical 

average as a share of GDP, or adopt some combination 

of those two approaches, federal debt will become 

unsustainable.

This issue brief analyzes the effects of raising the ages at 

which most people become eligible to collect benefits 

under those two programs.1

 Three categories of eligibility 

could be involved in such a change:

B The Medicare eligibility age (MEA), currently 65;

B The early eligibility age (EEA) under Social Security, 

at which participants may first claim retirement 

benefits, currently 62; and 

B The full retirement age (FRA) under Social Security, 

at which participants are eligible to receive full 

benefits, currently 66 but scheduled to increase to 67 

for people who were born after 1959.

Raising the MEA or the FRA would reduce federal 

spending on benefits and affect potential beneficiaries in 

various ways. For example, if the MEA rose to 67, annual 

federal spending on Medicare would be reduced by about 

5 percent, CBO estimates, because most people would 

lose access to Medicare at ages 65 and 66. A small share of 

those people would end up without health insurance, 

CBO expects, but most would have insurance coverage 

through employers, other government health care programs, or other sources. Many of the people who lose 

access to Medicare would pay higher premiums for health 

insurance, pay more out of pocket for health care, or 

both. An increase in the FRA amounts to a benefit 

reduction; raising the FRA to 70, for example, would 

ultimately reduce Social Security outlays by about 

13 percent, CBO estimates. Raising the EEA would have 

a much smaller effect on the federal budget in the long 

term: It would delay access to benefits for many people, 

but their monthly benefit amounts would be higher. 

Raising the ages of eligibility for Medicare and Social 

Security also would induce people to work longer. A twoyear rise in the EEA or a three-year rise in the FRA would 

boost both the size of the labor force and total output of 

the economy by slightly more than 1 percent, CBO estimates. Raising the MEA by two years would probably 

result in much smaller increases in the size of the labor 

force and total output. 

Under a schedule of gradual increases in all three eligibility ages that is described below, CBO estimates that by 

2035, outlays for Social Security and Medicare would fall 

by 0.4 percent of GDP and federal revenues would rise by 

around a half percent of GDP—leading to a reduction in 

the budget deficit of nearly 1 percent of GDP, not including the effects of lower interest outlays. CBO estimates 

that the outlay effects would grow to about 1 percent of 

1. CBO has explored this issue in other publications, most recently 

in March 2011 in Reducing the Deficit: Spending and Revenue 

Options; see Mandatory Spending Options 18, 29, and 30. 

ISSUE BRIEF

JANUARY 2012
2 RAISING THE AGES OF ELIGIBILITY FOR MEDICARE AND SOCIAL SECURITY JANUARY 2012

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GDP in 2060, when all retirement benefits would be 

based on the higher FRA, and the revenue effects would 

grow to about three-fourths of a percent of GDP in that 

year. Altogether, the federal budget deficit would be 

reduced by about 13⁄4 percent of GDP in 2060.

Ages of Eligibility 

Medicare’s eligibility age for the elderly has not changed 

since the program began in 1966. By contrast, the Social 

Security retirement age under the Old-Age and Survivors 

Insurance (OASI) program has been rising slowly since 

2000, after having not changed during the previous 

65 years of the program’s existence. Medicare and Social 

Security’s OASI program interact in different ways with 

Social Security’s Disability Insurance (DI) program.

Medicare

Medicare provides health insurance to almost everyone 

who is 65 or older as well as to most people who receive 

DI benefits and to people who have end-stage renal disease or amyotrophic lateral sclerosis. Part A of Medicare, 

Hospital Insurance, primarily covers inpatient services 

provided by hospitals and pays for skilled nursing and 

hospice care. Part B of Medicare, Supplementary Medical 

Insurance, mainly covers outpatient services at hospitals 

and office services provided by physicians and other practitioners.2

 Anyone who participates in either Part A or 

Part B also is eligible for Part D, the prescription drug 

benefit. Most participants must pay monthly premiums 

for Part B and Part D but not for Part A.

Workers and their spouses have strong incentives to 

enroll in Medicare when they turn 65. People can delay 

enrolling in Part B, but if they do so and they do not have 

access to a group health insurance plan through their own 

employment or through a spouse’s job, their premiums 

increase by 10 percent for each year they wait after turning 65. That penalty is designed to discourage people 

from waiting until they become ill to enroll in Part B and 

start paying premiums. Disabled workers also qualify for 

Medicare regardless of their age, in most cases 24 months 

after they become entitled to DI benefits.

Social Security

When Social Security was established in 1935, there was 

a single eligibility age: 65. In 1956, amendments to the 

law created an early eligibility age of 62 for women; men 

were given the same option in 1961. The Social Security 

Amendments of 1983 established a schedule for gradually 

raising the full retirement age from 65 to 67. The FRA 

for people born in 1938 is 65 years and 2 months. The 

age rises by two months per year of birth after that, reaching 66 for people born between 1943 and 1954, and then 

begins to rise again by two months per year for the group 

born in 1955, reaching 67 for those born in 1960 or later. 

The early eligibility age remains 62.

In general, someone who chooses to begin receiving 

retirement benefits at the FRA receives the primary 

insurance amount (PIA)—the full benefit amount as 

determined by an earnings-based formula.3

 Someone who 

claims benefits earlier receives benefits for a longer period 

but receives less per month. Specifically, the benefit is 

reduced by 6 2

/3 percent for each of the first three years of 

early claiming and by 5 percent for every year thereafter.4

If a worker with an FRA of 66 claims at 62, therefore, the 

benefit is 75 percent of the PIA (three years of 6 2

/3 percent reductions plus one year of a 5 percent reduction). 

Thus, people born in 1945 who claimed benefits at age 

62 are receiving 25 percent less each year than if they had 

waited until age 66 to begin claiming benefits (see 

Table 1).5

 In contrast, monthly benefits are more than the 

PIA for people who claim later than the FRA; that group 

receives what is known as the delayed retirement credit. 

