The Kaiser Family Foundation has released two new reports that estimate what would happen if the Medicare qualifying age was dropped from 65 to something lower. The key insight is in the second report:
Second analysis shows that people in their late 60's (on Medicare) actually have substantially *lower* health spending than people in their early 60's (on employer coverage), despite the fact that health care use increases with age.
Why? It's the prices. https://t.co/oUCw8b8y92
— Cynthia Cox (@cynthiaccox) April 27, 2021
people in their late 60’s (on Medicare) actually have substantially *lower* health spending than people in their early 60’s (on employer coverage), despite the fact that health care use increases with age. Why? It’s the prices.
Medicare uses its great mass of demand to get amazingly good rates. Medicare Advantage uses its administratively linked pricing power to get rates that are tightly clustered around what Medicare pays (sometimes a smidge more, sometimes a smidge less).
It is not unusual at all for private insurers to pay anywhere from 160% to 200% or more what Medicare pays for a given service. ‘
Medicare payments are part of the payer mixture for clinical providers. Medicare pays reasonably quickly with fairly predictable rules and for a massive number of procedures. However, the difference in profitability between otherwise similar provider groups will be the payment mixture. Groups that serve more privately insured individuals will have a lot more revenue per unit billed.
We talked about this in 2016:
I just want to re-iterate a very simple point. Most liberal health policy goals have a very simple summary: get more people on insurance that pays providers rates that are closer to Medicare rates than commercial large group rates.
This is the fundamental challenge. Any savings that accrue to the consumers or society in general comes out of someone’s income. If we think about how hospitals and provider groups conceive of their group interest, they have a clear interest in moving people from low payment to them insurance statuses to high payment to them insurance statuses. This means supporting Medicaid expansion as it moves people from cash, hope and a prayer payment level to mostly reliable and mostly on-time-ish Medicaid payments. It also means being neutral or indifferent to policy proposals that redesignate people within the same payment strata. It really means being willing to go to the mat in opposition to policy changes that move people from high payment strata to lower payment strata.
We saw this in ARP. One of the big policy planks on the healthcare side was the federal government paying 100% of COBRA for six months. COBRA is an extension of large group insurance. Someone who is not on COBRA is likely to move to either Exchange, Medicaid, or uninsured status. Exchange pays either at the local average group rate or well below it if there are narrow networks in a competitive market while Medicaid or uninsured both pay way less than typical commercial group rates. COBRA keeps people in plans that pay standard commercial group rates.
There is a policy justification for subsidizing COBRA instead of Exchange but it is thin:
The policy rationale can be boiled down to seamless transitions and a judgement about the nature of employment loss. We know that people fall through the cracks and starting new relationships impose significant individual and system level costs…If we think that most of the people who are losing their jobs are losing their jobs temporarily because of short term shutdowns and slowdowns BUT that those specific jobs for the people who are specifically eligible for COBRA are going to come back quickly, then minimizing the number and pain of insurance transitions makes a ton of policy sense….
The political take is simple — people don’t like navigating new systems of coverage and the population that likes COBRA relative to Exchange are fairly high propensity voters who would be seeing a very explicit and large policy that makes their lives a lot easier.
The public option in 2009-2010 was killed by intense lobbying by numerous state hospital associations. They are trusted and they are powerful. They saw their interests to be for an expansion of public coverage to massively shrink their bad debt problem without having the vast majority of the coverage expansion occurring at administratively set prices of either Medicaid Expansion or Medicare linked public option prices.
I think that a similar lobbying campaign will occur if there is a serious push to move Medicare age eligibility from 65 to 60 or 55. And I would bet on the hospitals winning as they have a definitive, particular and large point of pain while the benefits are far more diffuse.