Matthew Holt

Making (sh)it up as they go along

So today’s news is that the gang of ten have come up with something. (If you haven’t been following along, the gang of ten are the five “liberal” Democrats and the five DINOs asked by Harry Reid to come up with something to break the deadlock and get some type of compromise that will pass the Senate).  More details are here from Brian Beutler at TPM

So it might vanish like a Clinton-era trial balloon, or it might be a stayer, but the core of the new concept is to allow the 55–64 crowd to buy into Medicare, and to ask/allow/mandate a non-profit insurer(s) to provide a substitute public option. Exactly what the second point means is unclear to me. It may turn out to be some collapsing of Kent Conrad’s notion of the cooperative with an extension of the Federal Employees’ Plan (presumably minus the for-profit carriers) and somehow cramming that into the exchange. Of course providing something like the choice among private plans that Federal Employees now get was at the heart of Ron Wyden’s plan. We’ll see if it can last a couple of days scrutiny, or the wrath of the House Democrats.

The Medicare buy-in seems both sensible politics and half-decent policy.

As Suzy Khimm points out, associating the public option with Medicare improves its polling scores. But it’s also not bad policy as many of the most desperate uninsured are those in that age group. Although the rate of uninsurance is relatively lower amongst those 55–65, in most states it’s very hard for them to get insurance in the individual market and of course they have the highest costs of those below 65. The other good political and policy news is that they’ll be able to buy-in in 2011, not having to wait until 2014. It also appears that Medicare will be offered to people 55+ in the exchanges post 2014, so they’ll be able to use subsidies to buy it then. What the premiums required to buy into Medicare will be is also uncertain. Currently the 65+ population average around $16,000 a year while those 18–64 cost about $6,000 (my rough extrapolations from 2004 numbers). So perhaps the unsubsidized age-adjusted premiums would be $10,000 a year. A hell of a lot but not completely out of the question for many near-seniors who are working, may have paid off the mortgage and can’t get insurance at all now.

Writing on THCB six weeks ago (and on Health Affairs blog too) Jeff Goldsmith suggested the Medicare buy-in and to be fair he noted that it has had something of a life as floated-but-never-enacted-proposal over the years. Presumably some bright staffer read his article. And that’s why it’s in the mix today. After all in the past two years of campaigning and debate it never seemed to come up.

I’m somewhat reminded of the stories about how LBJ crammed Medicare and Medicaid into the bill in 1965 when both groups (the former New Dealers supporting Medicare for all and the AMA opposing it) both got some aspect of what they wanted. But although Medicare and Medicaid solved some problems, that whole mess created lots of others—all due to the political necessities of the time. I suspect that if this compromise holds true, there’ll be some improvement, but also plenty of unintended consequences too.

But is this any way to create sensible social programs? Stop me before I go off into vague ramblings about how Stalin won World War Two by collectivizing the Kulaks…..

9 replies »

  1. Matt,
    Funny title to this post. We shall see what the CBO says about this. Looks likes the Hospitals and Docs are now against “reform” (i.e., Medicare expansion) — in other words, they were lied to — why would they be surprised, they were talking to lawyer/politicians.
    Let’s not hold our breath for a last second deal that includes tort reform.
    By the way, a tax of $6.7B on insurers is ultimately a tax on those making less than $250k, since most of the premium-paying public makes less than that.
    Truth 1, Obama 0

  2. the current compromise was fashioned to move the ball downfield. At this stage of the game, nothing wrong with a ball control offense. “It’s so crazy it just might…” well, not actually work, but inch things on to the point where something more workable may take shape.

  3. This buy-in is not sensible policy. It doesn’t make much sense to create small pool of high-risk patients. Premiums for this will have to be very high (minimum $7500 sounds about right) and when we start subsidizing, it becomes a drain on the budget. The only way it becomes financially sustainable is to extend it to every one, which is exactly the point.
    This nothing but a first step to single-payer. Well if that’s the intention, let’s debate it frankly so that we can end up with the right kind. Not all single-payer systems are created equal, so even supporters should be careful how they get there.
    I am a doctor and I support healthcare reform. I also support reform to the payment system even if it means lower payment for some doctors so long as it’s appropriate with incentives for good medical practice and improved quality of care. But to just cut payment to doctors across the board is not only potentially harmful but downright unfair.
    Lastly, please don’t lump doctors in with insurance companies and other special interests and stakeholders. We make good money because we labor for it. We make great personal sacrifices and we provide an invaluable service that you just can’t put a price on (pardon the repetition). It makes little sense to demonize doctors and it’s disheartening.