For people born after 1942, the credit is 8 percent for 

each year of delay up to age 70. Thus, someone who was 

born in 1945 and claims benefits at age 70 in 2015 will 

receive 32 percent more each year than if he or she had 

claimed at the FRA of 66.

2. Most enrollees in Medicare are in the traditional fee-for-service 

program, in which the federal government pays for covered services directly. However, enrollees are allowed instead to choose 

coverage for Part A and Part B benefits through a private health 

insurance plan under Medicare Advantage, Part C of the program.

3. See Congressional Budget Office, Social Security Policy Options 

(July 2010), pp. 8–9.

4. The reductions are based on the month of claiming: A benefit 

is reduced by 5/9 of 1 percent for each of the first 36 months 

before the FRA. If the number of months exceeds 36, the benefit 

is further reduced by 5/12 of 1 percent per month.

5. A table of benefits as a share of PIA for all birth and claiming years 

is available online. See Social Security Administration, “Social 

Security Benefits: Effect of Early or Delayed Retirement on 

Retirement Benefits,” www.ssa.gov/oact/ProgData/ar_drc.html.
JANUARY 2012 RAISING THE AGES OF ELIGIBILITY FOR MEDICARE AND SOCIAL SECURITY 3

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Table 1.

Social Security Benefits, by Age at 

Which Benefits Are Claimed

(Percentage of primary insurance amount)

Source: Congressional Budget Office.

Note: Benefit amounts are lower than the primary insurance 

amount for workers who claim benefits before the full retirement age (FRA); benefits of workers who wait until after 

reaching the FRA are increased by the delayed retirement 

credit (DRC). For people born in 1937, the FRA is 65 and the 

DRC is 6.5 percent. For people born between 1943 and 1954, 

the FRA is 66 and the DRC is 8 percent. For people born in 

1960 or later, the FRA is 67 and the DRC is 8 percent.

Those adjustments are roughly actuarially fair, so for people who attain average life expectancy, the total economic 

value of benefits over a lifetime is approximately the same 

regardless of when benefits are claimed. Eventually, 

however, as average life expectancy increases, the higher 

benefits associated with later claiming will more than 

offset the effects of fewer years of receipt for beneficiaries 

with an average lifespan; lifetime benefits will be higher 

for people who claim later. 

The gradual increase in the FRA under current law is 

generating a reduction in lifetime benefits relative to what 

people would receive without the increase: For any given 

claiming age, a later FRA translates into lower monthly 

benefits (see Figure 1). Because of the three different rates 

of benefit adjustment, the effective reduction varies 

slightly according to claiming age. For example, the 

increase from age 66 to age 67 will result in a reduction in 

monthly benefits of between 6.1 percent (for people who 

claim benefits at 70) and 7.7 percent (for people who 

claim benefits at 64). For people who claim benefits at 

other ages, the reduction falls between those two values. 

The rise in the FRA also is increasing the number of 

people affected by the Social Security earnings test, which 

reduces the amount paid to beneficiaries who are younger 

than the FRA and have substantial earnings, thereby 

reinforcing the stated purpose of Social Security as insurance against loss of earnings. The earnings test affects 

beneficiaries who are younger than the FRA and earn 

more than a certain amount—$14,160 for most people 

in 2011.6

 An amount equal to half of their earnings above 

that threshold is withheld from current benefits, but 

beneficiaries are compensated with higher payments after 

they reach the FRA. Typically, the increase in later benefits fully offsets the reduction in benefits at earlier ages. 

Despite that compensation, for people who have not 

reached the FRA but have already begun to receive benefits, the earnings test has been observed to reduce the 

incentive to work.7

Unlike retirees, who receive reduced benefits if they claim 

before reaching the FRA, eligible workers can begin to 

receive full DI benefits regardless of their age at the time 

they become disabled. Monthly DI benefits are equal to 

the worker’s PIA, with no direct adjustment for the age at 

which benefits are claimed. Thus, someone with an FRA 

of 67 who qualifies for DI benefits at age 62 would 

receive a benefit that is 43 percent higher than that going 

to a retiree who claims Social Security benefits at the 

same age.

Despite the ongoing rise in the FRA, the purchasing 

power of average Social Security benefits has grown for 

each successive group of retirees and will continue to 

grow in the future, CBO projects. The PIA is indexed to 

growth in average earnings in the economy, and, in general, earnings grow more quickly than inflation. The rise 

in the FRA to 67 will reduce the so-called replacement 

rate—the ratio of benefits to earnings—but CBO still 

projects that average benefits as calculated under current 

law (known as scheduled benefits) will increase in real 

(inflation-adjusted) terms. In particular, CBO estimates 

that scheduled benefits will average $16,000 for retired 

workers born in the 1940s and $17,000 for retired 

workers born in the 1960s (all in 2010 dollars).8

Birth Year 62 65 66 67 70

1937 80.0 100.0 106.5 113.0 132.5

1943–1954 75.0 93.3 100.0 108.0 132.0

1960 or Later 70.0 86.6 93.3 100.0 124.0

6. For a detailed explanation of the earnings test, see Social Security 

Administration, “Automatic Determinations: Exempt Amounts 

Under the Earnings Test,” www.ssa.gov/oact/cola/rtea.html.

7. See Jae Song and Joyce Manchester, “New Evidence on Earnings 

and Benefit Claims Following Changes in the Retirement Earnings Test in 2000,” Journal of Public Economics, vol. 91, no. 3–4 

(April 2007), pp. 669–700.

8. See Congressional Budget Office, CBO’s 2011 Long-Term 

Projections for Social Security: Additional Information 

(August 2011), Exhibit 9, p. 15.
4 RAISING THE AGES OF ELIGIBILITY FOR MEDICARE AND SOCIAL SECURITY JANUARY 2012

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Figure 1.

