The Age Rating Game: Will Older Americans Pay More Under Health Reform? 

The Affordable Care Act leaves it to the states to decide whether they want to let insurers charge older Americans more for coverage. If a state takes no action, a 64-year-old buying his own insurance in the individual market will pay up to three times more than an 18-year-old. In the small-group market – if a small business employs an unusually large number of older workers – the same 3:1 ratio applies.

Today, in most states, there are no caps on how much insurers can charge a 60-something forced to purchase his own insurance. In the individual market, only New York State bans age rating altogether, and just three other states limit how much premiums can vary, based on age, to less than 3:1. When insurers sell policies to small businesses, Vermont also prohibits age rating, but only five other states cap increases.

To check whether your state shields older boomers in either of these markets, take a look at these charts. (A checkmark in the right-hand column means that age rating is now unregulated in that state.)

Help from the younger generation?

Under reform, more states could decide to ban age rating, or follow Massachusetts’ example, and limit the ratio to 2:1. But, politically, this would be a third-rail decision.

If older boomers pay less, younger adults would be charged more, and most are vehemently opposed to being asked to support the Pepsi Generation. As one of my younger readers once commented, “I’m willing to help my mother, but not someone else’s mother.”

Just how much more would a 20-something pay? According to researchers at the Urban Institute, eliminating age rating would lift average premiums for those 18 to 34 years old by $1,400 (from $3,600 to $5,000). Policy holders ages 35 to 44 would see their premiums rise by $800 (from $4,200 to $5,000). Meanwhile, premiums for those between age 45 and 64 would fall by about $2,400, from $7,500 to $5,100.

In other words, when costs are distributed over a large group, older adults save more than younger adults lose.

Still, many believe that older Boomers can and should pick up the higher tab for their own care. After all, throughout their financial lives, they have been luckier than most: they enjoyed first crack at the employment market when jobs were plentiful, and first dibs on housing when homes were affordable.

A generation hit hard

Yet in recent years, the economy has not been kind to the rock ‘n roll generation. One in six is now unemployed, and from 2000 to 2011, the average (mean) after-tax income of Americans age 45 to 54 (who are now in their 50s and early 60s) plunged by 13.3 percent.

By that measure, the recession has hit them harder than other age groups except Americans aged 15 to 24. Over those years, this cohort should have been enjoying their peak earning years. But as the chart below reveals, they didn’t.

Between 2000 and 2011 average after-tax income of Americans age 45 to 54 plunged by 13.3 percent. Graph: Advisor Perspectives, Inc.

Even worse, the Wall Street Journal reports, “at an age when they should be generating peak … savings,” many have been raiding their retirement funds and “applying for early Social Security benefits.” Among median-income households headed by someone age 55 to 64, total savings and assets stand at just $87,200. In 2014, they will be the 50- to 64-year-olds struggling to scrape together $7,500 to $8,500 to purchase health insurance in the individual market.

Of course, younger middle-class Americans also have watched their incomes slide, but time is on their side. They have many more years to recover. The problem for a jobless 60-year-old is that she won’t be able to make up for her losses unless she finds a higher-paying job – and that isn’t likely.

In 2014, just how many older Americans will find that they can’t afford universal coverage? Writing in Health Affairs in February, the Urban Institute’s researchers estimated that under reform, age rating means that roughly 1 million Americans age 45 to 64 will forego insurance.

Abolish age rating?

Yet there’s a trade off: if age rating were abolished, younger adults would be charged more, and some would decide they can’t afford insurance. Bottom line: “the number of uninsured older Americans would be roughly offset by increases in the number of uninsured adults in the two younger age groups (18-34 and 34-44).”

This worries policymakers for two reasons. First, we need young, healthy Americans in the pool to keep insurance costs down. Secondly, if young families decide to forego insurance, many won’t buy separate policies for the children.

How do we choose between children and their grandparents?

If we don’t want to ration care, the only rational solution is to bring down the cost by trimming waste in our health care system. This will be difficult. Most of the fat isn’t hanging out on the edges of the steak – it’s marbled throughout in the form of unnecessary treatments and over-priced products. It needs to be removed carefully, with a scalpel. But it can be done.

Maggie Mahar is an author and financial journalist who has written extensively about the American health care system. Her book, Money-Driven Medicine: The Real Reason Health Care Costs So Much, was the inspiration for the documentary, Money Driven Medicine. She is a prolific blogger, writing most recently for TIME’s Moneyland. Previously she wrote and edited the Health Beat blog for the progressive think tank, The Century Foundation. Previous work for the Health Insurance Resource Center includesWill the Supreme Court strike down health reform? She also recently provided background on Congressional health care legislation for HealthReformVotes.org, a special project of the Health Insurance Resource Center.

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  3. Tiffany & Keith

    Thank you very much for you coomment.
    You wrote:
    The attitude that some younger people have (I’ll pay for my mother but not someone else’s mother) is symptomatic of a larger problem in America. We don’t really care about our effect on other people. In some ways,”

    Yes i’m afraid that is true of many (but not all, and I hope, not most )Americans.

    You add: ” this is why the ACA would be a good thing. Even though at the moment it doesn’t have anything to stop age-rating (it should) it does make sure that everyone has health care coverage, regardless of moral objections or people who want to ride the system. Sam Ennis wrote a great column on some of the other benefits of the ACA here: http://www.constructionlitmag.com/additions/appeal-of-the-affordable-care

    Yes, I agree. And thank you for the link.

    Keith:: The good news is that he Affordable Care Act set s up financial bonuses for providers who try to keep paients well.

    They wil be paid more if they keep patients out of the hospital– and managing their chronic diseases.


  4. Brandy

    Brandy– Yes, the VA has been very succesful in negotiating for lower drug prices for Vets. But Republilcans pushed through a law that banned Medicare form following the VA’s example

    Neverthelesss Medicare, ike the VA , has the clout (size) to refuse to overpay.

    And President Obama has indicated that letting Medicare negotiate is stil on the table. See http://www.healthbeatblog.com/2011/04/using-medicares-clout-to-negotiate-drug-pricesdid-obama-put-that-back-on-the-table.html

  5. The attitude that some younger people have (I’ll pay for my mother but not someone else’s mother) is symptomatic of a larger problem in America. We don’t really care about our effect on other people. In some ways, this is why the ACA would be a good thing. Even though at the moment it doesn’t have anything to stop age-rating (it should) it does make sure that everyone has health care coverage, regardless of moral objections or people who want to ride the system. Sam Ennis wrote a great column on some of the other benefits of the ACA here: http://www.constructionlitmag.com/additions/appeal-of-the-affordable-care-act.

  6. Costs will always go up for everyone, patient, employer, and medicare. Our healthcare system is not based on wellness but sickness. If you want medicare to cover your healthcare needs you need to be sick, if you want medicare to cover health wellness your out of pocket, its not a benifit.

  7. Everyone should have affordable health care. The fact that I as an ordinary worker who has insurance pays more for the same drug as someone in the military or Canada, is insane. Health care needs to be regulated. False claims need to be stopped, which are driving up health care costs.

  8. Bob–

    Yes, under the Affordable Care Act states will control Age Rating.

    Insurers will not be able to charge older people more than 3 times as much as they charge a 20-year-old, but the law is very clear: States can also prohibit age rating altogehter, or lower it to 2:1.

    Your question reveals how even a very well-informed, intelligent person is not aware of the many, may ways that the Affordable Care Act will lower premiums. This is partially becuase few people have time to read the entire law, and “the good” is in the many details. It is also becaue so many people (including, I’m sorry to say, single-payer advocates who I admire, have spread so much misinformation about the law.)

    For exampl: , No , you don'[t have to pay $850 a month in New York. (Many people who don’t live heret don’t know the market, and haven’t bothered to do the nitty-gritty research.)

    I pay less than $500, and there is also a program called “Healthy New York” that makes very good insurance significantly less expensive for people who earn somewhat less than I do. (Here I’m talkng about people who earn well over Medicaid imits, but are in the the lower end of the middle-class.

    Finally, perhaps I should have said that I chose a policy that requires me to stay “in network.” I have no problem with this. I have never called a doctor who wouldn’t take my insurance. (And the docs I see are all either on the
    Upper West Side (where I live ) or on the East Side (Park Avenue) close to where I used to work.

    There are, of course, doctors who wouldn’t take my insurance. But in my experience (and I’ve been in plans where I could go out of network, and even see docs who took no insurance), they are no better than the in-network docs in my very large plan. (The key is just that you want to be in a very large network.)
    Finally, we already have evidence that reducing waste cuts spending.
    Hospitals are already reducing waste (anticipating what wil happen under the ACA) and Medicare spending has fallen sharply in the last two years.

    Try Googling “Peter Orszag” (former CBO director) on “growth” and
    “Medicare Spending” and slowing. Much has been written about this.

    But I’m afraid that people who spread misinformation word-of-mouth just
    don’t do that much reading.

  9. Bob –

    I think you are roughly correct in your assertion that large claims account for 70% of costs. If we just focus on the expenses that insurers actually pay such as hospital bills, physician and clinical fees, labs, imaging, PT, prescription drugs and the like, the first $5,000 of claims paid, I’m told by experts in the field, account for between 25% and 33% of total claims costs. That includes the first $5,000 for people with very high costs. There are significant medical costs that commercial health insurers don’t pay including long term and home health care, dental care, R&D, public health initiatives, hospital construction, etc. Total healthcare costs, including those that insurers don’t typically pay, add up to roughly $8,000 per person.

    The big potential for savings from the strategies that Maggie describes could come from avoiding surgeries that might be triggered by a high PSA score. Trying physical therapy first for people with low back pain would also be helpful. Better hospital discharge planning could reduce the number of costly readmissions. More intensive use of case managers for the very high cost cases could improve care coordination while more widespread use of electronic records could reduce duplicate testing and adverse drug interactions.

    I think it would be easier for doctors to embrace guidelines such as the recent PSTF pronouncement on PSA testing if we passed safe harbor protection from failure to diagnose lawsuits if doctors follow evidence based guidelines where they exist. I’m quite certain that defensive medicine is a factor in excessive testing now along with patient expectations and the opportunity to make more money under a fee for service payment model.

    If it were up to me, I wouldn’t pay for some of the ultra expensive cancer drugs that only give the patient an extra month or two of low quality life. I also think there is considerable potential savings from more aggressive fraud mitigation efforts in the Medicare and Medicaid programs. That’s important because it would help to free up money to pay to subsidize insurance for people age 64 and under.

    It is no easy task to get doctors to change long established practice patterns. The specialty societies need to get behind it and PCP’s need to push back against patients who wrongly think that more care is better care and more expensive care is better care. To help them do that, we probably need to pay them more for their time. At the same time, autonomy is a big deal in the physician world. Many of them don’t appreciate outside interference no matter how well intended or how much expertise the outsiders have.

    Employers, for their part, should embrace tiered network insurance products that would require patients to pay enough more to get their attention if they insist on going to a high cost provider whose care quality is no better than more cost-effective competitors.

    If Medicare is to take the lead in all of this to provide political cover for commercial insurers who would want to follow CMS’ lead, there are powerful political interests that need to be persuaded. That’s no easy task either.

  10. 1.Maggie, you imply that the states control age rate up ratos…..which they do now.

    Will they still have this control after 2014 if all laws remain unchanged?
    This is a recipe for chaos when it comes to subsidies.

    2. I was under the impression from Joe Antos and Health Affairs that community rating in NY state had pushed everyone’s health premiums up to $800 a month.

    If so, keep your insurance company a secrert.

    But still, from what I have read even Healthy NY charges $400+ a month and they get huge subsidies. So I still puzzled by your low premiums, but I won’t tell anyone.

    3. and most important —

    I am skeptical that cutting waste will lower insurance premiums.

    Let’s say you insure 1 million adults and the total cost of all the claims they file is $7,000 per person or $7 billion total.

    This might be the case if you had a somewhat older group that included high-risk persons (as the ACA does include them in the exchanges.)

    Large claims would be about 70% of the total. The bulk of the large claims would be for heart attacks, cancer, complications of diabetes, joint replacements, MS, Parkinsons, etc.

    My gut feeling is that even if you cut out all un-needed diagnostic tests, you would have trouble making a big dent in the $7 billion.

    We both know that the private insurance industry, as presently constituted,
    tries to save money by passing off sick people to Medicare and Medicaid or recissions or just denying coverage in the first place.

    My problem is that while I greatly dislike these methods, I don’t see a lot of other methods that will really work.

  11. Barry–

    If more people need subsidies than expected, we will need to do two
    a) find more ways to cut waste. As I said, I think CMS will develop formularies for drugs — and devices– just as the VA does. Obama knows that this must be done,and has said so publicly. VA outcomes are generlaly good because they are practicing evidence-based medicine.
    Drugs & devices now account for 18% of healhtcare costs (much of that
    cost shows up on hospital bills, not on retail pharmacy bills.)
    Private insurers would be eager to follow Medicare’s lead. (We will hae many fewer private insurers and so they will have enough clout to do this–as long as Medicare takes the lead.)

    I also am impressed by the fact that the Preventive Servcies Task Force came out recommending against PSA testing. This will eliminate a great
    many prostate cancer surgeries and radiation treatments (some exorbitantly expensive) that do aboslutely no good. (The disease would never have progressed to hurt the patient. No lives saved.)

    I expect that the Preventive Services TAsk Force and, the Secretary of HHS are going to recommend covering many other tests and treatments only
    for certain patients under certain circumstances, while also reducing payments for “overvalued” tests and treatments. Again, insurers will follow suit.

    Secondly, we may well have to raise taxes, on capital gains, inheritances,
    and income taxes not just for individiuals earning over $200,000, but
    perhaps individuals earning over, say, $150,000.

    But now, we are not going to cut the subsidies. The whole point of reform
    is to make sure that everyone (or nearly everyone) has access to high
    quality, comprehensive coverage, just as in every other developed
    country in the world.

    Of course if Romney is elected and the Republicans take both Houses, all
    bets are off. The Republicans are not committed to helping those
    who cannot help themselves. They would be happy to give everyone a voucher and tell them they are free to choose as much–or as little–health care as they can afford while Congress makes the Bush tax cuts for the
    wealthy permanent. As you know, I think that rationing health care according to ability to pay is wrong. Healthcare is a necessity and no one shoudl have to go without exactly the same care that you and I would want for ourselves and our chldren. Moreover, most people do not have enough
    money to pay even a moderately high deductible before insurance begins to cover them.

    Finally, what many people don’t realize is that Romney wants to do away with employer based insurance, so even those Americans who now have
    good insurance with a large employer won’t be able to keep it. People will be very surprised. This, alone could make him a one-term persident.

    As for the cost of insurance, I don’t know why your friend’s daughter is paying so much I’m in New York, and I I pay about $450 for an excellent, comprehensive policy with no deductible, no annual or life-time limits
    that covers virtually everything I might need. I also have a very good eye and
    dental policy that is quite cheap and covers $2,000 a year worth of dental care–no deductible. Perhaps your friends daughter went to an insurance broker. Some are very good. Some are promoting certain products from
    certain insurers . . . .
    Once we have Exchanges, navigators who are not paid by insurance companies (and so have no vested intereset in certain products) will
    be helping people find policies best suited to their needs.

  12. Maggie –

    I agree that the cost of health insurance in 2014 is very difficult to predict for all the reasons you mentioned. My concern relates to the consequences of being wrong. If healthcare costs are higher than our experts estimated or if many more people apply for and qualify for subsidies than we thought and the cost to taxpayers is far higher than we thought what then? Will we be prepared to scale back the subsidies, sharply increase deductibles or otherwise reduce the scope of coverage or find more coercive ways to reduce the cost of care? I think my fear that once enacted, the subsidies will be hard to scale back no matter how much more they cost than was originally projected is a legitimate taxpayer concern.

