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Research Questions

  1. What effects would a Medicare buy-in program have on health insurance coverage, individual market premiums, and federal health care spending?
  2. How might such a program be designed, and what effects would these decisions (such as limiting buy-in eligibility to certain age groups and insurers selectively marketing to healthier enrollees) have on the results?

Policymakers have long discussed allowing people under the age of 65 to buy into the Medicare program. Unlike health care proposals that seek to provide tax-financed health coverage to the entire population (often labeled "Medicare for All"), Medicare buy-in proposals would create a voluntary new option for eligible people to enroll in Medicare.

In this report, the authors analyze how allowing adults ages 50 and older to buy into the Medicare program could affect health insurance coverage, individual market premiums, and federal health care spending. They consider a base buy-in scenario that assumes 50-to-64-year-olds are eligible for the buy-in, advance premium tax credits and cost-sharing reductions (which are Affordable Care Act subsidies to help pay for cost-sharing at the point of service) are available on the buy-in, and — like traditional Medicare — the buy-in has no out-of-pocket maximum. They then estimate eight alternative scenarios that vary based on assumptions about the design of the buy-in and consumers' response to the program.

The findings presented in this report suggest that a Medicare buy-in could offer significantly more-affordable coverage to older adults while potentially leading to higher premiums for the pool of people remaining on the individual market.

Key Findings

  • In the base Medicare buy-in scenario, 6.0 million people would enroll in the buy-in. Across all scenarios considered, the authors estimate that between 2.8 million and 7.0 million people would choose to enroll. Enrollment is highest when buy-in administrative costs would fall to the level of fee-for-service Medicare and lowest when eligibility is limited to people ages 60 and over.
  • The buy-in is less expensive than a traditional individual market plan for most enrollees. In all scenarios, lower buy-in premiums are associated with reduced spending, on average, among people who are eligible for the buy-in. The authors estimate that total out-of-pocket health spending (premium contributions plus cost-sharing at the point of service) will fall, on average, by 16 percent to 35 percent for those who move from ACA-compliant individual market coverage to the buy-in.
  • Although out-of-pocket spending among those who choose to enroll in the buy-in goes down, spending increases for those who remain on the ACA-compliant individual market in many of the scenarios. Contrary to expectations, the authors find that when 50-to-64-year-olds move out of the individual market, premiums for individual market plans increase. When older adults leave the market, insurers are left with a smaller pool of younger, less healthy, and relatively expensive people given their age, leading to higher premiums.
  • The buy-in has little to no effect on total health insurance enrollment; roughly 246 million people under the age of 65 would be enrolled in insurance in all scenarios, including the scenario without the buy-in.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Methods

  • Chapter Three

    Results

  • Chapter Four

    Limitations and Uncertainty

  • Chapter Five

    Discussion and Conclusion

  • Appendix A

    COMPARE Overview

  • Appendix B

    Results with Cost-Sharing Reductions Funded

  • Appendix C

    Individual Market Premiums

  • Appendix D

    Merged Risk Pool

Research conducted by

This report was funded by AARP and conducted by the Payment, Cost, and Coverage Program within RAND Health Care.

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