Social Security Benefits, by Age at Which Benefits Are Claimed

(Percentage of primary insurance amount)

Source: Congressional Budget Office.

Note: Benefit amounts are lower than the primary insurance amount for workers who claim benefits before the full retirement age (FRA); 

benefits of workers who wait until after reaching the FRA are increased by the delayed retirement credit (DRC). For people born in 

1937, the FRA is 65 and the DRC is 6.5 percent. For people born between 1943 and 1954, the FRA is 66 and the DRC is 8 percent. 

For people born in 1960 or later, the FRA is 67 and the DRC is 8 percent.

Demographic Changes

Proposals to raise the ages of eligibility for Medicare and 

Social Security generally reflect concern about the effects 

on the federal budget of demographic trends that will 

make supporting retirees more challenging in decades to 

come. The aging of the population—which stems both 

from increases in life expectancy and from past declines 

in fertility—accounts for about half of the growth (relative to GDP) in spending on Medicare and other major 

federal health care programs projected for the next 

25 years and essentially all of the growth (relative to 

GDP) projected for Social Security outlays.9

 If life expectancy increases and retirement ages do not rise, people 

pay taxes for a shorter portion of their lives and are 

retired—and collecting Medicare and Social Security 

benefits—for a longer portion.10 In 1940, people turning 

65 could expect to live another 14 years, on average 

(see Figure 2), so the average person working until 65 

could expect to spend about 23 percent of adulthood in 

retirement. Today, people can expect to live for another 

20 years after turning 65, and the average person working 

until 65 can expect to spend about 30 percent of adulthood in retirement.11 Put differently, the expected time in 

retirement for someone who stops working this year at 

age 65 is more than 40 percent longer (20 years rather 

than 14 years) than it was in 1940. (Women tend to live 

longer than men. Today, as in 1940, 65-year old women 

can expect to live two years longer than men.)

The increase in life expectancy reflects improvements in 

the average health of the population, especially among 

62 63 64 65 66 67 68 69 70

0

20

40

60

80

100

120

140

Claiming Age

Full

Retirement Age

65

66

67

9. See Congressional Budget Office, CBO’s 2011 Long-Term Budget 

Outlook (June 2011), Box 1-1, pp. 10–11.

10. The average age of retirement declined, on balance, over the 

course of the 20th century, although it has risen somewhat in 

the past few decades. See Alicia Munnell, What Is the Average 

Retirement Age? Issue Brief 11-11 (Chestnut Hill, Mass.: Center 

for Retirement Research at Boston College, August 2011), 

http://crr.bc.edu/images/stories/Briefs/IB_11-11.pdf. 

11. Social Security Administration, The 2011 Annual Report of the 

Board of Trustees of the Federal Old-Age and Survivors Insurance 

and Federal Disability Insurance Trust Funds (May 13, 2011), 

Table V.A4, www.ssa.gov/oact/tr/2011/tr2011.pdf. CBO bases its 

long-term demographic projections on that report. 
JANUARY 2012 RAISING THE AGES OF ELIGIBILITY FOR MEDICARE AND SOCIAL SECURITY 5

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Figure 2.

Life Expectancy at Age 65, 1940 to 2050

(Years)

Source: Social Security Administration, Trustees’ Annual Report 

(May 13, 2011), Table V.A4, www.ssa.gov/oact/TR/2011/

lr5a4.html.

Note: Values are calculated for 65-year-olds in the year shown, 

using actual death rates through 2007 and estimated and 

projected rates for later years. This is known as the cohort 

life expectancy.

the elderly, and those improvements also allow many 

people to work longer.12 Disability rates among middleaged people have declined as well, although less so than 

among the elderly. In addition, because fewer jobs are 

physically demanding, many people who have mild physical disabilities can stay in the workforce longer than they 

might have in the past.13

In the absence of a rise in fertility or immigration rates, 

a corollary of increasing life expectancy is a decline in 

the ratio of workers to retirees. (That decline will be 

particularly steep in coming decades as the baby-boom 

generation enters retirement, but the longer-term trend is 

driven by projected growth in life expectancy.) In 1950, 

there were 7 people of working age—20 to 64—for every 

person 65 or older. That ratio is currently below 5 and 

will fall below 3 by 2030, CBO projects. If the fertility 

rate increased, the ratio could stabilize or rise. However, 

CBO expects that the fertility rate will remain stable, as it 

has in recent decades.

The average amount of benefits that can be supported 

by a given tax rate on earnings depends on the ratio of 

workers to retirees. Workers pay Social Security payroll 

taxes, and Social Security benefits are received primarily 

by retirees. In general, the fewer workers per retiree, the 

higher the tax rate needed to support a given average 

monthly benefit. CBO projects that, under current law, 

Social Security’s revenues will be insufficient to fund 

scheduled benefits. Therefore, the federal government 

will need to raise taxes, reduce scheduled benefits 

(through further increases in the ages of eligibility or 

by some other means), or both.14 Medicare Part A is 

financed using a similar structure, and it too faces a 

long-term shortfall that will require increases in taxes, 

reductions in scheduled payments, or both. Other parts 

of Medicare are fully funded under law by drawing on 

general revenues, but the aging of the population and the 

expected rapid growth in health care costs will significantly increase their burden on the overall federal budget.

Effects of Increasing the Medicare 

Eligibility Age 

If the Medicare eligibility age was raised above 65, fewer 

people would be eligible for Medicare, and federal outlays 

for the program would decline relative to those projected 

under current law. CBO expects that most people 

affected by the change would obtain health insurance 

from other sources, primarily employers or other government programs, although some would have no health 

insurance. Federal spending on those other programs 

would increase, partially offsetting the Medicare savings. 

Many of the people who would otherwise have enrolled 

in Medicare would face higher premiums for health 

insurance, higher out-of-pocket costs for health care, 

or both. 

