I could not disagree more with Stuart Butler’s assertion “I don’t think there is much disagreement about the moral need for action.” I find it much too facile.

The problem all along has been that, unlike in other countries, there has never evolved in this country a political consensus on the distributive social ethic that ought to govern health care. In fact, much of our debate over methods is really but a camouflaged debate over social ethics.

To illustrate, policy analysts and politicians who advocate health insurance with annual deductibles up to $10,000, coupled with tax deductible deposits into a Health Savings Account (HSA) surely do not favor the same distributive ethic as do those who advocate first-dollar coverage or even a single-payer system on the Canadian model.

That said there certainly is room for debates over the design parameters of universal health insurance among people to do share a roughly common social ethic, as Stuart and I do. I can easily grant Stuart that point.

Just let's not soothe ourselves with the idea that Americans all share a common social ethic for health care of for anything. When we say that we are a “heterogeneous” country, we do not mean that we are racially or ethically different. We mean economic heterogeneity on our ideals for the best social order.

My friend Uwe is right to raise the basic moral questions facing us as a nation associated with today’s huge gaps in coverage, especially for those who are older and more medically and financially precarious. I don’t think there is much disagreement about the moral need for action.

The debate is about how to act, and the consequences of acting in one way rather than another.

As long as health is so closely tied to the place of work these problems will continue whenever unemployment, early retirement or even change of job occurs. If our tax subsidies were not contingent on employment-based insurance we could envision a country in which early retirement did not automatically jeopardize insurance coverage.

John Rother of AARP points out the serious unintended consequences of leaving the current employment-based system untouched and opening up Medicare on a voluntary basis.

Mr Obama raised the prospect of ways of opening alternative ways of providing more continuous coverage. But as I and others have argued, there are problems with his approach.

One of those problems, quite frankly, is that the end result within a decade of an Obama/Baucus combination plan would be the single payers’ dream – essentially Medicare for all. Medicare eligibility would be reduced to 55. Medicaid/SCHIP eligibility would be raised up the income scale and include more adults. And a federally designed Medicare-like public plan would “compete” in a federally designed health exchange whose rules of competition would come from the same federal government. Who can doubt what the result of that would be after a few years? We’d all be in some kind of public program. A single payer system is a respectable position, though I don’t agree with it. But let’s be honest about what the result of combining Obama and Baucus would actually be.

Before even thinking about Marilyn’s question, I would like to raise the following questions:

“What should American society do about people 55 years or older who find themselves without health insurance (1) either because their employer does not provide employment-based health insurance on the job, or (2) the individual cannot afford out of his or her wage base to cover the employee’s share of health insurance offered by an employer, or (3) the individual is unemployed, an increasingly likely prospect in the years ahead.

Should we as a society

(a) turn our backs on these people and expect them to toughen it out somehow – perhaps even to leave our midst early -- lest they burden the rest of us fiscally? In other words, should we ration health care, the quality of life and life years to them by their income and the high prices charged the uninsured or

(b) come to their assistance with federal subsidies, and if so,

(c) what fraction of their disposable income should people age 55 or over now without health insurance be required to contribute to their own health care before any public subsidy toward that care is granted?”

Americans should muster the courage at long last to address these questions forthrightly, in plain English. Alas, they don’t.

Instead we get endless laments that, if our current tax structure never ever changed, and if future age-specific health spending per capita grew at current rates, and if GDP grew at X% per year from here to kingdom come (more precisely, to infinity), then we would now have to set aside a fund of $80 to 100 trillion or 6 to 8 times out current GDP to be able to pay for promised Medicare benefits from here to kingdom come. If I took all that palaver seriously, I’d quickly repair to Staten Island and jump off the Verrazano Narrow’s bridge. Of course I don’t, because how future generations of Americans choose to share their future GDP with their future contemporaries who are either too young or too old to work is really their problem, not mine. Somehow they will manage in 2020, 2050 4,891 and 111,389 and so on to infinity.

Next, to keep us in the club of civilized nations in the presence of the millions of uninsured fellow citizens, we expect our hospitals to operate a haphazard catastrophic health insurance scheme in the form of charity- and uncompensated care for critically ill, uninsured people and even mandate hospitals to do so, without explicitly paying them for it.