    Regarding the cost of insurance, I live in NJ where we also have community rating. When I retired at the end of last year, my wife was not yet eligible for Medicare. I was. COBRA coverage for here was a reasonable (to me) $437 per month. However, since my employer has an older than average workforce with somewhat above average healthcare costs per person, I asked her to price coverage in the NJ individual market. Horizon Blue Cross of NJ quoted $722 per month for a policy that was not as comprehensive as she would have under COBRA coverage from Highmark Blue Cross.

    A doctor I know told me that when his daughter graduated from college a couple of years ago, he wanted her to have health insurance before starting her new job as a teacher at a charter school in NYC. She was 23 or 24 and perfectly healthy. He had to pay over $600 per month for that coverage. You seem to suggest that younger people will only have to pay a little more so older people can pay less. In NY, NJ and ME, it’s a lot more. In NJ, we have guaranteed issue as long as you can show that you had prior coverage and no more than a 63 day gap in coverage before seeking replacement coverage.

    Finally, a friend who has a 60 year old wife with heart disease and one child now in college was paying $24K for a very comprehensive, low deductible family policy in New York State last year. For this year, he was told that his 2011 premium for the same coverage would be $39K! He found a high deductible plan from a different insurer for $22K and that was the small group market rate. A good part of the reason why health insurance is so expensive in NY and NJ is that very few young healthy people who don’t have employer coverage buy it and for good reason. The individual market in these two states is completely dysfunctional.

  13. Bob–

    No one knows what the subsidies will cost in 2014, or 2015
    because no one knows how high premiums will be.
    Everything depends on whether;
    A ) the underlying cost of care rises 2% a year or 5% a year– Will CMS and private insurers begin to reduce payments in certain areas? Will doctors become more aware that they are ordering too many tests? Will more urologists explain to patienets that even if they have early-stage prostate cancer, this disease progresses very slowly, and there are many reasons why they might want to consider “watchful waiting” instead of surgery?
    In general, will more doctors share decision-making with patients about
    elective surgery, sharing the data on what percent of knee replacements are not successful, how hard recovery and rehab can be, etc.
    Lately (last couple of years) growth in healthcare spending has slowed.
    Under reform, will this continue?
    B– How many healthy 20-something and 30-somethings people will buy
    insurance, and how many will decide to pay the penalty instead? This wil
    make a huge differenece. If health care costs are distributed over a large
    pool that contains many more young and healthy people, everyone will
    find that premiums are much lower.
    C– Will more states join Masschusetts and limitt age rating to 2:1, so that
    insurers can only charge older adults twice as much as they charge a 20-year-old?: Will these be large, populous states? If older people have to pay 3 times as much, there subsidies will have to be much larger.
    D– Wil CMS begin negotiating for lower prices on drugs and devices?
    Will CMS refuse to pay for some drugs and devices that are overpriced, and no better for most patients– covering those drugs and devices only
    under for patients who meet a particular medical profile. (If Obama is re-elected I predict this will happpen sometime over the next 4 years, and private insurers will follow suit.)

    There are just way too many large unknown to estimate how much subsidies will cost us. (And I too lilke EPI and Families USA.) Premature
    estimates are just that–premature.

    Finally, whether any individual winds up paying more or less than he does now depends, to a large degree, on where he lives. I live in New York
    State where we now have something close to community rating: an insurer
    cannot charge me more because I am older, because I am a woman, or if I suffer from a pre-existing condtion. Under reform, it’s very llkely that more young people will sign up for insurance in New York, in part becuase they
    will be eligible for subsidies. This means that my premiums shoudl go down– unless overall health care inflation heats up.

    If I lived in a state that lets insurers shun the sick, refusing to cover them, I would assume my insurance premiums would go up once those folks are
    alllowed into the pool. On the other hand, depending on my income and the size of my family, I might eligible for a subsidy . . .

  14. Bob –

    It wouldn’t be fair to just give currently uninsured people a high deductible plan because all the people who get health insurance through their employer are paying a meaningful sum out-of-pocket toward the cost of the insurance, especially for family coverage. Moreover, most economists argue that the employee is really paying the entire cost of the premium because the employer share is part of total employee compensation that would likely be rolled into pretax wages if the insurance were not provided.

    An insurance policy with an actuarial rating of 70% means that approximately 70% of the total medical costs incurred by a “standard population” of, presumably, average risk would be covered by the insurance and the rest would be paid out-of-pocket. The out-of-pocket cost includes not just co-pays and deductibles but the cost of services, tests, procedures and drugs that are not covered by the insurance policy. A plan with a 70% rating would be in the silver category under the ACA. The minimum bronze plan would have a rating of 60%. I can’t remember where I saw it but sometime ago I read that the standard FFS Medicare coverage would have an actuarial rating of 56% which reflects the $1,000 plus deductible for each hospitalization, the 20% co-pays for each Part B service, test or procedure with no out-of-pocket maximum limit and the fact that Medicare doesn’t cover long term care except under very limited circumstances such as after discharge from a hospital and then only in full for 20 days and at 80% for the next 80 days.

    With respect to state high risk pools, an expert on this subject put up a slide at a conference I attended a couple of years ago that showed that the medical cost ratio for state high risk pools generally ranged from 200%-300% which means that the premium paid by the insured only covered one-third to one-half of the cost of care. The rest was covered, depending on the state, by a combination of assessments on insurance companies and state general revenues. There are a lot of extremely high cost individuals in these pools though there are also some with comparatively modest costs but probably not many.

  15. While I am thinking about it, the Kaiser table that you summarized has another piece of data that has intrigued me for some time.

    Notice that at 400% of poverty, the subsidy for a family policy starts at $2000 and moves up steadily.

    At 300%, 200%, and 100% of poverty the subsidies will be larger of course.

    Anyways, I recently read studies by two defenders of the ACA — Families USA and the Economic Policy Institute. I really admire them incidentally.

    But what troubled me was that both of them put in writing that the average subsidy in the exchanges would be $4,000.

    By using a $4,000 average, they were coming up with the whole Exchange arrangement costing under $50 billion a year.

    Yet for a family earning $40,000 a year, the subsidy will be more like $14,000 a year. At that rate, the whole Exchange arrangement will cost the taxpayers far more than $50 billion.

    Familieis USA and EPI seem to assume that everyone in the exchanges is getting single coverage.


    I am totally in favor of subsidizing families, which is true in the French and German systems especially, But then we should expect higher costs.

  16. Barry, you are correct to at least look at high-deductible plans. In fact I would suggest that the government not merely subsidize them but actually provide them in full.

    Assume that a $10,000 deductible plan costs $1000 a year at younger ages, and $3000 a year at older ages. For $100 billion, using very rough numbers to save time, we could jiust give high-deductible Medicare policies to 50 million young people and 16 million older people. Leave the insurance companies out of it………no subsidy, just a benefit.

    This obviously needs a lot of refinement. Having a $10,000 deductible will still cause people to avoid seeing the doctor…..even if the preventive visit is free, what if the doctor finds a $5,000 problem? There are a lot of people who cannot find $5000 or borrow it. One of the bankruptcy studies showed that people did go bankrupt with medical debts of $5000.

    But anyways you are looking in the right direction.

    Myself, I am still reeling from the numbers that you were kind enought to copy from the Kaiser Calculator.

    If I am reading right, a 70% policy for a family of four will cost almost $11,000 a year at age 25 and going up to $32,000 a year at age 64.

    I am rusty on what 70% value really means, assume it refers to deductibles and co-pays.

    This must have a lot of inflation and lot of New York City pricing built in.

    I am in the Minnesota High Risk pool myself, and if I bought a 70% family policy from them today the cost would be about $20,000 a year……….
    and that is from a pool that is stuffed with sick people.(thisMN plan does receive some quiet state funding, I am not sure how much)

    Maybe Kaiser was taking a very pessimistic view on how many healthy persons will join the exchanges. Maybe we can use their numbers as what happens if there are no mandates.

  17. Maggie –

    My comment that referred to a $10,000 deductible included full coverage of preventive care though I would limit that to tests that receive an A or B from the Preventive Services Task Force.

    Frankly, I get a little tired of hearing that we have tens of millions of people who can’t afford basic care and won’t go to the doctor when they need to but, somehow, they can afford $150-$200 a month for cable TV and a similar sum for a couple of cell phones and a data package. As I said previously as well, you would be surprised how many people don’t take blood pressure and cholesterol drugs even when they don’t have to pay anything out of pocket for them.

    If people had the peace of mind knowing that they were largely covered for the cost of a catastrophic event as compared to having no health insurance at all, they would perceive themselves as much better off than they were before. In the meantime, given our current fiscal situation, subsidies for high deductible plans would be far more affordable for taxpayers than the comprehensive coverage as proposed under the ACA.

    In the meantime, we should focus more on cutting the cost of care through price and quality transparency tools, sensible tort reform, more use of tiered network and narrow network insurance products, refusing to pay for ultra expensive cancer drugs that are only marginally useful, more widespread use of living wills and advance directives, and aggressive fraud mitigation strategies, among others. When those bear fruit, we can lower the deductibles that are subsidized.

  18. Barry—

    You write: ” Ik now some will argue that people won’t go to the doctor because they can’t afford the deductible or just don’t want to pay for basic care and society will pay in the end if they wait until they are much sicker to seek care. As a taxpayer, I’m willing to take that risk.”

    Barry, as a taxpayer, you’re taking a financial risk that these people will
    not become more expensive later.

    They, on the other hand,
    are being forced to risk their health, their lives and their children’s lives.
    In this country, many people don’t use health care, not because they don’t need care, but because they cannot afford it. We all need some
    preventive care. (regular eye exams, dental exams, seeing a doctor when we have an irrregular growth that might be skn cancer. . . .

    Catastrhopic insurance is great for wealthy people who can afford to pay for preventive care out of pocket. For everyone else, it means that kids and older people don’t get the care they need.

    We are the only developed country in the world that does not believe that we have an obligation, as a civlilized society, to make sure that everyone has access to basic care and preventive care without large co-pays or deductibles.

  19. An interesting thing I learned on the Kaiser Subsidy Calculator site is that in any given year fully 25% of our people incur no healthcare costs whatsoever. Even within the Medicare program, in any given year the least expensive 50% of beneficiaries account for only 4% of the program’s cost or roundly $850 per person on average.

    I understand that we have to define minimum creditable coverage somehow or people could buy a policy for a nominal sum that covered everything above, say, a $1 billion deductible. If it were up to me, though, I would want to ensure that everyone at least had coverage for catastrophic events. A $10,000 deductible that included full coverage of preventive care, for an individual would be preferable because younger people and those with moderate incomes could much more easily afford the premium either without subsidies or with much lower subsidies than are currently contemplated.

    I know some will argue that people won’t go to the doctor because they can’t afford the deductible or just don’t want to pay for basic care and society will pay in the end if they wait until they are much sicker to seek care. As a taxpayer, I’m willing to take that risk. The insurers will tell you that there are plenty of people who don’t take their blood pressure and cholesterol drugs even when they can get them for zero out of pocket cost. You can lead the horse to water…. Personal responsibility has to count for something.

  20. Bob–

    As I’m quite sure you understand, if your children are adults, they are no longer your dependents, and thus not part of your “family” when
    calculating subsidies. (You are no longer feeding them, clothing them–etc.– or at least I hope you’re not.

    Even if your adult children move in with you, society expects them to do their best to get jobs and feed and clothe themselves (even if the jobs are not their dream jobs.)

    Holtz-Eakin’s numbers are colored by his ideology.

    If you want to get a better, more non-partisan feel for the cost, Google the
    CBO and cost of “health care reform.” The CBO is not entirely
    optimistic, but not entirely pessimistic either.

    Holtz-Eakin sticks to a script of conservative memes and avoids talking about specifics.

    I debated him on Lou Dobss, and even Dobbs (hardly a flaming liberal)
    began to side with me. (You’ll find the debate here. http://www.cnn.com/video/?/video/bestoftv/2009/10/20/ldt.face.off.cost.of.health.care.cnn#/video/us/2012/05/31/start-ks-pastor-homosexuality-comments.cnn (People tell me that it’s entertaining.)

  21. Bob –

    Thanks for the reference to the Kaiser Health Reform Subsidy Calculator. For fun, I found the cost of a so-called “Silver” plan with an actuarial rating of 70% for families of four with breadwinners of various ages with a projected income of 400% of the FPL in 2014 which Kaiser projects at $93,600 on its site. The results for higher medical cost regions are as follows with the first number being the full premium and the second number the value of the subsidy or tax credit.

    Age 25 — $10,967 and $2,075
    Age 30 — $12,130 and $3,238
    Age 35 — $13,324 and $4,432
    Age 40 — $14,556 and $5,664
    Age 45 — $17,094 and $8,202
    Age 50 — $20,229 and $11,337
    Age 55 — $23,700 and $14,808
    Age 60 — $28,851 and $19,959
    Age 64 — $32,902 and $24,010

    As I noted in my prior comment, if your income is just slightly higher, say 401% of the FPL or more, your subsidy will be ZERO. The individual or family’s contribution toward the premium appears capped at 9.5% of income, at least at this income level. The table also puts real numbers on what a 3 to 1 maximum age rating band looks like.

    In addition to the potential for certain employers to stop offering health insurance because their employees and their families can get a better deal on the exchange and qualify for significant subsidies, the underground economy is likely to result in lots of people hiding or materially underreporting their income to qualify for a larger subsidy and they will probably get away with it because while the IRS is very good at matching up documents like W-2 and 1099 forms, it’s not very good at finding income generated in the cash economy with no associated paperwork.

    The bottom line is that there is enormous potential for this program to cost far more than the so-called experts at CBO and elsewhere in the government think it will. If that turns out to be the case, we taxpayers will probably be stuck with the bill because entitlement programs are very difficult to repeal or significantly scale back once enacted.

  22. Barry is correct about the subsidies and family size. If you find an internet entry called 2012 Annual Federal Poverty Guideline, you find that a family of two hits 400% of poverty at $60,500, whereas a family of four hits 400% of poverty at about $92,000.

    I am definitiely inviting my adult children to come home and live with me!

    Meanwhile the Kaiser Health Reform Subsidy Calculator Website seemed to tell me that if my family was under 400% of poverty, then my health premium would be capped at 9-10% of income.

    I think that is the way Switzerland’s system works.

    So I am in favor, but this is a stunning and massive amount of money involved once every small business with older employees figures this out.

    Holtz-Eakin has some rather scary tables on the cost to the federal budget if the health exchanges have 40 or 50 million participants, versus the 10 million or so that was predicted when the legislation passed.

    Here is the question —

    if my family income is $60,000 and my family premium is

    Thanks to Barry for part of the answer.

    According to the Kaiser Health Reform Subsidy Calculator, a family of two hits the 400% of poverty limit at $60,500.

    A family of four hits the 400% of poverty limit at $92,000.

    Weclome home, kids!!

    I am still fuzzy on one thing………..

    If my family income is $60,000 and my famiily health premium on the exchange is $20,000…….

    then do I really get a subsidy of $14,000 to bring my out of pccket premium down to $6000 or 10% of income?

    That would be wonderful, but the cost to the federal budget will be a killer if corporation dump everyone onto the exchange.

    If 10 million families of 60 year olds get a subsidy of $14,000 each, then the cost to the federal budget is $140 billion a year.

    Stretch this to 50 year olds and 40 year olds, and the ACA will cost over $500 billion a year no sweat.

