Tuesday, February 19, 2019

Medicare at 50 Act: A bonanza for low income near-elderly

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The Medicare at 50 bill introduced last week by Senator Debbie Stabenow (D-MI) is a pretty bare outline that raises a lot of questions.

The bill allows people aged 50-64 to buy into Medicare. Those who qualify for ACA tax credits -- i.e., have incomes below 401% of the Federal Poverty Level and lack access to employer-sponsored insurance, Medicaid or other public insurance -- can apply those credits to the Medicare premium.  No new program is created; no adjustments to the over-65 Medicare benefit to make the program fit the needs of younger enrollees are specified.  To note a few oddities:

1) Enrollees can choose traditional fee-for-service Medicare (Parts A, B, D) or a Medicare Advantage plan. No annual cap on out-of-pocket costs is added to traditional Medicare, so those who choose it will forgo that ACA marketplace benefit, which currently caps costs at about $7,900 per person -- unless they qualify for Cost Sharing Reduction (CSR), per the next point below.  Enrollees in traditional Medicare can buy Medigap policies on a guaranteed issue basis. With no OOP cap, traditional Medicare would not qualify as ACA-compliant coverage -- except that the bill specifies that it shall.

2) Those with incomes up to 250% FPL will get the ACA's CSR benefit tacked onto the subsidized Medicare buy-in. That means that people in this age group with incomes up to 200% FPL can obtain traditional Medicare, with access to virtually all healthcare providers, along with an annual out-of-pocket cost cap of $2450 per person, the  max for people with incomes up to 200% FPL who obtain plans with CSR. CSR is also supposed to boost the actuarial value of a silver plan to 94% (for income up to 150% FPL) , 87% (at 151-200% FPL) or 73% (at 201-250% FPL). It's not clear how that would happen with traditional Medicare, as each marketplace plan sets copays or coinsurance and deductibles designed to deliver that AV. Since it's up to the HHS secretary to create and administer the Medicare plan, perhaps HHS will set copays etc. to conform with the AV levels. Medicare Advantage plans would also presumably have to offer plan versions that conform with CSR AV levels.

3) It's unclear how CSR would work for those with incomes in the 200-250% FPL range, at which level CSR raises AV in a marketplace silver plan to just 73% -- below Medicare's AV level, which is somewhere above 80%. The only relevant CSR benefit at this income level -- which is truly valuable -- would be the $6300 OOP cap that would potentially be tacked onto traditional Medicare.*

Some further notes:

1. For those with incomes up to 200% FPL in particular, CSR would add significant value to traditional Medicare. Enrollees would lose this added value when they turn 65, unless they are "dual eligibles," who qualify for Medicaid attached to Medicare, or they qualify for Medicare Savings Programs (MSPs). Many won't.  The cutoff for full dual eligibility in (Aged/Blind/Disabled Medicaid) is generally 87% FPL, and the MSPs have asset tests that disqualify many seniors.

2. The target group for a subsidized Medicare buy-in is fairly narrow. About 4 million marketplace enrollees are in the 50-64 age range (that's an estimate, as CMS breaks out age groups across the 50 year-old threshold, at 45-54). Perhaps another 2 million are insured off-exchange (and so unsubsidized)  in the individual market. In 2016, Avelere Health estimated that about 7 million people in the age group are uninsured -- not all of them eligible for tax credits.

3. As subsidies are available only to those eligible for ACA marketplace subsidies, the bill would do nothing to help 50-64 year-olds in the coverage gap -- that is, those with incomes below 100% FPL who live in states that refused to implement the ACA Medicaid expansion. That's a shame. The Kaiser Family Foundation estimates that 2.2 million people are currently in the coverage gap. Probably over 500,000 of them are in the 50-65 age group.

4. The buy-in may be very attractive to enrollees eligible for strong CSR -- currently obtained by about 5 million marketplace enrollees. If they migrate in large numbers, that would reduce the effects of silver loading,** weakening discounts for many in the 200-400% FPL range (see note at bottom). While pulling low-income older enrollees out of the marketplace might improve the marketplace risk pool, reducing silver loading discounts would partly offset that effect.

5. Speaking of silver loading, the bill also calls for transfer of the CSR reimbursements that would have been paid in the marketplace to the insurers of enrollees who opt into Medicare into a trust fund for the new program. But CSR reimbursements are not being paid at present, though their value at present is priced into silver marketplace plans, and so into subsidies. So how will that work?

Thanks to Larry Levitt for help interpreting the bill's CSR-related provisions.

Postscript, 2/24/19: AHIP, the major health insurance trade group, is calling Medicare at 50 "a a slippery slope to government-run health care for every American." They should consider that it could also be a slippery slope to Medicare Advantage eclipsing traditional Medicare. For 50-64 year-olds who don't qualify for CSR, MA would be the only path to obtaining Medicare with an OOP cap.  At present, about a third of Medicare enrollees choose MA. The buy-in could be a gateway to accelerating MA's growth in market share. The industry could even seek a compromise in which the buy-in is available for Medicare Advantage only. Perhaps it's even conceivable that some of the 22 Republican senators up for reelection in 2020 would go for that. Would Democrats?


*  A provision specifying how tax credits that enrollees in this program would have received in the marketplace get transferred to the program's trust fund specifies that the amount of transfer should be calculated "with special focus on enrollees with income below 200 percent of poverty" (p. 9). Does that imply no CSR add-on at 200-250% FPL, or only that CSR costs at that level have historically been negligible?  Since the CSR reduction in maximum OOP at this income level is pretty modest (reducing $7900 to $6300), the fund transfer might be negligible  -- but the value added onto traditional Medicare, which has no OOP cap, would be substantial.

** "Silver loading" refers to concentrating the cost of CSR subsidies (directly reimbursed to insurers by the federal government as stipulated by the ACA until Trump stopped payment in October 2017) in the premiums of silver plans, since CSR is available only with silver plans. Since premium subsidies, designed so that the enrollee pays a fixed percentage of income, are set to a silver plan benchmark (the second cheapest silver plan), inflated silver premiums create discounts for subsidized buyers in bronze and gold plans. And in states that allowed insurers to offer silver plans off-exchange with no CSR load, unsubsidized enrollees were protected from CSR costs, theoretically at least.

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