High Premiums in Senate Democrats’ Health Plan

A family of four earning $54,000 in 2016 would be eligible for a subsidy of $10,100 to help defray the cost of insurance …  By then, one of the most popular federal plans, a nationwide Blue Cross and Blue Shield policy, is projected to cost more than $20,000, with monthly (out of pocket) premium costs of more than $825, (about 1/6 of monthly income). Some people ages 55 to 64 could “buy in” to Medicare, starting in 2011. That could cost about $7,600 a year per person or $15,200 for a couple … No subsidies would be available until 2014.

New York Times, December 11, 2009

High Premiums in Senate Democrats’ Health Plan

By DAVID M. HERSZENHORN and ROBERT PEAR

WASHINGTON — Senate Democrats have provided few details about their latest health care proposal, but this much seems clear: Anyone who wants to buy the same health benefits as members of Congress, or to buy coverage through Medicare, should be prepared to fork over a large chunk of cash.

According to the Congressional Budget Office, a family of four earning $54,000 in 2016, when the health legislation is fully in effect, would be eligible for a subsidy of $10,100 to help defray the cost of insurance under the health legislation being debated by the Senate. By then, one of the most popular federal plans, a nationwide Blue Cross and Blue Shield policy, is projected to cost more than $20,000.

That could leave the family earning $54,000, slightly more than the current median household income, with monthly premium costs of more than $825.

The Democrats’ proposal would also allow some people ages 55 to 64 to “buy in” to Medicare, starting in 2011. That could cost about $7,600 a year per person or $15,200 for a couple, according to a budget office analysis of an earlier version of the concept. No subsidies would be available until 2014.

Senate Democrats have been careful to say that their proposal is not intended to offer exactly the same benefits that members of Congress have. In many cases, federal subsidies would cover a smaller share of the premium than what the government contributes to the cost of health insurance for federal employees.

The Medicare buy-in proposal is intended to fill a gap in the social safety net for millions of people nearing retirement who are unable to obtain or afford insurance. In general, the new Medicare option would be available only to people who are uninsured. People 55 to 64 who have employer-sponsored insurance would be expected to keep it.

Preliminary back-of-the-envelope calculations reflect the steep challenges that Senate Democrats face as they await a new cost analysis of their plan. The numbers also reflect potential pitfalls in the politically appealing message to constituents that they might get benefits similar to those of federal lawmakers.

Affordability for individuals and families, however, is hardly the only challenge facing Senate Democrats as they struggle to put together a proposal that can win the 60 votes needed for passage of the broader health care bill.

Senators from rural states voiced deep reservations on Thursday about the Medicare buy-in plan, which they said would hurt hospitals, doctors and other health care providers back home.

In addition to allowing people to buy in to Medicare, the Democrats’ latest plan would designate the federal Office of Personnel Management to oversee at least two new nonprofit national insurance plans.

The plans would be administered by private companies, but the personnel office would negotiate prices as it does now for the Federal Employees Health Benefits Program.

Federal employee unions and retiree groups expressed apprehension about asking the agency to take on the task of supervising health plans for millions more people.

Margaret L. Baptiste, the president of the National Active and Retired Federal Employees Association, said: “O.P.M. should be in the business of attracting the best and brightest to federal service.” The agency’s mission, she said, is “is too important to dilute with the massive undertaking of creating and administering a new health care system.”

Some insurance experts said that creating a menu of national plans could provide consumers with an array of interesting new choices that could meet their personal health care needs.

“It’s more choice for consumers, and it’s more good choice for consumers,” said Walton J. Francis, an insurance consultant and expert on the program for federal employees.

But Mr. Francis warned against the Medicare buy-in proposal, which he said would undermine the new national plans and would leave people nearing retirement with insufficient coverage.

“Medicare is not a good health plan,” Mr. Francis said. Even with coverage of prescription drugs, he said, “it still doesn’t have catastrophic protection.”

In response to questions from the Congressional Budget Office, Senate leaders provided additional details of the proposal announced hastily on Tuesday by the Senate majority leader, Harry Reid, Democrat of Nevada:

¶The new Medicare option would be available only to individuals, not to families. In a household consisting of a 60-year-old man, his 50-year-old wife and their 18-year-old daughter, only the man would be eligible for Medicare.

¶People 55 to 64 would receive the same benefits as people in the traditional Medicare program. The Democrats’ bill would limit out-of-pocket spending on health care by people in private plans ($5,000 a year for individuals and $10,000 for families). Medicare does not have such limits.

¶Medicare premiums for people under 65 would differ from those paid by people 65 and older, and the two parts of the program would be financed separately.

Marilyn Moon, a health economist and former public trustee of Medicare, said that for people 55 to 64, Medicare premiums could be higher than premiums charged by private health plans.

Health policy experts said that the people who chose to enroll in Medicare were likely to be heavy users of health care, with higher-than-average costs.

Moreover, Ms. Moon noted, private plans would have large numbers of healthy people under the age of 55, whose premiums could help cover costs for those 55 to 64. “Such cross-subsidies would not be available under the new Medicare option,” she said.

Democratic senators generally shied away from explaining or defending their Medicare proposal, on the ground that it was being analyzed by the budget office.

Republicans denounced the proposal, saying it would add new financial obligations to a program that could not afford its existing commitments.

“If the Titanic is sinking, the last thing you want to do is to put Grandma and more of your family on the boat,” said Senator Charles E. Grassley, Republican of Iowa.

But several liberal House Democrats welcomed the Medicare proposal.

“Extending this successful program to those between 55 and 64 would be the largest expansion of Medicare in 44 years and would perhaps get us on the path to a single-payer model,” said Representative Anthony Weiner, Democrat of New York.

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