I ask this question not knowing the answer, and invite speculation. I offer my own. What will be the long-term outcome of Senator Max Baucus’s proposal to allow people age 55-64 to buy into Medicare?
We hear terrible tales about how Medicare is faces monstrous unfunded liabilities – there’s something to that, but the same studies ought to be applied to the private sector as well. The simple fact is that medical advances are effective and wonderful and expensive. If we were apply the same econometric forecasts to medical needs in the private sector, which doesn’t have to deal with old people, we would still find that medical care will be sucking up more and more of GDP. Until we ration. So set aside for the fear forecasts for sake of argument about other aspects of medical care. I’m more interested in the impacts of the Baucus proposal.
Medicare has three sources of financing – a payroll tax of 2.9% on all wages in the country; monthly premiums for “Part A” (hospitals) of $96.40 from participants; and a 75% subsidy for “Part B” (doctors). (In addition, most Medicare participants pay separately for private insurance to pay for a deductible, usually 25% of what Medicare pays. This is the equivalent of the private-sector deductible and c0-pay system.)
In 2005, the total cost of the Medicare program, subsidized and unsubsdized, was $439 billion.
(I’m deliberately ignoring Medicare Part D, which is a government-sponsored industry subsidy providing a small drug benefit to Medicare recipients. It’s wildly expensive and in need of repair. Another day.)
Part of the Baucus-sponsored health care reform act in the coming legislative session would to temporarily open up Medicare to people aged 55-64. This is viewed as a temporary solution to a market deficiency – private insurers charge huge premiums for people in this age group, and these people are also likely to have preexisting conditions, meaning they can’t get insurance coverage at all.
Baucus would let them into Medicare on a “revenue neutral” basis, meaning that no part of the current subsidy would be available to them. Hence, they would be paying much more than current Medicare beneficiaries for coverage. But there would be two advantages – one, they could get coverage, and two, they could take advantage of Medicare’s built-in cost efficiencies – that is, Medicare operates with about 3% overhead, while private insurers experience 15-30%. So premiums should be considerably less than private policies – say $3,500 versus $5,000 for an individual. That’s a guess. Premiums would certainly be more than $96.40 per month.
The first impact of the Baucus plan would be similar to what Massachusetts is experiencing right now – a huge influx of sick people to whom coverage had previously been denied. This would stress the system, and cause many to cry out that it’s not working. The private sector would experience no loss or pain, however, as it is not offering coverage to these people anyway.
The second impact would be a migration of people in to Medicare. These would be people who are employed, retired and paying on their own, or retired and enjoying company-sponsored coverage as a long-term benefit. This would present a loss of revenue to the private insurers, and they would scream. They would probably try to head Baucus off at the pass, lobbying instead for premium subsidies for themselves to avoid loss of clientele. But assuming the Baucus package were to pass intact, the private insurers would suffer.
The premium advantage that people above age 55 would experience would create pressure from below as people less than age 55 would see that older people are paying lower premiums. They too would want to avail themselves of the low-overhead Medicare option. Political pressure would start to mount to expand Medicare yet further into lower age groups. Cost-conscious and financially strapped employers would want in as well.
In the end, the Baucus plan would chip away at our current hodgepodge system of profitable clients for the private sector, with non-profitable ones left out in the cold or dumped on government. Face it: We’re not going to get single-payer health care in this country even though most of us want it. The Baucus plan would be the start of a process that would eventually undermine the private sector entirely. Private insurers, as in Germany, would be left to take care of the needs of the wealthier sector, paying for private rooms and and helping them avoid waiting queues. There’d still be a niche for them, but we would no longer rely on them for basic care.
It’s going to take years, if not decades. Given the power of the medical lobby, it might not happen at all. I’m often a critic of Senator Max Baucus – he’s at best tentative and right-leaning on most issues. But I support him wholeheartedly on this. If we cannot blow up the house, at least we can chisel away at the foundation.
By the way, full disclosure: I’m 58, have a preexisting condition and am therefore uninsurable, and have to buy into the wildly expensive MCHA program.
Piece of Mindful 
Nothing will work until we first end the Bush administration’s war against the Medicare. Baucus extends the war. In response to growing support among medical professionals, and employers, for a universal, single-payer system, Bush’s budget cuts have deliberately attacked doctors and hospitals while coddling private insurance companies and HMOs — the overpriced, government-dependent villains in this story.
The privatization of Medicare is about destroying the program, not making it compatible. The only public health care plan that will work is a single-payer system. Medicare worked well until conservative ideologues, BIG insurance and pahrma, chicken-shit Democrats crippled it. The wrong road is the wrong road.
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…medical care will be sucking up more and more of GDP. Until we ration.
Okay, I’m with you so far…
The first impact of the Baucus plan would be similar to what Massachusetts is experiencing right now – a huge influx of sick people to whom coverage had previously been denied.
How do you reconcile these two? We seem to be getting some rationing now via high premiums for the “cusp of medicare” group. We’re angling for less rationing under the Baucus plan.
The premium advantage that people above age 55 would experience would create pressure from below as people less than age 55 would see that older people are paying lower premiums. They too would want to avail themselves of the low-overhead Medicare option. Political pressure would start to mount to expand Medicare yet further into lower age groups. Cost-conscious and financially strapped employers would want in as well.
Sounds like a plan, but, again, it is not injecting any rationing into the system–it will likely increase overall medical spending. You are anxious to squeeze out private insurance overhead, but I suspect this squeeze would be more than washed out by increased use.
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Taiwan experienced this when they went to universal care – at first a huge influx due to the underperforming system they had, and then it stabilized. They are now very happy with their system. Any universal system is gong to experience a huge influx of new patients, and then it stabilizes.