Finally, every year Milliman Inc. is commissioned to produce a study showing that private insurers and employers bear a huge hidden tax in the form of the extra payments they are forced somehow to make to hospitals to cover the hospitals’ cost of this haphazard catastrophic insurance system – allegedly $88 billion this year – in spite of the private insurers’ claim that they are tough bargainers and can control prices better than the public sector.

This is the American way in health care: Hidden taxes, sack cloth, gnashing of teeth and ashes upon our heads all around!

I have watched this weird spectacle for over three decades now. While I found it amusing in the earlier years – in the eyes of an immigrant it is, after all, somewhat amusing -- I now find it just pathetic. It makes America the laughing stock at international health-care conferences, where our health system (as distinct from our health care) has long served as the bogeyman.

As to Marilyn’s question concerning the impact of Senator Baucus’ proposal on Medicare and on the federal budget, that would depend crucially on the precise design parameters of the proposal.

If no attention were paid to adverse-risk selection on the part of patients, for example, the premiums for this new insurance product would quickly rise. One way to mitigate adverse risk selection would be to have open windows for enrollment but to charge much higher premiums past that window.

The answer to my question [c] above also would drive the fiscal impact of the measure on Medicare. The harsher we are prepared to be on fellow Americans without health insurance, the smaller will be the impact on the federal Medicare budget.

Finally, to give peace of mind to my good friend John Goodman, one should give the individual to be insured the option to use whatever public subsidy he or she would receive toward the purchase of competing private health insurance. If that insurance were cheaper – as he claims and as might be the case for healthy individuals with medically underwritten policies – fine. But once that option was chosen by the individual, he or she should be made to face a significant penalty to join Medicare, if private insurers repriced their policies after an episode of illness and Medicare became more attractive to the individual. Germany is even more drastic on this score. People with incomes above a threshold may opt for private rather than Statutory insurance there; but once they have opted out of the Statutory system, they cannot return unless they are certified paupers.

Updated Dec. 18 at 9:23 a.m.

We actually looked at and worked at this issue during the Clinton administration. One way to make the 55 plus program more affordable is to charge a higher premium at 65 when the individual moved into regular medicare. The would leave the government with a bit of a cash flow issue but it would be temporary and offset by the slightly larger 65 payment. Our analysis indicated that thousands not millions would take advantage of this program. It fills a gap but does not solve the access problem for people without money.

Permitting adults age 55 to 64 to buy into Medicare and eliminating the two-year waiting period for people will disabilities will improve access to care and reduce financial burdens on older and disabled adults who do not fare well in our current health insurance system. As Sen. Baucus notes, such individuals are rarely able to obtain affordable and adequate private coverage, since insurers in the individual market have a strong financial incentive to restrict enrollment or limit the benefits of older Americans and people with serious health problems.

Commonwealth Fund-supported studies show that opening up Medicare to older and disabled groups could help prevent serious health conditions from deteriorating and resulting in higher costs to Medicare once these individuals become eligible. Medicare coverage expansion policies are therefore integral to increasing access and providing financial protection to difficult-to-cover Americans.

Allowing older adults and early retirees to buy-in to Medicare also provides better value than coverage on the individual insurance market. Modeling by the Lewin Group shows that adults ages 60 to 64 who would buy into Medicare under the Building Blocks framework would pay a monthly premium of an estimated $532 per month--a much lower premium than those available to older adults through the individual insurance market.

Eliminating the two-year waiting period for people unable to work will also provide important protection and access to vulnerable citizens while driving national health systems savings in the aggregate. Additional modeling by the Lewin Group shows that immediately providing coverage of the disabled under Medicare would enable the estimated 1.6 million people who are currently waiting for Medicare to get the care they need. Almost 20 percent of this group has no coverage at all. This is particularly unacceptable given that absence of early treatment, preventative care, and chronic care management lead to higher costs once a beneficiary does qualify for Medicare.

Making smart investments in continuous coverage and preventive care by allowing buy-in at age 55 and eliminating the two-year waiting period for the disabled is a key strategy in efforts to achieve health systems savings while putting our nation on a path to a high performance health system.

