Monday, November 5, 2007

Medicare Buy-In For Retirees--Private Options Make It an Even Better Idea

"We should act now to let companies and unions buy their early retirees into Medicare." That's the point of a Washington Post op-ed today by Democratic Congressman Rahm Emanuel and the president of the Democratic Leadership Council, Bruce Reed.

These two former Clinton aides are arguing that:
  • "The troubles at GM and Chrysler--and Ford, which reached a tentative labor agreement this weekend -- underscore the enormous competitive burden that health-care costs impose on American companies."
  • "In 2005, Americans ages 55 to 64 were the fastest-growing segment of the population to become uninsured.
  • The average annual cost of covering a 30-year-old employee is $2,222. The average yearly cost for an employee who retires at 60 is $6,139."
  • "A Medicare buy-in for retirees ages 55 to 64 won't cost taxpayers. Companies could pick up most of the cost; instead of GM contributing $30 billion to a VEBA, that money would go to Medicare. Retirees would have to pay higher premiums than traditional Medicare beneficiaries do to receive health care."
Clearly, the 55-64 age group is the most difficult portion of the uninsured to deal with. Age-rating and pre-existing condition provisions all but exclude a big chunk of this market--because they are sicker and older. Creating a Medicare buy-in would likely create an insurable pool constructed at an efficient level.

Emanuel and Reed have a good idea. This does not mean taxpayers would get stuck with the costs. Existing employer/union funding plus affordable contributions by beneficiaries ought to be able to pay the full bill. The UAW which now has taken on enormous health care liability for its retirees from the auto industry, for example, would be far better off with these obligations part of the broader and more efficient Medicare system.

This proposal does not have to be a matter of the government absorbing liabilities to the detriment of the private market. We can have the best of both worlds.

Let's take this good idea one step further and create a set of private Medicare options and bring the forces of the private market to bear as well. And, as those of you who read this blog on a regular basis know, I am not suggesting a private Medicare market paid 12% or 19% more.

Opening this idea up to the private market will make it more palatable to the private market side of the health care debate.

If you believe in the market, you will be optimistic the market will do well.

If you do not believe in the market, you have nothing to fear from private competition--on a level playing field. With the Democrats likely in charge of the Congress in the coming years, I doubt they will cut the market any breaks.
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