Medicare Buy In

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Medicare Buy In is an extension of the current United States Medicare system that provides improved long term system viability while reducing medical costs for all ages. This is accomplished by allowing persons less than 65 years of age to purchase Medicare insurance through the payment of premiums that cover the full cost of the insurance (no tax based subsidies). Persons 65 and older are not directly affected by the extension of Medicare insurance to those not yet 65 years of age. However, the increased number of participants in the Medicare system dramatically improves market power (price negotiating power). The enlarged "consumer union" so formed will dramatically improve the services available to current Medicare participants as it reduces costs to taxpayers and policy holders alike. It is important to note that relief for low income persons (up to 400% of poverty level) is already provided by PPACA. It is assumed that subsidies would be honored for those who buy insurance from the Medicare provider just as for those who buy insurance from the private insurance sector exchanges.

This article documents the supporting analysis for Medicare Buy In. The primary underpinning for the assessment of reduced costs in Medicare Buy In is a report from the Congressional Budget Office that attests to the savings that the Medicare insurance system provides to its members in addition to the subsidies afforded the elderly. For those who disagree with the findings of the CBO we encourage them to call upon the CRS and or the GAO to produce more accurate and compelling studies.

Contents

The Congressional Budget Office Report and Analysis

Analysis by Jay Bookman

An article entitled "The CBO Verdict: Ryan Care or Mediscare" appearing in The Atlanta Journal-Constitution as authored by Jay Bookman discusses the findings of the Congressional Budget Office (CBO) in its inquiry into how the costs of medical care (for seniors) would be by the alterations to "Medicare" proposed in the Paul Ryan Medicare privatization plan.

Estimates of the Shares of Spending Borne by the Government and Beneficiaries

A private health insurance plan covering the standardized benefit would, CBO estimates, be more expensive currently than traditional Medicare. Both administrative costs (including profits) and payment rates to providers are higher for private plans than for Medicare. Those higher costs would be offset partly but not fully by savings from lower utilization stemming from two sources. First, private health insurers would probably impose greater utilization management than occurs in Medicare. Second, private plans might restrict enrollees’ ability to purchase supplemental insurance plans; enrollees would thus face higher out-of-pocket costs than they do in Medicare, and that increased cost sharing would encourage lower utilization. On net, for a typical 65-year-old in 2011, CBO estimates that average spending in traditional Medicare will be 89 percent of (that is, 11 percent less than) the spending that would occur if that same package of benefits was purchased from a private insurer (see Figure 1).16

Moreover, CBO projects that total health care spending for a typical beneficiary covered by the standardized benefit under the proposal would grow faster than such spending for the same beneficiary in traditional Medicare under either of CBO’s longterm scenarios. For the period before 2030, the difference in projected growth rates occurs primarily because CBO expects that the payments to providers in Medicare will grow more slowly (especially under the extended-baseline scenario) than those in the private market.

As a result, total health care spending for a typical 65-year-old in Medicare under the extended-baseline scenario in 2022 would be 66 percent of total spending with a private plan with the standardized benefit; in 2030, the figure would be 60 percent of that benchmark. Total health care spending in Medicare under the alternative fiscal scenario would be a larger share of total spending with a private plan—72 percent in 2022 and 71 percent in 2030—because payments to providers in Medicare are assumed to grow at a faster rate than under the extended-baseline scenario.

16. This calculation was conducted as if an insurance exchange offering such plans were in place in 2011, which is not part of the proposal. Since premium support payments and purchases through the exchange would not begin until 2022 under the proposal, no shares of the government’s or the

beneficiary’s contributions were estimated for 2011.

Extended Analysis of CBO data

The findings concerning the costs and of insurance apply to ALL age groups and not just the seniors. So if there is an 11% benefit to the Medicare System for the people over 65 then that same benefit will apply to others who would subscribe to Medicare.

My Analysis in January 0f 2011 without CBO data

Current Rates

http://www.cms.gov/ReportsTrustFunds/downloads/tr2010.pdf

From the above PDF we get

"Table V.B1.—HI and SMI Average per Beneficiary Costs"

And this table tells us that beneficiary Costs for 2010 for Hospitalization Insurance (Medicare part "A") was $5,230, Part B was $4,936, and part D was $1,797 per enrollee.

