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NEW STUDY FINDS COMMUNITY RATING A GAIN FOR OLDER WORKERS AND THEIR EMPLOYERS

 And Lowering the Age for Medicare Eligibility to 55
 for Retirees and Spouses Would Help Business,
 at a Cost to Government of Less than $10 Billion a Year
 /ADVANCE/ WASHINGTON, Sept. 29 /PRNewswire/ -- A major analysis of employer health care costs for older workers aged 55-64 finds that financing health insurance for these workers and their dependents through community-rated premiums, similar to those proposed by the administration's health reform proposal, will dramatically reduce their costs to employers, compared to costs incurred under the current experience-based financing system.
 Released today by The Commonwealth Fund, a private philanthropy located in New York City, the report, "Health Care Costs and Older Workers," finds that community-rated premiums, as the Clinton health care reform plan recommends for firms with 5,000 or fewer employees, would be much better than experience-rated premiums for older people's employment opportunities since the costs of providing their health care coverage would be pooled across all workers.
 "The proportion of all workers who are over the age of 55 is expected to increase by 20 percent from 1990 to 2005," said Karen Davis, executive vice president of The Commonwealth Fund. "President Clinton's choice of community rating is forward-looking because it does not penalize companies for hiring and retaining older employees as the experience-based financing does. The current system creates a major financial burden for firms with an older work force, contributes to early retirement and hence reduces tax revenues from older people and increases government expenditures for their health and welfare. And as the fund's previous research has shown, older Americans are too vital a resource to be lost to business."
 The study, prepared by Lewin-VHI, a Washington-based public policy research firm, compares the impact of three ways of financing health insurance for older workers and their dependents -- community-rated premiums, payroll tax and experience-rated premiums. The report finds that adopting community-rated premiums, which are age and gender neutral, would result in employer health care costs for older workers that would be from 25 percent to 59 percent lower than under experience- rated premiums, the difference depending upon the worker's gender, age and type of coverage (single or family) -- factors that are important determinants of experience-rated premiums.
 Cost differences are greatest for those with dependents. The report estimates that the community-rated premium for all older workers with dependents would be $3,270 in 1994. Under experience rating, the premium for older male workers with dependents would be $5,240, and for female workers it would be $7,960.
 The high costs for older workers with dependents under experience rating largely reflect high health care expenditures for both the workers and their spouses. Costs for women in this group are especially high because their dependents are often husbands who are not working because of a serious and expensive health problem. Experience-rated premiums for older female workers with dependents are estimated to equal about 35 percent of their earnings vs. 14 percent under community-rated premiums. These high percentages partly reflect the relatively low wages of older women who work.
 "Economic need prompts many older women to return to the labor force," said Lou Glasse, president of The Older Women's League (OWL). "Unfortunately, they confront many barriers to finding jobs. Use of experience-rated premiums increases the barriers and prices many women out of the job market."
 The study also examines the impact and cost of reducing the age of eligibility for Medicare to 55 for those who are neither workers nor the dependents of workers -- about 6 million people between the ages of 55 and 64, many of whom are early retirees, and many of whom are in poor health. Doing so would provide substantial relief to this group and to employers who are burdened by high costs for retiree health insurance. The result would mean a net increase in government spending of less than $10 billion.
 "Health reform needs to ensure that everyone can get reasonably priced health coverage," said John Rother, director, Legislation and Public Policy Division, American Association of Retired Persons. "With more companies dropping retiree health coverage every day, this issue needs to be addressed, and one way is to lower the age for Medicare coverage to 55 for non-employed people and their dependents. Retirees who lose their health coverage and are in poor health either have to pay extremely high premiums or find they can't get coverage. Sickness can eat up whatever nest egg they've accumulated for their retirement. Yet, if their former employers do continue to provide coverage, it is a drain on the companies' profitability."
 About 11 percent of older persons aged 55-64 outside the labor force are uninsured. Even for those with insurance, serious medical problems can rob them of economic security in retirement. In a study released last year, the General Accounting Office found that "firms are reducing or terminating health benefits for current and future retirees. Retirees who lose their company health coverage often face poor prospects for acquiring health coverage through another employer, and individual insurance may be available only at very high rates."
 The report notes that lowering the eligibility age for Medicare to 55 for those who are neither workers nor dependents of workers would lower the out-of-pocket expenditures of people in this group by 19 percent on average; reductions would be greatest for those who are sickest. Payments by private insurance, which are financed by former employers for some retirees, would be reduced by $4.5 billion, giving substantial relief to companies that are burdened by the high costs of retiree insurance.
 The report estimates the net cost to the government to be $9.7 billion, which includes an increase of $13.2 billion in Medicare expenditures, a reduction in Medicaid expenditures of $4.2 billion, and an increase of $0.5 billion for other public health expenditures.
 The study uses data from the 1987 National Medical Expenditure Survey (NMES), the most recent national database that provides detailed information on health care expenditures and sources of payment for individuals, along with information from a variety of sources to project costs in 1994.
 The Commonwealth Fund is a national philanthropy located in New York City. Its major programs focus on improving health care services, advancing the well-being of elderly people, bettering the health of minorities, developing the capacities of young people and promoting healthier lifestyles.
 Copies of the full report are available from the Communications Office of The Commonwealth Fund, 212-535-0400.
 -0- 9/29/93/1400
 /CONTACT: Mary Lou Russell for The Commonwealth Fund, 212-606-3842 or 202-544-2254/ CO: The Commonwealth Fund ST: District of Columbia IN: HEA SU:


MH-DC -- DC003 -- 6622 09/29/93 07:31 EDT
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Date:Sep 29, 1993
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