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Medicare vs. private insurers

Olympia Snowe is opposed to the Medicare buy-in idea. Joe Lieberman is open to it. We'll see if he stays that way. The more I think about it, the better it looks, which means the more likely it is to be opposed.

Compared with Medicare, the public option is a very small, very weak policy experiment. It was always, as Jon Cohn says, a faint shadow on the wall of the real idea, which was Medicare for All. This isn't Medicare for All, either, but it's Medicare for More, and it changes the character of Medicare in a way that's very dangerous for the private insurance industry.

As things stand, 65-year-olds get enrolled in Medicare. Buy-in is something of a different beast: Folks between 55 and 64 with access to the exchange could choose to buy Medicare. That sets up an apples-to-apples comparison. And that apples-to-apples comparison is not going to come out well for private insurers, as Medicare has a large and acknowledged price advantage over them. They might be fine with that, because no one wants to insure 60-year-olds anyway. But I doubt they're going to be fine with a world in which people see the full difference between the prices private insurers offer and the prices a robust public insurer can offer. That, after all, is why they fought the strong public plan so ferociously.

By Ezra Klein  |  December 8, 2009; 2:49 PM ET
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How about this trigger. Every year premiums go up faster than inflation, anyone who wants to can leave their insurance company and go to medicare. Simple solution. It gives insurance companies incentives to lower costs by bargaining harder with providers. Who could be against this modest proposal?

Posted by: srw3 | December 8, 2009 3:01 PM | Report abuse

Ezra - The biggest hurdles to overcome for a Medicare buy-in are doctors and hospitals. The AHA has already come out against both the Medicare buy-in and the Medicaid expansion. Haven't seen any comments from AMA, but i wouldn't be surprised if they have a similar view.

Once these groups dig in, i think it will get much harder to find enough votes for this idea.

Posted by: MBP2 | December 8, 2009 3:11 PM | Report abuse

Also, would Medicare buy-in and Medicaid expansion void the deals that hospitals have made with the administration in return for supporting reform?

Posted by: MBP2 | December 8, 2009 3:12 PM | Report abuse

Perhaps Ezra can walk through whether Snowe's explanation of why she's against it makes sense. Or interview her.

My general guess is that folks against it are against it because Progressives might think it's a good idea. And that's where we are at in the debate. Seeing how much more blood can be wrung out of Progressives to get the President and Rahm their "win".


Posted by: toshiaki | December 8, 2009 4:18 PM | Report abuse

To paraphrase Jane, "Do I look like a dancing monkey?"

Posted by: bmull | December 8, 2009 4:26 PM | Report abuse

I've always thought that opening up Medicare, Medicaid, the VA, the FEHBP (i.e. the federal employees' plan -- the plan Congress is on), and even state and local public employee plans to all comers was a fair compromise on the public option.

First off, it's government coverage. The reality is that Medicare, even the traditional fee-for-service Parts A and B, subcontracts out to private payors to run its claims-processing, so the notion of a truly government-run plan exists only in the VA. If private contractors provide coverage through a government filter, that's not even a compromise; it's reality.

Second, you're assured that the coverage is good. FEHBP, in particular, has standards. Not every health plan can be in FEHBP.

And buy-in to Medicare is not all that different from buy-in to Medicaid, which is already being experimented with in some states for people in the range of 200-to-300 percent of federal poverty level (i.e. the working poor). In some states, it's been proposed up to 400 percent of FPL.

Posted by: Rick00 | December 8, 2009 4:27 PM | Report abuse

Ezra, I have to disagree with you that a Medicare buy-in is on the same level playing field as an Exchange with a 2:1 community rating. With a 55-64 Medicare buy-in, these adults are forfeiting the generational subsidy from the 2:1 age rating, and instead are placed in a pool of people age 55-64 with Medicare's bargaining power.

So would adults ages 55-64 save more from basically an individual rating with Medicare's bargaining power than with the generational subsidy from a 2:1 age rating on the Exchange? I think the math is unclear about this.

I mean -- my uncle has a 55-year-old doctor friend who has a $40K policy. It's hard to believe that Medicare's bargaining power can lower premiums enough to compensate for the generational subsidy the 55-year-old would be giving up with the same rating rules as in the House bill.

Also, as Kent Conrad points out, Medicare's minimum actuarial value will be higher than the minimum actuarial value of the bill signed by the President. Wouldn't healthier people just purchase the cheapest policy on the Exchange, pocket the savings, and leave a sicker population on Medicare? And how would that affect the prices of people in the Medicare buy-in if it were to be based on a balanced budget?

I just think there are all kinds of things people aren't thinking about here.

Posted by: moronjim | December 8, 2009 4:41 PM | Report abuse


Medicare has a reimbursement advantage, not a price advantage. Medicare costs per enrollee are significantly higher than the private insurance market. Not surprisingly, its due to utilization. But determining what the appropriate price would be for a 55-64 yo in Medicare vs. private insurance is no slam dunk. As has been mentioned, there are generational subsidies likely inherent in both, in a way that may make coverage of 55-64 to be more cost advantageous in the private market. Particularly when considered against other reforms that will be put in place in the individual private insurance market.

Posted by: wisewon | December 8, 2009 4:47 PM | Report abuse

Well said by moronjim.

Posted by: wisewon | December 8, 2009 4:48 PM | Report abuse

I am not opposed to this idea, but as moronjim wisely points out, the benefit package would have to be adjusted.

There would also be adverse selection issues.

Posted by: scott1959 | December 8, 2009 5:00 PM | Report abuse

"because no one wants to insure 60-year-olds anyway"

Here is a data point I looked up to compare the transistion to Medicare in 1965 with a Medicare for All plan now, but it shows Ezra is being too flip.

In 1962 - 63, about 10% of the population was over 65 and went on Medicare in 1965. Of those over 74, 41% had some health insurance, while those between 65 and 74, 61% had health insurance

Posted by: lensch | December 9, 2009 3:04 PM | Report abuse

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