Congressman Paul Ryan of Wisconsin has given a lot of thought to the future of Medicare and how this program, which takes up 13% of the federal budget, should be shaped in the future.  Ryan is one of the Republican “Young Guns” who will take leadership roles on key committees if their party becomes the majority in the House of Representatives.

An article in Kaiser Health News provided an overview of Congressman Ryan’s proposal for Medicare:

Current Medicare beneficiaries, and those nearing retirement (55 and older), would get Medicare as it exists today. For everyone else, eligibility would begin at 69 and a half, and there would be a “standard Medicare payment” for the purchase of private health coverage.

At the beginning, Medicare vouchers would cover $11,000 of the cost of a health plan, which the proposal lists as the average amount of money that Medicare currently spends on a beneficiary. The total would increase with inflation, based on a combination of the consumer price index and its medical care component. If the payment exceeds the cost of a plan, the beneficiary could invest the leftover money in a medical savings account to pay for other medical needs, or buy long-term care insurance.

Government payments would vary depending on an individual’s income, health status, and initially region. Individuals with incomes less than $80,000 would receive the full amount, those between $80,000 and $200,000 would get half, and those above $200,000 would receive 30 percent. The government also would fully fund medical savings accounts for low-income beneficiaries.

Ryan is the top Republican on the House Budget Committee and a senior member of the Ways and Means committee which has jurisdiction over Medicare and Social Security.  He could become the chairman of the committee that oversees Medicare.

From my perspective (as I’m over 55), Ryan’s plan has some interesting ideas.  But unless the under-65 insurance market changes – and Republicans say they will repeal the recent health insurance changes  – the idea of raising the Medicare eligibility age to 69 is …frightening.

The idea of the government giving people money to buy their health insurance sounds interesting to me.  But the problem is that insurance companies will be making a profit from that money.  Why not get rid of health insurance for-profit and save the U.S government billions of dollars?  Other countries like Germany, France, and Switzerland have health insurance companies – but those companies are “not-for-profit”.  Medicare is a not-for-profit insurance organization. Its overhead costs are 2%.  Insurance company overhead costs are 15-20% and include profits.  What is the better deal for American taxpayers?  2% vs 20%:  I think the answer is obvious.

I recently got phone calls about individual insurance from two  men who work for a small, family-owned construction company that is canceling its small group health insurance. With everybody in the company being over 50, a couple in their 60′s, and at least one person with serious health problems, the health insurance premiums for every employee were very high.  The problem with small business health insurance plans is that everybody’s premium goes up if just one person gets sick and uses the insurance policy a lot, or if just a couple of employees are in their 60′s and healthy.

So this small family company with eight employees has left each individual to fend for himself for health insurance.  One of the employees, “John” (not his real name), is pretty healthy, so he should have no problem being approved for insurance – though I did hear today that the insurance company to which he applied has asked for his medical records to assess a condition he mentioned on his application.  John is in his mid-fifties and will have a lower premium than the one he had with the employer group plan.

I talked on the phone with John’s co-worker, “Alonzo”.  Alonzo told me he is “pretty healthy” – though he neglected to tell me he is overweight.  Alonzo applied on-line for health insurance, and the insurance company did not ask for his medical records before they declined him.  His weight and two other conditions indicated on his application made the “decline” decision easy for the insurance company.  And he thought he was healthy!

Alonzo is 64 years old and has one year to go until he gets Medicare.  If he were healthy, he could get an individual policy with a very high deductible for around $200 per month.  But because he has pre-existing conditions he will pay about three times that in order to get coverage through the Health Insurance Portability and Accountability Act (HIPAA).  This 1999 federal law allows a person losing group insurance (even small group) to get insurance with no underwriting (no questions asked).

