Understanding the Medicare Cliff: Transitioning from Medicaid at 65
The "Medicare cliff" refers to the loss of Medicaid coverage that some adults in the U.S. experience when they turn 65 and become eligible for Medicare. Unlike Medicaid, which bases eligibility primarily on income, Medicare eligibility starts at age 65 regardless of income. Although some individuals can be dual-eligible for both Medicare and Medicaid, many lose Medicaid when their income exceeds the stricter eligibility criteria for adults over 65. This transition often leads to higher out-of-pocket costs and changes in the scope of health coverage. The Affordable Care Act expanded Medicaid coverage primarily for adults under 65, with income thresholds around 138% of the federal poverty level (FPL). However, older adults face a lower income threshold near 100% of FPL for Medicaid eligibility, intensifying the coverage gap at age 65.
Medicare’s cost structure includes premiums, deductibles, and coinsurance that differ significantly from Medicaid’s capped out-of-pocket maximums. For example, in 2025, Medicare Part A premiums range from $285 to $518 monthly depending on income, with a deductible of $1,676, and Part B premiums are approximately $185 monthly with a $257 deductible. Medicaid generally limits out-of-pocket expenses to no more than 5% of family income, often requires no premiums for those below 150% of FPL, and covers long-term care and additional services like dental and vision in some states.
Coverage differences include Medicare’s lack of long-term care and limited dental, vision, or hearing benefits under Original Medicare, although Medicare Advantage plans may offer some additional benefits but with increased costs. Approximately 5.9 million adults age 65 and older fall below 100% FPL and may lose Medicaid upon reaching Medicare eligibility. This transition disproportionately impacts females assigned at birth and People of Color, with studies showing increased out-of-pocket healthcare spending by up to 25% and a 44% higher likelihood of difficulty paying medical bills.
Research indicates the Medicare cliff reduces healthcare utilization and enrollment particularly among Black and Hispanic communities. The current system offers no universal avoidance strategy for the Medicare cliff, though some programs can help mitigate its effects. Programs such as Medicare Savings Programs (MSPs) may assist with Medicare premiums and preserve some Medicaid benefits. Additional eligibility under Medicaid for aged, blind, or disabled individuals (ABD Medicaid) and Social Security Disability Insurance recipients can provide continued support.
Other financial aids include the Part D Low-Income Subsidy (Extra Help) for prescription costs, State Pharmaceutical Assistance Programs in certain states, and Medigap plans to help cover deductibles, copayments, and coinsurance not covered by Medicare.
State-specific eligibility changes after age 65 increase the risk of coverage loss, which can lead to significant financial and healthcare access challenges. The Medicare cliff’s impact highlights the need for attention to demographic disparities and the importance of supplementary programs in supporting older adults transitioning from Medicaid to Medicare.