Mother Nature clearly practices age discrimination when it comes to health.
U.S. government data for 2006 showed us that the average cost of care for a 20-year-old in America was about $2,600 per year. That same report showed that the average cost of care for a 45-year-old was double that -- $5,200.
The average cost of care for a 65 year old in America was double that -- roughly $10,100 per person, per year.
The average cost of care for an 85-year-old-was-double that -- more than $25,000 per year, for each person.
So Mother Nature clearly practices age discrimination.
Older people cost more money because older people use more care.
Why is that information relevant to the current health care reform debate?
It's relevant because we are trying to figure out how to cover everyone in America. We want to cover people of all ages. We need money to pay for people's care. It will clearly cost more to buy care for older people, because older people spend more money on care -- and that happens because, on average, older people both need and use a lot more care.
That difference in care costs by age is true whether the government buys the care, or whether private insurance plans pay for the care. Look at government expense levels by age. The average cost to our government of Medicaid paying for the care for a one-year-old child is a small fraction of the average cost that Medicare spends buying care for an 80-year-old adult. Medicare and Medicaid are not discriminating by age category. They just spend less money on kids, because kids, on average, need less care.
Similar cost differences exist by age category for non-governmental insurance.
Insurance premiums in the private marketplace are very directly based on the average cost of care for whoever has coverage. Most people buy health coverage in America today through groups -- mostly employer groups. Ninety-three percent of people with private coverage in this country buy their coverage through groups. In the group insurance marketplace in America, the premiums for each group are based on the average cost of buying care for all of the people in each group. So a group made up equally of older people and younger people would have an average premium -- right in the middle. That average premium would be higher than the money that is typically needed to buy care for the younger group members and lower than the money needed to buy care for the older members.
That's a major reason why premiums for group coverage tend to be collectively affordable. Group premiums are based on the average cost of care for the entire group -- and the lower costs of care for young people offset the higher costs of care for older people.
That model works for employer group coverage because every one of the people in all age groups stays in each employer-based insurance group.
If the younger people in any given employer group were to simply leave the group, the average cost of care for the rest of the people in that group would go up -- and that higher average cost would mean a higher premium that would need to be paid for the people who chose to remain in that specific group. Employers who lay off younger workers usually see a very quick increase in health care premiums for their remaining workers because the older workers who are still in the group simply have a higher average care expense and premium is based on the average cost of care for the people who are still covered.
Group insurance uses average prices for the whole group. By contrast, individual insurance sales use prices based on smaller segments of the population.
Why does that happen?
Consumer choices.
People are smart. People spending their own money are particularly smart. People who personally buy individual coverage tend to look for the lowest-cost premium to buy. That's why insurers in the "individual" market don't use average prices that reflect average costs of care for everyone of every age. Prices for the "non-group" insurance market tend to be set by age category. Why is that done? Young people who have real choices today between multiple premium levels that are now based just on their own age category will not voluntarily pay twice as much premium as they need to, to buy coverage, if the premium is based on care costs that include the costs of buying care for older people. So insurers who sell to the individual marketplace in America today don't try to sell "average" prices for everyone. Instead, they set up "average" prices for each age category based on the average costs of care used by the people in each age category. So young people today get to pick between low premiums offered by every insurer for younger people. Older people, unfortunately, get to chose between higher premiums that are also based very directly on the average cost of care for their age category.
That issue of age-related premium is primarily a problem in the individual insurance sales marketplace.
Groups solve that age distribution problem by having every employee in each group included in the risk pool -- so the premium for everyone in each group can always be based on the average cost of buying care for the entire group. The employer then pays an average amount for every employee, and that employer payment shields both young and old employees from age differences in their personal costs.
Why is this issue worth discussing? One major challenge we face in American health care policy today as we try to figure out how to make coverage affordable to everyone is how to build premiums for the individual people who buy "non-group" coverage that will be affordable for both older buyers and younger buyers.
Mother Nature clearly discriminates relative to health care costs and age. The cost numbers for care used by each age category tell the story and tee up the problem pretty clearly. If we change the rating approach overnight to give everyone in America who buys individual coverage one single "average" premium regardless of each person's age, all the young people with insurance who now pay the much-lower-cost insurance rates that are based on the care cost levels used by their age category will see their premium go way up. But older Americans who now have higher cost age-related private insurance would see their premiums go down. Both sets of people would see big premium changes if the new premiums for individual/non-group coverage in America were determined by law to be a single, flat-rate level that would be based on the average cost of care for people in all age groups.
Some people would see an increase in premium. Some people would see a decrease in premium. Only a very few people would keep their current premium.
That is not an easy issue for Congress to address and resolve. Resolving it abruptly by moving everyone to a single middle price could make some people very happy and some other people very angry. You don't need to be a rocket scientist to figure out who will be cranky and who will be pleased if the government decided to use "average" rates for everyone.
It really is a hard issue for Congress to resolve -- because any change in the current age category rating approach will require some subset of people to pay more money for their coverage. We need to figure out the best way of making coverage affordable for people of all ages. Solving this problem will probably require some clever combination of rate-level phase-ins and compromises about who subsidizes which premiums.
Just remember -- when you hear young people arguing to not have their premiums increased because they don't want their added premium payments to be used to subsidize the "average cost of care for everyone," and when you hear older people saying "don't discriminate against me on premiums," they are both just reflecting the impact of buying coverage in a world where Mother Nature isn't entirely fair in her distribution of health care costs.
Remember -- for Medicaid and Medicare -- two purely governmental programs -- one for the very young and one for the very old -- the cost difference to the government between old people and young people is huge -- hundreds of dollars per young person versus thousands of dollars per older person -- and that cost difference does not exist because the government is trying to discriminate against either group.
It is what it is. Congress is now trying to figure out the fairest solution to resolve our current rate calculation differences.
The only guarantee about the solution that will be selected is that it will make some folks unhappy because they will be paying more, and it will make some folks happy because they will be paying less.
You can buy happiness -- but someone has to pay for it.
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All of you wealthy people out there - you can't take all of your money to the grave but you certainly cause hardship and despair to your fellow citizens whom are not lucky enough to be in your position. No matter what all of you wealthy people seem to think, LUCK does play a roll in where you are at in the scheme of things.
I also believe hard work is critical too but, some times no matter how hard a person works things just don't work out. Then when that happens all you can do is try again. But while trying again where do you find yourself? Strapped for cash, unable to get health insurance(too expensive if you are out of work) current tough times etc.
I would like to see someone who could actually step up to the plate to really do something about this.
One thing I do realize is money means power in this world and no one wants to give any of this up.