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Mark Miller: Remaking Retirement

Medicare for All: What's in It for Seniors?

As debate heats up, contributor Mark Miller looks at Medicare's current shortcomings and how single-payer plans propose to fix them.

Run an internet search for "Medicare for All and seniors," and you'll see plenty of posts explaining just how harmful single payer health care would be for retirees.

The Medicare for All debate is just starting, with many questions yet to be answered. But don’t be too quick to assume that Medicare for All would take away something that seniors enrolled in the current Medicare program now enjoy. Just the opposite: The proposals circulating in both the House and Senate would improve Medicare by eliminating the program's most glaring coverage gaps for long-term care insurance, and for dental care, vision and hearing. The bills also would eliminate cost-sharing, meaning that one of traditional Medicare's weakness would be gone--the absence of a cap on total out-of-pocket spending.

Here's a rundown of the risks Medicare enrollees currently face for each of these five areas, in rough order of their relative importance. As a proxy for Medicare for All, we'll use the Medicare for All Act of 2019, sponsored by Rep. Pramila Jayapal, D-Washington, which is widely seen as the most pure Medicare for All plan circulating in the House. Sen Bernie Sanders, I-Vermont, has long been a proponent of Medicare for All, and his Senate legislation is expected to be similar in most respects to Jayapal's bill.

Long-term Support and Services
The Jayapal bill would cover long-term care, including nursing and medical services, rehab services, and services to support daily living. Services would be provided in a home or community-based setting, unless the patient requests otherwise.

The proposal aims to replace what just might be the most dysfunctional private insurance market in the U.S., and a key area of unprotected risk facing seniors. It is crystal clear that Americans just don't have much interest in buying private long-term care insurance. The American Association for Long-Term Care Insurance reports that fewer than 60,000 traditional (health-based) long-term care insurance policies were purchased in 2018, down from 700,000 in the peak years of 2000 through 2002. (Roughly 300,000 hybrid policies combining life insurance and long-term care protection were sold, the organization reports.)  The latest sign of the industry's struggles came last month, when one of the industry's largest underwriters--Genworth--announced that it would stop selling individual policies through brokers and agents.

The flagging sales stem from a plunge in the number of carriers underwriting new policies, and negative headlines and spiking premium rates for existing customers. Confusion about the need for insurance may also be a cause: a recent survey by Bankers Life found that 56% of middle-income boomers think Medicare does pay for ongoing long-term care; in reality, Medicare pays only for the first 100 days in a skilled nursing facility after a hospitalization.

Yet the need for long-term care remains one of the biggest unknowable risks retirees face. A study by Rand Corp. in 2017 found that 56% of people now age 57 to 61 will spend at least one night in a nursing home during their lifetimes. People currently in this age group run a 10% risk of spending three years or more in a nursing home and a 5% chance of needing more than four years of care.

Those odds may worsen in the years ahead. Howard Gleckman of the Tax Policy Center noted in a recent post for Forbes that the widespread use of statins and other life-prolonging drugs are reducing the growth of medical costs for seniors--but may also help them live longer. That increases the odds that they will survive long enough to ultimately require long term support and services.

"To oversimplify instead of dying of heart attacks at 60, more of us will live to 85, when we will get dementia," he writes. "That's why we need to shift resources from medical care to long-term support and services."

The costs can be staggering. Last year, the national monthly median cost of a private nursing home room was $8,365, according to the Genworth Cost of Care survey. And in high-cost states, the expense can be far greater. In New York state, for example, the monthly median cost last year was $12,189, Genworth found.

I have long argued that at least part of the long-term care solution must involve social insurance. An automatic payroll deduction for all workers will be the only way to get everyone contributing to a system that will provide risk protection affordably, mainly due to the enormous risk pool that would be created. This was one of the acknowledged conclusions of several well-regarded reports released in 2016 developed by a nonpartisan consortium of researchers. Those reports called for a hybrid of publicly financed risk pools to cover basic care, supplemented with optional privately-offered policies.

