Medicare Expansion: A Gift to the Relatively Wealthy
President Joe Biden’s ambitious proposals to reduce Medicare’s eligibility age to 60 may not be the gift to older Americans that its supporters believe it to be.
That’s the core finding of a new analysis from Avalere, a consultancy. The report concluded that lower-income adults would likely have to pay more for health coverage through an expanded version of Medicare than they do through the private health plan options that are already available to them.
That’s largely because the Biden administration has made Obamacare’s exchange subsidies considerably more generous. The American Rescue Plan Act, which was signed into law in March, ratcheted down the share of income that everyone shopping on the exchanges had to pay in premiums this year and next.
Those with incomes below 150% of the federal poverty level — $19,320 for an individual — can now get a benchmark, mid-level silver health plan premium-free. As incomes rise, the share of premiums exchange shoppers have to cover goes up. Those who make 200% of poverty are responsible for 2% of their premiums — compared to 6.52% under the old Obamacare status quo.
The maximum anyone pays is 8.5% of income, regardless of how high that income is.
The president intends to make these more generous subsidies permanent as part of the American Families Plan — at a cost of $200 billion.
One surprising consequence of these expanded subsidies is that, were Medicare made available to those 60 and older, it would no longer be the most affordable option for many patients. That’s because Medicare isn’t entirely free to seniors.
For instance, both Medicare Part A, which covers hospital care, and Medicare Part B, which covers visits to the doctor, carry deductibles. Part B also comes with 20% coinsurance and a monthly premium.
To defray these costs and fill the program’s various coverage gaps, many traditional Medicare beneficiaries purchase supplemental insurance, or “Medigap” coverage.
Others choose Medicare Advantage, which combines Part A, Part B, and often drug coverage through Part D in one privately administered health plan. Medicare Advantage beneficiaries must typically contend with premiums, deductibles, and out-of-pocket costs, too.
In short, whether someone gets their health plan from the exchanges or enrolls in Medicare, they will usually have to cover at least some costs on their own.
And according to the Avalere study, exchange coverage is actually the better deal for not just those low-income Americans who qualify for premium-free plans. Even those who make 250% of poverty — roughly $32,000 a year — are better off in the exchanges than they would be in Medicare.
At the other end of the income scale, an expanded version of Medicare could save wealthy older Americans a lot of money. Higher-income individuals are responsible for a much greater share of their health costs if they purchase exchange coverage than they would be if they enrolled in Medicare.
In other words, an expanded version of Medicare would offer lower-income adults higher costs than they currently face — and lavish more taxpayer dollars on the relatively wealthy. That’s probably not what the idea’s proponents had in mind.
Expanding Medicare was ill-advised even before Biden’s new Obamacare subsidies. Medicare Part A is due to run out of cash in just three years, according to the Congressional Budget Office. To preserve Medicare’s trust fund for another 25 years would require a 17% cut in hospital spending, the Medicare Payment Advisory Commission recently said.
We can scarcely afford the Medicare status quo, much less an expanded version of the program — especially if that expansion represents a giveaway to the well-off and a raw deal for the poor.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is “False Premise, False Promise: The Disastrous Reality of Medicare for All,” (Encounter 2020). Follow her on Twitter @sallypipes. Read Sally Pipes’ Reports — More Here.