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Why The Mandates Must Be Tied To The Medicare Buy-In Option

By Big Tent Democrat

One of the more frustrating aspects of Village Wonk blogging on the health care issue is the disconnect between the political ramifications of imposing an individual mandate without offering those you are forcing to buy insurance an affordable option. In their mind, the solution is to write about increasing the subsidy levels. Of course, they know that when President Obama said the bill could not cost more than $900 billion, that foreclosed a realistic subsidy level (might as well say let's do single payer or Wyden-Bennett. Never going to happen.) Besides that, they ignored how this approach merely was more feeding of the beast known as the health insurance industry and served to undermine their other pillar of concern - cost controls.

I have criticized them for this for months and months. Now we have a new and important wrinkle - the Medicare buy-in. Some continue to have faith in the Exchange idea. I have long stated I do not. I do believe that a Medicare buy-in available to persons eligible for the Exchange (which would be everyone whom the individual mandate will force to buy insurance) would solve both the cost containment problem and the political problem of forcing people to buy insurance. Jon Cohn writes:

The original idea of a public insurance option was to create a government-run plan, like Medicare, into which anybody could enroll. But those ambitions fell as the legislative process moved forward and the political opposition stiffened. The public option variant Harry Reid put in the bill now before the Senate would be available only to people buying coverage through the new exchanges, lack the pricing power that gives government programs their greatest cost-saving potential, and be available only in states that chose not to withdraw from it.

[. . . A] [m]ore promising [compromise] is a proposal that would allow older workers (perhaps ages 55 to 64) buying coverage through the exchanges* to purchase Medicare rather than a private policy. These workers, in other words, could pay for what is literally a government-run plan. It just happens to be plan that's already in existence, rather than one a reform would create anew.

This is certainly something I agree with. As Cohn writes - "what's more like Medicare than Medicare itself?"

Here's a question - when do the individual mandates start? Should they not start at the same time as the Exchange? Cohn writes:

Since exchanges wouldn't begin operating until 2014, at least under the Senate bill, the option wouldn't be available until then. And that's a long time to wait, particularly given the target population. People between the ages of 55 and 64 have a notoriously hard time buying coverage on their own, since their age and higher incidence of disease makes them the sorts of high medical risks insurers don't want to cover.

The senators negotiating this deal understand this, according to senior staffers. And while no decisions have been made--indeed, this whole deal is in flux, with numerous moving pieces--the staffers say the senators are thinking about one more twist: Making Medicare available even before the exchanges start up, perhaps as early as 2011.

That's a great idea. But I also think that a Medicare buy-in option should start for everyone subject to an individual mandate (putting them in the Exchange) the moment the individual mandate is imposed.

Cohn worries about cost:

Making Medicare available before the exchanges are ready gets complicated, because the premiums will inevitably be more than many workers can afford. (The idea is to make the program pay for itself, rather than dipping into the pool of funds for retirees, so the money coming in has to cover the medical bills this relatively unhealthy group would generate.) As such, Senators are examining whether it's possible to offer discounted premiums for the first few years, and then charging higher premiums later on to make up for it. (At that point, subsidies from the exchanges would be available to offset the costs).

Not sure why this would be a problem - accelerate the taxes on the wealthy (either through Reid's increase in the Medicare tax for those making more than $200K or the House's surtax on incomes in excess of $500k).

One final thought. Because worries about North Dakota will no doubt become central to this debate (I'm not kidding, Kent Conrad is already whining) - I think we should be prepared to put the Opt Out on the Medicare Buy-In provision. If North Dakota wants out, let them out.

Speaking for me only

Full post as published by TalkLeft on December 08, 2009 (boomark / email).