Allowing Medicare buy-ins would generate competition

Private insurance premiums for millions of families are due to dramatically rise at the end of this year for those who sign up for health insurance through the Affordable Care Act (ACA) due to the expiration of subsidies. The Democrats want the subsidies extended, while the Republicans want to give money directly to individuals in the form of health savings accounts to help pay for the rising rates. Neither plan addresses the underlying problem, which is the spiraling cost of health insurance. What the marketplace needs is more competition to drive rates lower. The best source of competition would be to allow individuals under the age of 65 to buy into Medicare.

Individuals could choose the buy-in Medicare option instead of adopting employer coverage, or employers could offer to pay part of the premium. Medicare would compete as one health insurance option, and that option could be offered on the ACA exchanges.

This approach would be different than "Medicare for All" plans that would be mandatory and essentially eliminate private insurance. Furthermore, a "Medicare for All" plan would likely require substantial increases in government outlays, which would need to be off set by increasing taxes, whereas a buy-in program could be set up such that premiums directly off set costs without additional government subsidy. Thus, a buy-in program might be easier to pass in Congress given that it would be revenue-neutral.

Buy-in enrollees would typically receive Medicare Part A (hospital care) and Medicare Part B (doctor visits, outpatient care) with options to add Part D (prescription drugs) and Medigap or a Medicare Advantage–style plan to cap out-of-pocket costs. Hospitals and doctors that currently accept Medicare patients would be required to accept the buy-in Medicare enrollees.

Because people under 65 are generally healthier than existing Medicare patients, premiums would be actuarially priced (based on expected costs) and would be expected to be higher than seniors' Medicare premiums since current Medicare plans are subsidized by the government. The buy-in premiums should be lower than premiums from private insurance companies, given that Medicare's overhead is far lower than private insurance (2-3% versus 12-18%) and Medicare doesn't have a profit margin to maintain, pay shareholder dividends, or spend heavily on marketing. Medicare generally pays doctors and hospitals less than private insurers, and that lowers overall costs and allows savings to be passed on as lower premiums. The buy-in Medicare premiums could be set such that the cost of the program would be self-financed (i.e., zero cost to the government) and not draw from the Medicare Trust Fund, thus satisfying the concerns of budget hawks. Premiums could also be adjusted based on income and age.

While a Medicare buy-in program could face resistance from insurance companies and health care providers, it should be considered as an option to create more competition in the health insurance marketplace.

Tom Hicks is a resident of Montpelier, a U.S. Naval Academy graduate, former nuclear submarine officer, engineering consultant and a former Democratic candidate for Congress in Virginia's 1st Congressional District. Follow him on Twitter @tomhicksva1.