Wednesday, September 25, 2013

When Medicare Opened for Business

Copyright, The New York Times Company

The Affordable Care Act creates health insurance marketplaces or “exchanges” where families and individuals can purchase private health insurance. Most people currently without insurance will be eligible for assistance with their health insurance premiums, capping their payments at 2 to 10 percent of their household income.

The federal budget, and perhaps also the health of millions of people, depends on how many people take advantage of the new program.

People will not be forced to take part in the exchanges, but those who do not will be assessed a small penalty for not being insured (whichever is greater, 1 percent of household income, or $95 per person) that would appear on their federal tax return when they file in early 2015. Doctors and hospitals may also insist that their uninsured patients join the exchanges rather than requesting “free” care.

On July 1, 1966, Americans 65 and older were first eligible to take part in the new Medicare health insurance program, in which the federal government paid much of the cost. Previously, almost half of the elderly had no health insurance.

By the end of 1966, 19 million people were enrolled in Medicare, almost exactly the same as the number of Americans who were 65 or older at the time. The first full year of the program was 1967.

Source: Bureau of Economic Analysis Source: Bureau of Economic Analysis

Those were the days before rapid Internet communication, and a number of elderly people lived in rural areas away from major hospitals and medical centers. In the current environment, the health insurance programs coming on line next week might spread even more quickly than Medicare did.

On the other hand, the elderly population may have been easier to reach than today’s uninsured nonelderly people, because the elderly had already been participating in the Social Security pension program. Also, the new health insurance exchanges will have staggered enrollment periods (about two months near the end of each calendar year), whereas elderly are enrolling in Medicare all year long (a person’s Medicare enrollment period is seven months based on the date he or she turns 65).

The Medicare-eligible population – essentially people 65 and over – is also less policy-sensitive than the population eligible for the new exchange plans. People over 65 are created by waiting for 64-year-olds to have another birthday, and there’s not much policy and economic events can do about that. But people eligible for the new exchange subsidies must be in families with income of 100 to 400 percent of the poverty line and must not have a job that offers affordable coverage — conditions that economic change or policies might affect.

Incentives and economic events are likely to increase the number of people eligible for the exchange subsidies, but those economic behaviors may take some time to play out. For that reason, participation in the exchange plans may continue to increase significantly even after 2015, when the program will have been two years old.

Based on the Medicare experience, I expect more than 15 million people to enroll in the new exchange plans by 2015, with millions more joining thereafter as the economy adjusts to the new law.

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