WASHINGTON, DC—Among the policy options to expand health coverage for Americans aged 55 to 64—the near elderly—comprehensive reform of the individual insurance market, coupled with a Medicaid expansion for those with very low incomes, would be the most effective and far-reaching approach, according to a new Policy Perspective from the Center for Studying Health System Change (HSC).
About 12 percent of near-elderly adults, or 4 million people, lacked health insurance in 2007. Adequate and affordable insurance coverage is a particular concern for near-elderly Americans because they are at greater risk for serious health problems and high health care costs than younger adults. And, the near elderly without access to employer-sponsored coverage often face problems obtaining affordable and adequate coverage in the individual insurance market.
Many of the health reform proposals now under discussion in Congress could assist the near elderly in obtaining health coverage—in particular expanding Medicaid coverage to childless adults and reforming the individual insurance market to include guaranteed issue and modified community rating, which prohibits basing premiums on an individual’s health status and limits the variation in premiums based on age.
For example, the House Tri-Committee bill (H.R. 3200) proposes expanding Medicaid to citizens with incomes up to 133 percent of poverty, or $14,400 a year for an individual in 2009. Approximately 5 million near-elderly people have incomes no higher than 133 percent of poverty, and about 1.6 million in this group are uninsured. If all 1.6 million people enrolled in Medicaid, the uninsurance rate for the near elderly would fall from 12 percent to 7.2 percent, according to the Policy Perspective.
Funded by the National Institute for Health Care Reform and written by HSC Senior Health Researcher Ha T. Tu, M.P.A., and Alison B. Liebhaber, a former HSC health research analyst, the Policy Perspective—Rough Passage: Affordable Health Coverage for Near-Elderly Americans.
If reform of the individual insurance markets fails to become a reality, then the most far-reaching approach to expand coverage to the near elderly would be a Medicare buy-in program with substantial subsidies, combined with a Medicaid expansion for the lowest-income individuals, according to the analysis.
However, without sizable premium subsidies, neither reform of the individual market nor an expansion of Medicare eligibility would be sufficient to make a significant dent in the proportion of uninsured near-elderly people.
Other policy options have been proposed but are more incremental in nature-and limited in expected impact—and often do not target the near elderly who are most in need of help. For example, options such as subsidies for COBRA coverage and expansions of tax-preferred accounts tend to help the relatively advantaged more than the most vulnerable among the near elderly. Approaches aimed at improving affordability of individual insurance—using mechanisms such as tax credits and reinsurance—would have little impact in the absence of comprehensive reform of the individual insurance market and are more likely to provide financial relief to those already covered in this market-including higher-income people-than to expand coverage to the uninsured.
Over the last decade, the proportion of employers offering health benefits to early retirees has declined significantly. Among all private-sector employers, for example, the proportion offering early-retiree health benefits declined from 22 percent in 1997 to 11 percent in 2008, according to findings from the Agency for Healthcare Research and Quality’s Medical Expenditures Panel Survey. The same downward trend is evident among large employers-those most likely to offer retiree benefits. Among companies with 1000 or more workers, only 36 percent offered early-retiree health benefits in 2008, compared to 53 percent in 1997.
If policy makers want to focus on options for preventing further erosion of health benefits to early retirees, the most direct and efficient mechanism would likely be a tax credit to employers who provide early-retiree health benefits—similar to the Medicare Part D credit paid to employers who maintain retiree prescription drug coverage, according to the analysis. Government reinsurance of retiree coverage has been proposed as an alternative mechanism, but because reinsurance reduces the insurer’s incentive to manage care, it is likely to prove a less efficient approach to subsidizing coverage than direct tax credits to employers.