Should Uncle Sam lower the eligibility age for government health care?
Yes and no, says one major study on the topic.
According to a new RAND Corporation study, opening Medicare to Americans aged 50 to 64 would lower health care premiums for the group, but also drive up costs for younger people who buy health insurance on exchanges created under the federal Affordable Care Act.
In the study, RAND analysts pegged the premium entry price to get into Medicare at $10,000. That figure represents a “good deal” for Americans over 50-years of ager when compared against similar plans on the Affordable Care Act exchanges, RAND states. The study notes that older Americans usually pay up to three times more than younger health consumers.
But moving older Americans into Medicare would prove costly to those remaining behind who get their health insurance on the ACA exchanges. According to the report, shifting adults aged 50 to 64 to Medicare could increase premiums for those remaining in the individual health insurance market by between 3% and 9%.
"Our findings suggest that Medicare buy-in could offer significantly more-affordable health care coverage to older adults, while potentially leading to higher premiums for the pool of people remaining on the individual market," says Christine Eibner, the study's lead author and the Paul O'Neill Alcoa Chair in Policy Analysis at RAND.
The actual age on a new recipient matters, too, when calculating health care costs in Medicare.
Rand notes a “typical” 50-year-old paying for a standard Medicare health insurance plan would “cost about $2,500 less than buying a gold-level plan on the insurance exchanges.” That said, it would also $500 more than a bronze-level plan. “Medicare offers significantly better coverage than bronze-level insurance plans, but unlike exchange plans, it does not have a maximum limit on the total amount of out-of-pocket spending a beneficiary might have to pay,” the study notes.
Compare that to a 60-year-old buying into Medicare for the first time. In that scenario, he or she would pay an estimated $8,000 less
For a typical 60-year-old, the savings would be greater. For this group, buying into Medicare would cost about $8,000 less annually than a gold-level plan on the ACA exchanges and it would cost $3,700 compared to a bronze-level plan.
All told, RAND concludes that enabling Americans between the ages of 50-and-64 to buy into Medicare “would not substantially change the number of Americans with health insurance.” However, while giving consumers in that age group access to Medicare would boost the number of Americans in that age range, “the higher costs on insurance exchanges is likely to mean that fewer younger Americans would buy coverage.”
Cracks in the Plan?
Health care insurance specialists say that there are a few flies in the ointment in bringing millions of older, but currently ineligible, Americans into Medicare.
“It depends on how one defines “viable”, says Shaun Green, head of business operations at HealthPocket.com. “The RAND report's schema includes the Advanced Premium Tax Credit and Cost Sharing Reduction, so first the question must be asked: why wouldn't we just keep the 50-64 year old demographic in the ACA, where they could get comparable coverage?”
The report “suggests that a Medicare buy-in could offer significantly more-affordable coverage to older adults, Green says.
“This is true, because it uses Medicare pricing in its models when commercial pricing is going to be 140% of Medicare or more (depending on the location,” he says. “Expect the American Medical Association and American Hospital Association to strenuously oppose this idea.”
The cost and logistics with a 50-and-up Medicare structure would present problem, too.
“If this were to be made into law, the extension of Medicare pricing to the six million people in the base scenario would cut the costs on those plans, but overall costs would not come out of the system,” Green adds. “They would be shifted to others - similar to what we see today with Medicare and Medicaid - that are subsidized by other health plans.”
“Plus, the logistics of shifting 6 million, many coming from ACA plans, will be complex as regulations will have to be re-written, and a plan made and executed. This will not be easy, as the Part D and ACA implementations demonstrated.”
The ACA would suffer if a move to expand Medicare to millions of Americans was made, as well.
“It would further diminish the ACA, which has been shrinking in recent years,” Green states. “The ACA is now stable, but this would cause serious issues for a risk pool that already has an adverse selection problem. This instability may negatively affect the overall health sector, which is about 18% of the entire U.S. economy.
Younger and Healthier = Lower Premiums
Allowing a younger and healthier population into the Medicare market would lower premiums on Medicare Supplemental Plans, experts say.
“Currently, Medicare eligibility coincides with typical retirement age,” says Troy Baccus, owner of Medicare Life Group, in Great Falls, Montana. “Depending on the extent to which their employer covers healthcare, you may see people defer their Medicare Part B enrollment until retirement anyway, which would mitigate some of the impact of the changes.”
Because Original Medicare coupled with a Medigap plan offers superior coverage to most employer plans, you'd likely see many employees leave their employer provided healthcare and enroll in Medicare while still employed, Baccus adds.
Medicare Life Group
Shaun Green – via Renee Volpini