By Geoffrey Joyce Published: Nov 21, 2019 9:23 am ET
This public-private
partnership is delivering high-quality health care at comparatively low cost
It’s hunting season for health insurers,
commonly referred to as “open enrollment.” People over 65 who turn on their TV
or open their mailbox from late October through November can’t escape advertisements
from private health insurers offering so-called Medicare Advantage plans on
behalf of the federal government.
The process may be mildly annoying, but it is
a sign of vitality in a public-private partnership that is delivering
high-quality health care at comparatively low cost. Over one-third of all
Medicare beneficiaries now enroll in these plans.
Politicians of both parties, take note: maybe
what we should be debating is not Medicare for All, but Medicare Advantage for
All.
Under traditional Medicare, beneficiaries can
go to almost any hospital or physician, and the federal government makes
reimbursements on a fee-for-service basis. Excluding deductibles and some other
exceptions, Medicare typically pays 80% of the bill and the beneficiary pays
20%.
By contrast, Medicare Advantage plans offer
benefits through private health-insurance companies such as United
Healthcare UNH-4.29% Aetna (now owned by CVS Health CVS-2.33% ) and Humana HUM-5.79% Medicare pays these plans a fixed monthly amount
for each enrolled beneficiary, and the plan assumes full financial
responsibility for providing all Medicare-covered benefits — and often more —
to their enrollees.
Until recently, Medicare Advantage plans were
almost exclusively Medicare HMOs, where beneficiaries pay lower premiums and/or
cost-sharing and have access only to a restricted panel of hospitals and
providers. This has changed somewhat in recent years, as some plans now include
preferred provider organizations (PPOs) that use lower cost-sharing to steer
beneficiaries to in-network providers, but unlike HMOs, still provide some
coverage for out-of-network providers.
Congress and the Clinton administration
created Medicare Advantage 22 years ago because Medicare fee-for-service
insurance was encouraging overuse among providers and patients. Providers are
paid more if they do more. Many beneficiaries bought supplemental coverage to
pay whatever portion of the bill Medicare doesn’t, and that lack of
cost-sharing also contributed to overuse of care.
The belief then was that private plans would
compete to enroll beneficiaries, encourage cost containment, and save money for
taxpayers. The primary concern was that by capping revenue, the private plans
might withhold some potentially valuable care in order to increase profits.
After two decades, how have they done? The
good news is that the plans did compete for enrollees and reduced utilization
of high-cost services with little adverse effects on health. Use of emergency
departments, ambulatory surgery and high-cost imaging are 20% to 30% lower in
Medicare Advantage plans compared to fee-for-service Medicare. Beneficiaries
enrolled in Medicare Advantage receive about 10% fewer hip and knee
replacements and have lower rates of hospital readmissions than traditional
Medicare. Further, the evidence suggests that risk-adjusted mortality is lower
in Medicare Advantage plans, which may reflect better care coordination and
greater use of preventive services.
Medicare Advantage plans can’t exclude the
sickest from participating in order to keep costs lower. While sicker seniors
historically tended to choose traditional Medicare because of the ability to
see any provider, that trend has diminished over time.
The bad news is that only one-eighth to
one-half of the realized savings in Medicare Advantage plans are passed on to
beneficiaries, either in the form of lower premiums and/or additional services
such as dental, vision, and hearing that traditional Medicare does not cover.
The bulk of the savings are retained by the plans.
So what does this tell us about alternative
health-care reforms currently under debate, particularly “Medicare for All”?
Despite its flaws that make it overly profitable to private plans, most
economists would prefer “Medicare Advantage for All” to expanding traditional,
fee-for-service Medicare to another 150 million to 250 million Americans.
Although no good apple-to-apple estimate
exists, the price tag for Medicare Advantage for All clearly would be much
lower than Elizabeth Warren’s 10-year estimate
of $20.5 trillion for expanding Medicare. More importantly,
Medicare for All does little to control spending other than apply Medicare
prices to all services. While government set prices would lower health-care
spending in the short run, the incentive to innovate, and in turn provide
quality, would diminish over time.
A more viable solution is to harness the competitive
forces inherent in Medicare Advantage while modernizing the bidding process and
standardizing plans to improve efficiency. The average beneficiary today has a
choice of 21 different Medicare Advantage plans, too many to identify the
optimal one. Standardizing a limited set of Medicare Advantage plans would
allow consumers to compare prices for the same set(s) of benefits, facilitating
competition on both price and quality. That would be a major step toward
universal coverage, and would make Medicare beneficiaries the hunters, not the
hunted.
Simply changing who pays the bill is not real
reform. The health systems most often cited for providing high-quality,
cost-effective care are integrated systems such as Kaiser Permanente in the
West, Intermountain Healthcare in Salt Lake City and Geisinger Health in
Pennsylvania. They each rely on coordinated, team-based care, with access to
transparent data on costs and clinical outcomes. And like most Medicare
Advantage plans, they do a better job of educating patients to enable them to
take greater control over their own health.
A universal health care system of managed
competition built around this type of care model is more politically feasible
and more economically sustainable than expanding fee-for-service Medicare.
Geoffrey Joyce is
director of health policy at the Leonard D. Schaeffer Center for Health Policy & Economics and
is a professor in the School of Pharmacy at the University of Southern
California.
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