The Effects of Medicare Buy-In Policies for Older Adults on Health Insurance Coverage and Health Care Spending

Research Report

The Effects of Medicare Buy-In Policies for Older Adults on Health Insurance Coverage and Health Care Spending


A Medicare buy-in program would allow qualifying individuals currently ineligible for Medicare to purchase a Medicare-like health insurance plan. In this report, using the Urban Institute's Health Insurance Policy Simulation Model, we estimate the coverage and health care spending implications of a Medicare buy-in policy targeting adults ages 50 to 64, similar to proposed legislation.

In the base buy-in policy scenario we model, adults ages 50 to 64 can purchase a plan like traditional fee-for-service Medicare that covers hospital care (Part A), physician and outpatient services (Part B), and prescription drugs (Part D). The plan would have an overall actuarial value of 85 percent, which is comparable with fee-for-service Medicare. The plan would reimburse providers at Medicare payment rates, which are typically lower than payment rates in the current nongroup market. Enrollees in this plan would form their own risk pool and the plan would be self-supporting. All buy-in enrollees within a rating area would pay the same premium (i.e., would not face age rating within the 50–64 age group). Premiums would be adjusted to reflect geographic variation in health care prices and would adopt the same subsidy structure (premium tax credits and cost-sharing reductions) used in the Affordable Care Act (ACA).

We also examine seven policy variations that change elements of the base buy-in policy in isolation: restricting eligibility to ages 55 to 64; setting a national average buy-in premium; coordinating the calculation of premium tax credits so families with mixed coverage pay up to a maximum percentage of income for all coverage; allowing people with an offer of affordable employer-sponsored insurance to buy into the plan; offering more extensive modernized Medicare benefits, including an out-of-pocket maximum and coverage for dental, vision, and hearing services; setting the full buy-in premium to a lower level than that for Medicare Parts A (typically no premium), B, and D; and providing enhanced premium subsidies in both the Marketplace and the buy-in plan.

The main finding from our analysis is that a Medicare buy-in policy’s potential to substantially expand health insurance coverage is limited given the subsidies already provided under the ACA. Buy-in enrollment does not exceed 3 million in any of our scenarios, including ones with lower premiums or much more generous subsidies than the ACA provides. What the buy-in policy primarily does in the scenarios we modeled is take advantage of lower provider payment rates and thereby increase coverage generosity and reduce out-of-pocket spending for beneficiaries. Buy-in policies can result in savings to national health spending overall because of lower provider payment rates. Increases in federal spending under more expansive policy scenarios (enhanced subsidies in the Marketplace and buy-in plan and reducing buy-in premiums to traditional Medicare levels) can shift dollars from private payers to public payers in a way that is roughly neutral for aggregate spending


This report was revised February 1, 2021. On page vii, incorrect parenthetical percentages in the fourth bullet were corrected (the dollar values are unaffected). That bullet now reads as follows: 

  • On net, the base buy-in policy would reduce aggregate health care spending by about $1.8 billion (about 0.1 percent). This reflects a net decrease in spending of $2.8 billion (0.3 percent)for older adults and an increase in spending of about $1.1 billion (less than 0.1 percent) for people under age 50. 

Related changes were made on page 21, where the text above was repeated as the first sentence of the first bullet. That sentence was deleted, and the parenthetical percentages were moved to the second sentence. The bullet on page 21 now reads as follows: 

  • Overall, we estimate the base buy-in scenario would lower total health care spending by $1.8 billion (0.1 percent). That net decline would result from an estimated $2.8 billion (0.3 percent) in savings for those in the buy-in-eligible age range (second panel) and $1.1 billion (less than 0.1 percent) in increased total spending among those below age 50 (third panel).

In addition, some text was changed on page 22. The first full bullet was edited to clarify that (a) the buy-in policy would have little net effect on federal spending for adults ages 50 to 64 and (b) the amount of that effect is $95 million, as shown in table 8. In the second bullet, “($631 billion)” was changed to “($631 million),” as shown in table 6.

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