For cash-strapped older adults, a costly wait for Medicare

Bill Youngblood considers himself an expert on the struggle many people in their 50s and early 60s face: how to find affordable health insurance before they turn 65 and qualify for Medicare.

Youngblood’s expertise is professional: He’s an insurance agent in Southern California’s Coachella Valley, a popular retirement destination and home to a growing baby-boomer population. 

And it’s personal too: He’s 63 – just two years shy of qualifying for Medicare, the federal health insurance plan for seniors. Right now, he’s paying $2,000 a month for health insurance through Covered California for himself and his wife, 62. Once they both turn 65, they will pay a combined $580 with no deductible or copay for a Medicare Part B plan, plus supplemental coverage and Part D prescription coverage. 

“What choice do I have but to pay that?” Youngblood said. “I certainly don’t want to roll the dice with my health insurance at this point in my life. Some people say they never get sick and they opt out, but you never know.”

Medicare covers nearly all seniors in California – only 1.4% of those 65 and older in the state lack health insurance, according to a study conducted by UC Berkeley looking at the years 2015 to 2017. But nearly 9% of Californians ages 50 to 64 are uninsured. 

To be sure, younger Californians are more likely to lack insurance: In the 20- to 34-year-old age group, 13% are uninsured, and in the 35-49 age group, the rate is 11%, according to the same UC Berkeley study. 

While new state subsidies aim to make individual premiums more affordable for middle-income individuals, officials still fear that won’t be enough for the pre-Medicare age group seeking insurance through Covered California. The problem is exacerbated for people who are 55 to 64 years old because they tend to pay the highest premiums and have more frequent, dire and expensive medical needs.

Youngblood knows many people his age who opt out of coverage until they qualify for Medicare or who select bare-bones plans to save money. Strapped for funds and fearful of large out-of-pocket expenses, many seek care only for urgent problems and delay treatment for more chronic conditions until they have better coverage at 65.

“I commonly see this problem in our area in my practice,” Youngblood said. “Especially with our demographics in the Coachella Valley where people are approaching Medicare age. Often times, they are stuck having to make a decision – they need medical insurance but can’t afford life. For some, it is tough.”

Expanded subsidies will help some pre-Medicare patients

Policy changes at the state level are bringing costs down for the pre-Medicare age group, while national policies have tried to keep costs steady since the start of the Affordable Care Act.

Federal rules enacted as part of the ACA mandate that the cost of individual policy premiums for people ages 50 to 64 can’t be more than three times what they cost younger patients. Before the Affordable Care Act, costs for seniors ballooned to five or six times what younger patients paid, said Laurel Lucia, health care program director at the UC Berkeley Center for Labor Research and Education.

In the Golden State, new Covered California subsidies will be available starting Jan. 1 for individuals who earn between $50,000 and $75,000 a year and families of four who take in $103,000 to $155,000. Covered California is the state’s insurance marketplace created under the ACA where people can buy policies if they do not have employer-provided health insurance. The expanded subsidies will benefit Californians who get insurance on the state’s exchange, including the pre-Medicare demographic. 

Currently, a 55-year-old couple in Northern California earning $74,000 would pay $1,362 per month – 22% of their income – for the lowest level of coverage available under the state marketplace, with a $6,300 deductible per person, Lucia said. With the new subsidies, they will pay $863 per month, with a $2,500 deductible per person.

The expanded Covered California subsidies to lower premiums for low- and middle-income residents will cost the state $1.5 billion over three years.

The subsidies will benefit people like Steve Isen, 64, who lives in Bermuda Dunes, 23 miles east of Palm Springs. Together, he and his wife earn about $75,000 a year.

Isen works full time in sales for a small floor-covering business that isn’t required to provide insurance. He enrolled in a Kaiser Permanente plan on his own through the Covered California exchange and pays about $16,800 per year for himself and his wife. He opted for the lowest level of coverage because the premiums were so expensive. His plan, he says, is hardly deluxe.

“It’s costing us a small fortune,” he said. “Medical insurance is what a mortgage used to be. I’ve been ignoring health issues — like I have spinal stenosis and prostate problems that are catching up with me — until I reach Medicare. I don’t want to open the can of worms until I have better coverage.”

Aside from delaying health care he needs, the cost of Isen’s premium has caused him to delay retirement. Currently, he is not able to save any money; he’s only able to pay necessary bills. He expects he will be working well into his 70s to make up what he’s currently spending on insurance premiums. 

On his current plan, Isen pays $60 per doctor visit, plus costs for lab work and prescriptions. Beyond that, the deductible is daunting, he says. 

“They call it the premium plan for Kaiser, but we still have to pay a $12,000 deductible a year,” he said. “I signed up for less coverage this year because I figured I could make it through one year before I qualify for Medicare without having too many health issues since I am pretty healthy.”

Isen is not alone. Statewide, 24% of residents enrolled in individual market plans chose to delay seeking health care because of cost in 2017, according to a study conducted by Harvard Medical School.

Long-term solution to ballooning costs is still needed

Youngblood pays even more than Isen because he and his wife have a slightly more robust plan. 

Their premiums have grown as they’ve aged. Insurance companies know that those who are older have a higher chance of needing care, and they charge them more.

But at least the Youngbloods still have an income to cover the premiums. Bradley Gilbert, executive officer of the Inland Empire Health Plan – the Medi-Cal health plan for Riverside and San Bernardino counties – said it’s most challenging to find affordable health insurance for people under 65 who opt to retire early. 

Many of these early retirees have too much income to qualify for subsidized coverage on the exchange or Medi-Cal, the state health program for low-income individuals.

“There’s been a lot of discussion about letting people buy into Medicare at age 50,” Gilbert noted. “That wouldn’t be cheap, but it would at least be a guaranteed option. ... Those discussions haven’t gone much of anywhere with this current administration, though.”

Even if people under 65 were able to buy into Medicare, Youngblood says, he’s not sure it would be a panacea. 

“I don’t think bringing these people into Medicare earlier is going to solve the problem. That doesn’t address the underlying issue,” Youngblood said. “It is the high cost of medication and the lack of transparency in provider services by the hospitals that drive the costs.”

Consumers in their 50s and early 60s need more choices, he said. 

“There aren’t many health insurance options available that are affordable, and Covered California really isn’t an option unless you qualify for subsidies, and those who are struggling are the ones who don’t qualify,” Youngblood said.  

Lucia, at the UC Berkeley Labor Center, agreed that expanding subsidies to middle-class Californians is a positive step but not a long-term fix as health care costs are rising rapidly.

“The rising cost of health care also impacts how much the state spends on Medi-Cal and how much the federal government spends on Medicare,” she said. “Ultimately, we really need to address the underlying growth in health care costs in our system.”

Follow the USC Center for Health Journalism Collaborative series "Uncovered California" here.