** Legislative Alert** Private drug-only policies: Actuarial perspectives
(The legislative alert appears at the end of this message.)
The Henry J. Kaiser Family Foundation June 2003 Medicare Prescription Drugs Through Private Drug-Only Policies: A Discussion with Actuaries By Health Policy Alternatives, Inc.
… the Kaiser Family Foundation contracted with Health Policy Alternatives, Inc. to convene a panel of health actuaries familiar with the Medicare program and the prescription drug debate.
The objective was to explore the implications of providing prescription drug benefits to Medicare beneficiaries through private, drug-only plans from the perspective of the insurance industry and other potential plan sponsors such as PBMs (pharmacy benefit managers).
… there was consensus among the actuaries interviewed for this project that certain features of a Medicare stand-alone prescription drug proposal would be important to attracting the participation of insurers or PBMs.
1. Freedom to set premiums without arbitrary government limits.
2. Government subsidies of beneficiary premiums that do not erode over time.
3. A one-time beneficiary enrollment opportunity, with aggressive government marketing and beneficiary information efforts to achieve maximum beneficiary participation.
4. Shared risk with the government, at least in the initial years, preferably through risk corridors.
5. Ability to price premiums locally and not nationally.
6. Flexibility to exit the market (no guaranteed renewal as exists for Medigap insurers).
7. Some benefit flexibility, especially with respect to cost-sharing.
8. Flexibility to use cost containment measures, including formularies.
9. Preemption of most state laws and regulations to reduce costs of compliance and make it easier to market on a multi-state or national basis.
10. Government collection and distribution of premiums to reduce the administrative burden of plans, and maximize retention of enrollees.
Whether a Medicare drug-only product would be sustainable as a line of business would depend on plan experience and future government policy, especially maintenance of adequate government subsidies and limited enrollment opportunities.
http://www.kff.org/content/2003/6086/6086.pdf
Comment: In order for this program to work, our government must bear most of the risk, must provide administrative functions and marketing, and must grant flexibility and relief from regulations. The plans must also have the right to shift costs to the Medicare beneficiaries and limit or even deny benefits.
If the plans are insisting that we, as taxpayers, accept the risks and bear the administrative functions normally provided by insurers, and that we, as beneficiaries, grant the plans flexibility to significantly reduce our plan benefits in order to embellish their profits, then what function are they serving other than interjecting themselves as superfluous middlemen? Why on earth do the Republicans and the “bipartisan Democrats” continue to insist that we must use private insurers to administer our own Medicare program? This question should be asked not only of the proposed prescription drug benefit, but also of the private Medicare “carrier” HMOs and the proposed Medicare PPO programs.
Another quote from the report is instructive:
“Even the more enthusiastic of our participants had reservations, however, about participating in a government sponsored program. Based on their experiences with M+C and Medigap, they regarded the government as an unreliable business partner and worried that they could not count on ‘the rules of the game’ remaining constant.”
Which is the “unreliable business partner” here? The health plans promised higher quality at a lower cost. They delivered higher costs while failing to deliver on quality. And now they claim that the government is an “unreliable partner” because of the reluctance to increase funding of the wasteful administrative excesses of the plans.
The plan actuaries are correct. Without taxpayer funding of plan excesses, and without the “flexibility” to adjust profits by denying patients their benefits, the plans cannot justify their existence. So what justification can the politicians provide?
*** Legislative Alert ***
Last night the Senate Finance Committee approved legislation that “would offer Medicare beneficiaries a stand-alone prescription drug benefit delivered through private insurance companies. And they also would offer a new Medicare option that would use preferred provider organizations (PPOs) to deliver comprehensive health coverage.”
http://www.washtimes.com/national/20030613-124454-9969r.htm
Opponents of privatization have indicated that they will accept this compromise in order to deliver on the promise of prescription drug coverage. But this is “barn door” privatization legislation that will not be readily amenable to future legislative correction. Privatization of Medicare is too great of a price to pay for an inadequate and highly defective prescription benefit. We need health policies that protect patients, not insurers.
We must now make every effort to defeat this legislation on the Senate floor, and then go to work to elect legislators who will protect, improve and expand our single payer Medicare program. Affordable, comprehensive health care for everyone is a goal that we must not surrender.
Don McCanne, MD President, Physicians for a National Health Program www.pnhp.org