12. Linda G. Martin, Robert F. Schoeni, and Patricia M. Andreski, 

“Trends in Health of Older Adults in the United States: Past, Present, Future,” Demography, vol. 47, suppl. (2010), pp. S17–S40.

13. John A. Turner, Promoting Work: Implications of Raising Social 

Security’s Early Retirement Age, WOB 12 (Chestnut Hill, Mass.: 

Center for Retirement Research at Boston College, August 2007), 

http://crr.bc.edu/briefs/promoting_work_implications_of_raising

_social_securitys_early_retirement_age.html.

1940 1960 1980 2000 2020 2040

0

5

10

15

20

25

Women

Men

14. This brief uses the term scheduled benefits to refer to benefits under 

current law. For a discussion of some options for increasing Social 

Security revenues or reducing scheduled Social Security outlays, 

see Congressional Budget Office, Social Security Policy Options.
6 RAISING THE AGES OF ELIGIBILITY FOR MEDICARE AND SOCIAL SECURITY JANUARY 2012

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How People Would Respond

CBO anticipates that most people affected by an increase 

in the Medicare eligibility age would shift to other forms 

of health insurance but that there also would be a slight 

increase in the number of uninsured people. As an example, CBO has estimated the effects of increasing the MEA 

by two months every year, beginning in 2014 for people 

who were born in 1949, until the MEA reached 67 in 

2027 for people born in 1960.15 Of the 5.4 million people who would be affected by the higher MEA in 2021, 

about 5 percent would become uninsured, and approximately half of the group would obtain insurance from 

their or their spouses’ employers or former employers. 

The remainder (about 2.3 million people in 2021) 

would, in roughly equal parts, receive coverage through 

Medicaid, receive coverage through Medicare because 

they would qualify for DI benefits, or purchase insurance 

either through the health insurance exchanges that will 

become available in 2014 under the terms of the Patient 

Protection and Affordable Care Act (PPACA; Public Law 

111-148, as amended by the Health Care Education and 

Reconciliation Act of 2010, P.L. 111-152) or in the nongroup market.

This analysis is based on the assumption that the many 

provisions of PPACA that do not apply to people age 65 

or older would be changed to refer to the new MEA. 

In particular, CBO assumed that people who became 

ineligible for Medicare under the new age limits could 

purchase health insurance through the exchanges, and, 

depending on their income, might qualify for federal subsidies. CBO also assumed that people with the lowest 

income would qualify for Medicaid benefits. Without 

those changes to the recently enacted health care laws, 

CBO anticipates many more people would become 

uninsured if the MEA was raised.

A rise in the MEA would encourage some people to work 

longer to maintain access to employment-based health 

insurance or to earn more to cover higher anticipated 

health care costs, but CBO expects that this effect would 

be small. Although some people currently work later in 

life than they otherwise would in order to keep their 

employment-based health insurance until they become 

eligible for Medicare, that need will diminish in 2014 

with the opening of the health insurance exchanges.16

Raising the MEA would reduce outlays for Social Security retirement benefits in the short term by inducing 

some people to wait to claim benefits—some people 

apply for Social Security and Medicare at the same 

time—and by encouraging some workers to delay retirement so they can maintain access to employment-based 

health insurance. However, because delayed claiming 

results in monthly benefits that are higher by an amount 

that is roughly actuarially fair, the long-term effect on 

Social Security benefits would be minimal.

Budgetary Effects

CBO estimates that raising the Medicare eligibility age 

according to the schedule described above would reduce 

federal Medicare outlays, net of premiums and other 

offsetting receipts, by $148 billion from 2012 through 

2021.17 (That estimate does not include the effect of 

changes in people’s decisions regarding work and 

retirement, discussed below.) By 2035, Medicare’s net 

spending would be about 5 percent below what it 

otherwise would be—4.7 percent of GDP rather than 

5.0 percent under current law. A rise in the MEA would 

cut by a larger percentage the number of years during 

which the average person would receive Medicare benefits, but the reduction in outlays would be less than 

proportionate because the youngest beneficiaries tend 

to be the healthiest and thus to require the least costly 

health care. 

Some people who would have been covered by Medicare 

under current law would be enrolled instead in Medicaid, 

would receive subsidies through the new insurance 

exchanges, or would receive additional benefits as federal 

retirees. A later MEA would boost federal spending for 

Medicaid in two ways. First, some people who were not 

eligible for Medicare would participate in Medicaid after 

15. For additional discussion, see Reducing the Deficit, Mandatory 

Spending Option 18, pp. 45–46. This brief updates CBO’s 

previous estimates.

16. For additional discussion, see Tricia Neuman and others, Raising 

the Age of Medicare Eligibility: A Fresh Look Following Implementation of Health Reform (Washington, D.C.: Henry J. Kaiser Family 

Foundation Program on Medicare Policy, July 2011), 

www.kff.org/medicare/upload/8169.pdf.

17. The estimates in this section reflect small updates to CBO’s 

economic and technical assumptions since the March 2011 publication of Reducing the Deficit. The estimate for 2035 also differs 

because the March estimate reflected gross Medicare outlays. 
JANUARY 2012 RAISING THE AGES OF ELIGIBILITY FOR MEDICARE AND SOCIAL SECURITY 7

CBO

2014. Second, people over 65 who would have been 

enrolled in both programs—and for whom Medicaid 

would have paid their Medicare premiums—would 

instead have Medicaid as their primary source of coverage 

until they reached the new MEA.18 Subsidies for insurance coverage purchased through insurance exchanges 

also would increase because some people whose eligibility 

for Medicare was delayed would receive those subsidies 

instead. CBO estimates that the effects of changes in 

federal spending on Medicaid, exchanges, federal retirees, 

and Social Security retirement would be to offset about 

one-quarter of the Medicare savings, reducing net federal 

savings to $113 billion over the next decade. That estimate does not account for a possible slight increase in 

the number of people who apply for DI benefits because 

CBO has not quantified such an effect. (State government outlays for Medicaid, which is partly state funded, 

also would increase, but the change is likely to be small 

compared with overall growth in state outlays for 

Medicaid.) 

