Friday, April 10, 2020

With Biden's public option, who needs Biden's Medicare buy-in?

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Joe Biden's healthcare reform plan, released last July, is a light sketch of a familiar reform model: "Medicare" for all who want it, centered on a public option that anyone can buy into on a subsidized basis.

Biden proposes a public option offered within the ACA marketplace, paying Medicare rates or something close them to providers (though the language is vague here) and available on a subsidized basis to people whose employers offer health coverage as well as those who lack access to employer-sponsored insurance (though the language on this front is also ambiguous*). The public option, and private plans within the ACA marketplace at the same benchmark metal level, would cover between 80% and 100% of the average enrollee's costs, diminishing with income, at premiums ranging from zero to 8.5% of income.**

A bill introduced in the House by Reps Jan Schakowsky and Rosa DeLauro, the Medicare for America bill, has this basic structure but integrates the new public option into a more comprehensive healthcare system overhaul, revamping and folding in both existing Medicare and Medicaid, and offering buy-ins to employers of all sizes.  Biden's bill leaves Medicaid and existing Medicare intact and does not offer buy-ins to employers, only employees.

That leaves an opening of sorts for Biden's latest initiative: opening existing Medicare to adults aged 60 and over. Such a step is imaginable as a stopgap that could be effected more quickly than Biden's more sweeping overhaul. But Biden is proposing that the opt-in to existing Medicare co-exist as an option beside "the Biden Medicare-like public option — as well as other subsidized private plans available to individuals through the Affordable Care Act."

If Biden's public option for non-senior adults is comprehensive and affordable, why would adults aged 60-65 (or 65-110, for that matter) need the second option of sticking with the current complex, multi-part gap-ridden Medicare offering? At present, Medicare invites seniors to choose (often suboptimally) among a dizzying array of Medicare Advantage and Medigap policies, or, if low-income, navigate a complex array of supplemental programs.

One rationale is that taking near-elderly adults out of the ACA marketplace (enhanced, with public option added) will improve that risk pool. But if the public option pays Medicare rates, the only variance in government's costs between the PO and existing Medicare will be according to which plan offloads more cost on the enrollee. Siphoning off 60-65 year-olds  may benefit private plans in the marketplace -- but then again, it may not:

The only other potential rationale is that some near-elderly would fare better in traditional Medicare than in the public option or comparable ACA marketplace plans. That might indeed be the case for some wealthier prospective enrollees -- those who can easily afford a good Medigap policy, and who would pay up to 8.5% of income for 80% AV coverage if they opted for Biden's public option or a comparable private plan.

The more expensive Medigap plans cost about $130-200 per month and raise AV effectively to 100%, or close to it (with the notable exception of drug costs). In total, couples with incomes below $170,000 may pay $300-400 per month each for Medicare Parts B and D plus Medigap.  At an income of $150,000, they'd pay about $531/month each for the public option.  And they'd be getting 80% AV rather than near 100% in Medigap (again, excluding drug costs).

As I've noted before, this is a political problem for the Medicare for America bill, which revamps existing Medicare and integrates it with the new public option, capping premiums at 8% of income. Enrollees would get more for their money than in current Medicare, most notably long-term care (for which Biden has a separate plan), as well as dental, vision and hearing coverage. The bill's revamped Medicare also has a minimum AV higher than 80%. While it does have 20% coinsurance for many services for people at high income levels, it also pays 100% of costs not only for preventive care (as do all ACA plans)  but also for chronic disease management, substance abuse treatment, coverage for the medically frail or those with special needs, and more.  Still, some affluent seniors might feel that current Medicare offerings are preferable.

From a pure policy standpoint, it doesn't make much sense to leave existing Medicare and Medicaid standing beside a comprehensive new public option offered on a sliding scale to all.  From a political standpoint, however, overhauling all major public programs at once is likely impossible. Offering existing Medicare to a new cohort of Americans who presumably (okay, theoretically) will have access to a robust, affordable public option is a major kludge.  But it may be smart politically, at least in prospect.  And it's easy to imagine a bill that drops the  Medicare eligibility age to 60 passing first, while the ACA overhaul triggers a battle royal or gets shelved.

If Medicare for American passes, some seniors will pay more (and get more) than at present
Medicare for all who want it: A compendium

* The plan description on Biden's website promises, " Whether you’re covered through your employer, buying your insurance on your own, or going without coverage altogether, the Biden Plan will give you the choice to purchase a public health insurance option like Medicare." That doesn't mean that the plan is available on a subsidized sliding scale basis if your employer offers coverage. Further down, we read, "If a family is covered by their employer but can get a better deal with the 8.5% premium cap, they can switch to a plan on the individual marketplace, too." That would seem to settle it. But as Colin Baillo recently pointed out, that language could refer to fixing the ACA's so-called family glitch -- granting subsidy eligibility if the employer's insurance is deemed unaffordable not only for the individual employee but for the employee's family as well.  That's probably not the case, but the language is frustratingly vague.

** Biden's plan does not spell out these details either. But in a general reference to using a gold (80% AV) benchmark, the plan links to an Urban Institute proposal that puts forward a revamped ACA subsidy schedule that sharply reduces benchmark ACA premiums and out-of-pocket costs at each income level (excepting one). The  premium-and-AV scale in this proposal is a variant on a scale used by coauthors Linda Blumberg and John Holahan in multiple proposals dating back to 2015, which have found their way into various bills and candidate plans.

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