    This is what right wingers like Ferrara and Holtz-Eakin and Goodman have been saying.

    Naturally the Administration will set up barriers to keep employers from dumping their plans.


  23. Barry–

    You are absolutely right that “:there is plenty we don’t know– and won’t know– until we gain some experience with Exchanges.”

    Again: Health Care Reform will be a process (not an event) that will require much tweaking over time.

    But we do now know that many Americans who have employer-sponsored insurance would be interested in the Exchanges. (See my post above on the Exchanges for the link to this survey.)

    Presumably , many of these are people who work for a small business.
    Their insurance is more likely to be more expensive, and less comprehensive than ift would be if they they were part of a large group (working for a large company)– or buying insurance in an Exchange (where they become part of a large group.)

    What many pepople don’t realize is that, once the Exchagnes open up in 2014, their small employer will be abe to enter an Exchange and shop for insurance for his small group of employees there. Because he and other small businesses will now form a large group, he will find that comprehensiive insurance doesn’t cost as much.

    Finally, regarding young people, we do know that the majority of 20-somethings and 30-somethings who don’t have insurance are low-income and lower-middle income.

    They don’t think they’re invincible; they just can’t afford it. (I’ve written about this on HealthBeat–with links to sources.)

    Under reform, they will have pretty generous subsidies. I feel pretty safe in predicting that many will sign up for insurance.

    How many? I have no idea. This is what we will find out.

  24. John–

    You write “Our president reallly seems to believe in both ponies and unicorns . . ”

    Great observation. I’m going to steal that line!

  25. Maggie –

    I actually like the idea of exchanges conceptually because they will facilitate comparison shopping and I hope they’re successful. Success is hardly guaranteed though for a number of reasons.

    We don’t know, for example, whether people who gravitate to the exchanges will have above average health risks and associated healthcare costs compared to people who get their insurance through an employer, especially a large self-funded employer. We don’t know how many young healthy people will choose to pay the penalty and remain uninsured. We don’t know to what extent the required scope of coverage to meet the “essential benefits” criteria will exceed the cost of typical insurance offerings to individuals and small groups today. We don’t know how much it will cost to administer the exchange itself and who will pay for that. Employers with lots of low wage workers in industries like restaurants and bars, retail trade and hospitality could opt to eliminate health insurance if they currently offer it and steer their employees toward exchanges because they will qualify for large subsidies. In short, there is plenty that we don’t know and won’t know until we gain some experience with exchanges. As I said above, I wish them well and hope they’re successful but I wouldn’t bet the ranch on it.

  26. Thanks, Maggie. I stand corrected.
    That’s why I’m in the peanut gallery and you get the big bucks.

    ~~> LOL <~~

    And you're right.
    Our president really seems to believe in both ponies and unicorns…

  27. John–

    No, insurers did not drive the legislation.

    Yes, the mandate brings them new customers, but they actually have to COVER them by coverring Essential Benefits (most policies for individuals don’t do that now) and by spending 85% of premiums on health care –or refund premiums to customers (which they have already begun doing.)

    The regulations are stiff enough that many for-profit insurers will be getting out of the business– they just won’t be able to make the profits that Wall Street expects.. (The best non-profits will be okay.)

    Recently, the CEO of Aetna said publicly that in a few years, the (for-profit) insurance industry, as we know it, will no longer exist.
    Both he and Zeke Emanuel have suggested that insurers will have to join up with providers, creating organizations like Kaiser and Geisinger, which provide health care and insurance. They have one
    goal: to keep people as healthy as possible.

    This will be a great improvement.

    By the way, Obama only pretended to be against the mandate because Hillary was in favor of it. He needed to find some way to distinguish himself from Hillary– and to appeal to the young voters who were so
    important to his base.

    But during the primary, Obama’s health care advisor, David Cutler, told me that Obama was hoping that young people would sign up voluntarily for insurance. If they didn’t. . . well then Obama realized we would have to have a mandate.

    I believe this. Obama often assumes that if you explain things to people in a reasonable way, they will agree to do the fair and reasonable thing. (So young people would agree to help pay for insurance for older, sicker people.)

    Obama even believed that this would be true of the most conservative Republicans. If he just sat down with them and explained that cutting taxes for the very wealthy just isn’t affordable, they woudl say “Oh, okay, we understand.” Then he could move on to having a rational discussion about Gay Marriage.. . .

  28. Bob–

    It’s not just REpublicans and blue-dog Democrats who would have voted against tax increases for the middle-class.

    We’re in a deep recession. Even upper-middle-class peope have to worry about suddenly losing their jobs. Very few voters would approve of
    raising taxes on any but the wealthiest Americans. If their Congressperson voted for such an increase they would “vote the bum out of office.”

    As for how the credits work, legislators thought about hte problems you raise. This is one reason the legislation is thousands of pages long–0 there we so many details that had to be addressed.

    I’ve forgotten exactly how they solved the problems you raised, but I do remember that they addressed it.

  29. Bob– It depends on the size of the familyl.

    The cut-off for a couple (the point at which they don’t qualify for a subsidy) is lower than the cut-off for a family of four.

    This is perfeclty logical: a family raising two children has more
    expenses than a childless couple.

    So yes, you would qualify for a subsidy and wind up paying about
    9.47% of your income (assuming your employer doesn’t offer insurance benefits and pay part of your premium)

    I purposefully picked the most extreme example–the couple who can be charged three times as much (becuase of their age) and earns just
    a little to much to get a subsidy (beucase they are a couple not a family of four.)

    I wanted to shine a spotlight on a small group that will face a serious problem, if states decide to let the 3:1 ratio stand.

  30. Bob–

    Wasting one-third of our Medicare dolalrs Is far too high a price to pay.
    If we continue to do this, Medicare will go broke.

    More likely, Congress will pass laws to shift more costs to seniors. Those who cannot afford the costs will be without care. Medicare will become a program that protects a smaller and smaller segment of elderly people.

    Moreover, keep in mind that this is hazardous waste– which hurts patients. Every medical treatment and test carries some risk. If the procedure offers no benefit to that particular patient, he is exposed to risk without benefit.

    If he is hospitalized, he is exposed to the many dangers of being there:
    gruesome infectoins (which can be deadly) , medication mix-ups, wrong-site surgeries, mistakes made by an inexperienced resident who has been working for 15 hours staright, etc. etc. Many patients are killed each year, simply because they were in a hospital

    As Dr. Elliott Fisher puts it “Hospitals are dangerous places, especially if you don’t need to be there.”

    It’s good that your parents can afford supplemental insurance.
    But some people can’t.

    As a result, they don’t get routine eye exams. (Medicare pays for them only if you are suffering from an eye disease. But how do you know you have Glaucoma if you never have an eye exam? This how people go blind.AMD is another disease that will be robbing more and more seniors of their eyesight.

    Medicare’s co-pays and deductibles are also too high for some seniors.
    So they go without preventive care. (Under the Affordable Care Act, there will be no co-pays and deductibles for preventive care)

    The whole point of this post is that the 58-year old couple would have to pay $15,000 for insurance ONLY IF THEIR STATE LETS INSURERS CHARAGE THEM TRIPLE THE PREMIUMS THAT A YOUNGER PERSON WOULD PAY.

    This is the problem–in this country (in contrast to European countires) many younger people are not willing to help pay for medical care for
    older people

    The exception is New York STate where there is no age-rating,. As a result, younger people pay somewhat more, but not nearly as much as this older couple would save.

    I’m hopeful that many states will follow Massachusetts and limit age rating so that insurers cannot charge older Americans more than twice as much as a 20–year-old. This would greatly reduce the premium for that 58-year-old couple earning $68,000 while raising premiums somewhat for younger Americans who earn too much to be eligible for subsidies. (If you’re eligibe for a subsidy, and premiums go up, so does your subsidy)

    Finally, the number of 58-year-olds who earn just a little too much to qualify for subsidies is relatively small. Many who don’t qualify for subsidies earn $125,000 a year, $150,000 a year. l . .

    We’re talking about a small slice of the population– people in their 50s and early 60s who
    a) -live in a state that allows 3:1 age rating
    b) do not receive health insurance from an employer and
    c) fall into that relatively narrow income band which makes them just a little too rich to be eligible for a subsidy, but not rich enough to
    afford the premiums

    In addition, they won’t be” forced” to pay $15,000– they can, fi they choose, decide not to buy insurance and pay a small penalty. (The penallties just aren’t that large.) . If they’re y healthy, they might be better off paying for their occasional doctors’ visits out of pocket . . .thoguh of course they would be taking the risk of becoming seriously ill. (At that point they would have to find the $15,000 to buy insurance. )

    Finally, keep in mind that many in this group Don’t Have Insurance Today–and don’t have the option of buying it –becuase they suffer from pre-existing condittions. Insurers refuse to cover them– or will
    cover them only if they pay 7 times as much as a 20-year old (which is perfectly legal in most states.)

  31. Barry–

    The Affordable Care ACt does Not encourage small businesses to
    stop offering insurance to their employoees.

    It encourages them to provide health benefits by offering tax credits to if they offer insurance. (This provision has already kicked in and many small businesses that didn’t offer insurance in the past have taken advantage of it.

    Secondly Small Businesses themselves can purchase insurance in the
    Echanges where they will find that premiums are lower because they
    are now part of a large group. (In the Exchanges, “navigators” will help them find the best deal for their company.)

    In addition, under the Affordable Care Act , they wil find that insurance is cheaper beause they will no longer have to pay more if they have a large number of women on their payroll.

    Finally, subsidies are available not just to those who purchase insurance in the Exchanges, but to people who purhcase insurance through Co-ops like the Freelancers Co-op that is being set up in New York.

  32. Bob –

    I think some of the confusion around how much in subsidies any given person or family might be entitled to under the ACA relates to family size. Most of the discussion on this topic in the press generally cites a family of four for which 100% of the federal poverty level (FPL) income for 2012 is pegged at $23,050 per year. For smaller families and individuals, the numbers are as follows: single person, $11,170; couple, $15,130; family of three, $19,090. The other interesting aspect of this is that while the amount of the subsidy phases down with income, it’s still substantial at the upper limit (400% of the FPL). However, if your income is even $1 above the upper limit, you’re entitled to nothing at all.

    I’m not sure about this but I also think only people who buy their insurance through an exchange are eligible for the subsidies which creates an incentive, especially for smaller employers, to drop coverage, raise salaries, pay the relatively modest penalty, and let employees shop for coverage on an exchange starting in 2014. For small firms with 30 employees or less, there is no penalty and for slightly larger firms, their penalty would be based on the number of employees they actually have minus 30. So, a firm with 50 employees would calculate its penalty based on 20 employees if it didn’t offer health insurance. Firms with older or sicker employees would be the most likely to pursue this route which suggests that premiums available on an exchange could be comparatively high because of adverse selection. There is an awful lot of potential for unintended consequences here.

    As for whatever the subsidy turns out to be, it will probably be paid directly to the selected insurer to make sure the employee doesn’t just pocket the money and either remains uninsured or buy a cheap extremely high deductible insurance plan off the exchange.

  33. Something tells me the insurance people have already figured out how they’re gonna do it. After all, they are the real beneficiaries of any new (previously uninsured) customers. Health care for them is only an afterthought. And they were the real force driving the mandate. (Remember, that was not part of the original Obama plan. The mandate percolated up from foggy bottom.)

    As for those who already have insurance, any credits or subsidies may come as a happy surprise.

  34. I assume that the tax credit gibberish is part of the Washington cowardice about openly raising taxes.

    If we were to say openly that “people who receive no employer assistance will now get $75 billion in subsidies, and to do this we will raise Medicare’s payroll tax by 1%,”…………..this would be treated as the end of the world by Republicans and blue dog democrats.

    Instead we will have tax credits that give out the money in effect by lowering government revenues, I think, and an honest debate is avoided.

    In some of the first tax credit schemes for health care a few years ago, the credit was not “claimed” until taxes were filed. The poor schmuck had to pay the high health premiums for a whole year and then hope his refund would be enough to pay himself back.

    If the ACA tax credits wind up working like that, then working people will join the Tea Party at the barricades.

    The ACA credits are not supposed to be that bad, but I still thinik they will be very hard to administer.
    Is your subsidy based on last year’s income or the current income? for anyone in sales the amounts can vary a lot. What if you were divorced?

  35. Thanks for the follow-up. It’s too bad more people are not as resourceful (and honest) as you.

    This may be part of the semantic confusion clouding so much of Washingtonspeak. To ordinary people the word subsidy implies cash in hand. An equivalent tax credit in whole or in part does not immediately come to mind.

    How often do we hear “tax increase” conflated with the expiration of a “tax cut”? Or better yet, when an automatic budget increas is removed a budget of exactly the same dollar amount is said to have been cut.

    And you’re right. The average person long ago stopped slogging around in the quagmire we call a “tax code” which has become a gold mine for seasonal tax services (which are to accounting what pawn brokers are to banking).

    (It makes me wonder what aftermarket businesses will flourish in the aftermath of ACA… presuming it survives.)

  36. As they used to say on Saturday morning cartoons, “Wait just a minute.”

    Maybe I am arguing in ignorance about subsidies in the ACA. I just went to an online subsidy calculator and plugged in $70,000 income for a male age 64 with a family of four. (that is me)

    According to the calculator, my unsubsidized premium would be $27,000 but I would get a tax credit/subsidy of $20,000+………….so that my total premium cost would be 9.47% of my income.

    The numbers are grotesque but I can certainly live with the outcome.

    Yet earlier I teed off on the idea that a couple earning $68,000 would get no subsidy at all.

    Which is right? $20,000 in subsidy or nothing?

    Is the online calculator incorrect?

    (and ouch, if I am a serious student of health policy and have this much confusion, what does that say about the general public’s knowledge of ACA?)

  37. All good points, Maggie. Let me just offer a couple of comments:

    1. Sometimes I see Medicare’s excess spending as a classic example of
    what Barney Frank called “collateral benefits”(in a very different context).
    In other words, the great national good that is served by universal social insurance may include some overspending — but it is not a bad price to pay.

    2. I handle all the health claims for my elderly parents, and I never see Medicare refusing to pay for vital treatments. The reason my parents carry Medicare supplement coverage is to make their health care feel free.
    The supplemental insurance covers their deductibles. They are incurring a fixed cost of $500 a month over and above Medicare so that they can avoid a balance billing of $100 here or $300 there to individual doctors.

    3. I am still struggling with the tremendous inequality that results when any government program has “cliffs” — i.e. arbitrary age or income limits.

    Even with the ACA, as you describe, a 60 year old couple with that $68,000 income will have to pay $15,000 a year for health insurance, or face a fine.
    If that couple’s after tax income is $52,000, (including FICA and state taxes),
    that means close to 30% of their income for just health insurance.

    Whereas the couple next door who are age 65 will pay $2400 a year for Medicare Plan B and perhaps $1200 a year for Plan D and whatever they feel like for a Supplement…………

    We need to have a ‘circuit breaker’ in there somewhere. When a government program mandates someone to pay 30% of income for anything, it almost turns me into a Ron Paul fan. Which knowing me says a lot.

  38. jmnyc-

    I Completely Agree with what you are saying– thanks for commenting.

    This post originally appeared as a two-part post on http://www.healthinsurance.org.

    In order to make it fit The Health Care Blog’s format, THCB editors re-formatted and edited, and in the process, my discussion the ways that the Affordable Care Act helps older Americans was lost.

