Friday, September 10, 2021

Dropping the Medicare age to 60 also requires...

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130 House Democrats have co-sponsored a bill introduced on September 3 by Pramila Jayapal, the Improving Medicare Coverage Act, that would drop the Medicare eligibility age to 60 -- simply and cleanly, with Medicare offered on the same terms at age 60 as it now is at age 65, within six months of enactment. That's the headline. But the bill does something else that's arguably more consequential. 

Without other changes to Medicare, dropping the eligibility age to 60 would be a mixed blessing at best. That's because for 60-64 year-olds with income below 200% of the Federal Poverty Level ($25,520 for an individual, $34,480 for a couple in 2021), Medicare in its current form would be considerably more expensive than ACA marketplace coverage (as enhanced through 2022 by the American Rescue Plan Act in enacted in March) -- excepting for those who are dually eligible for Medicaid and Medicare. While just over a quarter of the U.S. population is in households with incomes below 200% FPL, about half of the uninsured have incomes below that threshold.  

Jayapal's bill changes the equation by making all Medicare enrollees with income below 200% FPL eligible for a new Medicare Cost Assistance Program that would zero out premiums, coinsurance and deductibles for Medicare Parts A (hospital)  and B (physician and outpatient), and also subsidize Part D prescription drug coverage (covering the entire Part D premium and reducing prescription copays to single-digit dollar amounts).  The bill would also move administration of these benefits from state Medicaid programs to Medicare, with the federal government assuming 100% of costs now shared with states.

The Medicare Cost Assistance benefits in Jayapal’s bill are equivalent are equivalent to those currently offered in  the Qualified Medicare Beneficiary (QMB) program, which pays enrollees' Medicare Part A and B costs in full. The QMB program, the strongest of a hodgepodge of four Medicare Special Programs (MSPs) available to enrollees with low incomes and negligible assets, has a current income eligibility limit of $1,094 per month for an individual and $1,472 for couples, along with asset limits of $7,970 for an individual and $11,960 for couples (raised by some states).  Jayapal's bill would roughly double the income limits, to about $2,147/month for an individual and $2,903 for a couple -- and, importantly,  void the asset limits.  

The new cost-sharing benefit would replace three of the four existing MSPs, leaving in place one existing MSP subsidizing Medicare Part A for working disabled people under age 65.  A simplified application would replace the Byzantine and often onerous application process for the other MSPs and Part D Extra Help.

Most beneficiaries would be over age 65

Providing a Medicare benefit that covers all premiums and almost all out-of-pocket costs to all Medicare enrollees with incomes up to 200% FPL would be a huge boon to millions of people over age 60 (the new eligibility age established by the bill). As of 2018, 12.2 million Medicare enrollees had some form of dual eligibility, and 8.7 million are "full" dual eligibles, with all or almost all costs paid (some are subject to small Medicaid copays). Almost 40% of dual eligibles are on disability Medicare.  Only 5.3 million seniors are full dual eligibles. 

According to KFF, 6.9 million Medicare enrollees (12.3% of all enrollees) have incomes below 100% FPL, 11.0 million (19.5%)  have incomes in the 100-200% FPL range.  While some enrollees in the 100-200% FPL range do obtain partial or full  dual eligibility, most don't. Eligibility for the free or near-free Medicare benefit would also extend to perhaps a quarter of the nation's roughly 21 million 60-64 year-olds rendered newly eligible for Medicare by Jayapal's bill.

At present, Medicare enrollees who lack dual eligibility pay a minimum of $148.50  per month (the Part B premium for all but the wealthiest 5% of the population) for full coverage, via private Medicare Advantage plans that include Part D prescription drug coverage at no additional cost. According to KFF, almost two thirds (65%) of 26 million Medicare Advantage enrollees are in such plans, which also may include some measure of dental, vision and hearing coverage, along with other extras, such as gym memberships. The tradeoff is a limited provider network -- and networks are often narrow in MA plans that charge no additional premium. 

Perhaps the most valuable extra benefit provided by Medicare Advantage plans is a yearly cap on out-of-pocket (OOP) costs, which averages $5,091 for in-network services, and $9,208 for combined in-network and out-of-network services (the highest allowable caps are $7550 for in-network and $11,300 for OON). Conversely, the most glaring weakness in traditional, fee-for-service Medicare is the lack of an OOP cap (while the primary advantage over MA is a nearly unlimited choice of providers). 

