Thursday, May 16, 2019

If Medicare for America passes, some seniors would pay more (and get more) than at present

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Medicare for America,  the bill that would allow anyone at any age to buy into a revamped Medicare at an income-adjusted price (e.g., $0 for the bottom 30% of the income distribution), would be a clear benefit to anyone under 65. Even for those who continue to get insured through their employers, it would offer the true freedom from job-lock that the ACA promised and largely failed to deliver.

Most seniors who turn 65 after the new program would come into full effect (2023 were it to pass this year) would be gainers too (those enrolled in current Medicare before the new program launches would have the option of continuing to pay their then-current premiums). A fair number of new enrollees, however, would pay far more in premium than they would for existing fee-for-service Medicare or a Medicare Advantage plan. They would get more for their money. But the expectation that when you turn 65 you can get reliable insurance for under $200 per month is pretty hard-wired into Americans, I suspect. Violating that expectation for a substantial subset of the 3-4 million people who age into Medicare in year one (and every year following) is a political problem to be reckoned with.

The current Medicare offer

At present, traditional fee-for-service Medicare costs seniors with incomes up to $85,000 (individual) or $170,000 (couple) $135 per month for Part B (physician services) plus about $30-40 per month for Part D (prescription drugs). Part A, hospital services, is zero premium. For about 95% of the population, then, the premium for traditional Medicare with drug coverage is under $200 per month.

For higher earners, the Part B premium tops out at $460 per month at income over $500k. Part D coverage can cost up to $77 per month more than for the bottom 95% of enrollees. For those with incomes over $500k, then, FFS Medicare Parts A, B and D can cost up to a bit less than $600 per month.

By itself, FFS Medicare leaves seniors exposed to large out-of-pocket costs. Part B pays 80% of billed costs. Part D pays about 75%. Part A, hospital, has a $1364 deductible,then a $0 copay for the first 60 days of hospital admittance  and a $341/day co-pay for days 60-90 and $682/day for days 91 and up. The major weakness is that there's no annual cap on an enrollee's out-of-pocket costs.

Private Medicare Advantage plans do limit yearly out-of-pocket costs, however -- to a maximum of $6,700, and sometimes much lower. MA plans vary in premium, but can be zero premium above the standard Medicare premium -- again, under $200 per month. The tradeoff is a limited provider network. Then there's Medigap plans, which supplement traditional Medicare and can reduce out-of-pocket costs to essentially zero. They're relatively expensive -- a comprehensive plan is about $200 per month.

Most Medicare enrollees, then, can get virtually 100% coverage for about $400 per month (via Medigap), with an unlimited choice of providers,  or reasonably comprehensive, OOP-capped coverage for about $200 per month. About 15% of Medicare enrollees also qualify for some version of Medicaid, most of whom pay no premium and little or no out-of-pocket costs. [Update, 5/19: Per Kaiser, 12% of non-institutionalized Medicare enrollees over age 65 are also on Medicaid.]

The Medicare for America offer

Under Medicare for America, enrollees of all ages pay a percentage of income on a sliding scale for comprehensive coverage -- just how comprehensive, we'll get to later. A cap on out-of-pocket costs is also on a sliding scale.

Those with incomes up to 200% of the Federal Poverty Level (FPL) -- currently about 30% of the population, and probably a higher percentage of seniors -- pay nothing, either for premiums or out-of-pocket. Those with incomes over 600% FPL -- $72,840 for an individual, $98,760 for a couple -- pay 8% of income. Keep in mind that at present the lowest Medicare premium is available to individuals with incomes up to $85,000 -- about 700% FPL, and couples up to $170,000 -- about 1000% FPL (FPL for a couple is well below double FPL for an individual).

The sliding scale from 200-600% is left up to the HHS secretary to fill in. Charles Gaba scopes out the likely scale (with out-of-pocket maximums as well as premiums) as follows:



To the extent a future HHS secretary follows Gaba, here is what premiums for Medicare for America would look like at various incomes.

Premiums under Medicare for America - Individual

Income as % of FPL
Annual income
Monthly premium
200% or less
$24,280 or less
$    0
250%
$30,350
$  25
300%
$36,420
$  60
400%
$48,560
$162
450%
$54,630
$228
500%
$60,700
$304
600%
$72,840
$486
700%
$84,980
$566

Somewhere over 400% FPL, seniors would pay more in premium under Medicare for America than under current Medicare (without Medigap). As of 2017, a bit over 40% of the population was in households with income over 400% FPL, according to the Census. The percentage of seniors above that income level would presumably be lower.  At really high incomes, enrollees would pay full cost, currently about $1100 per month. At present, a top earner with a top-line Medigap policy might pay about $800 per month in total.*

The value proposition under Medicare for America

Medicare for America offers more comprehensive coverage than current FFS Medicare or Medicare Advantage. It offers coverage in some ways less comprehensive -- with vital exceptions -- than FFS Medicare combined with a strong Medigap plan -- a package that  95% of American seniors can get for a total, including the FFS Medicare premiums, of about $400 per month.

