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Medicare for 50-Somethings?

By The Editors December 10, 2009 7:23 pm December 10, 2009 7:23 pm

Chris Hondros/Getty Images Demonstrators outside of Senator Chuck Schumer’s office in New York City on Dec. 10.

Twelve percent of Americans aged 55 to 64 — 4.3 million people — do not have health insurance, according to the Kaiser Family Foundation. They would be the beneficiaries of a plan being pushed by Senate Democrats as part of the national health care overhaul that would allow people over 55 to buy into the Medicare program at subsidized rates if they can’t find coverage elsewhere.

The terms of the proposal are still being worked out — how soon would it begin, for example, and what would the subsidy be? — and it is unclear whether it has a chance of being adopted, given the skepticism of some crucial Republican moderates like Senator Olympia Snowe of Maine.

Does this proposal make sense as a way to protect the “near elderly,” especially as these baby boomers lose their health care along with their jobs? Or is it a back-door attempt at providing a public option that is unaffordable and adds further risks to Medicare’s fiscal viability?

Serving the Larger Goal

J. Michael McWilliams is assistant professor of health care policy and medicine at Harvard Medical School and Brigham and Women’s Hospital.

A Medicare buy-in option for adults ages 55-64 could provide an important complement to other health care reforms being considered by the House and Senate. As the details of this buy-in are debated, it is important to remember the ultimate goals of health reform and why these “near-elderly” adults should be a focus of legislative efforts.

The purpose of health reform is generally threefold: achieve universal coverage to protect all Americans from high medical expenses; improve health outcomes; and control rising health-care costs that threaten the nation’s fiscal condition and non-health sectors of our economy. A Medicare buy-in could help achieve all of these goals.

Expanding Coverage

Several proposed measures would help correct this failure in the private market, including insurance exchanges and mandates to pool risk, income-related subsidies for the purchase of insurance, and regulations prohibiting insurers from denying coverage or charging higher premium for pre-existing conditions.

Nevertheless, many near-elderly adults in the middle class may still find health insurance unaffordable. Because of its lower administrative costs and payment rates to providers, Medicare could provide an affordable alternative for these otherwise uninsured adults.

Improving Health

The health consequences for uninsured near-elderly adults with treatable chronic conditions can be quite severe, as suggested by their much higher risk of premature death compared with their insured counterparts.

Indeed, growing evidence suggests that when older uninsured adults gain Medicare coverage at age 65, their use of effective health services increases, their health trends improve, and their risk of cardiovascular complications diminishes. Near-universal Medicare coverage is also associated with reduced death rates for hospitalized patients and reduced racial and socioeconomic disparities in control of blood pressure, blood sugar and cholesterol.

Cost Containment

These distinctive health benefits suggest that expanding coverage for uninsured near-elderly adults may not cost as much as previously thought, as these adults would enter traditional Medicare eligibility at age 65 with lower risks of costly complications.

We recently estimated that universal coverage for adults currently 51-64 would increase total health care spending before 65 by $198 billion, but this increase may be partially offset by a subsequent $98 billion decrease in Medicare spending for these adults between ages 65-74. Furthermore, although a buy-in — particularly a subsidized program — would add to the governmental costs of health reform, the government and the public should be more concerned about controlling total national health care spending.

An effective buy-in may help control national spending because a greater fraction of care for the chronically ill would be affected by innovative changes to Medicare’s payment and delivery systems currently proposed by Congress.

Steffie Woolhandler is a professor of medicine and David Himmelstein is an associate professor of medicine, both at Harvard Medical School. They are co-founders of Physicians for a National Health Program .

Milk and lemon both taste good in tea. But mix them together and it’s a curdled mess. Similarly, the latest Senate health reform compromise combines two appetizing elements — a Medicare expansion and tighter insurance regulations –- to create a noxious brew.

Both the House and Senate versions of reform would turn over hundreds of billions of tax dollars to the same

private insurers who’ve proven incapable of controlling costs or giving American families the coverage they need. And these bills would make failure to buy insurers’ defective products a federal offense. Together these measures greatly augment insurers’ financial and, hence, political muscle.

The only concessions wrung out of the insurers for this windfall are modest new regulations on the policies they sell to individuals: insurers will have to accept every applicant; they won’t be allowed charge the sick higher premiums; and they’ll be able to charge older people only two to three times more than the young.

Most of these regulations won’t change things for people who get their coverage through an employer, but they’re helpful for the many of the roughly 7 percent of the population who buy their own private insurance.

For insurers, the regulations make the near-elderly who don’t get employer-sponsored coverage into pariahs. On average, they cost insurers far more than twice as much as the near-teens, but they can’t be charged premiums to match their costs.

Now the Senate plans to take some of these high-cost patients off private insurers’ books, and make them Medicare’s problem. Consequently, the costs of this Medicare buy-in will be high — both for patients and for the taxpayers who will subsidize the near-poor starting in 2014.

Meanwhile, younger, healthier and hence more profitable patients will be forced into private insurance. There’s no public option for them, nor for anyone offered employer-sponsored coverage. If you have private insurance and you like it, you can keep it; if you have private insurance and you don’t like it, you still have to keep it.

But even though it’s bad health policy, this new compromise is brilliant politics. For insurers, it offers a hidden subsidy. Meanwhile, it gives the appearance of responding to the vocal and growing legion of single payer supporters who want Medicare for All.

In the end, the Senate compromise, like its House counterpart, will do little to salvage the sinking U.S. health system. Costs will continue to skyrocket, putting coverage more and more out of reach for middle class Americans, and driving the costs of taxpayer-funded subsidies through the roof.

In contrast, a single payer system could save nearly $400 billion annually on health insurers’ overhead and the paperwork they inflict on doctors and hospitals -– savings that would make universal coverage affordable. Medicare for All won’t grow from the Senate compromise, but from its ashes.

Shelve the Proposal

Stuart M. Butler, an adjunct professor in public policy at Georgetown University, is the vice president for domestic policy at the Heritage Foundation .

Politically, the Medicare “buy-in” proposal is a good pain reliever for progressives faced with losing an explicit public option. But from a substantive point of view it has big problems. That’s why even analysts on the left of the spectrum have mixed feelings about it.

It is true that 1-in-10 55- to 64-year-olds are uninsured and can face crippling health costs, which rise with age. So why not let them join Medicare?

Expanding Medicare would only further weaken the already shaky finances of the program.

One problem is the steep premium required if these new beneficiaries pay the full cost. Individual coverage would cost nearly $8,000 annually (including prescription coverage). And Medicare still has gaps requiring costly supplemental coverage. That would make it unaffordable to many eligible Americans.

The government could provide hefty subsidies of course. But that would make it harder for Congress to stay within the health reform budget. Moreover, many or most of those eyed for a buy-in would be eligible for coverage and subsidies under the new exchanges. So why bring Medicare into the picture — unless your real aim is simply to expand government-sponsored coverage?

Another problem that worries groups like AARP is “adverse selection.” With steep buy-in premiums it would be the sickest who elect to sign up. So Medicare’s costs for each new enrollee would typically far exceed the premium income, further weakening the already shaky finances of the program and potentially raising rates for the elderly.

On top of that, a Medicare buy-in program would further unravel employer-sponsored retiree coverage, as firms nudged younger retirees into Medicare to cut their benefit costs. So the number of new enrollees, and total costs, could escalate.

A Medicare buy-in is enthusiastically taken off the policy shelf every few years. And after serious examination it is put back on that shelf. Hopefully that’s what will happen once again.

Category: Insurance

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