While most FFS Medicare enrollees plug that hole with a Medigap policy, MA plans provide the only means to cap costs for those who are not dual eligibles but find Medigap coverage unaffordable. Medigap premiums, added to Medicare premiums for Parts B and D, generally come to $300-400 per month per person.  Jayapal's bill might change that equation for many Medicare enrollees who feel they cannot afford Medigap (or whose former employers don't fund it, or an employer-sponsored equivalent).

Jayapal's bill would wipe out virtually all costs for care under traditional (fee-for-service) Medicare at ages over 60 and incomes up to 200% FPL (as well as for enrollees in disability Medicare below that income threshold). The primary remaining selling point for the Medicare Advantage Special Needs Plans (SNPs) designed for current dual eligibles, which have limited (and often narrow) provider networks, would be additional benefits added at no cost, such as dental, vision, and hearing. Meanwhile, though, the budget outline that passed the House last month includes adding some form of those benefits to Medicare. While it's uncertain what new benefits, if any, Democrats will be able to get through Congress this fall, the dental/hearing/vision benefits are a core goal -- more so than dropping the eligibility age to 60.

A modular approach to single payer?

Jayapal is also lead sponsor of the Medicare for All Act, which would establish a national single payer healthcare system.  While the Improving Medicare Coverage Act introduced last week is obviously far more limited (though also probably too good to pass), it suggests to me a modular approach to getting to a transformation of U.S. healthcare. It might work like this:

  • Extend premium-free and cost-sharing-free FFS Medicare coverage to all adults over age 60 with incomes up to 200% FPL.
  • Extend the program to all adults with incomes up to 200% FPL in the 12 states that have refused to enact the ACA Medicare expansion (finding a way to cover people in this "coverage gap" is another high-priority Democratic goal).
  • Extend the program to all adults with incomes under 200% FPL.
  • Extend the program to everyone.
It's interesting that the press release introducing this bill focuses almost exclusively on  dropping the Medicare eligibility to 60 and barely alludes to all but eliminating premiums and out-of-pocket costs for enrollees all the way up to 200% FPL.  Of the six sponsoring/cosponsoring members who are quoted in the release, only one, Haley Stevens, alludes to the low income benefits, asserting, "This bill reimagines programs that provide financial assistance to cover the costs of Medicare and eliminates barriers that prevent eligible seniors and people with disabilities from accessing much-needed care.” 

Given the Hunger Games struggle that Congressional Democrats are enmeshed in to select and pass some fragment of the social spending priorities outlined in their budget framework, it's highly unlikely that dropping the Medicare eligibility age to 60 will make the cut. On the other hand, the idea is popular, its backers are savvy legislators, and so, HuffPost's Jonathan Cohn suggests, "It’s not crazy to think Sanders, Jayapal and their allies would find some way to get some version of the idea into a final spending bill." 

What this discussion should make clear is that dropping the eligibility age is untenable without improving the benefit for low income enrollees, who can get coverage with zero-to-very-low premiums and relatively low OOP caps in the ACA marketplace.  Is it possible, however, that some fragment or echo of the cost assistance benefits for low-income enrollees in this bill will make it into the final mix?  That might be a more interesting and fruitful outcome.


My thanks to Josh Schultz, a veteran of the Medicare Rights Center and now at Softheon, for helping me tease through the cost assistance provisions of this bill.

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Photo by Kampus Production from Pexels


  1. Thanks for posting. It must be fun to work for Rep. Jayapal -- it does not seem that you ever have to pay for any proposals.
    There are about 20 million persons between ages 60 and 65. Just giving them the standard Medicare package might cost $12,000 per person, which means a federal budget hit of $240 billion per year.

    Taxing employers (who would now be relieved from covering their most expensive workers) would be extremely hard to implement.

    Removing premiums and deductibles for low income seniors is a great idea. It would help perhaps 20 million seniors overall...but that means another $60 billion in federal spending each year. Who is going to pay for that? Don't expect to raise taxes on wealthier seniors -- that was a disaster when tried in 1988.

