Retiree medical insurance. Most workers won’t receive retiree health benefits from their former employer. Only 28 percent of large firms with 200 or more workers offered retiree health insurance in 2010, down from 66 percent in 1988, according to a Kaiser Family Foundation survey of employers. And just 3 percent of small firms with between three and 199 workers have health plans for retirees. Companies can generally increase out-of-pocket costs or even revoke retiree health benefits at any time.

To encourage employers to maintain their healthcare coverage for early retirees, the healthcare reform bill promised to reimburse employers for high healthcare costs for retirees age 55 and older who are not yet eligible for Medicare. So far, more than 5,000 employers have signed up for the Early Retiree Reinsurance Program and collected $535 million from the federal government to subsidize retiree healthcare costs. Retiree health plans can also be expensive for individuals, depending on whether your former employer subsidizes your coverage. A Towers Watson survey of 552 primarily Fortune 1000 companies found that retirees under age 65 pay an average of $633 per month for individual coverage and $1,633 monthly for family coverage.

COBRA coverage. You can buy back into the group health insurance plan offered by your former employer using COBRA continuation coverage, typically for up to 18 months if your company had at least 20 employees. “If your company offers you COBRA when you get to be 63 1/2, then you could use COBRA for 18 months and then go right into Medicare,” says Nancy Davenport-Ennis, founder and CEO of the National Patient Advocate Foundation. But COBRA coverage, while guaranteed, could put a significant strain on your retirement budget. “COBRA is expensive and it’s time-limited,” says Elisabeth Schuler Russell, founder and president of Patient Navigator. You may be required to pay the entire cost of the health insurance premiums out-of-pocket, including any amount the company pays for active employees plus a 2 percent administrative fee. And if your former company closes or goes bankrupt, you will lose your COBRA coverage.

Other forms of group coverage. If your spouse is still working, you may be able to get health insurance through his or her employer. You will generally need to request enrollment within 30 days of losing eligibility for your previous health plan. “A lot of professional associations and societies and some churches have group coverage,” says Russell. “Group coverage in most cases will be less expensive than individual coverage.”

Individual insurance. Shop around carefully when selecting an individual insurance policy. Price points to consider include premiums, deductibles, co-pays, coinsurance, the annual limit you have to pay out-of-pocket before insurance covers everything, and the record of annual premium increases. But the price of a policy shouldn’t be the only determining factor. “Look at your family’s health history and be certain you are buying a plan that is going to give you the benefits you need when you are diagnosed,” says Davenport-Ennis. Examine whether your preferred doctors are in-network and whether preapproval is needed for procedures. “Check with the state insurance regulatory agency to see what complaints exist against that insurance company,” says Russell. “Go online and see what other people using it have to say.” You can compare a variety of insurance options in your area at healthcare.gov.

High risk pools and pre-existing condition plans. Many states have high-risk pool programs that help people with medical problems get health insurance. If you have been uninsured for six months, have a pre-existing condition, and have been denied coverage because of a health condition, you may be able to get health insurance through a pre-existing condition insurance plan. PCIPs were created by the healthcare reform bill to make health coverage available to individuals who have been denied health insurance by private insurance companies. Every state is required by law to have a PCIP. If you live in one of the 23 states where the U.S. Department of Health and Human Services runs the program, the monthly premium for a 50-year-old enrollee ranges from $267 to $605, depending on your state of residence and the plan options you choose. But it’s generally not a good idea to voluntarily go without coverage for half a year in order to qualify. “No one with a pre-existing condition should go uninsured for six months,” says Davenport-Ennis “If you spend six months uninsured with a pre-existing condition, your disease can move to a new status and you may not be able to get control of it again.”

Part-time job. If you are still able and willing to work in retirement, some companies provide health benefits to part-time employees. Starbucks, for example, offers health benefits to part-time employees who work a minimum of 240 hours in each calendar quarter, or about 20 hours a week. Find out the requirements to qualify for the health plan and make sure you stay ahead of the cutoff. “If you don’t think you can get individual health insurance because of your health status, you are better off staying employed,” says Deloitte health actuary John Schubert. “Some people will take a part-time job with reduced work hours or take a job they are overqualified for just to get health insurance.”

Exchanges coming in 2014. People who retire before age 65 will be able to purchase health insurance through insurance exchanges beginning in 2014, with tax credits for those with low and moderate incomes. “On July 1, 2012, you could take COBRA for a year and a half and then be able to purchase health insurance through the exchanges in 2014,” says Schubert. The risk is that the health reform law could be changed before exchanges become operational and then you won’t have a guaranteed way to buy health insurance. Says Schubert: “I would personally wait until after the 2012 election to find out how likely it is that you can do this.”

To which one reader responded:

I do completely reject that there are no cost controls in the Ryan budget. If there is no federal, state, insurance or private money to pay for extremely expensive care such as in Post No. 7 above, such care will simply not be delivered or paid for.

Let me, for all to see, acknowledge this well-taken point. If less money were available to be spent on health care, then overall health spending would be lower.

