Medicare, a primer (no math)

QMB- qualified Medicare beneficiary

MFA – Medicare for all, including Medicare for others

 

Current
Medicare Part A

• covers inpatient care, including care received while in a hospital, a skilled nursing facility, and sometimes at home.
• Most QMB qualify for $0.00 premium Medicare Part A.
• Most QMB earn eligibility at age 65 by paying in through 40 quarters of qualifying employment,  their’s or their spouse’s
• Pays everything after annual deductible
• Annual deductible and lifetime caps
• Part A deductible, and the 40 quarters of paying in (most QMB pay in wayy more than 40 quarters) and the actuarial math provide a reasonable forecast of Part A cost. The Part A deductible is set annually.

Medicare Part B

 

• Covers outpatient medical services or supplies needed to diagnose or treat a medical condition; preventive services, doctor appointments, ambulance, physical therapy, durable medical equipment
• All QMB have a Part B premium (sometimes Medicaid or other source will pay it)

• Most QMB earn eligibility at age 65 by paying in through 40 quarters of qualifying employment, their’s or their spouse’s
• Pays up to 80% of Medicare allowed charges
• In the olden times – 1965 – the requirement was that the Part B premium be calculated to pay 75% of the cost of administering Part B. For a variety of reasons, that doesn’t really work anymore. But in concept, it’s helpful. Like A, the annual deductible, time paying in through qualified work, and the actuarial math using age and those factors provide a reasonable forecast of Part B cost.

  But the main funding for current Part A and Part B expense is all the current qualified employment paying in. Current workers are not paying for their own future medical expenses, they are paying for their eligibility and the current money paid in pays for current beneficiaries’ medical insurance.

MFA proposes to open the eligibility to a new class of beneficiaries, so the math has to be redone in order to pay for the new beneficiaries’ medical expenses. It’s complex, stochastic, actuarial and doable and could yield a premium/deductible structure that improves the stability of Medicare.

WIthout proving the math, any medical insurance plan becomes more stable by adding premium paying, younger, healthier members. Likewise, if there are more future beneficiaries paying in each year (qualified work) the plan gets more stable.

There are a variety of differing proposals to implement MFA. But an important common feature is the ginormous reduction in administrative expenses and the elimination of private market profit margins for most situations.

Current Medicare includes insurance plans to cover things Medicare doesn’t cover – mainly the 20% coinsurance for Part B services, also Part A services that exceed the cap of original Medicare and also optical, dental, chiropractic, acupuncture, etc. But in MFA a majority of insurance industry profit margin would be gone.

Part D prescription drugs and Math will be in part 2, but we can tell it would work.

An example: lowering eligibility age to 60.

• Lets call QMB who become eligible under the current rules RED
  And QMB who qualify under the new rules BLUE
• RED: nothing changes

BLUE:

If employed, continue paying in (otherwise it weakens the actuarial math for RED)

Coverage rules are essentially the same for RED and BLUE
Part A&B premium set to pay 100% of the cost from 60 to 65, and then BLUE QMB become RED.

In this model, if 50% of Americans who are enrolled in an exchange plan (ACA, Obamacare) now instead choose BLUE, the premium would be approx $450/mo.  Yes, way higher than RED, but way lower than the insurance currently available.

Yes- there is an actuarial problem with allowing BLUE QMB to opt in or out. The 50% most likely to opt in are the most ill and in need of expensive care. SO far better actuarially if eligibility for all BLUE would work like RED now.

 

Who wins:

BLUE QMB

Who loses:
– health insurance companies who profit from premium paying Americans age 60-65 who opt in to BLUE
– companies who need to retain staff and rely on the fear of the staff that they will not find insurance if they leave
– an economy that needs BLUE QMB to continue working as long as possible, not as long as they want, but as long as they possibly can

(this starts to get into the really complicated math – FDR’s guys did the math in the 30’s and chose 65 as the magic age and LBJ got Congress to do it 30 years later. Losing those workers’ means in order to preserve GDP and overall profitability, we need to add more workers to replace them – in the 40’s companies convinced FDR and the New Dealers they would cooperate later, after the war. Yeah – ok.)