The purpose of this diary is to establish a clear case for "Medicare Buy In" that is politically robust.  The diary will show that the extension of Medicare on a non-subsidized basis will save the current retiree system as we know it while dramatically reducing medical price inflation.

The political "right" is all about how the Medicare system is going to bankrupt the nation.  Such stupidity is to be expected from those on the "right".  Health Care costs are out of control, but Medicare is not what is driving this.  As a matter of fact, many physicians and clinics limit the number of Medicare patients because Medicare pays less than other insurance.

It is obvious to the more alert that Medicare is the only current restraint on rising medical service costs.  Somewhat less obvious is the fact that by increasing the percentage of the population in the Medicare pool, it is less and less feasible for the private service providers to turn Medicare patients away and/or to shift costs to non Medicare payers.

Over the last few days I have attempted to produce some actual numbers concerning the Medicare system and how the "Buy In" would save the American middle class a whopping 20% on their medical insurance. That can be done with NO TAX SUBSIDIES and thus, no Republican pig manure and lying. I also point out how "Buy In" would work to strengthen the current seniors only system.  The "Buy In" can, and should do this while offering a lower cost alternative insurance plan to those under 65.  The politically important part of this plan is that it is NOT tax subsidized at all.  Lies about how it will increase the deficit will be spouted by all Republican talkers regardless.  The objective is to put together the numbers that show such pig manure to be what it is.  The hope is that WE can force the congress and the president to commission the GAO, and the CRS to undertake a more thorough job of establishing the EXACT numbers and then use this initiative in the "new rules" (allow debate) Senate to FORCE the House into line.  Medicare Buy In is not a revenue bill and need not be introduced in the House.


From the above PDF we get

"Table V.B1.—HI and SMI Average per Beneficiary Costs"

And this table tells us that beneficiary Costs for 2010 for Hospitalization Insurance (Medicare part "A") was $5,230, Part B was $4,936, and part D was $1,797 per enrollee.

The Monthly cost is therefore $436, $411. and $150 respectively for these insurances.  The Wikipedia tells us that Part "A" is priced at $461 and (indirectly) that part "B" is priced at $400.  (Part "B" is computed as the monthly premium charged the elderly, times 4 which for most is $95 and some is $110 (government picks up 75% of the tab)).  The difference is the cost of supplying the bookkeeping services (the overhead).  The total cost is $997 and the price of the "insurance" is that figure plus the overhead percentage computed as (461-436)/436 , i.e. 5.7%.

The right wing noise machine will immediately adopt a "talking point" against the "Buy In" saying that nobody will pay $12k a year for a medical insurance policy when they can get private insurance for half that amount.  As usual, this is a lie for many reasons.  But the most obvious is that Medicare is a  PPO with a $155 deductible and 20% coinsurance system with virtually no yearly or lifetime limit on outpatient benefits. On the other hand, the "half price" private plans are offered to only healthy persons, are typically $2500 deductible 30% coinsurance with yearly and lifetime limits on outpatient benefits.  It is like comparing watermelons and grapes.  There are no preexisting conditions bars to Medicare. If you are 65 and have been a legal resident on the US for the last 5 years you are eligible for and welcomed by Medicare.  Government pays subsidies if you have paid Medicare taxes for 10 years and smaller subsidies if you have paid for 30 quarters.  But all over 65 are welcome to join.

But the lies do not stop there:

Medicare benefits/costs are not currently broken down along age groups and that turns out to be very important. The older we get the more costly the yearly amount for medical care.  It doesn't matter if the Medicare system is paying or some private entity is paying.  Fraud and death wish aside, the COST is the same.

The only stuff I could find about the distribution of the costs across the age groups was from a 1994 publication:


And to this I added the last column which is a monthly cost/premium for Both "A" and "B".
TABLE 3.25.                                      
Average Medicare Part A and Part B Benefit      
Payment Per Elderly Enrollee by Age, 1994

+++++++++++++ Part A    Part B     Total   Monthly
65 and 66 years  1,494     1,087     2,581    215
67 and 68 years  1,674     1,215     2,889    240
69 and 70 years  1,852     1,269     3,121    260
71 and 72 years  2,135     1,370     3,505    292
73 and 74 years  2,349     1,468     3,817    318
75-79 years      2,876     1,624     4,500    375
80-84 years      3,547     1,716     5,263    438
85+ years        4,214     1,762     5,976    498
NOTE: Table prepared by CRS.

We can see that the hospitalization part of the total cost really climes into the stratosphere as we get really old.  But taking all these numbers one on one we can then fit a curve to these numbers and project the costs for the younger people.  I say "we" but I mean someone other than ME because I am mathematically illiterate.  I can average the numbers and say that in 1994 it cost $329.50 per month for each of the participants in the pool in 1994 (no drug benefits).