Out-of-Pocket Spending
Currently, traditional Medicare has no cap on total out-of-pocket costs. The two big risks for seniors here are hospitalization and prescription drug costs.

The 2019 Part A deductible is $1,364 and the daily coinsurance charge for longer hospital stays (61 to 90 days) is $341. In the unlikely event of a very long hospital stay, traditional Medicare covers up to 90 days of inpatient hospital care for each instance of care; enrollees also have another 60 days of coverage, known as "lifetime reserve days." These are like a bank of days that can be used once. (The Part B deductible this year is $185; you can view all Part A and Part B premiums and cost-sharing information for 2019 here.)

Currently, there are two ways to protect against high out-of-pocket hospitalization risk. Enrollees in traditional Medicare can purchase a Medigap supplemental plan, which carries an annual cost ranging from as little as $2,000 to $7,000 for the most comprehensive plans. Or, they can enroll in Medicare Advantage. These plans do put an annual limit on your maximum out-of-pocket expense, not exceeding $6,700 per year. (The average ceiling last year among all plans was $5,185, according to the Kaiser Family Foundation.)

For prescription drugs, even people who have bought Part D insurance face significant out-of-pocket risk in the event of a serious illness requiring specialty medications. A recent report by the Kaiser Family Foundation found that Part D enrollees are exposed to thousands of dollars in out-of-pocket costs for drugs that treat cancer and other serious illnesses. The researchers studied expected annual out-of-pocket costs this year for 30 specialty drugs used to treat four conditions: cancer, hepatitis C, multiple sclerosis, and rheumatoid arthritis. Median out-of-pocket costs ranged from $2,622 for Zepatier (for hepatitis C) to $16,551 for Idhifa (for leukemia).

Dental Coverage
Many retirees are surprised to learn that traditional fee-for-service Medicare does not cover dental care, despite its critical role in preventive healthcare.
Research shows clear links between poor oral health and chronic disease such as diabetes, as well as pain, chronic infection, and reduced quality of life.

Many seniors simply pay for dental care out of pocket; the average out-of-pocket expense among Medicare enrollees who needed dental care in 2016 was $607, but expense can run much higher if you need a crown, bridge, or root canal, for example.

A new research brief by the Kaiser Family Foundation finds that almost two thirds of Medicare beneficiaries do not have dental coverage and many go without needed care--almost half of all Medicare beneficiaries did not have a dental visit within the past year (49%). One in five spent more than $1,000 out-of-pocket on dental care in 2016.

Traditional Medicare will pay for dental care only in very limited circumstances--it must be deemed necessary as part of a covered procedure; for example a tooth extraction needed in preparation for radiation treatment. Many Medicare Advantage plans include some dental coverage, but usually cap annual benefit payments at $1,000 to $1,500. And cost-sharing is higher for surgery, restorative services and periodontal procedures than for preventive services.

Hearing Costs
Hearing loss has been linked with
increased risk for cognitive problems and dementia and higher risk of falling. Federal data shows that nearly 25% of those ages 65 to 74 and 50% of those who are 75 and older have disabling hearing loss. But many seniors don't use hearing aids, probably due to cost--a device for just one year can cost upward of $2,000.

Yet traditional Medicare does not cover hearings aids (some Advantage plans cover hearing exams and hearing aids). The Jayapal bill would provide full coverage for vision and audiology services.

Vision Care
Traditional Medicare does not cover routine eye care, such as exams, with some exceptions, such as people with diabetes or those who are at high risk for glaucoma. Medicare also covers some surgical procedures to correct chronic conditions, for example cataracts or glaucoma. The program also covers certain surgical procedures.

Many Medicare Advantage plans offer some level of vision care, typically routine exams and eyeglasses.

Mark Miller is a journalist and author who writes about trends in retirement and aging. He is a columnist for Reuters and also contributes to WealthManagement.com and the AARP magazine. He publishes a weekly newsletter on news and trends in the field at Retirement Revised. The views expressed in this column do not necessarily reflect the views of Morningstar.com.