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The current standard Medicare Part B premium is $202.90 a month. That equals about 25% of the cost of Part B. The average American worker with employer coverage pays about 26% of premium for family coverage.
Remember, Medicare payroll taxes only fund Part A of Medicare. Part D and B are funded via premiums and general tax revenue.
Combined, Connie and I pay $1,925.60 per month for Parts B and D and Plan G Medigap. That is over ten times my monthly employer payroll deduction the day before I retired.
Our Medigap is high, over $300 a month each. That’s because my employer dropped our Medicare supplement coverage and we ended up with age based premiums. Premium-wise having Medicare is not necessarily a bargain.
However, the good news is despite high premiums, our out-of-pocket costs are limited to the Part B deductible which, considering the expenses we are incurring, is a blessing indeed.
Would I like lower premiums? Absolutely. Do I think what we are paying is unfair? No.
Premiums for any health insurance are driven by the cost and use of healthcare by the people in the group be it Medicare, an ACA plan or employer plan (most of whom don’t even use insurance, but are self-funded). Because of this, a non-profit insurance company like a Blue Cross plan can have higher premiums than a for-profit.
The rhetoric about insurance company profits and CEO pay is quite irrelevant in the overall context of premiums. They represent a small percentage (2-5%) of each premium anyone pays. Health insurance company profit margins are no higher, sometimes lower, than those of regulated utilities.
The large corporate profits people refer to are driven by the volume of policies in effect and sometimes include foreign sales and other lines of business. It’s not because of a high premiums on individual policies. Premiums are reviewed for actuarial soundness and if they generate excess revenue after the fact beyond legal thresholds, money must be returned.
Premiums reflect how we use healthcare, the type of care we use and the price of each component of that care. That’s where our focus needs to be, but that is not easy because we all want the best, latest technology, most convenient, fastest care, we don’t want a third party interfering and we want it all to be at that undefined “affordable” price.
That will never exist because in the minds of people there is no amount of money spent on healthcare that is affordable. I just picked up an Rx yesterday and the co-pay was $255, that’s not a financial burden, but I would still rather have spent the same $255 on a new golf club I had my eye on…and that would certainly have been considered affordable. Perhaps like $200 tattoo for some people.
What Americans want will never happen. That is why other countries bury the collective cost in taxes and its citizens are willing to do with a bit less in convenience while not worrying about the cost of each service they receive.
I tell people that if you don’t want to change the system, stop complaining about the one you have.
That 2 to 5 percent profit margin must have skipped over two years that I had an individual policy, where the health insurance medical loss ratio for my insurer was 69% and 74%, less than the 80% set by the ACA,. I received rebates.
Insurers had to meet the ACA’s medical loss ratio (MLR) threshold: in the individual and small-group markets, insurers had to spend at least 80% of premium revenue on clinical care and quality improvement, with the rest going to administration, marketing, and profit. If they fell short, they owed rebates based on a three-year average.
Source: healthcare.gov
Apparently there was a valid basis to set a medical loss ratio for health insurers.
That’s a very nice retirement income level, Dick, with each of you paying ~$385+ in IRMAA as a married filing joint couple.
We currently pay $1465 ($732.50 each) for our Medicare A,B,&D + IRMAA. However, we get a partial reimbursement from my husband’s former employer (which provides our Medicare supplement, too) that is added to his monthly pension check. We’re still out-of-pocket about $500/month, but that’s for excellent coverage. It still seems like a lot, but really, I can’t complain.
2-5% of each premium, you only get a larger aggregate number when there are a lot of policyholders, but it’s not a large portion of the premiums any individual pays.
You said that profits are 2-5% of premiums paid. AI said we pay 1.6 trillion a year in premiums so that $32 to $80 billion a year in profits every year. That’s a lot. Also you said nothing about how insurance companies drive up costs by negotiating what’s best for their bottom lines vs. the member. There is also the issue of double dipping by insurance companies who own PBMs.
Speaking of PBMs why can’t insurance companies negotiate prices so we don’t have to use Good Rx?
2-5% of each premium, you only get a larger aggregate number when there are a lot of policyholders, but it’s not a large portion of the premiums any individual pays.
$32 to $80 billion here, $32 to $80 billion there, pretty soon it adds to real money. After all when compared to $40 trillion national debt, it’s peanuts. I admit that the two are not related.
We pay approximately $10K/year on Medicare and Plan G premiums, that is by far our largest financial obligation. I’m not complaining because those dollars are buying us the best healthcare we have ever had. Still, I wish there was a magic wand to wave, in order to keep provider costs in line with total inflation.
Dan, the basic problem is not provider costs, that is unit price, that is controlled by fee setting and negotiation. The problem is utilization and overhead costs. The only fair way is to have one risk pool and one set of fees instead of the wide differences we now have in allowable fees and minimize admin costs.
We should have a chip card with all our medical info, all our coverage, all our test results accessible no matter where we go for care anywhere in the country. That would speed care, avoid unnecessary and duplicative care and eliminate paperwork… but that is a dream.
Dick, I totally understand “experience”. Yes, the aging population is reeking havoc on the system. I was thinking of things not covered by Medicare when I mentioned provider fees. Dental services, eye care, hearing aids for example. Luckily, we have Costco to mitigate some of the damage, just avoid the popcorn.
Admin costs would make for an interesting conversation. I got quite the explanation when I asked AI why the fees are a higher % today than they were in the 70s.
Dick,
Buy the club!
What? The co-pay AND the club. I’m a retired senior citizen. I should be complaining about property taxes. 🤑