From the Journals

Rand analysis of proposed Medicare buy-in uncovers surprising findings

Early buy-in by people aged 50-64 might raise insurance premiums


 

Allowing people aged 50-64 to buy into Medicare might result in higher premiums for people who purchase their health insurance on the individual market, a finding that runs counter to many people’s expectations, said the authors of a newly released report.

In the report, Christine Eibner, PhD, of the RAND Corporation and colleagues estimated that the premium for so-called bronze market plans might increase by 2%-10%, depending on the design of a Medicare buy-in program. (The bronze plans are ones with fewer benefits sold on exchanges created through the implementation of the Affordable Care Act of 2010 [ACA].)

A perception has been that younger adults have been in effect subsidizing the cost of older ones in the marketplace plans. Instead, it appears that younger adults who enroll in the individual market tend to be relatively unhealthy and thus expensive to cover.

“When older adults leave the market, insurers are left with a smaller pool of younger, less healthy, and relatively expensive people given their age, leading to higher premiums,” Dr. Eibner and colleagues said in the report.

This result was unexpected, as there has been discussion of using a Medicare buy-in to reduce the cost of premiums for others in the marketplace, Dr. Eibner and colleagues said. But this result is consistent with other recent findings, including research presented by the consulting firm Milliman at a Society of Actuaries meeting in June. The Blue Cross Blue Shield Association estimates that losing a large group of customers could raise premiums by about 10% for the remaining pool of insured people, the New York Times has reported.

A buy-in would be less expensive than most ACA plans and would not have the kinds of limits on spending used in private insurance. That might make it attractive to middle-aged Americans. Dr. Eibner and colleagues estimated the annual premium for a Medicare buy-in at $9,747 in 2022. For a 50-year-old, a bronze-level ACA plan would cost $9,208 and a gold-level one, $12,277. For a 60-year-old, the annual premium for a bronze-level plan might be $13,512 and $18,016 for a gold-level plan.

Total out-of-pocket health spending, including premiums, would fall, on average, by 16%-35% for those who moved from ACA-compliant individual market coverage to a buy-in. The lower spending reflects that buy-in enrollees would have access to Medicare payment rates, which are substantially lower than private rates, and lower administrative costs.

There may be growing interest in allowing people aged 50-64 to buy into Medicare if enthusiasm wanes for bids to create a giant national health program, Dr. Eibner said in an interview.

“If there is concern that Medicare for all is going too far, I think this option is something that could become more prominent,” she said.

Many Democratic lawmakers already are focused on a Medicare buy-in approach. Sen. Debbie Stabenow (D-Mich.) has 20 Democratic cosponsors for her bill, which would allow for a Medicare buy-in at age 50. Sen. Bernie Sanders (I-Vt.) has 14 Democratic cosponsors for the current version of his well-known “Medicare-for-all” bill. That’s two fewer than he had for the Medicare-for-all bill he offered in the 115th session of Congress (Jan. 3, 2017–Jan. 3, 2019).

Among the supporters of Sen. Stabenow’s bill are several 2020 presidential contenders: Sen. Cory Booker (D-N.J.), Sen. Amy Klobuchar (D-Minn.), and Sen. Kamala Harris (D-Calif). As of Saturday, Sen. Elizabeth Warren (D-Mass.) backed Sanders’ bill, but not Stabenow’s. But Sen. Warren also has spoken recently of a Medicare expansion for people at age 50 as a step on the path toward universal coverage. Former Vice President Joseph R. Biden and Mayor Pete Buttigieg of South Bend, Ind., have said they would like to offer Americans the option to buy into Medicare or a public plan.

The idea of lowering the Medicare age has been considered for many years by Democrats. It was seen as a way to help older Americans afford medical care before the enactment of the ACA. Before that law took effect, consumers were not guaranteed access to a health plan, causing many older Americans to go without coverage.

But Dr. Eibner and colleagues found that a Medicare buy-in would have little to no effect on total health insurance enrollment. A Medicare buy-in might increase enrollment by 400,000 to 1.6 million for those over age 50, while decreasing enrollment by 100,000 to 800,000 for those under age 50 because of rising premiums.

“It’s not doing a lot to get people covered,” Dr. Eibner said in the interview.

In the report, Dr. Eibner and colleagues estimated that between 2.8 million and 7.0 million people would choose to enroll, depending on the approach used to design a Medicare buy-in. They considered numerous potential options for the design of a Medicare expansion, including various levels of federal subsidy for people using the buy-in. Dr. Eibner and colleagues also considered whether insurers would respond by trying to selectively market to healthier individuals, increasing their chance of enrolling.

The envisioned Medicare buy-in would have no effect on the Medicare Trust Fund, which pools money available through previously collected dedicated taxes, Dr. Eibner and colleagues said. In creating their model, they drew upon data from the Survey of Income and Program Participation, the Medical Expenditure Panel Survey, and the Kaiser Family Foundation and Health Research and Educational Trust Employer Health Benefits Survey.

Dr. Eibner and colleagues noted “several important limitations” for their work. It does not look at how the buy-in might affect clinicians and hospitals. Lower Medicare payment rates might cause some physicians to turn away patients covered by a Medicare buy-in.

“On the other hand, even if some providers decided not to participate in the buy-in, the buy-in might offer enrollees a broader network than what is available on the individual market,” Dr. Eibner and colleagues wrote. “Furthermore, it is not clear that providers would be legally allowed to opt out of the buy-in while still accepting payment for current Medicare beneficiaries.”

The Rand report was developed with the support of funding by the AARP.

SOURCE: Eibner C et al. RAND Corporation. Research Report. 2019. doi: 10.7249/RR4246.

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