Buying Into Medicare

So now that the public option is dead, Democrats are floating the idea of letting 55-to-64 year olds buy into Medicare.  I'm not sure I understand how this works.  Problem A:  good old adverse selection.  Unlike younger people who are mostly worried about catastrophic accidents, people in this age group are mostly worried about slow-moving diseases like diabetes.  Even with an open enrollment period, people might wait until they got sick.

What is a Medicare buy-in going to do if the check gets lost in the mail, or someone forgets?  Insurance companies cut you off.  Medicare is going to have a hard time telling some nice sixty year old woman that oops, they're not going to treat her cancer after all because she didn't make the payment deadline.  If they operate like any other government agency--pay off your arrearages and we'll restore service--they'll hemorrhage money as people figure out that the sensible thing to do, unless you're already sick, is to buy in for one month, and then "forget" to mail in the rest of the checks.

Second problem:  administration.  One of the reasons for Medicare's much-vaunted administrative costs is that they don't need to do the ordinary sorts of customer service things that insurance companies do.  They collect premiums by deducting them from your social security check.  No one terminates their "policy" unless they die.  You're talking about adding a substantial new bureaucracy to Medicare that will be expensive.  By the time you're done, how much cheaper will this be than what that age group can currently buy on the open market?

Third problem:  Budget deficits.  Medicare is currently driving our budget off a cliff.  Adding to the number of constituents that enjoy the service is not going to improve the fiscal picture, or the prospects for serious reform.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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