    Please see the original two posts here http://www.healthinsurance.org/blog/2012/05/21/despite-health-reform-age-rating-will-still-deliver-stiff-insurance-premiums-for-many-older-americans/

    and here: http://www.healthinsurance.org/blog/2012/05/21/does-your-state-protect-older-baby-boomers/

    As you can see, I did explain that limiting age ratiing a to 3:1 ratio was a great improvement; in some states, a 60 year old can now pay 7 times as much as a 20-year-old.
    I explained that the boomers who would be hurt would be those who earn just a little too much to qualify for subsidies.
    As you say, those who receive subsidies will receive bigger subsidies if their premiums are higher.
    I explained how community rating and guranteed issue are a huge boon
    for this age group..

    But thanks again for emphasizing these points.

  39. Barry & John

    First, if you look at the numbers, you’ll see that individuals earning over $200,000 and couples earning over $250,000 have watched their incomes rise sharply over most of the past 25 years while their taxes fell.

    Even upper-middle class Americans (households earning , say $80,000 to
    $150,000 or more have not seen similar increases in their incomes, and their taxes have gone up.

    Moreover, John is right–some things just aren’t politically possible. In the midst of the worst recession since The Great Depression, the Obama
    administratoin cannot raise taxes on upper-middle-class or middle-class families,

    At the same time, agree that many in upper-middle-class could easily afford to pay higher taxes (depending on how many children they have and where they live.) We shouldn’t just focus on the top 4%– probably we will need to gradually raise taxes on the top 10% to 15%.

    If Obama is re-elected and progressives have enough votes in Congress, I’m hopeful that we will see the tax system become more progressive over the next 4 plus years.

    We also need to raise taxes on unearned income— we rely too heavily on taxing money that people earn by working.

  40. Bob–

    Yes, progressive taxes are the best way to finance health care. Ideally, when
    forging reform legislation, Congress would have called for a “tax” rather than a “penalty” for those who didn’t buy insurance. But for political reasons, they
    were afraid to use the word “tax” during the worst recession since The Great Depression.

    The problem with expanding Medicare is that it is so wasteful and inefficient.
    The best medical research shows that 1 in 3 Medicare dollars are squandered on ineffective treatments, unnecessary tests, and over-priced drugs and devices that are no better than the older products that they are trying to replace.

    Because Congress has served has Medicare’s Board of Directors for all of these years, Medicare covers what lobbyists want it to cover: expensive
    back surgery for low back pain that back surgeons want covered (even though medical evidence show that in most cases back surgery for this particular problem does no good) PSA testing (which then leads to pricey
    prostate treatments which create more risks than benefits, and save very few lives–if any) that urologists want covered. (They’re still lobbying for PSA testing even though the Preventive Services Task Force has finally come out and recommended against it.) Drug-makers want exorbitanty expensive cancer drugs covered, even though they may give the average patient onlly an extra three weeks of poor quality life. GE and other equipment makers want certain tests and treatments covered– even when there is no
    evidence that we’re getting value for our dollars. Academic medical centers want Medicare to pour more money into medical education even though we really don’t (and won’t) need more specialists in most areas. We need more primary care docs and nurse practioners.

    Meanwhie academic medical centers are throwing billions into over-build– new wings, more marble, more hotel-like amentities..

    At the same time, Medicare doesn’t cover some things that it should cover:
    regular eye exams, for instance, hospice care that begins before the patient’s last few days, and adequate payment for palliative care that woudl encourage hospitals to hire more palliative care teams and more medical students would go into palliative care.

    The vast majority of people on Medicare have some form of supplemental private insurance (MediGap or Medicare Advantage) because there is so much that Medicare doesn’t cover which older patients truly need– while
    simultaneouslly wasting 1/3 of Medicare’s dollars on unneeded care.

    This is why I think it would be foolish to expand Medicare at this time.We don’t want to throw more people into a system that needs much repair.

    The Affordable Care Act sets out to repair Medicare by changing how we pay for care and how it is delivered, focusing on “evidence-based medicine.”
    Medical science–not lobbyists– should determine what we cover.

    Under the ACA, the Secretary of HHS has the power to lower payments for
    treatments that are overvalued while raising payments for treatments that are
    undervalued. And she doesn’t have to go through Congress– this is huge.

    In additioin, if a pilot program is successful, HHS can roll it out nation wide– without going through Congress. (In the past, Congress blocked national roll-out of successful programs because they cut into someone’s income stream.)

    It will take time for the ACA to reform Medicare, but I’m hopeful that, by 2020, it might make sense to talk about opening up Medicare to more people.

    In the meantime, non-profit insurers like Kaiser and Peugot Sound are helping to build data bases that show which treatments work for which patients. They have also made great strides in improving primary care, and in Kaiser’s case, reducing mortallities as a result of heart disease.,

    Even Aetna has done better than Medicare in some areas– figuring out that it’s better to pay for more hospice care, even though patients in hospice care live longer, their care is less expensive than (and more humane than) the care they would receive in an ICU where they are undergoing futile treatments. (Unlike Congress, Aetna’s board of directors doesn’t worry about “death panels” and is not adverse to letting people the way they choose to die.)

    Finally, with good IT systems, it won’t be that hard to verify who is eligible for subsidies. The Federal government has already given 5 or 6 states the funding they need to set up these systems, and they will serve as models for the verifiying eligibility in the other states.

    It now looks as if the Federal govenrment will partner with most states in running the Exchanges, and most likely the Federal government will be
    verifying eligibility.

    Pollitically, it will be difficult to cut the subsidies: they’re built into the ACA, which is the law of the land. Moreover, all of the interests in the health care industry (insurers, drug-makers, hospitals) are strongly in favor of the subsidies because the subsidies will bring them more customers.

    I agree that we need to try to do a better job of letting low-income and middle-income know that they will be eligibe for subsidies which are, inf act, quite generous. They also need to understand that the insurance they will be buying will be much better than the insurance that most individiuals and small groups have today–it will cover the “essential benefits” –many of which are not covered today–, and there will be no co-pays or deductibles for preventive care.

    The couple earning $68,000 aren’t eligible for subsidies because, if you look at income numbers, they’re upper-middle class. They earn more than median income for two people.

    As a practical matter, a couple who lives in New York City on $68,000 is middle-class (not uppper-middle-class) in terms of the life-style they can afford. But a couple who lives in Winston Salem, North Carolina (where my son lives) on that amount is quite affluent. (Everything from houses to wedding cakes are extraordinarily inexpensive in Winston Salem–and it’s a nice town! )

    I suspect we may need to adjust the subsidies upward in some geographic areas and also raise subsidies for older Americans in states where their premiums are triple what a younger person pays.

    Most importantly, we need to stop over-paying for many products and treatments. (My guess is that ultimately Medicare will begin negotiating for discounts with Pharma and device-makers, and private insurers will then
    demand lower prices as well). We need to stop over-paying for some specialists’ services, stop over-paying hospitals for preventable errors and readmissions, and start paying bonuses to doctors who keep their patients out of hospitals!

    Finally, funding reform through progressive taxes would have been cleaner and seemingly easier. But we never could have gotten reform through Congress if we tried to fund it solely through taxes.

    As I have said from the beginning, reform will be a process not an event. Over the next 10 years we will continue to tweak and revise the ACA. One can only hope that American voters elect wise representatives–wiser that the majority who are in Congress today. We will get the government– and the health care system– that we deserve.

  41. I am coming in late on this exchange, but I go back to what Joseph White wrote in Competing Solutions almost 20 years ago……..

    (I am paraphrasing here, having read the key passage about 30 times)

    “Americans would provide health care access by having people buy insurance, and the main debate is how to subsidize those who cannot afford the premiums……

    Whereas the international standard is to have health insurance premiums roughly determined by income, and collected essentially through taxation.”

    If we expanded Medicare and raised taxes to do it, then no one would face an impossible financial burden.

    A young person with low incomes would pay an extra 3% or whatever of a low income. A young person with a high income would pay an extra 3% of a high income.

    Likewise at older ages. A 60 year old making $200,000 a year would pay an extra 3% of $200,000. A 60-year old making $50,000 a year — who is slammed today in the individual market, and who will be slammed a little less hard in the PPACA — would pay 3% more on $50,000, not a big burden.

    I realize that expanding Medicare to the entire population is too drastic financially, but we could expand Medicare down to age 60 and then to age 55 over a decade or so. Robert Kuttner advocated this as did others.

    The PPACA does make an attempt to relate health insurance premiums to income, through its subsidies. I respect that. But the subsidies will be devilishly hard to administer and will be a target for budget-cutters from day one. As of right now, many of the people who will benefit from the subsidies are not even aware of this…….and some of those who think they will get subsidies are mistaken. I was shocked to read Maggie’s comment that a couple making over $67,000 will have no subsidy to buy a $15,000 health policy.

    Bob Hertz, The Health Care Crusade

    Bob Hertz, The Health Care Crusade

    Bob Hertz, The Health Care Crusade

  42. Barry Carol, you make an excellent point and I have thought about the same thing. I’m sure that the president and his staff are well aware of the arithmetic but have made a political calculation to go for a position that is easier to sell in an election year than what makes economic sense. It’s a big picture versus the details. (And we already know where the Devil lives…)

  43. To follow up, the Congressional Budget Office (CBO) estimates that allowing the Bush tax cuts to expire for individuals earning over $200K and couples earning over $250K would generate $700 billion over ten years based on their static analysis model which ignores behavioral or incentive effects. However, letting the Bush tax cuts expire for all taxpayers would generate $4 trillion over the same period again according to the CBO. If the Obama administration is serious about both paying for its healthcare reform plan and dealing with our long term fiscal issues, he has to ultimately raise taxes on the middle class and not just the wealthy because the broad middle class is where most of the money is. It’s about as simple as that.

  44. Maggie –

    President Obama implicitly defines middle class as individuals making less than $200,000 and couples making less than $250,000 since it’s only taxpayers with income above those thresholds upon whom he wants to raise income taxes. He is, in effect, suggesting that those below those income levels can have something for nothing that only the “rich” will have to pay for.

    The fact is that everyone earnings below $110K and paying FICA taxes is paying about 14% of income in FICA taxes now including the employer’s share as income though that share does not show up on a tax return. Employees with family health insurance coverage provided and largely paid for by an employer are paying more than 15% of their income in health insurance now if their salary is less than $100K, you count the employer contribution toward the premium as (untaxed) income and you include the required employee contribution toward the premium. Unionized employees, especially public sector employees, with rich health insurance benefits are, in effect, paying more than 20% of income for health insurance now if you calculate it the way I suggested above.

    One of the interesting things about the United States is its tremendous diversity. I read recently, for example, that 16% of households in Manhattan make over $200K which is not a huge sum there, especially south of 96th Street. At the same time, there are exurban and rural areas of Ohio and many other places where you can buy a modest but decent home for $35,000 or a bit more. You can work as a clerk at Wal-Mart making $8-$10 per hour as a single person and afford an apartment in the area.

    About half of all taxpayers pay no income taxes now. There aren’t enough rich people and they don’t make enough income in the aggregate to cover the majority of the load at reasonable levels of taxation. I repeat that the broad middle class has to pay for the broad middle class.

  45. First, the above alleged facts as submitted by Ms Mahar:

    those who honestly participated in that survey, much less what number did actually participate in the first place, as I doubt it was 100% of all practicing physicians, because, readers please take note, Medicare is so user friendly and cooperative with doctors (please see google of “statistics of physician fraud accusations for 2000-2010” as a start), and their lowering of payments every year or so really equates with the standards of living in this country.

    Take it from me who is a practicing physician since 1990, my colleagues are taking less Medicare referrals, as much as less of us are working in Medicaid offices, moreso clinics of late, and if they want to hide behind semantics of “oh, I take Medicare as I still see medicare patients but not new ones since 2008 or so”, well, you believe reported statistics or the facts in offices you go to!

    Second, and I’m sure this will bring a widened smile to Ms Mahar’s face for this post, this is my last comment at this deteriorating thread, which I admit I am complicit in some of the deterioration, but I never imply someone is a racist, so let’s move on from that and consider reading this hopefully short disclaimer I hope people will remember in future post threads:

    I went to medical school for several reasons, and one which is near the top of the list (helping people was first) was having autonomy. You know, that concept reviled by politicians and their ilk of equally controlling choir who want us to swallow their concepts of humanity that really don’t include exceptions, just their way or no way per the dialogue of late. So, when you value autonomy and then see people who aren’t even colleagues try to dictate the course of health care that really isn’t the standard of care taught in medical schools and residencies, it offends you at the least, enrages you when it will compromise care, that is if you care about what you do!

    I don’t know the specific statistic of how many of my colleagues don’t care and don’t pay attention to these intrusions and disruptions created these past 15 or so years, be it managed care, pharma dictations, hospital power plays, and now political disruptions as PPACA is intended to play out, but even if it is 20% are fairly much whores and cowards, that means 1 of every 5 physicians you interact with as a patient is not fully invested in your well being. I know the number is higher than 20%, at least with my generation of colleagues.

    If you all want the Maggie Mahars, Barack Obama and his clan, and other PR people who are interested in partisan gains and really don’t consider the ramifications of disrupting care as set now, then you really deserve the shitty care you will receive by 2014 and thereafter. Because people like me who see the writing on the wall as it stands now should PPACA stay in place, will either retire early, or find a way to insulate ourselves from as much political intrusions as possible and seriously select our patient populations that may in fact be read as discriminatory and heartless, but, as I have quoted the Ayn Rand comment from Atlas Shrugged, you don’t want a doctor who doesn’t care about being manipulated be your doctor.

    So, I end with this, people who care start out nice and try to be direct but polite, and when they realize they are dealing with others who’s only agenda is to profit and control, if you still care you raise the volume and realize your opponents only use empathy and compassion against you, because let’s be honest, squeaky wheel gets the grease, and this bunch of PPACA supporters are only going to shout louder and nastier when the Court is ready to render opinion.

    Good luck to those who care and are compassionate about protecting the health care system meant to be before business and politics took over. By the way, I still take Medicare patients, but if Medicare investigators ever come to my door with false accusations, F— them and their zeal to just act like McCarthy wannabes.

    You’ll get the care you deserve based on what is important to you. Believe the author of these posts and her choir, well, good luck. Ms Mahar has her own personal physicians who I’ll bet do not practice what she preaches, and she is so thankful to access the exceptions. She just doesn’t want you to know there will always be a multi level system of care access, ’cause she does not want to compete with you!

    Yeah, you will tell me I am out of line with that last comment, but, I have met some of your peers who are so zealous in promoting PPACA, and many of them are hypocrites, starting with the authors Nancy, Harry, and Barry.

    Sorry, longer than I intended, but leave you with this why I use an alias:


    Extremists are a bitch, eh?

  46. I understand your point about how some people who are 54-64 will have a hard time affording health insurance but here is my problem with this piece – it ignores the fact that a 3:1 age rating is a huge improvement over what most people in that age group face today. Even in consumer friendly states like Oregon the community rating rules permit 5:1 age rating and in states with no rules these people can be rating up to any amount and/or turned down coverage.

    The slant of this article makes it appear that this age group will be at a huge disadvantage under the law when in fact things will be MUCH better for them between the guaranteed issue, community rating and the limits on age rating.

    Also, you fail to mention that the ACA provides premium subsidies up to 400% of the poverty level meaning those suffering the most financially will be eligible for help paying their premiums.

    There are things in the ACA which I would change or improve upon but these provisions make it better for older americans, not worse.

  47. Here are some facts:

    “The March 2011 MedPAC report addressed the question of Medicare beneficiaires’ access to doctors, especially primary care doctors.
    MedPAC found that over 90% of doctors who accept Medicare are taking new patients. Another independent study found that 92.9% of doctors accept Medicare patients.”

