Hypothetical Mean

Commentary from an Actuarial and Economic Perspective

Healthcare Reform Fun Thought

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How will the government prevent people over age 65 from entering the guaranteed-issue Exchanges?  A person aged 64 earning in the low $20,000’s on fixed income can get a very nice Exchange policy for a post-subsidy amount that is less than the Part B and Part D premiums combined.  Moreover, if HR4872 passes, they will get an “actuarial value” that exceeds Medicare.  They may even get an actuarial value that exceed Medicare plus a Medigap plan.  That means a senior may be able to save hundreds of dollars per month in premiums by staying on the Exchange … *and* get a better health benefit.

People have speculated that healthcare reform is a secret plot to destroy Medicare, but the usual thought is that it will destroy Medicare by bankrupting hospitals and causing physicians to exit the program.  Millions currently on Medicare may decide to dump Medicare for the Exchanges, and millions more who age in with Exchange policies may never bother to sign up for Part B.

Just a fun thought to illustrate how this bill has not been thought through.

(note: the Basic Healthplan option is restricted to only sell to those under age 65; in this post, however, I am referring to commercial carriers.  Remember also that everyone will be risk-adjusted.  Therefore, a commercial carrier might find it quite profitable to market Exchange products to 80 year olds, even with the 3:1 age band restriction.)

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Written by Victor

March 20, 2010 at 3:43 pm

Posted in Healthcare Reform

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