Medicare at age 60

Democrats are pushing for the President to expand Medicare to age 60 eligibility and add new dental and hearing benefits. They say the cost can be paid for by simply allowing Medicare to negotiate drug prices although the Congressional Budget Office disagrees by a $200 billion difference in savings over ten years.

At the heart of the plan is a call to lower the eligibility age for Medicare to 60 from 65, adding about 23 million Americans to the federal health program for seniors at a cost of $200 billion over 10 years. The lawmakers also are pushing to expand Medicare benefits to to cover dental, vision and hearing, which would cost about $350 billion over 10 years. NYTs 5-27-21

But like all grand proposals from Congress, there are consequences. Consequences that are rarely explained to the public when selling the idea. In this case there are two important facts.

Negotiate just like the VA. To get the discounts it does, the VA uses a strict National formulary which is generally less visible to patients because the VA also dispenses the medication.

Like many federal programs, the VA has statutorily mandated access to favorable drug pricing. It also operates a national formulary and can exclude medications that the agency’s formulary committee concludes are inappropriate for the patient population or should be subject to prior authorization. That, in turn allows, the VA to negotiate even deeper discounts in some cases, particularly when there are multiple suppliers of either the same (generic) ingredient, or a closely comparable brand medicine.

Source: Veterans Health Administration | Health Affairs

Formularies are also used by Medicare Part D plans to obtain their discounts. These formularies are roundly criticized by patients when they find the medication prescribed by their doctor is not covered by their Part D plan.

BUT THE RX FORMULARY ISSUE is not the only consequence. Medicare reimburses health care providers significantly less than private insurance:

  • Private insurers paid nearly double Medicare rates for all hospital services (199% of Medicare rates, on average), ranging from 141% to 259% of Medicare rates across the reviewed studies.

  • The difference between private and Medicare rates was greater for outpatient than inpatient hospital services, which averaged 264% and 189% of Medicare rates overall, respectively.

  • For physician services, private insurance paid 143% of Medicare rates, on average, ranging from 118% to 179% of Medicare rates across studies.

SOURCE: https://www.kff.org/medicare/issue-brief/how-much-more-than-medicare-do-private-insurers-pay-a-review-of-the-literature/

What are the consequences of greatly reduced revenue on hospitals and other health care providers? On the availability of services? Private insurance negotiates reimbursement rates. Medicare sets what it will pay as a way of controlling costs.

Simply adding 23 million Americans to Medicare is not as simple as it may appear. Good, or bad … consequences ‼️

4 comments

  1. Medicare premium costs in 2021 (individuals and taxpayers – without the income surcharges for higher paid individuals) – part A premium as if the individual did not pay into via FICA-Med, Part B and Part D where taxpayers (general funds) pay 3/4ths of the cost.

    This is per person, so a couple, both age 60 would pay twice this much (~$28,000+ per year – plus the cost of any supplement)!

    Monthly Annual
    Part A Hospital $471.00 $ 5,652.00
    Part B Providers 594.00 7,128.00
    Part D Rx 132.24 1,586.88
    Total $1,197.24 $14,366.88

    So, it all depends on who is going to pay. My assumption is that no 60 – 64 year old senior will enroll at these rates. That means any such coverage expansion will be shouldered by individuals ages 18 – 59 – or instead of raising taxes, we’ll just put it on the national credit card. Keep in mind that adding 20+MM older folks to Medicare also means a 25+% increase in the cost shift already suffered by younger Americans (as documented above by Dick’s examples showing just how much providers charge commercially insured to make up for losses on Medicare beneficiaries). So, not only will workers FICA-Med and income taxes increase, so will their own health coverage premiums and out of pocket expenses – repeating the scenario we just experienced in the ten years since passage of PPACA.

    I’m thinking they plan to execute using the “same ol same ol” – promise more benefits to older folks to buy votes and the run up the national debt so that the bill is foisted on generations too young to vote or those yet unborn.

    Go ahead, vote for D’s – you’ll screw over your own children and grandchildren (mine too!)

    Liked by 1 person

  2. What would lowering the age do to our premiums as Seniors? With Medicare premiums continually going up that means that our net SS checks become less every month as they automatically take out Medicare before issuing SS check. Every year Medicare has increased regardless of how little our COLA . That really doesn’t help us with the economy increasing as rapidly as it is for paying for rising costs of utilities, groceries, other insurances etc. If it somehow remains the same premium, I am all for it, however, I don’t see anything mentioned about that issue. Yes, it may help lower our health costs, however, there are other costs to be considered in addition to health/medication expenses we have to put in our budgets.

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    1. That’s a good question. It depends on how the costs re-allocated. If it is all one big pool of people, then the premiums would tend to go down because younger people tend to be healthier. HOWEVER, if enrollment is voluntary then adverse selection is likely meaning the sicker folks would enroll first. If there are two pools of people, one age 65+ and the other younger, not much should change.

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  3. Richard: I am in complete agreement with your comments on this issue. One of the reasons I didn’t retire until I was almost 70, was because I didn’t want to go on Medicare. Medicare has historically been stingy with their reimbursements and a number of the doctors I was seeing around the time I retired sold their practices to large hospitals because they couldn’t make it any longer with 50% or more of their patients on Medicare. Thanks to our wonderful US government that simply likes to spend with no plan (and no regard for future generations), I’m afraid that the advent of universal healthcare will be here before we know it. If there was a private alternative to Medicare, I would be on it.

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