I admit to being confused by the NY Times article:
It has been mentioned elsewhere that the Medicare prescription drug benefit was ill-advised (by Bush) since it has cost Medicare too much money. However, retirees pay a premium for their drug benefit; and if it is all done by private insurors, how come it is costing the Medicare program money? I understand that the premiums on this coverage continue to increase; and the premium is deducted from the SS checks automatically.Ms. Snowe’s proposal recalls a provision of the 2003 law that added a prescription drug benefit to Medicare. At the time, experts doubted that insurers would sell stand-alone policies covering only prescription drugs.
That law allowed the government to establish a prescription drug insurance plan in any geographic area with fewer than two private plans. But private insurers, seeing a lucrative business opportunity, rushed into the market, and the government never had to establish a plan of its own.
The Medicare drug benefit is thus delivered entirely by private insurers under contract with the federal government.
The same article is discussing the govt only offering a public option where "affordable" health insurance is not available. They define "affordable" as
The figures would meanCongress would define “affordable” with a sliding scale based on income. Under a proposal being considered by the Finance Committee, Medicaid would be extended to anyone with income less than 133 percent of the poverty level ($29,327 for a family of four).
For people with incomes just above that level, insurance would be considered affordable if they could find a policy with premiums equal to no more than, say, 3 percent or 4 percent of their income. For people with incomes exceeding three times the poverty level ($66,150 for a family of four), insurance might be deemed unaffordable if the premiums were more than, say, 12.5 percent to 15 percent of their income.
3% of $29,328 = $879.84 ($73.32/mo)
12.5% of $66.150 = $8268.75 ($689.06)
Thus, someone making about 2.26X the $29,328 would be deemed capable of paying 9.4X more for health insurance before it became "unaffordable".
I wonder if they intend to change the "tax" for not having health insurance. At the presently proposed 2.5% individyual tax (even for higher incomes), the fellow earning $66,150 would pay $1653.75/year. Or does the present proposal call for a sliding scale upward on this no-insurance tax?
If the govt views 12.5% as "affordable", then will that be what the govt charges for its public option? Keeping in mind that the govt's goal will be to use the premiums it collects from younger, higher-income individuals to offset the "losses" on the older insureds with pre-existing conditions.
The math of this actuarial principle only works if the amount you collect from the young, healthy people is sufficient to cover the much larger costs of the older, less healthy people. As Dave says, there is no escaping aging.
The problem with govt programs (using SS & Medicare as examples) has been that as soon as the govt sees reserves building, which is actuarily sound & should be intended, they can't resist spending those reserves. In the end, when those reserves would have been needed to sustain the program, they have already been spent. In the case of SS, the govt actually "borrowed" from SS to throw $ into the general budget.
If there is to be any public option, there would have to be an absolutely inviolate prohibition on the reserves that build from being spent in any other program, or for increasing benefits without commensurate actuarial soundness. Only then could any plan, run privately or publicly, maintain its actuarial soundness.
Am I mistaken, or is it correct that nowhere are there any estimates of how much someone will pay for the presently proposed public option? For those who are in favor of some type of public option (even if proposed as a "back-up"), they might end up being very surprised by how much it would cost.
I cannot believe that the private health insurors can't come up with a computer "model" of such a program. The govt should also have the computerization capability to do this. If so, why haven't they done so? If they have done so, why isn't it public information? The COB has extrapolated the costs of the program, but they have not translated it into the individual cost to each insured, it would appear.
Locally, this kind of thinking, in one of our local school districts, ended up costing the taxpayers $57 million! The basic outline of that situation. The school board was sold a bill of goods that by buying derivatives they would save $2 to $3 million on the financing of the district's debt (being used to build new facilities). The board members have since admitted that they never understood what the whole thing was, nor did they understand what the negative aspects might be. They essentially played the stock market with taxpayer money, but didn't even understand what they were doing! Bottom line, if they didn't understand what they were voting for, they had no business voting for it. Financially, it is now considered the most troubled school district in the entire state.