Effects on Medicare Beneficiaries 

Shifts in the sources of health insurance (and loss of 

insurance for some people) would affect the health care 

people receive and what they pay for it. Some people 

would end up without health insurance. People without 

health insurance are likely to receive lower quality care 

and pay more than insured people do. Many, but not all, 

people who end up with a different source of insurance 

would pay higher premiums than they would for Medicare and spend more out of pocket. The quality of health 

care could differ as well, in various ways. For example, 

people with private health insurance might have better 

access to physicians than they would under Medicare. 

Some people on Medicaid could have more difficulty 

obtaining services, but others could have access to health 

care with lower out-of-pocket costs than they would have 

under Medicare.

The provisions of PPACA would make not having health 

insurance through Medicare or an employer less onerous 

than it would be otherwise. Virtually everyone affected 

would have access to health insurance, either through 

Medicaid or through exchanges. Although in many cases 

the premiums in the exchanges would be higher than 

they are for Medicare, the insurance would be priced 

without regard to health status and with limited 

adjustments for age.

Effects of Increasing the Early 

Eligibility Age for Social Security

Currently, more than half of nondisabled beneficiaries 

who receive Social Security benefits based on their own 

work history (rather than as spouses or survivors of workers) claim benefits at 62, and almost 60 percent claim 

before 64. Therefore, if the early eligibility age for Social 

Security was increased from age 62 to age 64, many 

people would be forced to claim benefits later than they 

otherwise would. They would receive larger benefits each 

month for fewer months overall. Currently, those two 

factors would approximately balance for a person with an 

average life expectancy, and such a person would receive 

roughly the same total benefits over a lifetime. For simplicity in exposition, this section discusses the effects of 

raising the EEA while leaving the FRA alone, even 

though most proposals that call for raising the EEA also 

would raise the FRA; such proposals are discussed later.

How People Would Respond

Many people who would otherwise stop working before 

age 62 do not have enough income or savings to retire 

without receiving Social Security benefits, so they work 

until they become eligible for those benefits at age 62.19

Other people retire at the current EEA apparently 

because of a perception that 62 is the “correct” retirement 

age; raising the EEA could alter that societal norm. Still 

others retire, for various reasons, at an age between the 

current EEA and a later EEA that might be imposed. 

Therefore, raising the EEA would cause many people 

who might currently claim benefits sometime between 

the ages of 62 and 64 to work longer, thus increasing the 

size of the labor force and boosting federal revenues from 

income and payroll taxes.

Raising the EEA also would affect the work patterns of 

some people who, under current law, choose to stop 

working before the EEA. Some of those people would 

decide that their assets were sufficient or they had enough 

18. Some dual Medicare and Medicaid enrollees currently qualify 

for full Medicaid benefits; others qualify only for assistance with 

certain types of Medicare cost sharing. 

19. Eric R. Kingson and Maria T. Brown, Are Age-62/63 Retired 

Worker Beneficiaries At Risk? Working Paper 2009-13 (Boston: 

Center for Retirement Research at Boston College, August 2009), 

http://crr.bc.edu/images/stories/Working_Papers/wp_2009-13.pdf.
8 RAISING THE AGES OF ELIGIBILITY FOR MEDICARE AND SOCIAL SECURITY JANUARY 2012

CBO

non-Social Security income to retire at the same age as 

under current law, especially because they would recoup 

the extra money later on in retirement as the rise in the 

EEA resulted in higher monthly Social Security benefits. 

However, other people in that group would decide that 

they could not live without benefits for the longer period 

and would respond to the change in the EEA by staying 

in the workforce longer.

A rise in the EEA would affect applications for DI benefits in three ways: First, because some people learn about 

their possible eligibility for DI benefits only as they apply 

for Social Security retiree benefits—the DI application 

rate doubles in the months immediately before people 

turn 62—a later EEA would lead to a delay in some 

applications until just before the new age took effect. 

That factor would cause a temporary decline in applications. Second, some people who would have claimed 

retirement benefits at 62 would decide to apply for DI 

benefits either at 62 or at an earlier age, thus increasing 

the number of DI applicants and beneficiaries. Although 

applying for DI benefits can be difficult—in part because 

applicants cannot have had substantial earnings during a 

five-month waiting period before benefits begin—the 

greater incentive resulting from a rise in the EEA would 

cause more people to do so. Finally, the number of people 

who have acute health conditions or who experience 

medical events that lead to disability—such as heart 

attack or stroke—before reaching the EEA would be 

higher as the EEA rose, simply because there would be 

more years in which such illnesses could occur.

Budgetary Effects

The budgetary effects of a rise in the EEA in the short 

term would be different from those over a longer period. 

Federal outlays would decline in the short term because 

people would have to wait until they were older to apply 

for Social Security benefits. Over time, higher subsequent 

monthly benefits would offset an increasing share of the 

savings from delayed eligibility. Eventually, as average life 

expectancy increased, the higher benefits associated with 

later claiming would more than offset the savings for the 

beneficiary with an average lifespan, so lifetime benefits 

would increase. Federal outlays would therefore increase 

as well, unless the reduction for claiming benefits early 

was increased as life expectancy grew. 

A rise in the EEA also could affect other federal spending—for Supplemental Security Income, Medicaid, 

the Supplemental Nutrition Assistance Program, and 

unemployment benefits, for example. The loss of income 

from Social Security benefits would result in higher 

spending on such programs, but the gain in income of 

people who chose to work longer would result in lower 

spending. The net effect could be positive or negative, 

depending on the extent to which low-income people 

increased the amount that they worked, but would 

probably be small.