The Monthly cost is therefore $436, $411. and $150 respectively for these insurances. The Wikipedia tells us that Part "A" is priced at $461 and (indirectly) that part "B" is priced at $400. (Part "B" is computed as the monthly premium charged the elderly, times 4 which for most is $95 and some is $110 (government picks up 75% of the tab)). The difference is the cost of supplying the bookkeeping services (the overhead). The total cost is $997 and the price of the "insurance" is that figure plus the overhead percentage computed as (461-436)/436 , i.e. 5.7%.

Age Based Costs 65 and Older

"http://www.access.gpo.gov/congress/house/ways-and-means/sec3.pdf"

TABLE 3.25. Average Medicare Part A and Part B Benefit Payment Per Elderly Enrollee by Age, 1994

AGE Part A-- Part B-- Total-- Monthly
65 and 66 years-- 1,494 1,087 2,581 215
67 and 68 years-- 1,674 1,215 2,889 240
69 and 70 years 1,852 1,269 3,121 260
71 and 72 years 2,135 1,370 3,505 292
73 and 74 years 2,349 1,468 3,817 318
75-79 years 2,876 1,624 4,500 375
80-84 years 3,547 1,716 5,263 438
85+ years 4,214 1,762 5,976 498


We can project a drug benefit back to 1994 in proportion to the other cost differences. If the cost of "A" plus "B" was 329.50 in 1994 and that cost is $861 today then 861 is to 329.50 as 150 is to X. X = 57.4 per month (or 688 per year). We add that to the _average_ monthly cost of 329.5 and get $387 as the inferred _AVERAGE_ cost of Medicare _with_ drug benefits in 1994. The resulting distribution looks like this:

Age Based 1994 Medicare Costs with projected Part D drug benefit:

Years Part A Part B A+B Part D Total Monthly
65 and 66 years 1,494 1,087 2,581 449 3,030 $253
67 and 68 years 1,674 1,215 2,889 503 3,392 $283
69 and 70 years 1,852 1,269 3,121 543 3,664 $305
71 and 72 years 2,135 1,370 3,505 610 4,115 $342
73 and 74 years 2,349 1,468 3,817 665 4,482 $373
75-79 years 2,876 1,624 4,500 784 5,284 $440
80-84 years 3,547 1,716 5,263 916 6,179 $515
85+ years 4,214 1,762 5,976 1,041 7,017 $585
Totals 20,141 11,511 31,652 5,511 37,163 $3,096
Averages 2,518 1,439 3,957 689 4,645 $387
Monthly 210 120 330 57 387 check


Aged Based Monthly costs distributed as they were in 1994

Years Monthly
65 and 66 years $652
67 and 68 years $729
69 and 70 years $786
71 and 72 years $881
73 and 74 years $961
75 tru 79 years $1,134
80 --- 84 years $1,327
85 +---- Years $1,507
Total $7,977
Average 997

Age based Decline in costs at two year intervals

From 75 to 73 the drop is 15%
From 73 to 71 the drop is 8.3%
From 71 to 69 the drop is 10.8%
From 69 to 67 the drop is 7.3%
From 67 to 65 the drop is 10.6%
Total 52%
Average 10.4% or 5.2% per year.


Projected Costs & Premiums 64 and Younger

Medical costs are projected to decline as indicated by the cost declines for those over 65, i.e. 5% for 6 years, then 4.8% per year for the next six years. These projections are amateurish. The objective is to encourage our representatives to employ the CRS and the GAO and the Board of Trustees to produce more accurate estimates.

Age Decline Cost Premium
63 - 64 5% 587 620
61 - 62 5% 528 588
59 - 60 5% 475 502
57 - 58 4.8% 430 478
55 - 56 4.8% 389 411
53 - 54 4.8% 352 372

Age and Location Based Insurance Quotes From Private Insurance providers

The quotes from the various companies in the various locales all assume the definition of "healthy" that is particular to the locale in question. These definitions change between locales. The state of Washington has a well understood point system in which you receive points for preexisting conditions and if you score higher than 325 points you will not be accepted by standard insurance providers. Texas also rejects people with preexisting conditions such as diabetes and other problems. The quotes below are for healthy people.

