Throughout the reform process members of Congress have been fighting over whether or not the reform legislation should include the option of purchasing a government-sponsored plan through the proposed insurance exchanges – the so-called “public option.” Since Congressman Alan Grayson introduced the “Public Option Act” or “Medicare You Can Buy Into Act” three days ago, a wave of enthusiastic support has been generated based on the perception that this is the perfect solution. Today’s comment briefly discusses this legislation, and it will sound really great at first blush, but do not draw any firm conclusions until you read through to the end.Okay. What does this bill do? It simply allows any legal resident of the United States under age 65 to buy into Medicare. The program will be paid for by the premiums to be collected from the individuals purchasing the coverage. Six age brackets are established for purposes of pooling funds. This reduces the financial burden on younger, healthier individuals by requiring older individuals to pay the higher premiums that would be required to fully fund their less healthy risk pool.
Many are not aware of this, but Medicare already has a buy-in program. Under Title XVIII, Sec. 1818, individuals over 65 who have fewer than 40 quarters of Medicare-covered employment who would otherwise not be eligible for Medicare can still participate by paying a full premium for Part A coverage (hospital) or a reduced premium if they have 30 to 39 quarters of Medicare-covered employment. Likewise, under Sec. 1818A, disabled individuals whose entitlement ends due to having earnings that exceed the qualification level can also purchase Medicare Part A. Grayson’s bill adds a new Sec. 1818B to Title XVIII to expand the buy-in option to anyone under 65.
For 2010, the premium under Sec. 1818 and Sec. 1818A to buy into Medicare Part A is $461 per month. The premium for Part B (supplemental medical) is the same as for qualified retirees – $110.50 and up, based on income (ignoring the hold harmless exception). Thus the buy-in is about $571 per month, or more for those with higher incomes.
Although Medicare beneficiaries have a high rate of chronic disease plus the costs of end-of-life care, the risk pool is diluted with a very large number of healthy seniors, thus the premiums are not as high as one might think. On the other hand, it is likely that the risk pools for the older but still under 65 age groups in the Grayson proposal would be subject to adverse selection. Since the premiums must pay all costs, they may be higher, perhaps much higher, than the diluted post 65 risk pool. Grayson has not included any risk adjustment mechanism to compensate for this.
At any rate, the Grayson proposal seems to be the true public option, run by the government, that progressives have been fighting for. So what could be wrong with it?
The greatest concern of all is that it still does not fix our outrageously expensive, administratively wasteful, highly inequitable, fragmented method of financing health care. It merely provides another expensive option in our very sick system of paying for health care. Providing yet one more option that people can’t afford really hasn’t moved the process.
Although Medicare is a very popular program, it is highly flawed. It has an oppressive central bureaucracy. It fails to use more efficient financing systems such as global budgeting for hospitals and negotiation to obtain greater value in health care purchasing. There are serious questions about whether Medicare funds are being distributed equitably and in a manner to promote greater efficiency. Its benefit package is relatively poor, covering only about half of health care costs for our seniors. Most Medicare beneficiaries feel that they essentially are forced either to purchase Medigap plans, which provide the worst value of all private health plans, or to enroll in Medicare Advantage plans, which waste too many tax and premium dollars. It would be both much less expensive for all of us and better for Medicare beneficiaries if the extra benefits of these private plans were rolled into the traditional Medicare program. Part D should be stripped of its private market administrative and profit excesses and also be rolled into the traditional program. Medicare also has failed to introduce beneficial innovative programs such as the British NICE system, which would improve both quality and value in our health care.
When we advocate for an improved Medicare for all, we really aren’t advocating for Medicare with a few tweaks. We are advocating for replacing Medicare with a single payer national health program that covers everyone, which we can still call Medicare, just as the Canadians do. Adding another buy-in program to the two buy-in programs that already exist in our highly dysfunctional system will do virtually nothing to fix these flaws we now have. It does nothing to slow the growth in our national health expenditures, and the high premiums for a package of mediocre benefits will do little to reduce the numbers of uninsured.
For those who say that a Medicare buy-in is an incremental step towards health care utopia, explain precisely how that is going to work. Explain each problem that it solves. Explain how it is going to morph into a universal or near universal system in which each individual is paying the full actuarial value of the coverage. It won’t happen.
Playing with a Medicare buy-in is an unnecessary diversion at a time that we need to get serious about reform. We need to fix Medicare and expand it to cover everyone. Nothing less will do.