    1. Conversely, Bob, actual spending on healthcare for 60-64 year-olds is far higher in commercial insurance than it would be in Medicare. KFF: "Average health care spending per person per month for enrollees ages 60-64 in large employer plans ($1,061) is 38% higher than average monthly spending for traditional Medicare beneficiaries ages 65-69 ($770) (Figure 1). This comparison understates the savings that could be realized by shifting 60-64 year olds to Medicare, since one would expect 65-69 year olds to have roughly 20-25% higher spending, because health needs rise with age."
      We pay those higher costs in the form of lost wages. If the U.S. had the political capacity to build a fair tax system to fund healthcare at Medicare rates, we'd be better off.

  2. Good points, thanks. I was careless in forgetting that Medicare spends less on 65-69 year olds than the overall Medicare $12,000 average -- but that makes perfect sense.

    This is one of many places in health care where we could (in effect) replace a dollar's worth of private insurance spending with seventy-five cents of Medicare spending.

    My question whenever I encounter this is to say, "Sounds great, but where does the government get the 75 cents?"

    How would we raise taxes in this instance? We could increase the Medicare Part A tax from the current 2.98% of payroll -- but it would be a big increase, and it would hit a lot of young workers who have trouble enough.

    We could raise income taxes on people making over (let's say) $80,000. I would vote for that one.

    We could demand that employers pay a tax based on how much they have saved in insurance premiums, but I think that is administratively hopeless (and probably unconstitutional.)

    As you say, it ain't easy.

  3. "It's interesting that the press release introducing this bill focuses almost exclusively on dropping the Medicare eligibility to 60 and barely alludes to all but eliminating premiums and out-of-pocket costs for enrollees all the way up to 200% FPL."

    Interesting, but entirely expected. Here you have the obviously greatest benefit for the greatest number of voters in the proposal, yet it is downplayed in the effort to drum up support for the proposal. Of course it is. Even your one sentence description of this feature can't avoid use of the term "FPL", Federal Poverty Level. This is welfare talk. This is Satan worship. Any association with welfare programs is feared by D politicians more than contact with rats carrying Bubonic Plague.

    Ds have spent the last 50 years running as fast as their legs will carry them away from giving any public hint that they support welfare programs, handouts to the undeserving poor. Of course the press releases about this proposal are going to almost unanimously and categorically avoid all mention of provisions that get within ten miles of FPLs.

    You could indeed get around this difficulty by skipping every step in your modular approach and going straight to "Extend the program to everyone.", at which point it's no longer welfare. Or rather, it's now under the General Welfare Clause, and the welfare of all of us isn't "welfare" anymore, in the sense of handouts to the undeserving, lazy, Cadillac-driving poor.

    But if there's one thing our current office-holders are more allergic to than welfare programs, it's taking responsibility for obvious and substantial improvements in our society. A proposal has to be incremental, and only achieve obvious and substantial good several election cycles in the future.

    Maybe lowering eligibility to age 60 could succeed along these conventional lines of politics. But there is no way the good part, the substantial social benefit that you outline, could possibly survive as part of a proposal that passes. If even the Ds who propose it are unwilling to tout the benefits of that aspect of the plan, of course they will abandon it under any degree of the opposition the whole proposal will inevitably face. The Rs may not be smart enough to analyze a proposal for its public policy outcomes, but they are plenty politically smart enough to spot weaknesses in D resolve, and failure to tout the actually beneficial aspect of the proposal makes it obvious that we will not defend those provisions as the proposal moves closer to approval.

    Our side, on the other hand, is not politically smart or daring enough to see any benefit in throwing off incrementalism and going straight to the end of your steps, extend the benefit to all, and do so both transparently and a year before the next election. If we did that, by the 2024 election they'd be hunting Rs with dogs (hat tip to Phil Gramm), but we won't do that because it is so far out there that not even our best Ds will whisper hints of thinking that might be a good idea, lest they cause an outbreak of mass convulsions among our conventional politicos.

  4. It is true that both parties seem to run away from talking honestly about the poor..... but for all this posturing, the number of poor persons on Medicaid has grown from 19 million in 1980 to 75 million in 2020. (the overall US population grew from 227 million to 328 million during this 40 year period).

    So, something positive is going on here. The American welfare state seems to have some momentum all its own. This has been an allegation from conservatives for some time, and they might be right.