But let me also reproduce a comment from that Post No. 7:

If cutting Medicare is so important, why not start now, rather than with today’s 55-year-olds? Start by not paying for life-support treatments for critically ill very old people, as Medicare did for my 92-year-old father’s PEG feeding tube three years ago. He got one, recovered enough to spend three more years in nursing homes and died last month after running up another $300K or so in medical bills paid by Medicare and his health insurance as a retired teacher.

Clearly, these comments land us smack in the middle of the treacherous terrain of cost-effectiveness analysis, end-of-life care and rationing of health care — all issues over which President Obama and his allies in Congress got into hot water during the health care debate of the last two years.

Among the harshest critics were Betsy McCaughey, the former lieutenant governor of New York, and Sarah Palin. Longtime readers of this blog may recall that I have explored all of these topics in a number of earlier posts, for example in a piece on rationing; a post on cost-effectiveness analysis and one on pricing human life.

The two readers I cite above advocate rationing of health care through the marketplace, by price and the patient’s own ability to pay, rather than by government. Furthermore, at least one of them argues, with apparent approval, that the Ryan plan will force that result.

The general idea is that, using whatever financial resources are available to them, patients or their loved ones will, of necessity, engage in a benefit-cost analysis and decide whether the anticipated benefits of end-of-life care exceed its expected cost to the household in terms of what that household has to forgo to buy the extra care. This is how markets work.

Economic theory suggests that, other things being equal, rich and less rich households will come to different conclusions on this question. If less money is available over all to spend on elderly Americans, it is the lower middle class that is likely to do most of the self-rationing.

Note that the Ryan plan proposes a means test to determine the federal contribution to Medicare — the very poor elderly will receive larger federal subsidies, although the size of these subsidies remain unspecified. But the middle and lower-middle class is likely to be on its own.

Another way of putting this issue is that patients and their loved ones will calculate the cost of end-of-life year per unit of medical outcome, measured by “quality-adjusted life years” (known as QALYs). That cost is, in effect, a price at which the household can purchase added QALYs from the health care sector.

Once that price is known, patients or those responsible for them can decide whether to buy the added QALYs yielded by end-of-life care at the available price. This forces patients or loved ones to compare the price with the monetary equivalent value of the benefits they anticipate from those QALYs.

This is the private version of what is known as cost-utility analysis, the analytic approach that is anathema in the halls of Congress (see the section starting on Page 519).

For reasons that escape me, many Americans do not regard rationing scarce resources through the marketplace, by price and ability to pay, as rationing at all, reserving that term for government withholding of marginally beneficial procedures, based on formal cost-effectiveness analysis.

I do beg to differ. In their well-known textbook “Microeconomics,” Michael L. Katz of Harvard and Harvey S. Rosen of Princeton, put it thus:

Prices ration scarce resources. If bread were free, a huge quantity of it would be demanded. Because the resources used to produce bread are scarce, the actual amount of bread has to be rationed among its potential users. Not everyone can have all the bread that they could possibly want. The bread must be rationed somehow; the price system accomplishes this in the following way: Everyone who is willing to pay the equilibrium price gets the good, and everyone who does not, does not.

That states the matter succinctly, although the authors could have been more precise by writing “willing and able to pay” rather than just “willing to pay.”

I have also applied the economist’s reasoning to an analysis of styles of rationing in Canada and in the United States and would be happy to hear what readers make of that.

Others commenting on last week’s post have suggested that privatizing Medicare along the Ryan plan will not lead to rationing, because the private health insurance system can deliver the same quality care more efficiently and more cheaply. They cite the prescription drug plan under Medicare Part D as support for their position. I will take up that proposition in the future.

During the first two days of committee action on his bill, Baucus, a Democrat from Montana, beat back repeated attempts by most of the committee’s Republicans to gut provisions that would slow runaway growth in Medicare spending. Republicans want us to believe that they care deeply about the federal deficit and about keeping Medicare from going broke, while at the same time demanding that there should be no cuts in benefits, no cuts in payments to insurers or providers, and no reduction in the utilization of medical services. It was the most craven, cynical, hypocritical performance by a group of elected officials that I can remember, and a good measure of the political, intellectual and moral bankruptcy of the Republican leadership in Congress.

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There is, however, one feature of all the Democratic health proposals — including Baucus’s — that’s been bothering me for a while, and it has drawn little attention. That’s the two-tiered structure of the health-insurance market that the proposals envision.

One part of the market — the one that has received all the attention — would be organized around the new government-sponsored health-insurance exchanges, in which insurance companies would offer standardized policies to small businesses, self-employed individuals and employees of any firm that does not offer insurance.

By going through an exchange, these firms and individuals would get the purchasing power and risk-spreading that comes with being a part of a large, heterogeneous group. Insurers would be required to offer the policies to anyone, regardless of health condition, at a price that varies only by age. Plans would have to offer preventive care with no deductibles or co-pays, and annual out-of-pocket costs would be capped.

People who purchase insurance through an exchange would have, as one option, the choice of an insurance plan run by the government — or, in the case of the Baucus proposal, a nonprofit insurance cooperative. Most significantly, lower-income workers who purchase insurance through the exchange would be eligible for federal subsidies to help them pay for their insurance premiums, as would small businesses that offer health-insurance benefits.

