Cecily O'Connor
RedwoodAge.com

The Congressional Budget Office has proposed allowing boomers to buy into Medicare before the age of 65 as an alternative to buying private insurance.

The CBO  studied a limited Medicare buy-in option for adults between 62 and 64. It estimated that the annual premium for single coverage in 2011, the year in which open enrollment beings, would be $7,600. That amount includes drug coverage. 

By comparison, a private insurance policy premium for a 64-year-old can cost $12,000 to $16,000 a year. That amount does not include co-pays and deductibles. And it excludes coverage for those with even minor health problems, according to Consumer Watchdog, an advocacy group. 

In 2006, Medicare spent and average of $10,200 per beneficiary, which currently includes an older and sicker population than that envisioned by the buy-in program.

"The report emphasizes an important point for policy makers to keep in mind as they grapple with fixing our nation's health care: Medicare provides more affordable coverage because it eliminates the waste and profiteering of the private market," said Jerry Flanagan, a Consumer Watchdog spokesman. 

Bridging the Gaps
The buy-in option would be especially important to aging boomers - the oldest of whom turn 63 this year. While Americans become eligible for Social Security at age 62, they must wait three more years for Medicare coverage to kick in under current rules.

Generally, Medicare is limited to people 65 or older, younger people with disabilities and people with permanent kidney failure requiring dialysis or transplant. 

As a result, finding a way to close the gap between Social Security and Medicare eligibility has become one of the biggest financial challenges faced by boomers who wish to retire early. Many working boomers have put retirement plans on hold, given the slow economy and the rising cost of health insurance.. 

Other boomers are scrambling due to a lost job or other financial hardships. While they can rely on private insurance, that option can come with strings attached. Many people who have health problems are denied coverage altogether, or are offered policies that exclude coverage for pre-existing conditions. 

By 2014, about 300,000 people would be participating in the Medicare buy-in program, two-thirds of whom otherwise would have had private coverage, according to CBO estimates. The other 80,000 would have been uninsured, and 20,000 would have remained employed and had employment-based coverage. The participants who otherwise would have been uninsured represent approximately 9 percent of the uninsured population ages 62 to 64.

Still, the Medicare buy-in option could lead to higher-than-expected Social Security payments because, due to the program, more Americans over 62 are likely to  retire earlier than without the coverage. Consumer Watchdog said those expenditures - which the CBO described as "minimal" over the long term - could be erased if the program were expanded to allow any American to buy-in to Medicare regardless of age.

For example, if Medicare also covered the young, the estimated cost per person would fall. Children in federally subsidized plans cost about $2,300 a year (including dental), and younger adults fall in the middle.