We can project a drug benefit back to 1994 in proportion to the other cost differences.  If the cost of "A" plus "B" was 329.50 in 1994 and that cost is $861 today then 861 is to 329.50 as 150 is to X.
X = 57.4 per month (or 688 per year).  We add that to the average monthly cost of 329.5 and get $387 as the inferred AVERAGE cost of Medicare with drug benefits in 1994.  The resulting list looks like this:
+++++++++++++ Part A    Part B     A+B =       Part D       Total        (monthly)
65 and 66 years  1,494     1,087     2,581         449        3,030          $253
67 and 68 years  1,674     1,215     2,889         503        3,392          $283
69 and 70 years  1,852     1,269     3,121         543        3,664          $305
71 and 72 years  2,135     1,370     3,505         610        4,115          $342
73 and 74 years  2,349     1,468     3,817         665        4,482          $373
75-79 years      2,876     1,624     4,500         784        5,284          $440
80-84 years      3,547     1,716     5,263         916        6,179          $515
85+ years        4,214     1,762     5,976       1,041        7,017          $585
Totals          20,141    11,511    31,652       5,511       37,163        $3,096
Averages         2,518     1,439     3,957         689        4,645         $387
Monthly            210      120        330          57         387         check

If we project this 1994 set of numbers onto our $997 per month average cost in 2010 and we get the following set:

65 and 66 years  =  $652
67 and 68 years  =  $729
69 and 70 years  =  $786
71 and 72 years  =  $881
73 and 74 years  =  $961
75 tru 79 years = $1,134
80 --- 84 years = $1,327
85 -----  Years = $1,507
total           = $7,977
Average             997  

From 75 to 73 the drop is 15%
From 73 to 71 the drop is 8.3%
From 71 to 69 the drop is 10.8%
From 69 to 67 the drop is 7.3%
From 67 to 65 the drop is 10.6%
Total                     52%
Average                   10.4%  or 5.2% per year.

Continuing this series downward at 5% per year drop:

63 and 64 years  =  $587
61 and 62 years  =  $528
59 and 60 years  =  $475

Then we drop at 4.75% just to be fair

57 and 59 years  =  $431
55 and 56 years  =  $391
53 and 54 years  =  $355

enough of that.

We now go to https://www.ehealthinsurance.com/...
to compare what private health insurance will cost if you are in perfect health.  Note that the Medicare prices are 5.7% higher than the above cost projections so that the numbers include the cost of the people doing the "insurance business" of Medicare.

++++++++++ Tacoma Austin SprFld Doravl Clevld Denver Private
+++  Medicare   WA.      TX.      MO.       GA.     OH.     CO.    Avg
63 - 64   620      789      803     642      794     665     642     723
61 - 62   558      789      749     615      719     606     617     683
59 - 60   502      789      667     529      637     542     525     615
57 - 59   456      673      602     490      580     489     503     556
55 - 56   413      673      537     421      523     437     429     503
53 - 54   375      673      471     387      471     392     395     465
Avg       487  ||| 731      638     514      621     522     519     591

Omitting the Washington state numbers because they are 5 year declines and averaging the other numbers we get the following set:

661  6.77%
580  12.25%
532  8.2%
469  12%
423  9%
AVG 9.64 % or 4.8% decline per year.
This indicates that my projected decrease in costs for Medicare based on age are probably pretty much right. Only the CRS/GAO can tall us the exact stuff.

So!!!  Assuming you are in perfect health, would you like to pay an average of $591 and be subject to a 1000 deductible? Or would you rather pay an average of $487 a month with a $155 deductible?

Based on these numbers we could probably conclude that, given the opportunity, most sane people would opt to join the Medicare Insurance Company as opposed to paying their current thief.

But wait a minute.  

http://wonkroom.thinkprogress.org/...  ----

In of itself, the unsubsidized Medicare buy-in would wouldn’t provide an affordable option for most Americans. Clinton era reformers sought to expand the Medicare program but were never able to provide enrollees with affordable premiums on an unsubsidized basis.


Allen Grayson says these prices are un-affordable. I like Grayson and respect him.  But what he is really saying is that medical insurance and medical care in America costs too much.  We already know that. No argument.  Still, a 17.6% reduction in premium cost with superior coverage is not to be sneezed at.  The actual reduction is, of course, more than the foregoing numbers indicate because the thieves are able to offer their published rates by excluding people that aren't perfectly healthy.

According to a national agent contacted through https://www.ehealthinsurance.com/... If you are diabetic and you live in Texas you are screwed.  In Texas you will automatically be declined for health insurance and be forced into the Texas high risk pool OR you will see a "rate up" that will come close to the pool premium amounts.  In Washington State it seems that you can qualify for regular insurance at regular rates (see above table on rates) if you have type 2 diabetes and depression and high cholesterol.  Anything in addition to this and you are forced into the high risk pool.  This might explain why the rates in Washington are quite high in that the Washington rules on who can be excluded are much more favorable to the people and less favorable to the insurance companies.