I would like to second John Rother's three considerations.

Even if there were no adverse selection (which there surely will be), I don't believe Medicare can compete against private plans, charging a budget neutral premium. Remember, the average Medicare enrollee is currently paying three premiums to three plans ( Part B, Medigap, and Part D drug coverage) and still doesn't have the coverage most nonelderly Americans have (a donut hole on drug coverage, for example).

So it is almost inevitable that the premium will not be actuarially fair. That means a subsidized premium. That means a new entitlement. And just to remind everyone, Medicare's unfunded liability is $85 + trillion. Even if we ended the program tomorrow -- accepting no more payroll taxes and allowing no more benefit accruals -- we still owe $33 trillion in benefits that people have already earned! See study here: http://www.john-goodman-blog.com/thinking-about-tomorrow/

Let’s Make the Medicare Buy-in Work

Sen. Max Baucus’s proposal to allow an immediate buy-in to separate Medicare coverage for older adults 55+ offers many attractive benefits for the millions of Americans who have the most trouble finding meaningful insurance protection in the individual market today. There are several design and financing considerations, however that must be addressed to make the idea workable.

The 55 – 64 age group needs meaningful insurance protection because they are most likely to need and use medical services. In a market that’s currently underwritten and age-rated, it’s not surprising that over 4 million currently lack any coverage, and millions more face huge financial liabilities due to underinsurance. This age group is also more likely to suffer from chronic conditions and functional limitations compared to younger adults. Those determined to be disabled face a 2 year waiting period before they can enroll in Medicare.

Three considerations – affordability, risk adjustment, and choice/supplementation – will determine how workable a response this option will prove to be in reality.

Sen. Baucus has proposed a “budget neutral” standard for the buy-in. This implies premiums in the range of $430/mo if there is no adverse selection. For those who are unemployed or lower income, this premium level may well prove unaffordable. Some level of subsidy may be necessary to achieve any real improvement in coverage for this age group.

Since the buy-in would be voluntary for individuals, there is likely to be significant adverse selection in enrollment, driving premiums up over time. Financing sufficient to counter risk selection would be essential to avoid a “death spiral” of higher premiums and fewer enrollees every year. This is especially true as the option is phased out, as proposed, and the group ages.

A third consideration is choice and supplementation. Since the Medicare benefit is so inadequate, individuals seeking meaningful insurance protection would need either to enroll in a Medicare Advantage plan (if available) or else purchase supplemental private insurance at additional cost.

Allowing older workers and disabled Americans to buy into the Medicare program will immediately fill a significant hole in our health care system – through which about four million people age 55 to 64 slipped last year. Declines in employer-sponsored benefits and retiree coverage have made it increasingly difficult for Americans in their 50s and early 60s to get coverage. The individual market – which is often their only option – is increasingly unaffordable or even unavailable to those with pre-existing conditions. Last year, the average premium for people age 60 to 64 was more than $5,000 for single coverage, as compared to $1,360 for a single 18 to 24 year old. With no other options, many people age 55 to 64 – about 12 percent in 2007 – are left uninsured.

Since 1965, Medicare has provided health care coverage to Americans age 65 and over and Americans with disabilities. Making Medicare an option for older Americans below age 65 can increase access to care without increasing the cost to taxpayers. Under my plan, Medicare would charge those participating in the buy-in an annual premium, which would be calculated so that the total costs for the buy-in population would be budget neutral. In other words, the program would not increase federal spending. The program wouldn’t be permanent, but rather a way for older workers to access care immediately while we work to get the Health Insurance Exchange – a one-stop health coverage marketplace where Americans can easily compare and buy affordable plans – up and running. People who participate in this temporary program would be allowed to remain in the Medicare buy-in program, and once the Exchange is up and running, Americans who turn 55 or who did not opt to buy into Medicare will be able to get care there. Moreover, providing access to Americans aged 55 to 64 can eventually save money in Medicare, because when these populations do enter the traditional Medicare program, they will likely be healthier than if they had previously been uninsured and received less care. Providing access to care for Americans aged 55 to 64 without adding to Medicare’s financial burden is a win-win and important step toward successfully reforming our health care system.