Is our public option “affordable?”


Much of the discussion around health care reform centers on one word, “affordable.”  We strive for affordable, high quality health care although I have yet to meet anyone who knows exactly what either means.  To some people neither is achievable without a public option so I decided to look at the one public option we have in place, Medicare.  If Medicare is the model for affordable health care, we better check with the elderly and see what they think.

The average family income in the U.S. is slightly under $50,000 a year, the average income for seniors is considerably less at around $34,000 as best I could find.  The older the individual,  the lower the income level so when you reach the age 85 and over group the income level is slightly more than $21,000.

Hmmm, a few more and I cover my last office visit coinsurance
Hmmm, a few more and I cover my last office visit coinsurance

Now let’s talk about affordability for health care.  The Medicare hospital deductible is $1,068 applicable to the first 60 days after that there is a daily co-payment.  The Part B deductible is $135. After the deductible is met, the beneficiary pays 20% of the allowable cost with no cap or out of pocket limit.  Of course, any prescription drug expenses are additional. For this Part B each person currently pays $96.40 (higher income people pay more).  To add Part D is in the area of $35 per month.

The Commonwealth Fund estimates the out of pocket cost as follows:

Medicare’s benefit structure leaves beneficiaries with significant out-of-pocket costs, particularly if they lack supplemental coverage. Out-of-pocket costs disproportionately affect low-income, old, and chronically ill Medicare beneficiaries: in 2003, the elderly with incomes under 135 percent of federal poverty level (FPL) spent one-third of their income on uncovered medical care, on average. Individuals of all incomes with fair or poor health status or age 85 and older spent almost 30 percent. (The 2007 Federal Poverty Level for a non-elderly adult is $10,787, and it is $9,944 for an elderly adult.) Although Medicare added an outpatient prescription drug benefit in 2006, poor and sick beneficiaries still face a substantial cost burden.

The average Medicare beneficiary and spouse pay $ 263.40 for Part B and D of Medicare that is $3160.80 per year, nearly 10% of income and more for the oldest Medicare recipients.  Of course, out of pocket expenses are in addition to that as noted above.  To avoid most of these out of pocket costs supplemental coverage is available.  The AARP option J that provides the broadest coverage costs $266.75 per month; $533.50 per couple or $6004.00 per year which is nearly 20% of average income. 

One could argue that we have yet to provide “affordable” health care to those in America over age 65. Medicare costs are increasing as fast or faster than other medical costs, Medicare is headed for financial trouble in only eight years.  With all this, how then can we expect that another public option will do any better controlling costs or making health care affordable?  It is also interesting to note that despite the Medicare experience, pending health care reform legislation calls for use of co-pays over coinsurance, has no limits on coverage, and seeks to add additional services without out of pocket costs.

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