  48. Since I can’t reply above to Mr Ballard’s comment starting with Restaurant operators in the 60s serving negroes, I’ll do it here and readers can connect the dots.

    WTF is that analogy besides a racist reference!?

    Medicare and Medicaid payments are fairly lousy for the work you have to do with these patient populations, and enjoy your world of denial that this is no big deal for physicians to accept.

    Really, readers who are not bastions of partisan rhetoric, am I the only one who reads the anti physician agenda by some here!?

  49. Race card? Huh?
    What am I missing?
    Are Medicare and Medicaid patients all minorities? Or black? Or what?

    If this is logic, then bring me some madness.

  50. Just so readers know, per the below cheap shot by a commenter I am racist, the dark brown color of the sky inferred the color of crap being forced on us by the legislative dump brought to you by Democrats of all colors and lack of representative skills!

    Wow, what people will stoop to on trying to force their will on the masses.

    What’s next, I am a fascist!?!?

  51. Wow, last defense of a scoundrel, play the race card.

    Don’t even try to dismiss this interpretation.

  52. You sound like restaurant operators in the Sixties claiming that if they served Negroes their white customers would no longer do business with them. It was a good argument, of course, because it was true… until the much contested public accommodations section of the Civil Rights Act of 1964 came along.

    Funny thing about that. When the public realized that everywhere they went they would be eating in a desegregated environment the bigots realized there was no alternative, the restaurant business survived and those opposed either got over it, stopped eating out or stayed in their private clubs. (Private schools also flourished about that time, very much for the same reason.)

    I don’t recall any number of people avoiding ER departments when the COBRA/ EMTALA mandate was passed in 1986. And I’m sure that whatever expenses are not covered by reimbursements from tax revenue are peanuts compared with the retail revenue streams.

    Nothing about accepting Medicare or Medicaid patients stands in the way of a lucrative concierge practice other than the lack of additional patronage in the cold winds of the non-tax-advantaged marketplace.

    Here’s a thought. Let’s all pull together for a realistic medical deduction for ordinary tax payers… something like amounts over one or two percent of AGI instead of the ten percent it has become. That should help a lot.

  53. Wow, let’s define “few” in Mahar World, shall we? Less than what, 25%, Ms Mahar? I bet as of the beginning of 2012, more than 30% of private practitioners have dropped at least new patients with Medicare.

    But that’s you and buddies Barack, nancy, and Harry’s next target if, god forbid, democrats take back Congress and keep the White House next January. You think those who embrace freedom from ill conceived mandates are not waiting for that next boot stomp if the Supremes are intimidated by your leader?

    Think about it folks, it ain’t broccoli that these budding tyrants are schemin’ next. Just stay passive and indifferent and let the monarchy good ol’ Barry is trying to impose stay in place.

    Catch the NewYork Times article on Barry’s Kill List he works on weekly?

    THAT is a chilling, frightening concept for anyone who embraces this country’s ideals and freedoms. Doubt Ms Mahar will comment on that!

    Deeds, not words are what define us. Hope has devolved into much fear, and change, yeah, tell me what has changed? Bush’s skin tone is all I see.


  54. Not if the next “mandate” is all doctors will have to accept all Medicare and Medicaid patients. Didn’t see that one coming as a possible option should mandating all get insurance survives the Supremes, did ya!?

  55. Steve —

    You are right; any doctor who is unhappy with Medicare’s payments is free to practice concierge medicine — and refuse to take Medicare or any insurance.

    Very, very few doctors have stopped taking Medicare (See MedPAC’s reports)
    because few are able to make it economically without Medicare.

  56. …doctors can get ready to be shafted again.

    Doctors who have been carping all this time about gubmint takeover are perfectly free to stop sucking the tax tit (along with the insurance industry) and set up a concierge practice.
    Ya want free market?
    There it is. Nobody’s stopping you.
    Root, hog, or die.
    If it’s good enough for those without education, social status and zero net worth, it should be a walk in the park for someone with a head start in all those areas.

    Not to hurt anybody’s feelings — if the shoe fits, wear it. If not, get over it.

  57. I sat at my kitchen table and thought about this “mandate” attitude you and your cohorts as Democrats think you can dump on individuals like me both as a citizen and physician, and came to realize at least superficially what a hypocrite you are: you want censorship at your threads and yet no one else I have read at has had the gall for exemptions for their posts.

    Face the pending reality the Supreme Court may render: PPACA was not a sound and fair legislative decision, and it is time for bipartisan processes to redo responsible and fair legislation as able.

    People who demand mandates, well, enjoy your choir. doesn’t it get a little boring hearing everyone talk the same day in and out? Not if you are descendants of Narcicism and Ignorance!

  58. Umm, what is the applicable word for people who access these above programs? Have a person call your office and become indignant if you do not accept Medicare or Medicaid? And talk to people on SSI, do not even go near the attitudes of those on SSDI, having to endure repeated conversations how they are being shafted by the government in “not getting their fair share”?

    Gee, this kind of attitude comes across as textbook entitlement to me!

  59. Yeah, right, states who have to take over much of the financial burdens are going to pay physicians with medicaid funding as much as Medicare will pay.

    Oh, I get it, Medicare pays so crappy now with doctors dumping it as much as able, so doctors can get ready to be shafted again.

    Some readers, ie your choir, just love your rhetoric and agendas. Not this doc! Really, what is the color of the sky in your world of enslavement of physicians? Dark brown would be my guess.

    Oh, and this comment of yours:
    “You’re right– Social Security just needs tweaking–and it will be fine.”

    Wow, I really implore you to testify to congress how easy that simplification can be applied. How often do you visit the White House?

  60. John–

    You’re right– Social Security just needs tweaking–and it will be fine.

    When it comes to pensions, the shift from “defined benefit” (witih the employer guaranteeing a certain amount of benefits when you retire) to
    defined contribution (with the employer promise to contribute a certain amount and leaving it to the employee to manage the money so that he has enough when he retires) was a disastrous idea.

    Wall Street promoted defined contribution (401-k ) programs beause Wall
    Street knew that it could persuade amateur investors to put their money into stocks–espeically “growth stocks”. In the past, professional pension managers had invested pensions in bonds and very stable stocks– usually stocks that paid good dividends– old-fashioned utililties, blue chip companies that someone like Warren Buffet would favoir.

    Most people are not cut out ot be money-managers. They don’t have the time, the knowledge or the experience. Fear and greed drive their decisions. (This is also true of professional investors, but the good ones are self-disciplined. ) By contrast, too many individual 401-k investors
    buy high and sell low. This is why so many 401-ks have performed poorly even if the investor didn’t borrow from them.

    Most amateur investors also don’t know how to diversify into emerging market bonds, commodities, Treasuries real-estate, gold, etc. The best protection against risk is diversification, ,but you also have to pay attention to historical cycles. Only the shrewdest institutional investors realized that
    gold was heading into a bull market early in this century.

    As for Medicare & Medicaid, I agree that the term “entitlement” does perpetuate the Welfare Queen trope. People who are poor enough to qualify for Medicaid need the help. Finally, we should combine Medicare and Medicaid into one system. Doctors who care for Medicaid patients should be paid just as much as doctors who care for Medicare patients.

    Under reform, physicians providing primary care for Medicaid patients will be paid Medicare rates–which is good. But it would be better just to combine them in one federal program. Many states have done a very poor job with Medicaid–in some cases, because the state is poor, in other cases because state politicians just don’t care about their poor.

  61. Albert & Barry

    All of Western Europe spends far less on health care than we do– and often have better outcomes. But No Western European Country Has a Single-Payer system. Only the UK and Canada have single-payer, and care there is not as good as in France, Germany, Denmark, etc.

    Wester European countries use private sector insurers. The diffeerence is that they regulate them– and most of them are not-for-profit.
    Under the Affordable Care Act we would be regulating insurers and the regulations are strict enough that many for-profit insurers will get out of the business. They just won’t be able to make the profits that Wall Street is looking for.

    Single-payer is not a magic solution to health care costs. Europeans spend less because they don’t over-pay for drugs, devices and doctors.
    Their hospitals are by and large much more Spartan– no waterfall, marble lobbies or resort-like amenities. Many fewer private rooms. Less luxury, , but good care.
    And Europeans are not over-treated the way we are: many fewer screening tests(most stopped doing PSA testing long ago);, fewer surgeries. Most babies are delivered by midwives rather than Ob-Gyns — and outcomes are better. (Fewer infant deaths and fewer maternal deaths.) In many countires, healthy children never see a pediatricians–they see pediatric nurses for ear-aches and regular check-ups. This is why the cost of care is lower– not because they have single payer (which they don’t.)

    The notion that the wealthy should take care of the poor is a good one,
    But when you say the middle class should take care of itself are you talking about the true middle-class –households earning joint income of
    roughlly $60,000? In this country, many people with joint income of say,
    $120,000 consider themselves middle class. But they aren’t . Half of households earn less than roughly $60,000, half earn more.

    We forget how little the middle-class make (because their incomes have stagnated for most of the past 25 years.) As a result, they cannot afford to pay 15% of their income for their healthcare. The wealthy must help support not just the poor but the statistical middle-class definied as households earning roughly $45,0009 to $80,000–though much depends on where you live. A couple earnign $45,000 in Manhattan is not middle-class–they’re poor. A couple earning $80,000 in South Carolina is relatively affluent.

    But I think it’s very important that when we use terms like “middle-class” we pay attention to the actual numbers. Romney has said that by raising taxes on individuals earning over $200,000 and couples earning over
    $250,000, Obama is raising taxes on “the middle-class” in order to fund
    healthcare reform. That just isn’t true.

    Finally, on education– upper-middle class people (joint income over $80,000 shouldn’t have to take out huge loans to send their children to state univeritites. If the children work in the summers, and the parents begin saving a modest amount each year when the children are very young, they should be able to afford most, if not all college costs at a state school. Kids also can get on-campus jobs to help cover costs.

    On the other hand, even state schools are getting too expensive for those in the true middle class. A couple earning $50,000 or $60,000 a year just doesn’t have much in the way of discretionary income left over after paying for the essentials: housing, ultilities , transportation, childcare, clothing, healthcare, etc. etc. It is virtually impossible for a couple with two children to save enough for their own retirement and their kids’ college education, even if they both work. And these days, at least one of them is likely to be
    out of work for some periods of time, making it even tougher. Then there are life’s minor catastrophes: suddenly, you need a new roof, a car accident –no one is hurt but it that totals the famiy car, a kitchen fire that wrecks the kitchen; the family pet is very sick and suddenly you have large vet bills . . .Everyone experiences these unforeseen expenses . . .

  62. I have a mixed reaction to what the writer claims. It is a mistake to put Social Security, private pensions, Medicare and Medicaid all into the same bucket for the purpose of arguing that all need to be tossed and/or replaced by something entirely different.
    Social Security is a self-funding program based on the idea that if a working person (and their employer) contributes about seven percent of earnings for an entire working lifetime the amount should be adequate to furnish a Social Security benefit to others for the duration of their non-working years. I’m not sure what the numbers might be (and they are certain to change as inflation and other variables come to pass) but if a <working lifetime is forty years and the non-working ramainder is about half that long, the overall concept is not as impractical as it might seem.

    If I had put away seven percent of my earnings from my twenties for forty years, that would amount to a sizable nest egg principle, not counting any investment returns. So when I quit work in my sixties that amount only needs to last for about fifteen years — not forty more. In round figures that is not a crazy construct. And we all know that even though many have only that income, Social Security has never been intended to be more than a “safety net” to supplement other assets and/or income sources.

    Whether or not the famous “trust fund” is real or not is a red herring. Whether or not we call it a debt or not is beside the point. The overall concept of Social Security is sound. There are very few moving parts. All that is needed it a bit of tweaking to keep it viable. In my lifetime the “full retirement” age has already crept up by a year of two, although many beneficiaries (especially during this current spell of hard times) have opted to begin their benefits early (age 62?, I dunno) but from an actuarial standpoint that can be called “revenue neutral.”
    Private Pensions are another matter altogether. The old-fashioned employer-paid defined benefits plans are slowly but surely being replaced by employee-paid plans (IRA, 401k, Roth, others) which are double-edged swords. On the one hand, they save the employer a mountain of expense and paperwork. And on the plus side, since they are owned by the worker, the future beneficiary, they are also portable. The prudent worker can put that money anyplace they like, tax-advantaged and shift gears as often as he wants.

    On the downside the new employee-owned arrangements are very tempting sources for people to borrow money they really should not be borrowing. Unlike pensions, the new plans require a measure of individual discipline that pension plans do not require. I’m thinking that a generation or two may have to get burned a little to catch on the the idea of saving for retirement, but that may be the price to be paid for becoming more mature in financial management.

    Thanks to the Pension Benefits Guarantee Corporation (PBGC) which is a quasi-governmental privately funded insurance plan similar to FDIC, pension beneficiaries of companies that go bankrupt have a safety net, although “highly-paid” employees may not receive as much as they might otherwise receive had their employer not gone out of business.

    (Unfortunately, more than a few companies have failed to fund their pensions adequately and I have a hunch many are deliberately going bankrupt mainly for the purpose of escaping that liability. In view of the new employee-paid plans they are getting away with it politically since (a) a lot of people are watching their plans grow and have forgotten about their pensions and (b) since pensions are now essentially obsolete and serve a vanishing population any political will to rectify any problems is also a vanishing problem. )
    Medicare and Medicaid are categorically different from these other two plans and there is no need for me to repeat here the endless arguments that clutter up these comments threads.

    I am very tired of the term “entitlements” because it perpetuates the newly resurrected Welfare Queen trope. I’m seeing that piece of urban fiction popping up more and more like flies at a picnic and it makes me sick. Yes, I know personally a few examples of people gaming the system and some who don’t “deserve” the benefits they are getting. But taken as a whole I am keenly aware that most of those getting food or emergency funds are children and elderly people who are really in need.

    But I need to stop writing here before I work myself into a lather.

    My main point is that the broad brush approach criticizing everything done by government is not only wrong but essentially ignorant and I would really like to see otherwise intelligent people stop doing it.

  63. “It strikes me that many 20-somethings have unrealistic expectations”

    This I agree with. Indeed, a lot of people in their 30’s 40’s and 50’s have much higher expectations than the generation before them and that includes people who never went to college. They’ve come to define middle class life in a way that makes it extremely difficult to make ends meet without two incomes. This is a good part of the reason why too many people not only can’t afford health insurance but haven’t saved nearly enough for retirement vs. what they probably could have saved if they had more realistic expectations.

    As for the cost of college, tuition has been rising rapidly at many state institutions as state support shrinks. Room, board, books and other non-tuition expenses cost roughly the same whether you go to a public or private school assuming you live on campus as opposed to commute from home. In-state tuition at most state universities is in the $10,000 to $12,000 range these days while NY’s SUNY system is less. That’s still a bargain compared to the $40K plus charged by many of the better private colleges and universities.

    Back to age rating for health insurance, though, there is an interesting editorial in the WSJ this morning about what happened in Maine when they passed community rating in 1993 with an age band limitation of 1.5. Even a $10K deductible for a young person costs $665 per month.

    The problem with average and median statistics is that they don’t reflect large variances from the averages. If most people who have employer provided health insurance knew the total value of the policy or what it would cost to buy a similar policy in the individual market, they would find that health insurance would consume 15%-20% of their gross income including the value of the employer contribution as income. If you asked people if they would be willing to swap the current employer based system for one with a 15%-20% payroll tax on the first $110K of income (approximate FICA ceiling), I suspect you won’t get many takers.