This is aside from the rationing question. That’s a fact of life for everyone everywhere under every system. Others are more rational about rationing than the US.
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Taiwan is a small, homogeneous country with a lower average standard of living. This sort of example is not comparable to the United States.
Just as rightsaidfred noted, the US mindset does not accept sacrifice and shoddy conditions, even if it may get better.
Extending government health care to ages 55-64 just seems like a way to ensure the entire baby boomer vote is on their side.
I am 24, with medical conditions, and pay for my private sector insurance. I think it’s a pity that Social Security from my taxes will no longer be around by the time I reach the age to use it.
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I don’t see any rationing plans for US health care. Every proposal seems to be, “Let’s get everyone covered, then we’ll worry about costs.” It seems that every state that’s tried some sort of rationing has been sued into expanding coverage by an interest group.
Taiwan is an interesting example. They have the advantage of being a relatively small, homogeneous population, so there is quite a bit more willingness for individuals to sacrifice for others than we might be able to gin up in America. This sacrifice includes putting up with some shoddy conditions, conditions that in America would mean a huge lawsuit that would keep several lawyers on the golf course for a long time.
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If you start with the premise that our health care system is good and reasonably priced and that people currently get the care they need without rationing, then you make sense. Otherwise you don’t.
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If you start with the premise that our health care system is good and reasonably priced…
I’d say our system is good and expensive and a lot of people like it that way.
…and that people currently get the care they need without rationing
We ration a lot less than other countries. We do some diagnostic procedures at twice the rate of the Europeans. Things like hip and knee replacement are almost double the rate of our counterparts. I’m not sure how you put more people under subsidized care and stuff this genie back in the bottle.
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You’re not getting it at all. We “ration” by excluding a great number of people from the system – outsiders, thereby freeing up resources for insiders. If we did not ration that way, we would be forced to ration as Europeans and Canadians do – waiting queues for non-life-threatening procedures.
All other questions about rationing within our system are pointless until we institute a system that attempts to include all of us. Then we will indeed have, as other industrialized nations have, a happy problem.
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We “ration” by excluding a great number of people from the system – outsiders…
The more I look at this, it appears we don’t exclude that many people. Many of the uninsured are young and healthy. The sick enter the system eventually, even if it is at a later, more serious stage of an illness.
…thereby freeing up resources for insiders.
I suspect it is not quite the lifeboat analogy you imply. Health care supply does expand and contract. Expanding coverage brings more people into the system at current costs. Bringing those costs down is a separate problem, and not necessarily a happy one. Our health care system is an ersatz union, providing jobs and patronage for many. You talk like we can casually harpoon the beast, then gut it and skin it. There will be a bigger fight.
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You are oversimplifying beyond the pale, anxious to convince yourself that we don’t really have a problem. Yes, it is true that many of the uninsured are young – probably around 50% are 34 or younger. But you are wrong to assume they are uninsured by choice. Usually it is income – for instance, WalMart workers are not paid enough to afford their own insurance, and usually forgo it.
Secondly, you are unknowingly highlighting the main defect in the private insurance model – adverse selection. Many people feel themselves healthy and therefore forgo insurance, becoming a public burden when they do get sick. Max Bucks is one. People likely to get sick are drawn to insurance – therefore, insurance companies are constantly faced with the problem of having a sick clientele.
To get around this, insurers went to the workplace – a place where people are assembled for some reason other than health insurance. There they get a good cross section of healthy and unhealthy alike. This is the only way private insurance can work.
Insurers have one other weapon in averting adverse selection – you might want to give this some thought – they simply deny coverage. In the end, the ones to whom they deny coverage are not profitable clients, and are either left out in eh cold or dumped on the government.
That’s why I say insurance companies are leaches on society, and should be done away with.
And, as with the Middle East, your knowledge here is superficial at best.
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I’m thinking of several acquaintances with big time medical problems. They either pay huge insurance premiums, or they finance the care themselves at great personal sacrifice. They would be much better off under your system of everyone paying one rate. I’m not going to argue too hard on this point.
However, we’re still left with the high cost of health care in this country. We do twice as many CT scans per capita than Europe, and each scan costs four times as much. I don’t see this changing when we have everyone chipping in equally when there will be more people flocking in to avail themselves of these services. Who is going to tell the x-ray manufacturers that their product is overpriced? Who is going to stand up to the trial lawyers, who like a big, fat, medical establishment so they can skim off their contingency fees? Who is going to tell the local ambulance service to cut their prices? You argue cogently about more equality in paying for medical care, but you sort of wave your hand when it comes time to discuss how to control the actual costs of the care.
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I simply wave my hand when it comes to hard decisions? Not hardly – that is an apt description of the right wing in this country – we can’t change it without ruining it, is if there were something of value to be ruined. Insurers and ambulance companies have a mutally satisfactory deal – they pay less than advertised for people inside the system, but charge full price for anyone outside. It’s but one example.
The way to fix it is to have one single payer for everyone, thereby eliminating insiders and outsiders, and solving your problem.
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The way to fix it is to have one single payer for everyone, thereby eliminating insiders and outsiders, and solving your problem.
And the hand continues to wave.
Single payer brings on another set of problems one gets with monopolistic entities I’m not sure our country is set up to handle.
Your motivation in the health care debate is to get rid of insurance companies. They have their problems, but the alternative is not the panacea you imagine.
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I offer no panacea. Canada and Britain and Europe and Taiwan have problems aplenty. They are simply more effective and efficient in providing health care. We’re a holy mess.
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