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Home Publications Blogs Beat the Press Obamacare Needs Healthy People to Sign Up, It Doesn't Matter Whether or Not They Are Young

Obamacare Needs Healthy People to Sign Up, It Doesn't Matter Whether or Not They Are Young

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Saturday, 26 October 2013 09:48

For some bizarre reason there is an obsession in the media about Obamacare needing young healthy people to sign up for the program to work (e.g. see Ezra Klein today). Actually, the program needs healthy people to sign up regardless of their age.

The logic is that healthy people who get little care are in effect subsidizing the care of the less healthy. This is every bit as much true for older healthy people as it is for younger ones. In fact, the subsidies are considerably larger in the case of older healthy people since people in the 55 to 64 age group will pay roughly three times as much for their insurance as people in the youngest age groups.

The likelihood of someone being in good health gets smaller as they age, but there are still millions of people in this older age group who will use very little health care over the course of a year. Their money will help support the program every bit as much as the money of younger people.

 

Comments (20)Add Comment
Older Healthy Poor Americans get great deal
written by Robert Salzberg, October 26, 2013 11:20
I checked the Kaiser calculator for Obamacare for a 57 year old friend of mine who makes $1000 a month. She'll pay a few hundred dollar a year for the silver plan and get around $6000 in subsidies. She hasn't had health insurance for the last 15 years and has only spent a couple of few grand on health care, half of which was for removal of a small skin cancer. She's on no meds, has low normal blood pressure, good cholesterol, and is very active. So yes, people like her that sign up will in general be a much bigger boast than young healthy people.
Obamacare needs healthy people with decent incomes to sign up, Low-rated comment [Show]
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written by Jerry Brown, October 26, 2013 12:38
That's not entirely accurate Lord. Healthy people still broaden the pool of those who have insurance and help avoid the problem of adverse selection regardless of who is paying their premiums.
Let Them Eat the Romneycare They Created
written by Last Mover, October 26, 2013 12:51

The reason we are where we are today with Obamacare is way back when, the Heritage Foundation was terrified anything looking like efficient single payer (read the VA system) would get its socialist foot in the door under the Clinton administration.

So Heritage invented Romney/Obamacare for Massachusetts to kill single payer. When it succeeded and expanded into today's Obamacare for the entire nation, Heritage and the sock puppet MSM media conveniently disowned it on grounds it forced mostly the young to buy insurance or pay a penalty - very close to the Romneycare model.

The result is botched single payer with no true single payer (monopsony buyer), but with the same cost averaging principle of true single payer which also ignores some demographic factors through community ratings in end-use pricing.

The botched part means total cost of health care is still 2 or 3 times that of other developed countries, all to preserve the high cost of market failure by providers along with completely unnecessary protectionist cost of preserving private "insurers" to act as useless bill collectors for providers.

The economic predators who created Romney/Obamacare are still not happy, clamoring every step of the way that it will fail from web site or sign-up problems. The reason is the way the high total costs are averaged across a larger base, combined with subsidies for low income people like @Salzberg presents above who can finally get access to effective health care.

That's what they really hate, that the unwashed masses can actually access quality health care despite its outrageous cost that lives on under Obamacare. So they tie that outcome to the notion that the young are being forced to subsidize "free" health care through required sign-up or pay a penalty ... under the same plan their masters devised under Romney/Obamacare.

Let them eat the economic monster they created. They're the ones who continued subsidies in the form of unearned monopoly profit for providers and insurers through Obamacare. That more end users have affordable access to the cesspool of exploding costs necessary for health care from the supply side is their problem, not the problem of customers on the demand side.
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written by AlanInAZ, October 26, 2013 1:40
A big difference between young and "old" healthy is that the health status is more likely to change quickly for the older person. I'm guessing that the difference in premiums only partially offsets this risk.
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written by skeptonomist, October 26, 2013 1:50
Healthy single people with few assets are the most likely to choose not to buy insurance, since they have least to lose if they get sick. These people are mostly younger. Presumably the more dependents you have, the more subsidies you will get - and the more likely there is to be someone in your household with a chronic condition. Young people are also more likely to consider themselves to be immortal. I don't have any data, but I would suppose that this may be related to the total number of serious conditions encountered over a lifetime; and the probability of such conditions must tend to increase with age.
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written by Kat, October 26, 2013 2:59
Thank you! I was just thinking about this today after reading version 29 of The Sorrows of Young Millenials. Yes, they're screwed, but not because they have to buy insurance to "pick up the tab for baby boomers" as this article asserted.
Not a baby boomer here, but old enough that I assume I'm someone that they're "picking up the tab for". It's a tiny tab. I have no reasons to go to the doctor. I don't have kids. I'm pure profit for the insurance company.
At any rate a person in their early 20's is not really at the peak of health. That honor falls on persons in their early thirties. This is a generalization of course, but if we're going to make generalizations we should at least try to make the generalization more accurate.
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written by AlanInAZ, October 26, 2013 4:51
Medicine today keeps pushing interventions and screenings earlier in life. Major surgeries such as joint replacements are being recommended for younger patients. The average age for hip replacements is now 67 but that age will come down significantly over the next decade. I see the average cost for the 55-64 group increasing faster than younger groupings. If I were running the program as a business I would prefer to load up on the healthy young rather than the "healthy" oldsters. In my own case there has been a number of medical issues adding costs that have surfaced after turning 60.
The Consistent Position Against the Mandate
written by Steve Rodgers, October 26, 2013 7:42
So far when debating libertarians and others who object to the ACA's mandate, I've not found one willing to answer the question: do you also advocate the repeal of EMTALA (the requirement that ER's treat uninsured patients)? This, of course, is the fundamental inconsistency to the position that such the mandate abrogates freedom.