    If we want to help people with moderate and lower incomes buy health insurance, we should have subsidies that only kick in after the individual contributes a reasonable percentage of income toward the premium. We should pay for the subsidies largely with taxes on the middle class instead of sneaky hidden taxes on drug companies, insurers and device manufacturers will be passed on in higher prices. We can raise taxes on the rich, especially on capital gains and qualified dividends, to help mitigate the federal fiscal imbalance.

    I’ve said many times that the broad middle class has to pay for the broad middle class. The rich can pay most of the cost of the safety net for the poor. While it’s too bad that politicians can’t be more honest about these issues than they have been historically there’s a good reason why they aren’t. At election time, voters too often reward pandering, demagoguery, and negative campaigning while they punish straight talk about tough choices. Ultimately, we get the government we deserve.

  64. Yeah. I see a much grimmer future for us. We will choose to remain in denial until it all comes tumbling down.

  65. After all the partisan bickering, and half baked compromises, and bumbling attempts to involve the “free market”, and the bending and twisting to include the insurance industry in the final solution, and not to mention the U.S Supreme Court ‘s pontification with it’s politically determined law “making”….. and the whole ugly Rube Goldburg contraption tumbles down and collapses of its own weight and expense………THEN, and not before then will we settle down to a real-world, practical solution…….A SINGLE PAYER HEALTH CARE DELIVERY SYSTEM. A system run with heavy input from those in the medical community who are willing to sacrifice some of their glittering specialty lifestyles and by the diagnostic and treating community for the benefit of ALL Americans.

  66. Barry:

    First, no one is asking unemployed college graduates in their 20s–or those working in low-paying jobs– to help support heatlh care for older

    These 20-somethings would qualify for generous subsidies, based on thier income. The higher the premiums they are asked to pay, the hgiher
    their premiums.

    Twenty-somethings and 30-somethings that are lucky enough to earn well over median income would be the ones helping to pay for their elders. (The subsidies taper off above median income. for all Americans.)

    Secondly, you wrote: “Regarding age rating, for every 55-64 year old person that fell on hard times, got laid off, saw his 401-K decline in value or was unable to save as much for retirement as he hoped, there is probably at least one young person who graduated from college with substantial school loans, couldn’t find a job, even at an entry level salary, in the field he or she trained for . .. . ”

    Barry- less than half of all Americans go to college. And only 42% of those who go to college take out loans (See http://thechoice.blogs.nytimes.com/2009/08/24/survey-finds-that-many-families-dont-borrow-for-college/

    Meanwhile 100% of Americans 50-64 are 50-64. And these are baby-boomers (part of a larger cohort than today’s 20-somethings.) Logically this means that there are many more 50-64 year-olds than there are 20-somethings with college debt.

    You and I are keenly aware of the problems students with high debt face because most of the people we know send their kids to college, and many go to expensive private colleges. Jouranlists and others in the media also live in a world where most kids go to college, often to private colleges. So they, too, tend to focus on the problem of college loans. In their world, it looms large.

    But our perception is skewed by the fact that we live in a fairlly small world of upper-middle-class people. From a larger perspective, the economic problems that the average 50-64-year old faces are much lareger.

    And, as I pointed out in the pos,t when people are in their 50s and early 60s, : they have little hope of making up for their losses. A 30-year old earnign $50,000 a year can still pay off his loans, and go on to save money. Not true for an unemployed 58-year-old.

    Moroever, college students don’t necessarily have to take out such arge loans. As this NYT article points out, http://thechoice.blogs.nytimes.com/2009/08/24/survey-finds-that-many-families-dont-borrow-for-college/
    today, most students go to college without taking out loans.

    Is this because their families are extremely wealthy? Not necessarily.

    The numbers for the average American family (whehter or not they took out college loans) show that “grants and scholarships covered 25 percent of a student’s costs. . . . more than half received such aid.

    “For the average family, the survey found, the rest of the cost came from borrowing by the student and his or her family (23 percent), the parents’ income and savings (36 percent), the student’s income and savings (10 percent) and gifts from relatives and friends (6 percent.)”

    in other words, many students avoided or reduced loans by working hard enough in high school to qualify for a scholarship or grant. (In some cases, this may also have meant that they woroked hardto t find scholarships & grants that they could apply for. In other words, they were not cavalier about taking out loans.

    10% of the money came from the student’s own income. These were kids who worked summers in high school and maybe in college– rather than
    taking unpaid internships, travelling, or just hanging out at home.

    I woudl suggest that when kids work to pay for part of their college expenses, they are much less likely to borrow more in order to cover
    “eating out,” “ordering in”, expensive clothing, vacations, gadgets, etc.

    There parents also had savings squirrled away for college,. In the 90s, other upper-middle class parents “shopped until they dropped” and so didn’t have savings to contribute to their kids education. They believed that it was up to the govt to provide loans.And it did. But now the kids or the paretns have to pay them off.

    Finaly, many kids who get jobs could pay off their college loans more quickly– if they were willing to rein in their lifestlye.

    Tongiht I watched news program about student loans that profiled a 30-year-old, working in finance, and earning
    $80,000 a year who complained that he is saddled with $70,000 in loans that he can’t pay off.

    He’s single, 30, and earning $80,000 a year. Why can’t he pay, say $15,000 or $20,000 to pay off his loans? I have no idea.

    He also could afford to paya $1,000 more a year for heatlh insiurance to help an unemployed 57-year-old woman.

    Another young woman explained that when she took out loans, she never bothered to read the loan statement. “Why would I?” Now, she’s grousing that she has such high loans.

    Yet another 27-year-old -s compalined that, because of their loans, she and her fiance aren’t at all sure that they will be able to buy a home.

    My husband and I didn’t buy our first home until we were in our early 30s and this was also true of our friends (Many of whom were young professors at Yale.) No one expected to buy a house or condo at 27.
    My son & his wife justs bought their first home in North Carolilna, where
    housing is surprisingly cheap, and he’s 32.

    It strikes me that many 20-somethings have unrealistic expectations . . . and this stands in the way of paying off loans.

    Finaly, the Times article pointed out that “Those who borrowed ( . . . spent an average of 30 percent more on college than those who did not borrow.

    Generally speaking , this means that they attended far more expenisve private colleges rather than public universities. (There are a great many veyr good public universities in this country. Ph.D.s, from the best universitie, have been having a very hard time finding jobs for the last 10
    or 15 years; many are working in public universities and are excellent teachers.)

    Other students may have spent 30% more while in college because they chose more expensive housing (an off-campus apt rather than a dorm) or a more expensive life-style. This was their choice.

    Pooling money to pay for everyone’s health care is all about
    making up for the fact that some people have bad luck; others have good luck. Some of use will become veyr sick when we are relatively young. Some of us will lose our jobs. When any one of us pays higher premiums that help support others, we shoudl realilze that we are among the lucky ones: “There but for fortune, goes I.”

    nuimber of 20-somethings with college loans

  67. Long comment? Whatever.

    “Physicians are the Sellers, and In a Free Market they Are SUPPOSED to Have NO Meaningful Control Over Prices. As I said in a free market customers are in the driver’s seat. Customers make the judgment as to what the product or service is worth.”

    Yeah, real applicable if the rules of business could be applied to health care.

    How more obvious can you be in saying physicians have no say in determining costs! Sure, a physician could be ridiculous and charge 400% what are the realistic costs of a procedure or service, but to make this encompassing claim that patients set the price is absurd on all levels of reality we in America and on earth live by.

    You yourself ask why isn’t health care under the rules of a free market? Umm, because it involves an intangible that is not part of that principle to business: profit, but yet at the risk of compromising care to risking lives, which you try so conveniently to either ignore or rationalize away as not applicable to be concerned with. Do business models take into account what is the cost of life!?

    Well I’ll say it again to remind those readers interested in truth and reality for the public’s well being: when you are dealing with an industry/service that has trillions of dollars involved every year, it doesn’t just attract the honest and fair participants, so as long as there are monies to skim as profits are sought, and who is going to not weigh cutting corners to maximize income at the literal cost of patients? In other words, what is the price of life in business?

    When that honest question is sincerely forwarded to be answered by those genuinely concerned with the direction of health care, I hope I am around to read and participate.

    Until then, more pontificating for political agendas

  68. Maggie –

    Regarding age rating, for every 55-64 year old person that fell on hard times, got laid off, saw his 401-K decline in value or was unable to save as much for retirement as he hoped, there is probably at least one young person who graduated from college with substantial school loans, couldn’t find a job, even at an entry level salary, in the field he or she trained for and was forced to move back in with parents or other relatives. They may be doing low wage work that doesn’t require a degree while searching for that foot in the door that will get them on a career track. They can’t afford to subsidize older people especially if they are older than 26 and no longer qualify to remain on their parents’ insurance policy assuming the parents have one. We can’t get blood out of that stone either.

    If we’re going to subsidize people who make too much to qualify for Medicaid, I think it would be better to peg the subsidies to the cost of the least expensive comprehensive insurance policy in each regional or local market and require people to spend at least 10% of income in excess of the FPL level before the subsidy kicks in and then only after rigorous income verification and with stiff penalties for hiding or underreporting income.

    At the same time, an interesting but complex and tricky issue is how the value of employer provided health insurance is allocated to individual employees if the tax preference were eventually eliminated and offset by lower marginal income tax rates and / or a higher standard deduction? While the self-insured employer may set the employee contribution toward the premium on a community rated basis, the quantification of the employer contribution for income tax purposes should probably be age rated.

    In Massachusetts, Harvard-Pilgrim age rates each insured person with an assigned score of between 0.4 and 2.4. To comply with MA’s 2 to 1 maximum age band, though, for premium setting purposes, no individual can be rated less than 0.66 no matter how young or more than 1.32 no matter how old. The 0.4 to 2.4 pure age rating range reflects the fact that the oldest in the group consume 6 times more healthcare on average than the youngest.

    With respect to the concept of a free market in healthcare, I think it would be enormously helpful if actual insurance contract reimbursement rates were easily ascertainable by both patients and referring doctors. Lots of care is scheduled well in advance and whether routine or not, if referring doctors knew the contract rates, especially for hospital based care, it would be much easier for them to ensure that patients received appropriate and necessary care from the most cost-effective high quality providers. Just because patients wrongly think that more care is better care and more expensive care is better care doesn’t mean we should have to pay for it. Part of the idea behind tiered insurance networks is to at least require patients to pay more out of pocket if they insist on going to the high cost hospital or specialist for care that virtually every provider can perform perfectly well.

    Care that needs to be delivered quickly under emergency conditions is a separate issue but it’s not a large percentage of overall healthcare costs.

  69. Dr Mike-, John, Bobby G, Everyone

    I’m afraid this is going to be a long comment, but you’ve raised some issues that I think will be of interest to many readers.

    Let’s begin by defining a free market. In a free market the government does not set prices. Sellers compete with each other by offering their products and services at various prices. Buyers then pick the products and services that they believe offer the best value at the best price.
    If buyers think a product or service is overpriced, they won’t purchase from that seller, and the seller will be in danger of going out of business. At that point, the seller’s only recourse is to put his product or service on sale, lowering his price.

    Note the customer or consumer is in the driver’s seat. He decides what a product is worth, and what is a fair price.

    Sellers who are able or willing to deliver their product or services for less–either because they are more efficient or because they are willing to earn less– also have some control over setting the “market price.”

    Supply and demand also plays a role. When there is a shortage of a product, buyers will pay more because they are afraid that the product they want won’t be available if they wait too long. Thus, if there are a shortage of houses for sale, they will pay more for a house. If, however, there is an abundant supply of products or services available, they pay less. When a great many houses are on the market, it becomes a “buyer’s market,” and buyer’s can negotiate much lower prices.

    In a free market, the government’s only role
    is to make sure that sellers don’t get together to quietly agree in what they all charge. This is called “price fixing” and is illegal because it undermines competition. The government also tries to make sure that big companies don’t compete unfairly, strangling big companies. Thus the government tries to break up monopolies.

    Now look at our health care system.

    Dr. MIKE, you write “Physicians have no meaningful control over prices. That is not free market.”

    Physicians are the Sellers, and In a Free Market they Are SUPPOSED to Have NO Meaningful Control Over Prices. As I said in a free market customers are in the driver’s seat. Customers make the judgment as to what the product or service is worth

    In a free market .Health care providers could “ask” what they wish, but no one would be obliged to pay that price. If they charge high prices, customers will buy only if they are persuaded that the treatments that doctor or hospital offers are significantly better than the treatments offered by other providers.

    This also would be true when the seller is selling to the government.
    For instance, defense contractors “bid” for jobs, and in theory, the government picks the lowest bidder who offers a satisfactory product that meets the government’s needs. (Of course, sometimes the bidding is “fixed” but this is not how a free market is supposed to work.)

    So, in a free market, Medicare and Medicaid would look at a doctor’s (or a hospital’s) outcomes, adjust for whether some treated sicker patients than others, and pay the lowest price available among providers who showed generally good outcomes in a particular region. (Price would vary according to differences in cost of living, and what the hospital had to pay for labor, etc. in different regions.)

    If a free market, supply also would play a role. In places like Manhattan, Miami or L.A. there are an abundance of specialists ((In Manhattan, I can get an appointment with a Park Avenue specialist who takes both Medicare and private insurance within 2 or 3 days, even if I’m a new patient. . Thus in Manhattan, both I and Medicare should be paying specialists less.

    In a free market where competition worked to bring down prices, doctors who want edto earn more, would have to go to an area where there is a shortage of doctors– perhaps a rural area. The government might apay them more to work in places where few doctors want to live– say, rural Alabama, where public schools aren’t as good, there aren’t many gourmet grocery stores or restaurants, and few opportunities to attend a concert.
    But of course our health care system doesn’t work that way. Doctors in Manhattan generally charge more than doctors in Alabama. Hospitals in N.Y. charge far more than hospitals in poor rural regions. And research shows that when there are more hospitals in a city, prices are higher, not lower. Hospitals don’t compete on price.

    This isn’t how free markets are supposed to work, but this is how our health care market works, because health care is different from all other products.

    Why is this? First, because we spend most of our health care dollars when we are chronically ill, suffering from a disease like cancer, diabetes, heart disease etc. That’s where 75% of our health care dollars go. And when people are very sick, we want the best care available, Period. They are not bargain-hunting. If a hospital advertised: “We do heart surgery for less” patients would be very wary. If a doctor let it be known that he would see patients for less, patients would assume that there was something wrong with him– a reason why he had a hard time drawing patients.

    Dr. MIKE, you make the point that in our health care market, patients are not spending their own money, and imply that if they were, they would shop around for a bargain.

    This is not true. Even when spending their own money (patients with a very high deductible, for instance) people will borrow, beg money from relatives, sell their homes or go into deeply debt to get the best health care they can find for themselves and their loved ones. Only very rarely do you read about a cancer patient refusing radiation because it’s “too expensive and not worth it.” (Sometimes patients refuse radiation because they don’t want to go through the ordeal, particularly if they think they’re going to die fairly soon anyway. But this is different– it’s not about saving money.

    Secondly– and this is very important– patients tend to assume that in health care, the most expensive doctor or the most expensive hospital is “the best.” This is why health care providers rarely compete on price. A hospital knows that if it offered lower prices, it would be hurting its reputation as a “premiere” hospital. Patients brag to friends about how much their specialist charges: “It’s a lot, but he’s the best!”

    Third– and this is important, health care is very different than other markets because the customer is not in a position to judge how good the product is, or whether it will meet his needs.

    Here we get to the heart of the matter. Patients are not scientists. They are not medical researchers. Sometimes, they can tell if a doctor is not very good. (You smell liquor on his breath. His office is dirty. He spills cigarette ashes on you while examining you. This once happened to me and the specialist had been recommended by another doctor!)