The main added extra value in Medicare for America is long-term care coverage.  Commercial LTC insurance in the U.S. is a dysfunctional market; coverage is out of reach for most Americans. Premium rates have not historically been guaranteed; people who bought in at one rate have been slammed with huge premium increases, and insurers have exited the market en masse. According to the AARP, premiums average $225 per month for individuals and $315/month for couples. Unreliable and expensive...and only about 7 million Americans hold policies.

Somewhere between half and two thirds of seniors will eventually need some kind of long-term care, according to various estimates; about one third will need nursing home care, according to the Kaiser Family Foundation. Most Americans have two means of paying for care, which averages about $140,000 per year: die before their assets are depleted, or go on Medicaid when their assets are depleted. Medicaid currently pays the fees for over 60% of seniors in nursing homes. Medicare for America would provide 100% coverage for enrollees at all ages.

Medicare for America would also provide dental, vision and hearing services.  While it would pay 80% of most medical bills, like current FFS Medicare, its annual out-of-pocket maximums at the highest income level are lower than those of most Medicare Advantage plans: $3,500 for an individual, $5,000 for a family (e.g., a couple). Those OOP maxes would be lower at incomes below 600% FPL or perhaps below 400% FPL; the sliding scale is not specified (see Gaba's guesses above). They would be $0 up to 200% FPL.

Further, Medicare for America would pay 100% of costs for a host of vital services: preventive care (as does current Medicare), chronic disease management, substance abuse treatment, coverage for the medically frail or those with special needs, and more. David Anderson has estimated the actuarial value of the package (with the top OOP maxes) at 87-89%. Current FFS Medicare and Medicare Advantage AV is generally estimated at about 80%.

Apples-to-apples comparisons are impossible. Most people would be better off under Medicare for America. But a substantial number of moderately affluent to very affluent seniors would pay more in premiums -- enough, probably, to kick up a fearsome fuss, juiced by the right-wing attack machine.

A final political note: Medicare for America would be financed by steep taxes on high incomes. That may be sound policy. But Medicare and Social Security are grounded in the principle of benefits for all. As noted above, current Medicare Part B premiums top out $460 per month -- more than three times what most Americans pay, but moderate at an income over $500,000. It might be politically prudent to put a dollar cap on Medicare for America premiums.

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* For couples, Medicare for America premiums fare better relative to current FFS Medicare than for individuals. That's because, while FPL is only 35% more for two people than for one, couples pay a fixed percentage of income rather than two premiums as in FFS Medicare. Here are the premiums at different income levels, again, assuming Gaba's scale.

Premiums under Medicare for America - Couple

Income as % of FPL
Annual income
Monthly premium (for 2)
200% or less
$  32,920 or less
$    0
250%
$  41,150
$  34
300%
$  49,380
$  82
400%
$  65,840
$220
450%
$  74,070
$309
500%
$  82,300
$412
600%
$  98,760
$658
700%
$115,220
$768

UPDATE, 5/20: the next post digs a bit deeper into the number of seniors who would potentially pay more for Medicare for America than for FFS Medicare + Medigap under current law. Via an update to that post, the upshot: According to the Census' American Housing Survey (via its table creator), the median household income for people aged 65-74 up is $43,210, and for people 75 and over, $28,200.  Approximately 4 million households with residents over age 65 have incomes over $100,000, representing about 13% of households above that age threshold;  about 17% of households in the 65-74 age bracket have incomes over $100k. About 2.7 million senior households have incomes over $120,000.  Average household size at age 65+ is 1.4, according the Bureau of Labor Statistics. As suggested in this post and the prior one, some fraction of them would pay more for Medicare for America than for FFS Medicare + top-line Medigap (see the premium comparison charts above). A much larger group would pay more for M4America than for a Medicare Advantage plan -- while also, again, getting considerably more comprehensive coverage.

Thanks to Chris Pope of the Manhattan Institute and Larry Levitt of the Kaiser Family Foundation for pointing me to the Census' table creators.


More on Medicare for America
Would Medicare for America phase out employer-sponsored insurance?
A major fix in Medicare for America 2.0
Which healthcare reform bills offer the most affordable coverage to the most people?

2 comments:

  1. My own proposals for single payer have always left Medicare alone. Any significant tax increase on senior citizens will be voted down. In 1989, a tax increase on wealthier seniors for the Catastrophic Health Care act was a political disaster.

    As for long term care, I am totally in favor of expanding social insurance to cover it. However, it would be rational to fear that this coverage might be taken away by a future administration. That has happened before.

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    1. I suspect you're right, Bob - though this is a premium increase, not a tax increase (except on the wealthy). That's why I'm trying to call attention to a political vulnerability in a bill that I think takes the right approach overall to expanding access and controlling costs

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