By David Uttermohlen
Apr 3, 2019
Mayor Pete Buttigieg proposed a rational
approach to Medicare-for-all; make it the long awaited public option for
Obamacare. Insurance, however, is only half our health care problem. American
health care costs more and gets worse outcomes than health care in all of the
other developed countries. The Affordable Care Act slowed the rise, but costs
are still increasing.
Medicare comes in two flavors: 1) a
traditional fee-for-service called Parts A and B (hospitals and physicians) and
2) Medicare Advantage (Part C). To understand the difference between the two,
think of the old adage, “You get what you pay for.”
Medicare A and B pay fee-for-service for patients
who are sick. To control costs, Medicare determines the allowable cost of
services and pays 80 percent of that cost. Hospitals and physicians are paid
for the volume of services delivered even if those services are not doing the
patient any good. We all have heard: Won’t hurt, might help. To cover losses
from Medicare, providers shift costs by charging other payers, usually private
insurance or self-pay, full price.
Under the ACA (Obamacare), insurance purchased
on the exchanges is heavily subsidized for low- and middle-income buyers so the
government is paying higher premiums to subsidize the revenue gap created by
Medicare. If more people get Medicare Part A and B, then more cost will be
shifted to private insurance driving premiums higher.
Medicare Advantage pays for efficiency and
good outcomes. Medicare Advantage sets a flat fee per member for private plans
(like HMOs and PPOs) to provide all of that member’s care in sickness or in
health. Plans want to prevent illness, which saves cost, and to keep patients
happy so they will stay enrolled. The plan gets to keep part of any cost
savings.
The other part of the savings is required to
be spent on increased member services. For example, I am on Medicare Advantage.
On my plan, I get the basic health care offered under traditional Medicare plus
dental, optical and drug benefits. They try to keep me healthy. The plan gets a
bonus for patient satisfaction, and there is no cost shifting. Best of all, it
is about $600 per year cheaper than the plan I had last year. Without cost
shifting, private insurance can charge for services without the hidden Medicare
“tax.”
With either plan, the government collects
money and pays for services. Medicare Parts A and B sets prices and limits
services. Medicare Advantage enlists the free market to improve services and
drive down costs.
So, Pete, which Medicare-for-all are you all
for?
David Uttermohlen
formerly worked as a consultant in health care. He lives in Granger.
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