If they work as envisioned, these exchanges would be a huge step toward extending coverage and lowering the cost of health insurance for about 25 to 30 million Americans, according to congressional estimates. But that still leaves roughly 125 million workers and family members who would continue to get their health insurance from medium and large employers under the existing system, where the insurance reforms would not apply and where there would be few — if any — subsidies.

In the Baucus plan, for example, workers with the lowest wages in the current system could opt out of their employers’ plans and buy coverage through an exchange instead, triggering a “free-rider” tax on their employers. In several proposals, the new rules on benefits, pricing and guaranteed coverage would not extend to insurance plans offered outside the exchange. The size thresholds that would determine which businesses qualify for the exchanges or the subsidies or an exemption from providing health benefits are all over the map. Nobody outside the exchange could opt for the government-run public plan.

The reasons given for maintaining separate markets are mostly political. It allows politicians to assure Americans who already have and like their health insurance that they can keep things as they are. It saves money by limiting the worker subsidies to employees of small firms or companies that don’t offer insurance. And it allows Congress to continue kowtowing to small-business owners who throw a political hissy fit any time anyone proposes that they live by the same rules as everyone else.

Unfortunately, what this means is that the system not only winds up unnecessarily complicated and susceptible to all manner of games-playing by companies, workers and even insurance companies angling to qualify for subsides and exemptions. It means that the government will be in the awkward position of subsidizing some low-wage workers but not others, simply because one works for a small firm and the other does not. And it means that both labor and product markets will be distorted by variations in health-care costs.

As a practical matter, it’s probably a good idea to get the exchanges up and running by limiting them initially to individuals and small businesses that now have the hardest time finding affordable insurance. But if they prove to be efficient and effective at spreading risk and offering a wide choice of plans at competitive prices, there’s no reason why they shouldn’t be quickly opened to all workers and all companies, as Sens. Ron Wyden (D-Ore.) and Olympia J. Snowe (R-Maine) have proposed. Under the pressure of competition — and with some tweaks in the regulations and the structure of the subsidies — the distinctions between the two markets could fade away.

It’s all a bit wonky, I realize, but it sure beats the shouting matches over death panels and government takeovers.

There’s no simple answer.

“It may be they can get a plan that’s just as good or possibly even better than what their employer offers for less money on the individual market if they are young and healthy,” says Karyn Schwartz, a senior policy analyst with the Henry J. Kaiser Family Foundation. But there are lots of individual plans that lack the comprehensive coverage of an employer-based plan, she adds.

“You can end up with a situation where your health care needs aren’t being met by the insurance you bought. It’s hard to figure out, and you don’t have [a human resources] department to help navigate it,” Schwartz says. “If you have any health problems, you can end up with some pretty serious bills.” And you won’t be able to switch back to your employer plan until the next open enrollment.

Make no mistake, you need insurance. Going without insurance to save a buck is not an option. And there are plenty of good reasons to stick with your work plan. Besides often offering generous benefits, employer plans don’t require that you be in perfect health to be covered. Employers also pick up a good chunk of the cost, which many workers don’t realize. A Kaiser study found this year that the average annual premium in a workplace plan was $13,375 for family coverage and $4,824 for singles. Yet the employee on average pays $3,515 for family coverage and $779 for single coverage.

At $779 a year, that’s about $65 a month. “For most people, that would be tough to find comprehensive coverage for less than that,” Schwartz says. Kaiser also found that 81 percent of workers enroll in employer-sponsored plans when offered them. Of those who don’t enroll, the likely reason is they are being priced out, Schwartz says.

For those in such a squeeze, it’s worth investigating whether they can find an affordable policy in the individual market, she says. One of the advantages of an individual policy is you can select your benefits, says Sam Gibbs, senior vice president of eHealthInsurance.com, an online insurance broker. “Only pick and choose the benefit you need and save a substantial amount of money.”

A young male, for instance, doesn’t need maternity benefits that are typically included in a workplace plan. (Some states, including Maryland, mandate coverage for certain conditions.)

Don’t just choose the cheapest policy, Gibbs says. “Spend extra time and know what you are getting for your money,” he says. Also, look at the maximum out-of-pocket costs you could pay each year under the policy.

According to eHealth, a 25-year-old Baltimore man who doesn’t smoke can find a policy with premiums ranging from $33 to $373.70 a month. But dig into the details. With the cheapest policy, the annual out-of-pocket costs – including the deductible – can be as much as $12,500.

“Try to look carefully at the plan and exactly what it covers. A lot of plans have caps that might be hidden in the fine print,” Schwartz says. A plan may cap, say, outpatient hospital care, which might not seem like a big deal. But given that more and more illnesses, including cancer, are treated on an outpatient basis, a cap could be significant, Schwartz says.

Be warned, you might not qualify for an individual policy if you have certain health conditions. And once you look closely at the numbers, it’s possible that an employer plan may be cheaper after all because of the company’s subsidy.