CBO recently estimated the effects of raising the EEA 

from 62 to 64 by two months per year. Under that policy, 

the EEA would increase to 62 and 2 months for people 

born in 1950 (who will turn 62 in 2012) and would 

reach 64 for people born in 1961 or later.20 Federal outlays would be reduced by nearly $144 billion through 

2021, slightly more than 1 percent of projected Social 

Security spending. (Those figures exclude the effect of the 

higher EEA on people’s work decisions, discussed below.) 

Outlays would continue to be slightly lower than under 

current law until about 2035 and would be slightly 

higher thereafter.

Effects on Social Security Beneficiaries

The early eligibility age for Social Security does not 

depend on an individual’s earnings under current law and 

under most proposals for changing that age. However, if 

the age increased, people with lower earnings would tend 

to experience a greater percentage reduction in living 

standards than would people with higher earnings. That 

difference would arise in part because, relative to people 

with higher earnings, people with lower earnings tend to 

have fewer assets, to have shorter lifespans, to have less in 

retirement savings and private pension benefits, and to be 

less likely to have health insurance through former 

employers.21

Raising the EEA would impose a hardship for some people in the years leading up to that age, especially if they 

are without other sources of income. Some people could 

stay out of poverty by continuing to work, although that 

20. See Congressional Budget Office, Reducing the Deficit, Mandatory 

Spending Option 29, p. 62.

21. Congressional Budget Office, Growing Disparities in Life 

Expectancy, Issue Brief (April 2008).
JANUARY 2012 RAISING THE AGES OF ELIGIBILITY FOR MEDICARE AND SOCIAL SECURITY 9

CBO

would be more difficult for people with physically 

demanding jobs. Other people could stay out of poverty 

by saving more, especially if the change was announced 

well ahead of implementation, although that would also 

be difficult for some people. People who currently claim 

Social Security benefits at age 62 or 63 but could not 

work because of health limitations and have no other 

sources of income would be at particular risk of poverty. 

Several researchers have reported that, depending on how 

income and health are measured, between 5 percent and 

20 percent of people who currently claim Social Security 

benefits at age 62 or 63 would become poor if the EEA 

increased.22

In particular, if the EEA was raised, the consequences of 

losing a job—because of an economic downturn or for 

another reason—would become greater for people 

between age 62 and the new EEA. Although older workers are less likely than are younger workers to lose their 

jobs (because they tend to have greater seniority), when 

older workers do lose their jobs they often have more 

difficulty than younger workers do at finding work. 

Reemployment rates for men age 62 or older are about 

half those for men between 25 and 34, and more older 

men leave the labor force after they lose their jobs.23

Existing government programs, including Social Security 

DI, Supplemental Security Income, and the Supplemental Nutrition Assistance Program, would provide a safety 

net for some people who would have financial difficulty 

until reaching the EEA. One approach to moderating the 

effects of a later EEA would be to broaden the eligibility 

standards of those other programs for people age 62 or 

older. Another approach would be to create a new 

program to support older workers who had experienced a 

loss of income even if they did not meet the medical criteria of the DI program.24 Such support for older workers 

might include wage subsidies, health insurance subsidies, 

extended unemployment benefits, and employment 

counseling. Providing that support would require additional federal outlays.

At the same time, raising the EEA would help some people who are older than the new EEA. A rise in the EEA 

essentially would require people to accept higher benefits 

beginning at a later age. Those higher benefits would be 

likely to reduce poverty rates among people receiving the 

benefits. 

Increasing the EEA would tend to lower lifetime benefits 

for people with lower earnings, because those people tend 

to have shorter lives, and raise lifetime benefits for people 

with higher earnings, because they tend to have longer 

lives. For example, someone who claims Social Security at 

62 and lives until age 68 receives six years of retirement 

benefits; a two-year increase in the EEA would reduce the 

number of years of benefits by a third, a difference that 

would be only partially offset by higher benefits during 

those years.

Effects of Increasing the Full 

Retirement Age for Social Security

Raising the FRA for Social Security would reduce federal 

outlays and lower income for retirees. People would 

respond by looking for ways to increase income from 

other sources; some would work more, and some would 

apply for DI benefits. (This section discusses the effects 

of raising the FRA with no change in the EEA; the effects 

of raising both the FRA and the EEA are discussed later.)

How People Would Respond

On average, people would work longer to offset the lost 

income. Moreover, the additional work would probably 

be greater than would occur under an equivalent benefit 

reduction with the same FRA as under current law 

22. See Kingson and Brown, Are Age-62/63 Retired Worker Beneficiaries At Risk?; Xiaoyan Li, Michael Hurd, and David S. Loughran, 

The Characteristics of Social Security Beneficiaries Who Claim 

Benefits at the Early Entitlement Age, Publication 2008-19 (Washington D.C.: AARP, Public Policy Institute, November 2008), 

http://assets.aarp.org/rgcenter/econ/2008_19_beneficiaries.pdf; 

and Alicia H. Munnell and others, Should We Raise Social Security’s 

Earliest Eligibility Age? Issue Brief 18 (Boston: Center for Retirement Research at Boston College, June 2004), http://crr.bc.edu/

images/stories/Briefs/ib_18.pdf.

23. Richard W. Johnson and Corina Mommaerts, Age Differences in 

Job Loss, Job Search, and Reemployment, Discussion Paper 11-01 

(Washington, D.C.: Urban Institute Program on Retirement 

Policy, January 2011), www.urban.org/uploadedpdf/412284-AgeDifferences.pdf. 

24. See, for example, David Stapleton, Employment Support for the 

Transition to Retirement: Can a New Program Help Older Workers 

Continue to Work and Protect Those Who Cannot? Research Report 

2009-05 (Washington, D.C.: AARP Public Policy Institute, 

April 2009), http://assets.aarp.org/rgcenter/econ/

2009_05_transition.pdf. 
10 RAISING THE AGES OF ELIGIBILITY FOR MEDICARE AND SOCIAL SECURITY JANUARY 2012

CBO

Figure 3.

