Editor's Note: This is the fifth post in an ongoing series outlining a
comprehensive proposal for Medicare reform and beyond. Previous posts in the
series can be found here: Part 1, Part 2, Part 3, and Part 4.
Now that a report funded by
the Koch Brothers™ (do they have a logo?) accidentally fueled the single payer
movement by demonstrating a
national coverage system would be cheaper than the irrational hodgepodge we
have now, it’s important to continue to weigh the evidence regarding which
approach to universal coverage would be optimal.
The focal point of the single payer cause is
Senator Bernie Sanders’ “Medicare for All” proposal. (Spoiler alert: it’s not actually
Medicare. More on that in a minute). While I happen to believe the single payer
crowd’s intentions are in the right place, I have to wonder, for starters,
whether the arguably most conservative developed nation will adopt one of the
most liberal, socialized approaches to health care coverage.
Instead, I continue to believe that a regime
that truly leverages the existing Medicare program in a way that minimizes
disruption and maximizes market forces will produce the cheapest, highest
quality, most sustainable, and – to use a loaded term – American result.
Sanders
Plan 101
Perhaps the most interesting thing about the
Sanders Medicare for All plan, scooped above, is that it would not actually
extend Medicare to everyone. To the contrary, section 901 of his bill would halt all
Medicare benefits, effectively repealing the program in its entirety.
Instead, his proposal would institute a wholly
new program, with different benefit design and brand new administrative
infrastructure. For example, a new list of essential benefits is outlined in
the legislation, the elaborate Medicare cost-sharing scheme would be replaced
with first dollar coverage, and the prescription drug program would be replaced
with a national formulary.
The Sanders plan does make use of Medicare by
adopting its provider payment rates, albeit with some modifications. There are
a few other cross-references to the program, such as its appeals process, but
suffice it to say this is not a proposal about Medicare in any meaningful way.
Some key compelling facets are that there are
no premiums and no ongoing employer or state contribution is required to help
fund the program, which is why, on the other hand, Sanders has proposed a set
of tax increases to pay for it.
The proposal bans commercial or employer
coverage that duplicates what it would provide and, in addition to halting
Medicare benefits, would do likewise for the Children’s Health Insurance
Program, the Affordable Care Act (ACA) exchanges, the Federal Employee Health
Benefits Program, and Tricare. It maintains the Indian Health Service and
Veterans Health program.
Curiously, with regard to Medicaid, it bars
duplicative coverage and repeals the Federal contribution to the program while
instituting a new mandate for it to cover long-term care services. I welcome an
explanation of this anomaly from the proposals’ supporters, but to me it is one
of several indications that the legislation Senator Sanders introduced, and
which some notable presidential aspirants have cosponsored, is more of a
theoretical outline than a shelf-ready policy.
Medicare
Advantage 101
Instead, what if we actually did just expand
the stable, beloved Medicare program to include everyone, with emphasis on
competition between the traditional benefit and increasingly popular Medicare
Advantage plans? In a prior post, I took a closer look at the basic
Medicare benefit design. Here, I’d like to explain how the Medicare Advantage
(MA), or Part C, program worksand what it could
offer to a national coverage regime.
MA carriers are required to cover all
traditional Medicare benefits (Parts A and B) and offer at least one plan that
includes an accompanying prescription drug (Part D) component. Every year, MA
plans submit bids to Medicare based on their projected costs for delivering
these benefits.
These bids are compared against county-level
benchmarks, which are set at a percentage of projected costs under traditional
Medicare. The primary purpose of the benchmarks, which range from 95 to 115
percent, is to draw plans into underserved, primarily rural, parts of the
country. (It works – 99 percent of
beneficiaries have access to at least one MA plan).
If a plan’s bid is under the benchmark, its
base payment rate is that amount, plus a rebate calculated from the difference
between their bid and the benchmark. Plans are required to pass through a
portion of that rebate to enrollees in the form of additional benefits, such as
vision and dental services or lower cost-sharing requirements.
A key strategy that these plans use to reduce
costs, which is not deployed in the traditional Medicare program, is limited
provider networks. As explained in a prior post, this
function lies at the core of why health plans can continue to play an important
role in our system. Despite using this leverage vigorously, MA plans typically
include about half of the
hospitals and physicians in their service area.
If the plan bids above the benchmark, its rate
is the benchmark and the difference is passed through to the enrollee in the
form of a premium, on top of the standard premium for outpatient (Part B)
services that all Medicare enrollees pay (we’ll address subsidies provided to
low-income enrollees in another post).
Plan payment is also adjusted based on
the demographic factors and health status of their enrollees, quality ratings,
and some other even more technical factors that I’ll leave to your own pursuits
if you desire.
In 2017, MA plan payments were, on
average, equal to the costs
of delivering the traditional Medicare benefit. Despite a raft of cuts under
the ACA that helped achieve this parity, the program continues to be extremely
popular, with one third of
Medicare beneficiaries selecting an MA plan in 2018, an 80 percent increase
since passage of the cuts.
With regard to stability, the average Medicare
enrollee has access to 21 plan options offered
by six different carriers in 2018, with 93 percent having access to an HMO and
87 percent to a PPO. The one percent of beneficiaries who live in areas with no
plan still of course have access to the traditional Medicare benefit, a helpful
fallback and, elsewhere, competitor.
Unlike traditional Medicare, MA plans are
required to cap annual enrollee out of pocket spending on outpatient services
at $6700. Using those rebates described above, 50 percent of plans
offered coverage that caps that liability at below $5000 in 2017. Also, about
half of plans were able to eliminate the Part D deductible altogether.
In
Other Words…
I don’t think we need a wholly new coverage
regime that upends 20 percent of our economy and, with its centralization of
decision-making within the federal government, will never earn the broad
support necessary to pass, much less make it sustainable.
After the ACA, I think we’re weary of
conjuring new coverage regimes from whole cloth. We have plenty in this country
already. Let’s pick the one that has proven itself for decades and increasingly
leverages competition between commercial carriers and a government administered
option to deliver high-value choices to its consumers. In other words:
Medicare.
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