Washington State risk pool premiums:


We see that $1000 deductible insurance for risky people age 60 through 64 will cost
$1,354 per month.


We see that in Texas the rate will be $1,195 to 1,695 depending on where you live in the state.

We know that the Medicare system does not exclude people with preexisting conditions.  Medicare takes all the people qualified as being a legal resident of this country for at least the last 5 years and being of age. Subsidies are paid for people over 65 if they have paid wage taxes for 10 years. So the cost to seniors over 65 is drastically reduced.  While the cost of the care is a thousand a month, most seniors pay a total of about $150 a month including drugs.  One of the objectives of Medicare Buy In should be to maintain this assistance to people over the age of 65 (in the face of demographic problems) by MINIMALLY increasing the price of the BUY IN for younger people.

I cannot find the data I would need to adjust private insurance rates to what they would be if preexisting conditions were not part of the "selection" process of who will be offered insurance.  But I am not out of bounds to say that the prices we see in the above table would be higher.  And hence, the difference between projected Medicare Buy In costs and private insurance costs would be MORE THAN 17.6%.

Let us return, now, to this reality that medical costs (including insurance) are un-affordable.  This does not mean that we should abandon Medicare Buy In.  To agree with Grayson's insinuation is to agree that people age 60 to 65 don't have medical insurance and are at risk for losing their life's savings if they become injured or ill.  This is bull crap.  People decide what level of risk they are willing to take and they insure themselves based on that decision.  Most of the older, asset heavy and income light, population accept a $2500 deductible instead of a $1000 deductible.  In addition, some of the people accept limitations of how they can access medical services in order to reduce their costs (HMO as opposed to PPO).  Let us leave the HMO-PPO debate for some other diary and just look at the deductible as a means of adjusting costs while providing real and plausible insurance at affordable rates.  The point I am making is that Medicare Buy In should compete with private insurance in a more "heads up" fashion.  The Medicare Insurance Company should be allowed to offer $2500 per year deductible insurance simply because that is what a HUGE number of the citizens actually would prefer as opposed to paying the private sector a lot more money for the same thing.  It is entirely possible to keep the no preexisting condition exclusion part of Medicare if Medicare can offer a $2500 deductible plan.

The next Table of numbers is designed to make that point:  The decline in private insurance rates brought about by adjusting the deductible ONLY is 31.6%.  And we can legitimately apply that same function to projected Medicare benefits and rates.  Those adjustments are seen in the table below.  The Insurance rates are from
https://www.ehealthinsurance.com/... while the Medicare rates are computed based on what was found to be the difference in private rates.
++++++++++ Tacoma Austin SprFld Doravl Clevld Denver Private
+++  Medicare   WA.      TX.      MO.       GA.     OH.       CO.     Avg
63 - 64  424        540      555     496       505     445       495     506
61 - 62  382        540      500     459       455     414       466     472
59 - 60  343        455      453     380       407     363       416     412
57 - 59  312        455      415     348       368     331       384     384
55 - 56  282        378      369     307       339     296       357     341
53 - 54  256        330      336     280       300     269       330     308
Avg      333        450      438     378       396     353       408     404

NOTE!  The ACA will force the insurance companies to compete with Medicare regarding preexisting conditions.  The price of private insurance will rise.  The projected price of Medicare insurance will not rise because Medicare is already funded to ignore preexisting conditions.  I can only GUESS that this will make Medicare insurance minimally 20% less expensive than private health insurance.

And that is when the real savings begin:

There are quite a few providers that are opting out of Medicare, choosing to serve only patients that have private insurance.  This is because private insurance pays them more.  But if people opt for Medicare insurance, then there will be a lot less low hanging fruit for the providers to pick.  There will be a reduction in the pool size of private insurance providers and dramatically increased rates for people who choose to stay with private insurance.  That will see even more people switching to Medicare insurance.  The size of the Medicare insurance pool (lobby or consumer union if you will) will grow very quickly.  The health care providers will either serve the Medicare patients or change their careers, because there will not be enough high rollers around to pay the bills.  The monopsony power of Medicare is probably the ONLY way to stop escalating costs of health care in this country.

Such a system will not suffer the problems of the Canadian Single Payer system because private insurance will still be available and the number of providers will be quite high by comparison to Canada.  It may also be possible to raise the amounts paid by Medicare to providers and STILL have a much more cost effective health care system.

And all of it is optional.  The people who like being ripped off by private health insurance can pay as much as they want; them and Joe Lieberman.  What is it about the words "choice" and "option" that scares the hell out of Republicans?

If you find errors in this diary please comment on them.  I will be moving most of the numbers to the new DKospedia article on this subject.  You/We can fix it there. Please attempt to stay on topic.

Originally posted to TruthMerchant on Thu Jan 06, 2011 at 04:27 PM PST.


Who dhould be commissioned to a study this Medicare Buy In:

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