  4. Follow up: I forgot to mention that the numbers you cite based on the 2004 data appear to be for total health care spending, not the medical claims cost or premium cost. So, it includes out of pocket expenditures that don’t make it into premium.
    If that’s the case, and traditional Medicare is expanded, then we could get a premium cost that is something like 20% lower still, since traditional Medicare actually has a pretty high level of cost sharing. (Something that fans and detractors alike tend to ignore.)
    Or maybe that was included in Snowe’s estimate.

  5. Matt (and Maggie)- The $10,000 figure might be off by quite a lot–not as an estimate of medical cost, but as an estimate of unsubsidized premium. The reason is that people who buy in to Medicare before 65 have still paid into Medicare for their entire working lives. They would get the benefits of that, just as those who are 65 do.
    I don’t know how much the premium could be reduced and still be actuarially sound, but Snowe has thrown out a number around $7,500, which sounds about right.

  6. MD as Hell- Although I’ve been tempted on many occasions to label you a self-serving ranter in the same category as those protecting the insurance industry, you have provided a lightning bolt of clarity.
    No matter what side one takes in this insane discourse, at the end of the day our broken, corrupt system of “solving” problems which threaten our viability as a country will relegate us to the economically unavoidable default. I’ve been predicting single payer but you’re right- the inevitable default that we will collectively become a ward of the state: just not ours. At the end we’ll all get what those who own us choose to provide.
    And it’s going to be China. We have no prayer of fixing a broken health care system until we fix how decisions get made in Washington.

  7. Matthew–
    Thanks much for bringing up the cost of providing care for people 55-65.
    The fatal flaw in the “expanding Medicare to include people 55-64” part of this plan is that you are isolating a very expensive group in a very small pool.
    This is why, as you suggest, Medicare would have to charge them about $10,000 per person–just to cover the cost of providing comprehensive insurance. (I’ve just written about this on HealthBeat, referring to your numbers.)
    The is, of course, in part because the cost of care in our inefficient and over-priced system is so high.
    But it’s also because it makes no sense to isolate older people in a pool of their own; insurance becomes too expensive. They can’t afford it. (Joint Median income for this age group is $58,000 per household. Half earn less.)
    Medicare works because the funding for that very expensive cohort comes from everyone, over a long period of time.
    The Gang of 10 “Solution” doesn’t even provide subisdies when it rolls out expanded Medicare in 2011.
    And even if there are subsidies in 2014, a couple earning $58,200 wouldn’t qualify–and couldn’t afford $20,000 worth of insurance.
    Of course we could cut the benefits in “medicare for the middle-aged” and make it a skimpy, cheaper plan–
    you know, it covers surgery, but not rehab after surgery, doesn’t attempt to manage chronic diseases and and comes with a $10,000 deductible so the 1/3 of 55-64 year olds with joint household income udner $35,000 can’t affored to use it.
    But that’s okay. We can all pretend that we’re moving toward universal coverage.
    As for the other half of the plan, administered by the folks who administrer Federal Employees’ insurance–ask a postman how well he likes FEHBP.
    The only good thing about it is that the government picks up the lion’s share of the premiums. Under this plan, most people would have to pick up a large share (or all) for the premiums themselves.
    The fact that the insurers would be non-profit means nothing. As you know, most non-profits are not Geisinger or Kaiser.
    These proposals don’t represent reform, just the pretense of reform.

  8. Medicare is financially ruined. It will not be there without major new taxes. If the cost per life does not go down, then we will borrow until we are not a country anymore. When we are a Chinese state we will get Chinese healthcare. So what ever healthcare coverage the Chinese people get now, we should shoot for in reform. Anything else is just political BS.
    As a doctor, I cannot take anymore theft-by-legislation ripoffs and still pay the staff. I cannot hold your hand on the big government’s nickel when it costs me a dime.
    We need reform.
    We need to get back to cash and carry.
    Computers should telll most people they do not need to go to the doctor for what they are worried about. The government should tell them they are not covered just because they are worried about something. Random spending of Medicare money by patients must stop.
    The individual Medicare beneficiary has a direct tap into the treasury. That is a crime! Congress can stop that today with a single simple bill.

  9. You do have to love a proposal, the insuers, hospitals, and doctor stakeholders/special interests are all opposing. Insurance plans object warning (shock, shock, shock) Medicare is going broke, hospitals and doctors object because they aren’t paid enough by Medicare.
    What part don’t folks get? In America you can buy health insurance for you dog/cat/parrot/ferret (for about $50/month) but I can’t get affordable health insurance. In my second life I’m definitely returning as my companion animal!