Today, people have become pretty inured to ignoring homeless people on the street in most major cities. If they were truly consistent, people will have to get used to stepping over dead bodies in the street.

I've little doubt we can do it! After all that system works in other parts of the worl -- with the added benefit of providing significant competitive advantage versus other economies.
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written by denise, October 26, 2013 9:46
AlaninAZ - but don't forget that those healthy 55+-year-olds are paying three times as much the youngsters.
Change Bankruptcy Law
written by jumpinjezebel, October 26, 2013 10:43
Change the bankruptcy law such that if someone does not have insurance and turns out that they need care and can't pay - then you can't write it off. Just like student loans.
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written by watermelonpunch, October 26, 2013 11:08
written by AlanInAZ, October 26, 2013 12:40
A big difference between young and "old" healthy is that the health status is more likely to change quickly for the older person.


Do we know that?
Because it seems to me the older people I know, developed their health problems gradually, over time. (Like blood pressure, heart problems, arthritis, etc.)
Whereas the people with really expensive huge big serious problems that appeared quickly, were young. (Like cancer, appendicitis, organ rupture, or losing a leg in a car accident.)

So I don't know, I'd want to see some statistics before deciding that older people are more likely to have a quick change into medical need catastrophe.
append
written by watermelonpunch, October 26, 2013 11:13
For clarification: I'm calling "young", for these purposes, anyone under the age of 55.
$12,000 Income = Medicaid = No Subsidies [?]
written by jerseycityjoan, October 27, 2013 5:12
"I checked the Kaiser calculator for Obamacare for a 57 year old friend of mine who makes $1000 a month. She'll pay a few hundred dollar a year for the silver plan and get around $6000 in subsidies."

I am mystified by the first comment by Robert Salzberg.

My understanding was that people making up to 133% of poverty level -- over $15,000 for one person -- be would only be eligible for Medicaid. They would not be eligible for private insurance and subsidies. [The one exception I know of is that legal immigrants have to be here five years to qualify for Medicaid, they would be able to get subsidies and get private insurance through the exchanges.]

And for those whose states did not agree to the extended Medicaid, there was no alternative. They simply get nothing.

Can somebody explain what's going here? How is anybody making less than 133% of poverty level who's lived in the US for at least the past 15 years getting getting a subsidy and private insurance?
Eligibility for subsidies
written by Mike B., October 27, 2013 8:45
If you are not eligible for Medicaid (or Medicare or acceptable health insurance from your employer or other source), you can get subsidies as long as your income is at least the federal poverty level (a little under $1000/month this year for a single person). Only those under 100% FPL get nothing. The 133% FPL threshold only applies to those in states that have accepted Medicaid expansion.
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written by skeptonomist, October 27, 2013 10:05
What we're seeing in these incredible complications and the (hopefully temporary) failure of the Obamacare sites (some state sites have not even opened) is another reason why health care is not a suitable field for the operation of the "free market", at least if it is assumed that everyone should get health care. For police or fire protection everyone just pays taxes, according to a schedule which may or may not be progressive according to income, and everyone gets the services. What if you had to sign up on a web site to get police protection? Likewise for military services - should you pay for them according to the degree to which you feel threatened by terrorism or foreign invasion? I think I could save a lot in federal taxes if it were done this way.
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written by PeonInChief, October 27, 2013 1:10
I looked at the calculator, and Robert Salzberg's friend may be netting $1K a month, so her AGI (which is what matters for ACA coverage) may be high enough to keep her out of Medicaid. Indeed people close to the cutoff--about $16K in California--should try to keep themselves out of Medicaid and on the exchange. At that income level, the coverage costs about $540 a year in premiums and gets you much better care than Medicaid.
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written by Insurance Guy, October 27, 2013 3:35
Thank you.

Paul Krugman keeps making this same mistake on his website. He seems to believe that the goal is to sign up large numbers of young people and overcharge them in order to ensure that the funds coming in balance those going out.

That's not necessary whatsoever. In fact, everyone can be charged an actuarial fair premium for their own age group.

The important point is to avoid adverse selection. You don't want just sick people to sign up, because the program would fail if that were to occur.


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written by watermelonpunch, October 28, 2013 12:48
written by PeonInChief, October 27, 2013 12:10
I looked at the calculator, and Robert Salzberg's friend may be netting $1K a month, so her AGI (which is what matters for ACA coverage) may be high enough to keep her out of Medicaid. Indeed people close to the cutoff--about $16K in California--should try to keep themselves out of Medicaid and on the exchange. At that income level, the coverage costs about $540 a year in premiums and gets you much better care than Medicaid.

I don't know if this is always the case. I think it would depend on how close someone is living on the edge.
Obviously if the person has a bit put aside, and qualifies for Medicaid because of current lower income that is likely temporary, I would agree. However if someone is just about digging themselves out of poverty, and just living paycheck to paycheck, it could be prohibitive, even with the extra help of lower out-of-pockets in addition to subsidies on the exchange.
@ Insurance Guy
written by Matchoo, October 29, 2013 1:04
Your comment is factually incorrect. The max premium for older folks is capped at 3x what younger folks pay in order to keep policies affordable for them. Thus, younger folks do get ripped off to subsidize older folks.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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