    But lay people are not in a position to judge whether the
    doctor’s diagnosis correct, and whether he is prescribing the right treatment.

    Googling does not give you a medical education The only possible exception is when a well-educated patient suffers from a disease for a long time (say, diabetes) reads a lot about it, reads medical journals, and becomes well-informed. But this is the exception. Most Americans do not have a college education, and most importantly, most of the time we are being treated for something that we have never had before, and hope never to have again.

    Moreover, as John points out, when you are very sick, time is of the essence. You can’t wait two or three years for the prices on cancer drugs to come down. (This is why the cost of medical technology almost never falls. Competition doesn’t work in this market because the buyer can’t wait for a new seller to come into the market, offering a lower price.) And normally the the patient can’t spend 3 months comparison shopping . .

    Basically, you have to trust that the doctor knows what he is doing. This is the one case where the Seller is in the driver’s seat. A doctor or a hospital tells you what you need– a treatment, a test, surgery, whatever– and after asking a few questions the patient normally agrees, even though he can’t be at all certain that what the provider says is true.

    Note even the doctor may be far from certain. As Doctor Atul Gawande explains in his brilliant book Complications: A Surgeon’s Notes On An Imperfect Science, medicine is still an infant science, fraught with uncertainty.: “ Medicine is an enterprise of constantly changing knowledge,” Gawande writes, “uncertain information, fallible individuals . . . the core predicament of medicine, its uncertainty, is the thing that makes being a patient so wrenching, being a doctor so difficult, and being part of a society that pays the bills so vexing,”

    There are no accessible guides to the “best medicine.” While Consumer Reports can rate midpriced refrigerators briskly and clearly, in a way that makes comparisons easy, it is all but impossible, even for a physician, to be positive of the relative benefits of a great many medical procedures.

    (Also, as JOHN points out , the fact that corporations are often making a great deal of money peddling a piece of equipment, a drug, etc. also muddies the waters. When they test their products, they often do not divulge negative results, and so even physicians have no way of knowing that the treatment may hurt many patients.)

    Of course, a patient can go to a second doctor for a second opinion. And many do. But if the doctors disagree– whether only slightly, or in major ways– the patient who is not an M.D. has no way of knowing who is right. In a free market, customers are supposed to “set” fair prices by judging the value of the product or service. When it knows to healthcare, the customer just isn’t in a position to do that.

    Even after the fact, the patient won’t usually know whether he got the best treatment. If he gets better, he has no way of knowing whether the treatment caused him to heal, or whether his body healed itself. (Time is a great healer, and sometime, people just get better with the passage of time.) Even if the treatment worked, he has no way of knowing whether a less expensive, less invasive treatment would have worked just as well. (A pill or physical therapy rather than surgery.) Finally, if the patient doesn’t get better he usually has no way of knowing whether the doctor or hospital made the wrong diagnosis or recommended the wrong treatment, or whether he simply couldn’t be cured. Every human body is unique, and reacts differently to treatments. What worked for your brother-in-law may not work for you.

    As Kenneth Arrow, the Nobel Laureate economist who is considered the father of health care economics pointed out long ago, free market competition does not work in health care because the consumer doesn’t have the knowledge needed to judge which advice or treatment is “best.”
    “Uncertainty as to the quality of the product is perhaps more intense than in any other market,” Arrow wrote. “Recovery from disease is as unpredictable as its incidence . . . and further there is a special quality to t he uncertainty: it is very different on each side of the equation. The information possessed by the physician as to the consequences and possibilities of treatment is necessarily very much greater than that of the patient, or at least so it i believed by both parties.

    This is why, ultimately, the patient must trust the doctor that he is giving the best advice possible. And, in fact, the vast majority of the time, doctors are giving what they truly believe to be the best advice.

    But not all doctors are equal: as Gawande points out, doctors, like everyone else, live on a bell curve. In the middle, we find most doctors who are “pretty good”– at the far left, very poor doctors, and at the far right, excellent doctors. Although a layman may be able to spot the poor doctor, he is rarely in a position to distinguish between the “middling” doctor and the excellent physician. This, of course, often is not true. (Ask nurses, who know more than anyone else about which docotors in their hospitals are
    mediocre, poor or outstanding.But nurses rarely talk, except to close family members.)

    The same holds true for hospitals. As a hospital CEO once told me: “Our patients know whether they like the food, the views– whether the nurses are friendly. They have no idea whether they’re getting the right treatments, the right medications . .
    Under reform, we will have more information about hospital- acquired infections and error rates– and we will discover that some of the most expensive brand-name hospitals are in fact, very dangerous places. (In New York State, we have collected quite a bit of information, and some of it is shocking.)

    And under reform, Medicare will be trying to pay hospitals and doctors more for “better outcomes.” But it still will be all but impossible to judge the quality of individual doctors–and whether they are “pretty good” or outstanding because the pool of patients that a doctor sees is just too small. A handful of non-compliant or very sick patients can skew his outcomes. By contrast, it is much easier to judge the quality of a large group of providers by looking at outcomes.When a hospital or an accountable care organizations sees thousands of patients, the outlier patients are averaged into the large pool, and don’t’ make such a difference.

    Finally, on Insurers: Dr. MIKE suggests that insurers have too much power, and that if we had a true free market, the government (or someone) would bring anti-trust suits against them. But in fact, while insurers have great power in some parts of the country, in other places, hospitals that have consolidated have disproportionate power and are able to charge insurers and others exorbitant prices for simple services. (In Massachusetts, the Attorney General is looking into cases of Marquee hospitals that have been gouging insurers who feel they must have them in their networks (because they are brand-name hospitals) even though they are no better at providing simple services )

    And Dr. MIKE, I’m afraid that you are simply mistaken in thinking that reform has strengthened the insurers position. Insurers will be forced to cover the “essential services” that many today do not cover. They will not be allowed to charge patients more (or turn them down altogether) if they are suffering form pre-existing conditions. They will have to spend 85%of the premiums they collect on medical care, keeping only 15% to cover their own expenses and profits. If they don’t spend 85% they will have to refund money to their customers– which they are already doing.

    That means that fat profit margins become impossible: even if you raise premiums, you can keep only 15% of the increase.

    Not long ago, the CEO of Aetna said that the health insurance business will soon be extinct. The business model no longer works. Insurers will have to partner with providers, and work with them to keep patients healthy.

  70. The US health care system is not a free market in any way that matters.

    That’s a refreshing observation, Dr. Mike. I fully agree. In fact, due to literally thousands of exceptions and contradictions the words free and market are virtually meaningless. For starters, the term “health care” itself includes tons of expenses having little or nothing to do with healing or medicine. I haven’t pasted my laundry list here, but here is a link.


    At the core of the challenge is the notion that health care is a market commodity, subject to the same competitive dynamics as, say, safety features for next year’s automobiles or memorable vacations on a cruise ship. As consumers we can accept that we might wait a few more seasons to keep up with the brother-in-law who just bought a new car, because it’s still priced out of reach, and besides, in a couple of years I can get exactly the same car for considerably less cuz it won’t be new any more. And if I learn that the guy beside me on the airplane or the next cabin in the ship paid half or less than I did, I swallow hard and remind myself that I could have had the same deep discount had I been willing to wait until the last batch of tickets were being sold for less simply to fill out the passenger list.

    Sick and injured people and their families haven’t that kind of flexibility or incentive to wait. Time is usually of the essence. (In fact, I’m sure you know that persuading the fifty-five year old guy worried about high PSA numbers without any other signs or symptoms to consider “active surveillance” instead of going for more invasive options is a tough sell.)

    Having followed this debate for several years now I have observed a couple of muddy ideas causing confusion.

    ►The difference between professional compensation and corporate profits. Too many doctors, especially those in small private practices, are much better at medicine than accounting.

    ►Most billing is based on coding numbers rather than actual costs.

    ►The many so-called non-profit outfits — both medical and insurance — serve more as money-laundering centers for clusters of for-profit operations woven into the same matrix along which nearly all patients are passed. (Not to mention extravagant executive compensation packages for both insurance and medical service providers which are clearly contrary to the spirit of anything calling itself “non-profit.”)

    I could go on, but eyes are already glazing over. Besides, the day is just starting and my time is limited.
    Thanks to anyone who has made it this far.

  71. There is certainly a compelling argument that can be made for universal government supplied coverage for health care expenses. But there are legitimate concerns that can be raised about the success of adopting one of the other current models of universal health care – is the US different in some fundamental way that will thwart the cost-controlling aspects of current universal health care examples?
    This is not to say that we shouldn’t be discussion universal health care – we absolutely should and I believe that there are at least several ways it could be implemented that recognize and take advantage of uniquely American characteristics.
    But it doesn’t help the argument for universal health when this lie about our so called free market system keeps being repeated. The US health care system is not a free market in any way that matters. Yes providers (hospitals, physicians, etc) are rewarded for volume over quality, but where is the competition? Insurance companies are exempt from anti-trust laws and it shows. That is not free market. Physicians have no meaningful control over their prices. That is not free market. Patients do not pay for their own care – that is not free market. Patients have no incentive to compare providers – their insurance largely dictates where they go. This is not free market. So what is responsible for sky-rocketing costs? The third party payment system – the very system that is strengthened under health care reform. We need to be freed from both the current system and from the so called reform and focus on crafting a uniquely American approach to providing health care to all our citizens. In my opinion an approach that includes true and proven free market incentives to reduce costs while improving quality of life. To claim that the free market has failed us it to take off the table the very thing that can make affordable universal health care possible.

  72. Steve–

    Yes, since 1980, government- regulated universal coverage has spread throughout the OECD while our laissez-faire system which assumes (wrongly) that market compeition will tamp down prices has
    led to sky-rocketing costs.

    You write:

    “As to general inequality, it previously peaked in 1929, then again in 2007/2008. Guess you wil need to decide for yourself is there is some link between massive inequality and financial crises:


  73. Barry–

    Good to hear from you. You are right that healthcare for older Americans (55-64) costs 5 to 7 times more than care for 20-somethings.
    In this way, the Affordable Care Act, which says that insurers can charge older people only 3 times more is a boon for this group
    I discussed this in the original two-part post that appeared on Healthinsurance.org. You will find those two posts here http://www.healthinsurance.org/blog/2012/05/21/despite-health-reform-age-rating-will-still-deliver-stiff-insurance-premiums-for-many-older-americans/
    and here
    (When THCB edited the two-part post to fit its format, it had to cut some sections, and these points were lost.)
    But the problem is that Americans who are 55-64 are no longer as much wealthier than younger Americans as they once were. As middle-class wages have stagnated, their “peak earning years” are no longer as lucrative as they were in the past..
    As I indicate in the post, over the past 12 years the 55-64 year old group has been hit hard by unemployment, declining incomes and losses in their 401-k funds (many of which never really recovered from the 2000 crash). Many simply won’t be able to afford to pay premiums that are 3 times higher. You can’t get blood out of a stone.
    Middle-class individuals and couples who earn just a little too much to qualify for subsidies (say a couple earning $68,000, joint, before taxes) won’t be able to ante up $15,000 for insurance–plus co-pays and a deductible.
    On the other hand, a 35-45 year old who earns $150-000 to $250,000 a year can afford to contribute $10, 000 a year to the health care pool–whether through taxes or premiums. (Over the past 32 years, as the rich have gotten richer, and middle-income Americans have gotten poorer, there are many more wealthy 30-somethings and 40-somethings who could help. )
    On reducing heath care costs: I agree that preventive care may not reduce costs. If people get good preventive care and live longer, they may well cost society more.
    But chronic disease management does lower costs. This is one reason why health care costs are lower in Europe than they are here. They are much better at managing chronic diseases.
    Here, I’m not thinking of Alzheimer’s, but diabetes. Diabetic patients don’t t have to go blind– or undergo a series of amputations–if the disease is controlled. If patients suffering from heart disease are given good advice, many could improve by taking low-cost medications, changing their diet and exercising. A great many don’t need expensive invasive procedures.
    As for other countries: patients in Japan see doctors more frequently, but are much less likely to be hospitalized and undergo surgery. (The Japanese are very reluctant about surgery, and surgeons are paid very little. Their doctors are paid more to prescribe medication rather than hospitalize patients. This is much, much less expensive.
    In Europe, when patients are hospitalized, they do spend more time in the hospital, but much less happens to them while they are there. Many fewer tests. Many fewer procedures. Many fewer consultations with various specialists.
    Their health care systemsby and large, are not “for-profit” systems, and so there is not the same money-driven incentive to ramp up costs.

  74. Since this is a health care blog, I would to Maggie above by noting that if you look at health care expenditures, we were in a pack with the rest of the world up until somewhere around 1980. Since then, our spending has diverged upwards away from the rest of the OECD. At the same time, almost all of the rest of the OECD was gaining universal coverage.

    As to general inequality, it previously peaked in 1929, then again in 2007/2008. Guess you wil need to decide for yourself is there is some link between massive inequality and financial crises.


  75. By the way, just reading how Obama is increasing the use of drone strikes in countries like pakistan shows what is the real caliber of this president. You really think he is interested in dialogue and discussion? You do not respect the sovereignty of other counties who do not have to abide by our choices, what the hell do you think this guy has in mind for his own people?

    He acts like a king, and I’ll be damned if I will accept being a subject. Nor put up with his PR minions who echo false promises and stretched facts/statistics as I have read here.

    Man, June can’t come soon enough for me.

  76. Paying for care that just delays mortality is a waste of time, money, and energy. Making wide sweeping expectations and dismissing the big picture of accepting we are ignoring the limits of what nature intends of us is just a reinforcement of the adage “hear the lie enough until it becomes truth”.

    Your extended thread comments will not figuratively shout down dissenters who know the facts and realities of health care. Society has to contract if to survive as a viable part of our species.

    You know why many countries resent us? We are a lousy representation of what humans should be doing as part of this ecosystem.

    Can’t wait to read the bully retorts to that last opinion.

  77. I’m surprised I used the word utopian, not my usual term. But, even so, I take exception to those who just advise what is basically enslavement, if not at least accepting entitlement, and then getting so indignant when appropriately called on it being unacceptable as a societal standard without exception or debate.

    I really hope the Supremes do dent PPACA at the very least. It will be interesting to see who howls loudest.

  78. Thanks, Maggie. You are a wellspring of good information. Keep up the good work.

    I just came from another thread dealing with a commenter for whom I furnished a sterling link and she replied “The facts you conveniently quoted are often wrong.” It’s frustrating trying to reach otherwise intelligent and well-meaning people capable of that kind of compartmentalized thinking. We seem to be reverting to a kind of Dark Ages.

    Here’s a link I came across last week that will rub a lot of fur the wrong way but I sure made me feel better. I’m coming to believe it’s best to ignore irate responses and let the sparks fly.


  79. Maggie –

    Insurers will tell you that at the population level, people in the 55-64 age range use 5-7 times more healthcare than people in their 20’s. So, with a 3 to 1 age rating limit under PPACA, older people are already being subsidized by the young. If comprehensive health insurance could be had for $1,000 per year per person like car or homeowner insurance, both a mandate to buy insurance and an end to age rating would be reasonable. Expecting a young healthy person to pay $5,000 ($10,000 for a young couple) for a benefit that they are likely to use very little of is unreasonable given the likelihood of relatively low entry level earnings and, probably, school loans to repay.

    Regarding utilization of healthcare services in the U.S. vs. other countries, an article in the current issue of Health Affairs about the Japanese healthcare system notes that annual per capital physician visits are 13.2 in Japan vs. 3.9 in the U.S. Annual hospital admissions per 1,000 people are 119.9 in Japan vs. 92.8 in the U.S. MRI units per million people total 42.1 in Japan vs. 25.9 in the U.S. Yet, Japan spends only about 8.5% of GDP on healthcare vs. over 17% in the U.S.

