Medicare Buy In
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.
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 thebeneficiary’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
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
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|
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|
Aged Based Monthly costs distributed as they were in 1994
|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|
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%|
|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.
|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.
|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|
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.
|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|
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.
|Age||Plan I||Plan II||Plan III||Plan IV||Plan V|
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
|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|
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.