How Claiming Patterns for RetiredWorker Benefits Changed as the FRA 

Increased

Source: Congressional Budget Office based on data from Jae Song 

and Joyce Manchester, Have People Delayed Claiming 

Retirement Benefits? Responses to Changes in Social 

Security Rules, Congressional Budget Office Working 

Paper 2008-4 (May 2008).

Notes: Each panel uses monthly data to depict claiming patterns of 

the population between the ages of 62 and 66 and six 

months that is entitled to retired-worker benefits under 

Social Security. Both exclude people who received Disability 

Insurance benefits.

FRA = full retirement age.

because more people would be inclined to claim benefits 

later. One might not expect that claiming of Social Security benefits would be very different at the FRA than at 

other ages because benefits are always smaller for people 

who claim earlier and larger for people who claim later 

(up to age 70). However, as the FRA has risen, some people have responded by claiming at the new age, rather 

than at 65 (see Figure 3, top panel). Indeed, as the FRA 

has risen, the share of people who have claimed retiredworker benefits by each year of age from 62 to 66 has 

declined, suggesting delayed claiming even before the 

FRA (see Figure 3, bottom panel).25

A higher FRA would result in a small increase in the 

number of people applying for DI benefits. That increase 

would occur because DI benefits are not affected by an 

increase in the FRA. Therefore, as the FRA increases, 

DI benefits become more attractive relative to retirement 

benefits.26

Budgetary Effects

CBO has estimated the effects of one option for gradually 

increasing the FRA to age 70 by two months per year. 

Under that option, the FRA would rise to 66 years and 

two months for workers born in 1950 (who turn 62 in 

2012), reach 67 for workers who were born in 1955 (who 

turn 62 in 2017 or later and whose current FRA is 

66 years and two months), and climb to 70 for workers 

born in 1973 or later (who turn 62 in 2035 or later).27

The result would be to shrink federal outlays by $120 billion through 2021. (Those figures do not include the 

effect on people’s work decisions, discussed below.) By 

2035, the option would reduce Social Security outlays 

by 4 percent relative to what would occur under current 

law—from 6.1 percent to 5.9 percent of GDP. The effect 

of the changes would continue to grow; by 2060, outlays 

would be reduced by 13 percent.

62 63 64 65 66

0

20

40

60

80

100

Share of People Who Have

Claimed Benefits, by Age and Birth Year (Percent)

Age at Which People

Claimed Benefits, by Birth Year

FRA for Birth Year

1936 1939 1942

(Percentage of claimants)

Born in 1936;

FRA = 65

Born in 1939;

FRA = 65 and

4 months

Born in 1942;

FRA = 65 and

10 months

Share Who

Have Claimed,

by Birth Year

1936

1939

1942

62 63 64 65 66

0

10

20

30

40

50

Claiming Age

Age

FRA

1936

1939

1942

25. There is, however, still a small increase in claims at 65—the 

MEA—and shortly before 65, when many people contact the 

Social Security Administration to apply for Medicare. 

26. By one estimate, the increase in the FRA from 65 to 67 would 

cause an additional 1 percent of the population between the ages 

of 45 and 64 to claim DI benefits. See Mark Duggan, Perry Singleton, and Jae Song, “Aching to Retire? The Rise in the Full 

Retirement Age and Its Impact on the Social Security Disability 

Rolls,” Journal of Public Economics, vol. 91, no. 7–8 (August 

2007), pp. 1327–1350. Currently, more than 8 percent of people 

in that age range receive DI benefits.

27. See Congressional Budget Office, Reducing the Deficit, Mandatory 

Spending Option 30, pp. 63–64.
JANUARY 2012 RAISING THE AGES OF ELIGIBILITY FOR MEDICARE AND SOCIAL SECURITY 11

CBO

Effects on Social Security Beneficiaries

A rise in the FRA would reduce benefits at any given age 

of claiming: Participants could delay claiming benefits by 

the amount of time that the FRA increased and receive 

the same monthly benefit as under current law for fewer 

months, delay claiming by fewer months than the 

increase in the FRA and get a somewhat lower monthly 

benefit for a somewhat shorter period than under current 

law, or claim at the same age that they would have under 

current law and accept a lower benefit for the same duration. Today, more than 80 percent of retirees claim before 

the FRA and receive reduced benefits, and the share of 

people who receive reduced benefits would rise if the 

FRA increased substantially. 

The reduction in monthly benefits for some beneficiaries 

would lower average income and increase poverty rates in 

the future among the elderly. The increase in poverty 

would be more pronounced if the FRA changed without 

a commensurate rise in the EEA. If, for example, the FRA 

became 70 and the EEA stayed at 62, under existing rules 

for reducing benefits for early claims, people who claimed 

at 62 would receive only 55 percent of their primary 

insurance amount, compared with the 70 percent they 

would receive under current law. 

The increase in the FRA would be particularly burdensome for people with low income, who tend to rely 

heavily on Social Security benefits, and especially for 

those who could neither qualify for DI nor adjust their 

work patterns. The benefit reductions could be offset 

for some lower-income beneficiaries through targeted 

increases in benefits. For example, retirees with low lifetime earnings could be made eligible to receive the larger 

of the traditional Social Security benefit or a separately 

calculated alternative benefit, or the traditional benefit 

could be increased for low-earning retirees.28 Such 

changes would require additional federal outlays.

Effects of Simultaneously Raising the 

Ages of Eligibility for Medicare and 

Social Security 

The arguments in favor of raising the MEA and FRA are 

similar: Life expectancy has increased and disability rates 

among older people have declined, and raising the ages of 

eligibility would reduce federal outlays and, because 

people would have more incentive to remain in the workforce longer, increase revenues. Some proposals would 

raise the EEA and FRA at the same time; others would 

simultaneously raise the MEA as well.

