Would early opt-ins to Medicare be a boost or a burden?

The Dallas Morning News (MCT) - When Robert Barnhouse of Richardson, Texas, lost his job in October, he tried to hold onto his health insurance but quickly found he couldn't afford the $500 monthly premiums.

The 61-year-old engineer dropped the coverage after one month and is now taking his chances. "I'm paying more attention to my diet and exercising more, because I can't get sick," he said.

So far, he's avoided any major health care expenses. But without insurance, he's had to postpone the exam and blood tests he schedules at the beginning of each year.

Barnhouse is one of 5.1 million uninsured Americans between 55 and 64 who experts say would benefit from a proposal to let people in late middle age buy into Medicare early.

Medicare kicks in at 65 for most Americans. But an early buy-in would allow someone as young as 55 to enroll in the program and pay a higher monthly premium than seniors do.

Depending on how lawmakers design the program, the premiums would cost several hundred dollars a month. The services would be the same as those for current Medicare beneficiaries.

The idea has been around for years, but it has gained new currency as the recession deepens and a Democratic Congress and administration begin to discuss health care reform.

Advocates of an early Medicare buy-in say it would complement other entitlement reforms because it would keep older workers healthy and productive longer and help rein in government spending over the long haul.

"The proposal has legs for the first time in years," said Stuart Guterman, a policy analyst at the Commonwealth Fund, a private foundation that researches health care issues.

"Suddenly, the notion of buying into Medicare has friends in high places," he said.

Senate Finance Committee Chairman Max Baucus' health care plan, which many experts view as the starting point for reform in the new Congress, has called for lawmakers to make the buy-in immediately available.

The option would remain in place, Baucus said, until Washington comes up with a more comprehensive answer for the 46 million Americans without insurance.

The incoming deputy director of the White House Office of Health Reform, University of Texas associate professor Jeanne Lambrew, also has spoken favorably of an early buy-in.

"The political opponents to a Medicare buy-in have been successful for the last decade, primarily on ideological grounds. But concerns about ideology may be outpaced by concerns about health security as the pressure for change rises," she told the Senate Aging Committee last year.

Opening Medicare to Americans in their late 50s or early 60s could plug a gaping hole in the nation's health care safety net, experts say.

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Between 2000 and 2010, as the oldest baby boomers approach or reach retirement, the number of Americans 55 to 64 will increase 50 percent, from 24.4 million to 36.2 million.

At a time of life when serious or chronic health problems frequently crop up, many boomers are losing their group insurance, said John Sheils, a senior vice president of the Lewin Group, a health care consulting firm.

The recession has cost many their jobs and employer-subsidized medical coverage. Often, they take part-time jobs or go to work for businesses that don't offer group health plans, he said.

Likewise, early retirees once could depend on employer-subsidized insurance, but companies hit by rising medical costs have scaled back their retiree health coverage, Sheils said.

People in late middle age who turn to individual insurance may suffer sticker shock or worse, said Richard Johnson, an economist with the Urban Institute, a public policy research group.

The annual premium for people 60 to 64 averages more than $5,000 for single coverage and $9,200 for family coverage, according to the Baucus health care report.

"Many with health problems are denied insurance or offered policies that exclude coverage for pre-existing conditions," Johnson said.

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Jon Battle of Plano, Texas, retired at 60 and thought he and his wife could rely on private insurance until they reached 65, but his slightly elevated blood pressure and her back problems proved insurmountable.

Battle now works 20 hours a week as a concierge at a shopping mall mostly because the job provides group health insurance.

"Individual insurance was a constant uphill struggle," he said. "Group insurance is much better."

An early Medicare buy-in would extend a lifeline to an age group especially vulnerable to high medical costs, Guterman said.

People could purchase Medicare coverage regardless of poor health and for less than what they'd pay on the individual insurance market or through their former employer, he said.

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Despite advocates' claims that premiums alone would cover the cost of a Medicare buy-in program, others believe taxpayer subsidies would be needed to make the option affordable for most people.

The proposal poses a dilemma for policymakers, said James Capretta, a fellow at the Ethics and Public Policy Center. If lawmakers don't subsidize an early buy-in, the substantial premium would appeal only to people who can't buy insurance in the private market because of health problems, he said.

"It would end up helping only a limited number of Americans," Capretta said.

But if lawmakers subsidize the program enough to drive down premium costs, they might cause a stampede of people leaving private insurance and encourage more Americans to retire early, he said.

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"That would be counterproductive," Capretta said. "Our government's already overburdened with Social Security and Medicare obligations and ought to be persuading people to delay retirement."

A taxpayer subsidy would only exacerbate Medicare's financing problems, said John Goodman, president and chief executive of the Dallas-based National Center for Policy Analysis.

"Instead of expanding another government entitlement, we should be giving employers more ways to help retirees obtain and afford individually owned insurance," he said.

Still, advocates of an early Medicare buy-in say critics overlook the long-term savings it would reap for the government.

"Opening Medicare to Americans in their late 50s or early 60s would help prevent serious health conditions from deteriorating and resulting in higher costs to Medicare once those people turn 65," Guterman said.

Research has found that previously uninsured adults with common chronic illnesses spend more on doctors' visits and hospital stays after they become eligible for Medicare than people who had insurance before 65, he said.

"People who are uninsured wait until they can get Medicare, so there's a pent-up need at 65," Guterman said. "If they received treatment earlier, they'd be healthier and cost Medicare less."

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Despite critics' prediction that a buy-in program would prompt some older workers to retire early, the insurance coverage also would keep people healthy and allow them to work longer, he said.

Many boomers in their late 50s and early 60s are interested in launching second careers and staying in the workforce until their 70s, but that's possible only if they enjoy good health, Guterman said.

Both supporters and critics agree that the most powerful force behind an early Medicare buy-in may be simply that many boomers want it.

The idea squares with boomer ambitions at the moment, they say, and the past half-century has shown that what boomers want, they often get.

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© 2009, The Dallas Morning News.