Age Discrimination, or a Rational Response to Economic Factors?

Posted By Stephen D. Rosenberg In Medicare
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Take a few days off, and news just keeps on piling up. In the next few posts, I am going to try to pass along some of the more interesting events, articles, court decisions and stories that crossed my desk over the past several days, starting with this one, a story out of the New York Times today that does an admirable job of explaining a new regulation out of the EEOC allowing employers to provide different health benefits to retirees under 65 than to retirees over that age. The idea behind the regulation is that employers ought to be able to move retirees eligible for Medicare into that program and off of their books, and at the same time, be encouraged to maintain benefits for younger retirees -who are not eligible for Medicare - by knowing that they don’t have to pay for medical benefits to the same extent for the class of older retirees. This is still more of the playing at the margins of the health insurance crisis that we also see, as I discussed here for instance, with state fair share acts; the real problem is the cost to employers of providing health insurance benefits, and steps like this regulation are directed only at making a bad situation a little better, without addressing the fundamental economic problem that creates the need for these half-steps, namely the extraordinary cost to employers of providing health insurance to employees and retirees.

Part D, Medicare and Economic Distortions

Posted By Stephen D. Rosenberg In Health Insurance , Medicaid , Medicare , Medicare Part D
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The New York Times provides an excellent report today on the impact of Medicare Part D and the unintended - maybe(?) - result of moving millions of lower income patients from Medicaid to Medicare. The article points out that drug company profits will increase significantly because the patients are moved from Medicaid, which has certain price restrictions, to Part D, which lacks those same restrictions. In the article, A Windfall from Shifts to Medicare, the author sums up:

The windfall, which by some estimates could be $2 billion or more this year, is a result of the transfer of millions of low-income people into the new Medicare Part D drug program that went into effect in January. Under that program, as it turns out, the prices paid by insurers, and eventually the taxpayer, for the medications given to those transferred are likely to be higher than what was paid under the federal-state Medicaid programs for the poor.
About 6.5 million low-income elderly people or younger disabled poor people were automatically transferred into the Part D program for drug coverage. . . .
Drugs tend to be cheaper under the Medicaid programs because the states are the buyers and by law they receive the lowest available prices for drugs.
But in creating the federal Part D program, Congress - in what critics saw as a sop to the drug industry - barred the government from having a negotiating role. Instead, prices are worked out between drug makers and the dozens of large and small Part D drug plans run by commercial insurers.

The article provides a thorough summary of a complex problem. Beyond the problem, though, is a question. Is this an economic distortion flowing from the structure of the industry, of the type discussed in an earlier post on such distortions? Or was the original cheaper structure the distortion?