The HIPAA law which will allow Alonzo to get health insurance is a good thing.  The bad thing is that insurance companies only have to offer one or two plans under the HIPAA law and they can take the normal premium and triple it. (UPDATE: It turns out they take the “standard” rate, not the “preferred rate” and triple it.) So Alonzo will pay around $800 per month for a health insurance policy with a $10,000 deductible. We looked at other policies with much lower deductibles, but the premium for Alonzo would be over $1,000 per month for these plans.  So Alonzo will sign up for this policy, cross his fingers, and hope he stays healthy for the next year.   He can’t wait to turn 65 and get good, affordable health insurance with Medicare.

UPDATED INFO: Alonzo ended up with a HIPAA plan with a $3,500 deductible and $1,400 per month premium. He chose this plan because he needed treatment for prostate cancer which was diagnosed just as he was losing his group plan.

I hate individual insurance because I have met too many people like Alonzo.  He thinks he’s healthy.  He has worked all his life.  He and his wife have a lovely, well-kept, small home in Tucson. He is a responsible citizen who knows he needs health insurance to protect everything he has worked for all his life – and he’s willing to pay for it.  He can get health insurance because of the HIPAA law, but he is basically getting ripped off with such an expensive policy that won’t kick in until he has spent $10,000 on medical costs.

In 2014, someone like Alonzo will go onto an insurance exchange, compare plans being offered (with different deductibles and premiums), and sign up for a plan.  How simple! Of course, this kind of simple choice, with nobody being rejected for insurance coverage, can only happen if everybody is in the system – including young, healthy people.  If everybody is in the system, people like Alonzo won’t be left out in the cold.  And small businesses getting tax breaks for contributing to their employees’ premium costs will be more likely to have a group plan.

There are too many people in Tucson and across the country like Alonzo.  For me, it seems un-american to say, “Sorry, you are un-insurable.  Take a hike. Fend for yourself. It’s not our problem.  I don’t want health insurance so who cares if you don’t have health insurance.”  In 2014 this will change.  For now, I repeat, I hate individual health insurance.

As an insurance agent I work mostly with Medicare and I’m happy about that.  Medicare can be confusing because seniors have a number of choices to make about their coverage – but there are standards and, most importantly, nobody is refused coverage. The individual insurance market is completely different, and I hate it – especially when I have to inform a client that they have been “declined” by the insurance company, or when an insurance company gets away with unfair practices.

An Update on “United Healthcare:  Can they get away with that?”

Back in September I wrote about “Terry”, who had a decent individual insurance policy with Pacificare.  Pacificare was bought by UnitedHealthcare several years ago and all Pacificare policies are being terminated and coverted to UnitedHealthcare policies.  Apparently, United can take Terry’s decent health insurance policy and convert it to a crappy policy – and it’s perfectly legal.   As a result of my September 14th blog post about Terry, United did look at her case and corrected two out of three problems I had pointed out.

1) United acknowledged that Terry’s conversion policy should not have a $250,000 lifetime benefit limit. Oops, United had somehow missed the news about the Affordable Care Act that eliminates caps on what insurance companies must pay out for clients’ health care costs.

2) Terry’s packet of info on her conversion policy did not include drug coverage, but it turns out the policy will have a drug plan. Oops, somebody at United had left out this info.

3) Terry’s conversion policy has no cap on her 20% co-insurance, which is what she pays for her health care costs after she has met her deductible.  It turns out this is perfectly legal.

I have never seen an individual health insurance policy offered by United that does not include such a cap.  This cap is important because it limits financial risk in case a person has a serious illness like cancer.  I’ll say it again.  I have never seen a health insurance policy that does not have such a limit, so I don’t know why United designed such a policy for Terry.  Oh, wait, I think I do know why.  Terry has diabetes and is un-insurable.  She can’t get another insurance policy because of her pre-existing condition, so she must take what United gives her.  What a system!  I can’t wait for 2014 when this will no longer be permitted!

Next:  I’ll be writing about several people trying to get individual health insurance, some with success and one who was declined.  Medicare is so easy – even if a bit confusing – and individual insurance is so disheartening and unfair.  I hate it!