Increases could be combined in a variety of ways. For 

example, the gap between the EEA and the FRA could 

be held at five years, as it is under current law for people 

born in 1960 or later. Alternatively, the EEA could be 

raised faster than the FRA so that the gap would return to 

three years, as was the case for people who were born 

before 1938; doing so would ensure that no one experienced more than a 20 percent reduction in benefits for 

claiming benefits at the EEA rather than at the FRA.

It is difficult to project how behavioral responses to 

simultaneous increases in all three eligibility ages would 

differ from the sums of responses to raising each separately. Raising all ages at the same time would clearly 

encourage later retirement and result in a greater increase 

in the size of the labor force and total output than would 

raising a single age. However, CBO does not have a basis 

for predicting the sign or magnitude of the interaction 

effects if the ages were increased simultaneously. On the 

one hand, if the ages went up together, public awareness 

of the changes probably would be greater, especially if 

similar revisions occurred in state, local, and privatesector policy; as a result, societal norms and behavior 

might shift more sharply, and the effects might be 

reinforcing. On the other hand, the responses to changes 

in the various ages might be largely overlapping, so that 

changing all of them together would have less effect on 

behavior than would the sum of the individual effects. 

In the absence of evidence on the issue, CBO assumes 

that the effects of simultaneous increases in the eligibility 

ages would equal the sum of the effects of increasing 

each age separately.

Effects on Labor Supply

Raising the ages of eligibility for Medicare or Social 

Security would cause many people to work longer. 

Although people are not required to stop working in 

order to receive Medicare or Social Security benefits, the 

decisions to claim benefits and to stop working generally 

are linked. Therefore, policies that would raise the ages of 

eligibility would cause people to work longer, increasing 

the size of the labor force and total economic output and 

incomes. Increases in the eligibility ages also might cause 

28. See Congressional Budget Office, Social Security Policy Options, 

Options 23–25, pp. 28–30. 
12 RAISING THE AGES OF ELIGIBILITY FOR MEDICARE AND SOCIAL SECURITY JANUARY 2012

CBO

people to save more, in anticipation of lower Social 

Security benefits and higher health insurance premiums 

and out-of-pocket health care costs.

CBO’s estimates of the effects on labor supply of raising 

the eligibility ages are based on current patterns of work 

and benefit claims and on past changes in claiming and 

work patterns as the FRA was raised from 65 to 66. People who have claimed Social Security benefits are much 

less likely to work than are those who are not receiving 

benefits. If the EEA rose, many people would work longer to support themselves. If the FRA rose, the effect is 

less certain, but when that age went up in the past, participants claimed later and worked longer to offset part of 

the benefit reduction. Because the experience of changes 

in the eligibility ages is limited, CBO’s estimates of the 

effects of such changes on work decisions are highly 

uncertain.

Raising the EEA by two years, to 64, or raising the FRA 

by three years, to 70, would induce workers to work an 

additional eight months, on average, CBO estimates. 

Per year of increase, changing the EEA would have a 

larger effect on work because it would eliminate benefits 

for many people. In contrast, an increase in the FRA 

would reduce the amount of benefits people receive but 

would not eliminate them for anyone. The effects on 

work would be larger for groups directly affected by the 

changes. For example, CBO estimates, increasing the 

EEA by two years would induce people who would have 

claimed at age 62 or 63 to work an additional 11 months, 

on average. Once the new EEA or FRA applied to all people close to retirement, the policy change would increase 

the size of the labor force by slightly more than 1 percent 

and increase GDP by slightly more than 1 percent, 

according to CBO’s estimates.29 (In the example 

discussed above for the increase in the FRA, the full 

increase in the labor force would not occur until about 

2050. About two-thirds of that increase would take place 

by 2035.) 

Raising the MEA to 67 would result in an additional 

month of work per worker, on average, and would 

increase the size of the labor force and GDP by about 

0.1 percent, CBO estimates. If the health insurance 

exchanges established by PPACA were not available, 

people would have a larger incentive to delay retirement; 

under that scenario, an increase in the MEA would result 

in a larger increase in the labor force. 

Greater output would result in higher federal revenues 

because more income would be subject to individual 

income taxes, payroll taxes, corporate income taxes, and 

other taxes. CBO expects that the increase in revenues 

would be roughly one-fourth as large as the increase in 

total output and income if different types of income 

increased by similar percentages; the exact increase in revenue would depend on the composition of the increase in 

income and on future tax rates. For example, if GDP was 

1 percent larger than projected, federal revenues would 

generally be about a quarter of a percent of GDP higher.30

(CBO’s 10-year cost estimates assume that legislation 

does not affect aggregate economic output, so such estimates do not incorporate the effects of proposals on the 

size of the workforce.)

If all three ages of eligibility were increased according to 

the schedules described above, then the size of the labor 

force and GDP in 2035 would be about 2 percent larger 

than under current law, and federal revenues would be 

about half a percent of GDP higher. By 2060, the size of 

the labor force and GDP would be almost 3 percent 

larger than under current law, and federal revenues would 

be about three-fourths of a percent of GDP higher.

29. The labor force and GDP are projected to grow by the same 

percentage because, in these long-term projections, CBO assumes 

that national saving will adjust to keep the ratio of capital to labor 

roughly constant and thus to keep interest rates constant. 

30. The increase in work also would affect Social Security benefits. 

The higher benefits that stemmed from greater earnings probably 

would be only about one-tenth of the increase in federal revenues.

This brief was prepared by Noah Meyerson and 

Joyce Manchester of CBO’s Long-Term Modeling 

Group. Useful comments were provided by Richard 

Johnson of the Urban Institute and Steven Sass of the 

Center for Retirement Research at Boston College. 

The assistance of external reviewers implies no 

responsibility for the final product, which rests solely 

with CBO. This brief and other CBO publications 

are available at the agency’s Web site (www.cbo.gov).

Douglas W. Elmendorf 

Director