What’s A Medicare “Buy-In”?

What’s A Medicare “Buy-In”?

In the debate over rising healthcare costs, attention has focused on people age 50 to 64 who are among those with the highest premiums, deductibles, and out-of-pocket  costs.  Some policy experts say that removing these older people from the market for younger workers would lower costs, and proponents of the idea argue that people age 50 to 64 would not cost as much to insure under Medicare.  Should this idea gain traction in the new Congress, here are some things that would need to be addressed:

Premium subsidies:

Currently, people age 50 to 64 who don’t receive insurance through their employer have access to insurance through federal or state health exchanges or Medicaid.  In 2016 health exchange premiums for people ages 50 to 64 averaged $357 - $600 per month nationally, but premiums for 2017 rose by an average of 25%.  While the majority of people who purchase health insurance through the exchanges receive an advance tax credit, also known as a subsidy, to lower their premiums, anyone with income that is more than four times higher than the federal poverty level — $47,520 (individuals) or $64,080 (couples) in 2016 — must pay the full amount of the insurance premium.

Medicare beneficiaries 65 and over also receive a subsidy.  The federal government pays 75% of the standard Part B premium and people with incomes below $85,000 pay the other 25% as their premium.  The amount of subsidy becomes less generous, depending on income over $85,000 (individuals), or $170,000 (couples).  The full cost of the standard Medicare Part B premium in 2016 was $483.20 per month, and most new enrollees last year paid a $120.80 monthly premium.

Need for additional coverage under Medicare:

Medicare covers roughly half of all expenses, and no prescription drugs, other than those administered in a hospital or in doctors’ office (like chemo).  To cover the costs that Medicare doesn’t, most new Medicare enrollees 65 and up purchase either a Medicare supplement and Part D plan, or enroll in a Medicare Advantage plan that includes drug coverage.  In 2016, monthly premiums of Medicare supplements averaged about $230, prescription drug plans averaged $39, and Medicare Advantage premiums averaged $37.

Out-of-pocket limits:

State and federal health exchange plans are required to cap out-of-pocket costs.  In 2016 health exchange plans, maximum annual out-of-pocket costs were capped at $7,150 (individuals) and no more than $14,300 (family).  Traditional Medicare has no out -of-pocket cap, but all Medicare Advantage plans do.  The maximum in-network limit in 2017 for Medicare Advantage enrollees is $6,700 per person.

A Medicare buy-in proposal might help some people, particularly middle-income individuals and families age 55-64 who currently pay higher than average premiums and receive a lower than average, or no subsidy.  But the question of whether a Medicare buy-in would save money would all depend on the details and how the proposal would be funded.

 

Sources:  “How Age Affects Health Insurance Costs,” Value Penquin.com, October 21, 2016. “Medicare Advantage 2016 Spotlight,” Kaiser Family Foundation, May 2016.  “13 Million Adults Could Be Eligible to Purchase Medicare Coverage Under Proposed Clinton Plan,” Pearson, Avalere Health, May 19, 2016.

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