    While 75% of U.S. healthcare spending relates to the management of chronic disease, a very large amount of it, I believe, is not all that expensive. For example, I take five drugs for management of heart disease all of which are now generics. Depending on what Plavix costs in generic form, all five combined are likely to cost less than $1,500 per year. Throw in another few hundred for an annual stress test and we’re not talking serious money here per person. Multiply my experience millions of times, though, and it adds up. The same is true for millions of diabetes and asthma patients whose condition is well controlled with medication.

    As for preventive care, it’s not likely to ward off dementia or Alzheimer’s. It may catch cancer at an earlier stage. I’ve known plenty of people who have lived near perfect lifestyles with respect to diet and exercise and still developed cancer or, later, dementia. I’ve said many times before that good preventive care is likely to help people live longer and healthier lives which are good things but it’s not likely to save money for the healthcare system. Suggesting that it will is disingenuous, I think.

    The primary driver of high healthcare costs in the U.S., especially in recent years, is high prices. Hospital prices, along with drug and device prices are the main culprits. Overtreatment is a factor. Uncoordinated care, especially for the expensive dual eligible population, is a factor. So is fraud and defensive medicine. So is futile end of life care and unnecessary surgeries and procedures in certain specialties.

    Other countries pay less for drugs because they can get away with free riding on the ability of drug companies to charge high prices in the U.S. market. If that were stopped, we could wind up with less innovation. Alternatively, drug companies might figure out a way to charge foreign customers more so U.S. customers could pay less. Oddly, generics are actually cheaper in the U.S.

    Back to the subject of your post, though, I don’t think ending age rating is the answer. In New York State, for example, the number of young people willing to pay the required premium in the individual insurance market is infinitesimal. It won’t work.

  80. John–

    Everyone other country in the developed world agrees with you about our
    obligations as a civilized society to provide healthcare for all.

    But inequality of the type we now see in the U.S. is not part of the “natural order of things.

    It is only in the past 32 years that we have seen such growing gaps between the haves and the have-nots in this country, and these gaps have undermined both our society and our economy.

    In other developed countires the vast majority of people are middle-class. In the U.S. the middle-class has been disappearing, while the number of
    very poor and very rich Americans grows.

    We were far more prosperous — and less divided as a society– in the 50s and the 60s when white America, at least, was largely middle-class. That is no longer the case.

    (If you live in a large city on one of the Coasts you might not be aware of how many poor white Americans there are living in rural areas. Fully Forty-Two percent of Americans Living Below the Poverty Line are
    Non-Hispanic Whites.

    Tthe U.S. has a larger percentage of children living in poverty than any other country in the world. Thjs is not becase we have many illegal immigrants. The vast majority are the children of native-born Americans.
    The majority are white. Many go to bed hungry. And we claim that, as a society we love children!

    At one time the U.S. led the world in the percentage of the population that received a college education. Now we rank 12th– behind Canada, Korea, the Russian Federation,
    Japan, New Zealand, Ireland, Norway, Israel, France, Belgium and Australia http://completionagenda.collegeboard.org/sites/default/files/reports_pdf/Progress_Report_2010.pdf

    As this Bloomberg editorial (written by Bloomberg’s editors) points out this is because we are not putting enough resources into public
    education pre-school from 12. http://www.bloomberg.com/news/2012-05-22/u-s-must-educate-itself-beyond-affirmative-action.html

    The editors write: “If the U.S. is to achieve its goal of a . . society that provides equal opportunity for all, policy makers must target preschool, elementary and secondary education, where the foundation of success or failure is built . . The U.S. must focus on the base problem: failing younger students trapped in failing public schools —

    They go on to point out that a college education is not a luxury– it has become a necessity. “.College graduates earned an average of $1,053 a week in 2011 and had an unemployment rate almost half that of high school graduates, who earned an average of $638 a week. This pay gap continues to grow.”

    Writing about how the U.S. has fallen behind, the College Board writes that free public pre-schools should be available to all Americans.
    Class sizes of 24-26 in public elementary schools are far too large for even the best teacher to give students the attention they need-.

    Meanwhile, cities like NY have been cutting back on the numbe of teachers and so classes sizes are growing

    As Paul KRugman recently said: We need to “hire back the goddamned teachers.”

    To their credit, some A students choose to become public school teachers, but we need more of them. Starting salaries must be higher and the amount a teacher will earn after 35 or 40 years of teaching should be equivalent to what other professionals earn toward the end of their careers.

    What does all of this have to do with heatlhcare and the cost of heatlh care? We know that level of education correlates with health: people who are better-educated are both healthier and wealthier than the rest of
    the population.

  81. The point of this post is that under reform, many older Americans (55-64) will not be able to afford health insurance.
    They have been hit hard by unemployment. Their 401ks were hit hard by
    the 2000 crash (and to a large degree, never recovered. See the history of the S&P since 2000). If they were cautious and invested in Treasuries, they now find that those Treasuries pay very little interest. Their income has fallen by 13% over the last 11 years. . (If you don’t have discretionary income, you can’t save.) On in six in this age group wants full-time work and is unemployed.
    (And John– making healthcare deductible doesn’t help much if you have little income to deduct it from )
    Meanwhile, under reform, an individual policy for a 58-year-old will run about $8500. For a couple, perhaps $15,000. If a middle-class couple earns $67,000 a year, jointly, before taxes, they will not qualify for a subsidy. Unless they are lucky enough to work for a large employer who provides generous insurance, they will have to pay that $8500 to $15,000 out of pocket– plus deductibles and co-pays. Many just won’t be able to do it.
    If these middle-class 55-64 year olds don’t have insurance, they will still be with us. They will get sick, their diabetes will progress; they will be diagnosed with cancer; some will develop early-stage Alzheimer’s.
    If they don’t receive regular preventive care, their chronic diseases will get worse (this is the time of life when chronic diseases progress) and they will need more healthcare.
    We, as a society, will wind up caring for him. (We’re not going to let a diabetic die of gangrene; we will admit him io a hospital and amputate his toes, his foot, his leg . . . If a 57-year-old woman develops breast cancer, we will provide surgery, radiation, etc. even if she doesn’t have insurance.
    So even if young people don’t pay higher premiums to help support this older generation, they will wind up paying for them one way or another.- And if the 55-64 year olds don’t get preventive care and help managing chronic diseases, they will be that much sicker– and that much more expensive when they go on Medicare.
    Both progressive politicians and the administration agreed to let insurers charge older customers more because they didn’t want to alienate the younger voters who helped elect Obama. (This is why Obama originally opposed a mandate; he didn’t want to anger the many 20-somethings and 30-somethings who supported him and were opposed to being told that they had to buy insurance.)

    But ultimately, if 55-64 year olds can’t affords insurance We All Lose:.They get sicker, and we all pay for them.
    John– the largest share of our health care dollars are spent, not on extreme futile measures during the last weeks of llfe, but on chronic diseases which because they are “chronic” require years of treatment. (For example, the 3-5 years between the time a cancer patient is diagnosed and he or she dies, the nine or 10 years that a diabetic goes downhill, requiring amputations, losing his eye-sight, etc.. . the ten years that someone suffers from heart disease.
    Iin most cases, we don’t know which of those cancer patients or patients suffering from heart disease will surive and which will die. So we have to treat all of them.
    The only win/win for all of us is if Everyone has insurance old and young, and we all share in the cost, based, not on our age, but on our income– with poorer Americans receiving subsidies.
    In every other developed country, ,practically everyone is covered, and young people help pay for older people, knowing that when they are old, younger people will help pay for their care.

    As a result, total health care spending is much lower because everyone receives preventive care and Chronic Disease Management. (These countries all do a much better job of manging the chronic diseaes that middle-aged people suffer from. In addition, they pay less for every procedure, pay less for drugs and devices, and don’t do nearly as many tests.

    The government regulates prices. Doctors earn significantlly less than
    docttors in the U.S. (even after adjusting for differences in the cost of living and the fact that our doctors graduate from med school with large loans.)
    Hospital CEOs earn far less. The government doesn’t let drug-makers and
    device-makers gouge their customers.

    We over-pay for virtually everything, and our system is set up to overtreat.

    We want to make sure healthcare is affordable for 50-64 year olds because this is a time of life when good care is crucial. But we also want care to be affordable for 20-somethings, 30-somethings and their children.

    The only way we can make healthcare affordable for Everyone is by using that scalpel to trim prices, and eliminate unncessary procedures (Tests are at the top of the list, along with unnecessary sugeries (back surgery,
    C-sections, knee surgeries, and many other surgeries that we know are done too often. Young patients as well as older patients are regularly overtreated and over-tested.

    Finally,–and this is most important– we need to think collectively about the cost of care– what is best for all of us, not what is best for “me” Few Frenchmen, or Germans or Swedes or Canadians would say “I’m wiling to help pay for my mother, but not someone else’s mother.” They are not just kinder, but wiser than we are. Ultimately we all wind up paying for other people’s mothers (assuming that we’re not going to leave them to die on the street outside of a hospital).

  82. “What bothers me is the very wrong belief that civilized people have no responsibility to take care of those among us who for whatever reason either do not or cannot care for themselves. And yes, that includes those who are stupid, lazy, irresponsible and careless as well as the orphans, infirm, aged and those with birth defects as well.”

    But that should be a choice. Resentment nor inconvenienced should not be the reaction to helping others. Politicians do not understand true sacrifice and commitment, hence where we are now. And your starting comment about utopian worlds or equal health care, where did I write that?

    This bs concept we should save all potentially at the expense of the community, well, good luck with those infinite resources of time, money, and energy expended as both provider and patient.

  83. Dr. Determined, I hope that “utopian worlds or equal health care for all” was not aimed at what I wrote. I have no illusions that there will always be well cared for people at the top of the economic heap. And believe it or not, that doesn’t trouble me at all. It seems to be part of the natural order not only in human history but most of Nature. (Yeah, I know animals are not piled into economic heaps but you know what I mean.)

    What bothers me is the very wrong belief that civilized people have no responsibility to take care of those among us who for whatever reason either do not or cannot care for themselves. And yes, that includes those who are stupid, lazy, irresponsible and careless as well as the orphans, infirm, aged and those with birth defects as well.

    As a society Americans piss away enough resources to accomplish that very modest responsibility and never miss them, but for some reason we opt for selfishness and indifference instead. Just yesterday someone asked me if I thought that tax policies changed human behavior (the argument was about earned income tax credit) and I said no, of course not. The reason we have such policies is not to change behavior but to furnish a reasonable safety net which can easily be supported by our vast resources.

    I realize that there are some who regard the safety net a hammock, but that attitude simply underscores their unfamiliarity with a level of desperation and need that is a large and growing challenge to our way of life. Yesterday was Memorial Day and few people connected the dots indicating the reason a great many men and women sign up for military service is the scarcity of economic alternatives and the diminishing of the American Dream called upward mobility. Add to that the reality that veteran suicides average about fifteen per day (more vets die in a year by their own hand than are killed in combat over several years of actual war) and the size and effectiveness of that “hammock” is far short of what it needs to be.

    No, utopianism is not my dream. I will settle for a little higher baseline of savagery and indifference.
    (And by the way, I really like that other comment that “healthcare debt should not live longer than the beneficiary.” Wish I’d said that.)

  84. Healthcare debt should not live longer than the benificiary. IF it does, there is a monumental problem of theft by legislation going on. Our government is borrowing to pay for grandma’s artificial hip she got between dialysys runs. That is wrong.

  85. Ok, if those of you really want the class warfare agenda of the left/Democrats, let’s look at those shiny examples of homogenous societies that allegedly practice or practiced it so wonderfully, China and the former USSR come to mind. Not reading them as sound examples of utopian worlds or equal health care for all.

    As I came on after reading the editorial piece of The Week magazine from April 27, I’ll leave you this for the day:

    (since 401K plans were started in the 80s) “they are a disaster in the making. Half of all workers have put nothing away for retirement. Baby boomers ages 55 to 64, on the cusp of retirement, have a median 401K savings of only $78,000–a pittance. To sustain a middle class lifestyle across 15 or more years, the financial experts say, a retiree needs savings of at least $900,000.”

    Oh, by the way, William Falk who authored the piece, starts with this near the top: “Most people do not act responsibly or rationally or even in their own long term self interest.”

    Yeah, so show me this piece of paper I signed saying I owe all in this culture equal and fair opportunities irregardless of their poor choices and belief systems. I am not advocating for anarchy or self termination by proxy, but, how about this simple concept of ACCOUNTABILITY. You know, that thing dumped in the garbage can by the doors entering political arenas of federal and state halls?

  86. The two of you are so predictable. Keep on twisting my comments to demean and bully. Pathetic!

    And when you try to deflect with usual retorts of “you do it too” , who is the bigger person, the bully or the victim? Oh yeah, in your world, the bully is the guy! Good luck with that.

    Hang out in any nursing home lately? Yeah, there’s a strong argument to reasonably argue my perspective.

  87. As usual this is a conversation about the haves versus the have-nots, disguised as a policy discussion. There always has been and will always be a population with more than enough assets to cover any kind of basic and ancillary care they both need and want. I see it every day as a senior care giver. There is a vast network of profitable enterprises thriving on the needs and wants of aging adults.

    Joint replacements, organ transplants and advanced (i.e extravagantly costly) “treatments” for cancer, cardiac, orthopedic and other costly conditions of aging continue to proliferate with the economic vitality of new car sales. As long as we continue to allow for-profit companies to take in sums large enough to cover extravagant executive compensation packages, sales bonuses for high achievers (selling, not furnishing healthcare but pumping the premium revenue stream) and advertising packages larded with enough funds to buy the most expensive production, print and broadcast media… we can expect that the costs of actual “care” will remain high. (There is even a proliferation of hospice companies competing for that little four thousand dollar Medicare “benefit.” Many are excellent but others fall way short of the blessings the sector is trying to groom.)

    Maggie is right about the scalpel approach. I think a good place to start would be a return to the day when medical expenses were deductible for individual taxpayers, not the corporate entities that have taken that plum away. It ain’t no “plum” for the family faced with the costs of caring for someone with advancing dementia, incontinence and lost mobility, needing 24/7 attention. It only becomes a plum when harvested by companies competing for tax dollars and corporate benefit contributions. If the have-nots were once again tax-advantaged those now in that line of work would tighten up their game. As Maggie’s example said, paying for the needs of MY aging parent is not the same as paying for everybody else’s. If licensed, regulated assisted living arrangements and licensed, regulated private-duty care-givers were tax advantaged for those who pay for them, the medical-industrial complex would experience a corrective that would do the job of a thousand scalpels.

    And this conversation would quickly get refocused on the real problems of aging, not the challenges of not having enough money.

  88. “intended”?

    By what specific objective principle or edict?

    Why don’t we just summarily terminate all those expensively irksome people ages 76 and older?

  89. To answer the question that is this the title of this post: why not, people think they can live to 80 or more years after retiring at 65 to 70, why should the young be literally burdened with keeping the elderly alive and foster true dependency reversed? Hey, I’m over 50, and I would not ask my children to pay my SSI and Medicare for more than 10 to 15 years. We should accept that our species isn’t intended to live more than 75 years. But, this culture isn’t interested in realistic boundaries, is it!?

  90. Quit stealing from young people just to steal the next electon. Healthcare coverage is a joke when you are male and under 50. All you need is catastrophic coverage. Why be enslaved to fund political campaign give-aways?