The following table documents monthly insurance premium prices for the noted city and state with a $1000 deductible and a 20% coinsurance. These quotes are from EHealthInsurance, retrieved during the first week of 2011.

Age Average Tacoma Austin SprFld Doravl Clevld Denver Private
Group Medicare WA. TX. MO. GA. OH. CO. Avg
63 - 64 620 789 803 642 794 665 642 723
61 - 62 558 789 749 615 719 606 617 683
59 - 60 502 789 667 529 637 542 525 615
57 - 59 456 673 602 490 580 489 503 556
55 - 56 413 673 537 421 523 437 429 503
53 - 54 375 673 471 387 471 392 395 465
Avg 487 731 638 514 621 522 519 591

In the table below we document the prices for a $2500 deductible and a 20% coinsurance for "healthy" people.. These quotes are from EHealthInsurance , retrieved during the first week of 2011. The Medicare prices are projected as the same percentage of decline as the average private rates.

Age Average Tacoma Austin SprFld Doravl Clevld Denver Private
Group Medicare WA. TX. MO. GA. OH. CO. Avg
63 - 64 424 540 555 496 505 445 495 506
61 - 62 382 540 500 459 455 414 466 472
59 - 60 343 455 453 380 407 363 416 412
57 - 59 312 455 415 348 368 331 384 384
55 - 56 282 378 369 307 339 296 357 341
53 - 54 256 330 336 280 300 269 330 308
Avg 333 450 438 378 396 353 408 404

State Based Risk Pool Insurance

The reason that the health insurance premiums are as low as they are is because the private insurance companies only insure people with a very low risk of needing medical attention. Many of the states set up high risk insurance pools that are sometimes, but not always, subsidized by sources in addition to premiums. Still, the premiums are quite high. The following links are to state based "risk pools" that currently provide insurance to people with preexisting conditions.

"Washington State Risk Pool"


"Texas Risk Pool"

"Missouri 2009 MHIP Statewide Premium Rates"
Age Plan I Plan II Plan III Plan IV Plan V
Group 500 1000 2500 5000 Health
.... Deductible Deductible Deductible Deductible Savings
..... Male Female Male Female Male Female Male Female Male Female
0-17 $247 $247 $188 $188 $149 $149 $120 $120 $149 $149
18-29362672279525218418170300218418
30-39460792359613279477221362279477
40-44610867485700381548300418381548
45-49760953605769479597381483479597
50-549531,053763867600688473555600688
55-591,1991,181966979756783593642756783
60-641,5121,3501,2111,112928869743715928869

Medicare Buy In is probably not feasible without ACA, as ACA forces insurance companies to accept all persons ignoring preexisting conditions, placing these companies on an level playing field with an _UNSUBSIDIZED_ Medicare Insurance Company. When these people are included in the current "healthy" groups, the private insurance prices will rise. Medicare insurance has never been refused to anyone because of preexisting conditions. Therefore, the projected price of Medicare Buy In type insurance will not need to be adjusted in respect of ACA. The premium estimates for Medicare Buy In will be 20% less expensive across the board than the resulting private insurance premiums. It is important to offer _REAL_ insurance that is is location based. Insurance based on cost of living in a local is extremely important. People who insist on living in areas that are extremely expensive should be paying higher premiums than people living in less attractive settings. There are also limitations with regard to distance from medical facilities. To say that the states can do a better job of this is certainly not evident from looking at the Washington State High Risk pool. Both Texas and Ohio seem to be taking cost of living and commute distance into account.

National Risk Pool Insurance

"National Pre-Existing Condition Insurance Plans"

"Premiums for National Pre-Existing Condition Insurance Plans"

Age Standard Option Extended Option HSA Option
0 to 18 $174 $234 $181
19 to 34 $261 $351 $271
35 to 44 $313 $422 $325
45 to 54 $400 $539 $416
55+ $557 $749 $578


Looking through all the states that are administered by PCIP we see the average cost for early retirees of 55 and older is about $550 per month. This is about half the rates of the State Risk Pools. The Ohio State Risk Pool is managed by the state of Ohio, but it is APPARENTLY funded via the NATIONAL risk pool mechanism. This is assumed because it is NAMED the Ohio NATIONAL risk pool.

"Ohio Risk Pool"

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