Medicare buy-in could benefit involuntary retirees

About the same time that snippets of a deal on health-care legislation worked by Senate Democrats were leaking out last night, more than 150 unemployed people and their families gathered for a holiday party at St. Joseph's Roman Catholic Church in Downingtown.

Among those in attendance was a group of people particularly hit hard - people forced into early retirement by the economy and thereby forced out of their medical coverage.

They could be among the beneficiaries of one aspect of the health-care deal: A proposal that opens Medicare, a national public health-insurance program for those over 65, to the uninsured at age 55.

And that's good news, said Cheryl Spaulding, cofounder of Joseph's People, the support group for the unemployed that was the host of yesterday's party.

"We have literally taken a huge number of people who are 55 and older and retired them," she said. "They can't get Social Security and they have no health care. At least giving them health care would be something."

Twelve percent of Americans aged 55 to 64 - 4.3 million people - are uninsured, according to the Kaiser Family Foundation, a nonprofit organization focused on major health issues. These people often face much higher prices for insurance than younger, healthier people and may not be able to buy insurance at all because of their medical problems.

So far, it is unclear who would have access to Medicare in the new Senate compromise or how much they would have to pay.

The idea of joining Medicare at an earlier age sounds enticing, but younger people likely will not be able to get the same deal as those over 65, said Gretchen Jacobson, a senior policy analyst with the Kaiser foundation who wrote a report on previous proposals to expand Medicare earlier this year.

"The number of people who enroll in a Medicare buy-in would vary tremendously depending on how much it is subsidized," she said. Other important variables are who would be eligible to buy Medicare - most previous proposals limit it to people who cannot get into a group plan provided by an employer - and how benefits would compare to what is available from private insurance.

Based on numbers supplied by Towers Perrin, a benefits-consulting company, Medicare could cost about $750 a month. House and Senate reform bills already proposed contain subsidies for low-income people of all ages to buy private insurance. Whether those subsidies would extend to Medicare is unclear.

Most previous proposals would have prohibited businesses and workers with company health plans from buying into Medicare.

Insurers are not quite as thrilled as Spaulding.

"It's hard to understand the wisdom of adding two to three million more people to a government program that's already going broke," said Independence Blue Cross spokeswoman Elizabeth Williams.

Insurers say the federal government underpays hospitals and doctors for Medicare services. To make up the difference, "those extra costs are shifted to families and employers that have private insurance coverage," she said.

Meanwhile, as baby boomers move through their retirement years and as companies increasingly drop their early-retiree medical plans, the question of how to provide health coverage for this in-between group is becoming more pressing.

"The boomers are beginning to move into retirement as health-care costs and the private insurance market aren't being very helpful to them with access and affordability," said Barry Carleton, a principal at the Philadelphia office of Towers Perrin.

"The potential access [to Medicare] could solve the dilemma for many boomers as well as their employers who are struggling with the likelihood of many people continuing to work solely for health insurance."

"It's sort of a job lock," he said.

Employees who would like to retire "would look at earlier access to Medicare as safe-haven," according to Carleton. Employers struggling with the costs of retiree medical coverage would also see this as a positive, he said.

According to an October report from America's Health Insurance Plans, the industry trade group, the average cost of privately purchased insurance for 55- to 59-year-olds is $4,895 per year for an individual and $8,414 for a family. For 60- to 64-year-olds, it costs $5,755 for an individual and $9,952 for a family.

Nearly 30 percent of those aged 60 to 64, applicants were denied coverage, as were one in four aged 55 to 59, the report said.

Mark Pauly, a health economist at the Wharton School, said the government would almost certainly have to subsidize the price of Medicare to make it competitive with private plans.

Insurance is all about spreading risk. Medicare would insure only older consumers, the people most likely to need expensive health care, while private plans also have younger, healthier subscribers.

One of the reasons there has been such demand for changes to health care is that current rules allow insurers to discriminate against older and sicker subscribers, either by charging prices so high that many cannot afford insurance or by refusing to sell to people who have health problems.

Currently, a 60-year-old likely would pay five or six times more for private medical insurance than someone in his twenties, Pauly said.

The House and Senate bills, though, would make it illegal to deny coverage. They also would limit the price spread for the youngest to older customers to 1-to-2 in the House bill and 1-to-3 in the Senate's. That means younger, healthier people likely will be subsidizing the price of insurance for 55- to 64-year-olds in the private market.

Highly subsidized price is part of the allure of Medicare for the elderly, Pauly said. They pay only about one-tenth of the cost.

"The thing that makes most elderly people love Medicare, I am convinced, is not that it's great insurance," he said. "It's that it's such a buy."