Dr. Pamela Farley Short, professor and director of Penn State’s Center for Health Policy Research, led the study. She says, "Some Americans will lose coverage through their employer’s health plan if they retire at 62, the age at which they first qualify for Social Security. Others already lack health insurance at 62 because they stopped working or have jobs that don’t provide coverage. Many cannot afford the high cost of an individual policy at that age.
"Being uninsured is a particularly significant problem among people 62 to 64 because the risk of serious and costly illness is greatest for older age groups," she adds.
With support from the Commonwealth Fund Task Force on the Future of Health Insurance, Short and co-authors Dr. Dennis Shea, professor of health policy and administration, and M. Paige Powell, a doctoral student, developed a solution. Their proposal was published this month, August, along with proposals addressing other health insurance issues, in a special edition of the journal, Inquiry. Their paper is titled, "A Workable Solution for the Pre-Medicare Population." Inquiry is published by the Blue Cross and Blue Shield Association and the Blue Cross and Blue Shield of the Rochester Area. The Penn State researchers propose that everyone over age 62 be allowed to purchase coverage through Medicare at a community-rated premium. For individuals and couples with low lifetime earnings, they propose government-subsidized vouchers that could be used either to buy into Medicare or to pay for private health insurance. To help everyone else save for health insurance after age 62, when premiums are high because of the greater likelihood of large claims for older policyholders, the researchers propose tax-free medical insurance savings accounts.
"Currently, non-group insurance, which is very costly, is more prevalent among the pre-Medicare population than any other age group. We propose giving all people 62 to 64 access to a source of insurance that achieves some of the economies of scale offered by large employer plans," says Short. "We favor Medicare over new sources of insurance because this age group is only three years away from enrolling in Medicare anyway."
The authors note that their proposal does not favor either work or retirement for people age 62 to 64 since both workers and early retirees would be eligible for pre-Medicare vouchers and savings accounts. However, they add that, by providing all older Americans with access to group insurance and by basing subsidies on lifetime earnings, their proposal will encourage some people to retire earlier.
They write, "By designing a proposal that is explicitly part of financial planning for retirement, we also have minimized the distortion of savings and consumption decisions." They add, "Our proposal rewards savers with a tax exemption for interest and dividends but does not favor people who consume all of their earnings and fail to save for their retirement years."
The authors conclude,"By encouraging people to save for health insurance in their early retirement years, our proposal would make pre-Medicare insurance more affordable without a big increase in government spending. At the same time, subsidies would be available to the life-long poor who have earned too little during their lives to pay for health insurance."
Journal
Inquiry