^{Posted on November 25, 2008}

The Medicare Advantage lesson on what not to do

Medicare’s Private Plans: A Report Card On Medicare Advantage

MA has brought much more choice but also added complexity, higher costs, no apparent quality gains, and uneven benefits.

by Marsha Gold
Health Affairs
November 24, 2008

With higher payments and expanded private-plan authority, Medicare Advantage (MA) has caused the market to grow. One in three Medicare beneficiaries with Part D now gets this coverage through MA. Analysis of the sources of and reasons for enrollment growth suggest a troubling report card. Clearly, the Medicare Modernization Act (MMA) has expanded choice and the private-sector role. But it also has added to Medicare’s complexity and costs and has created potential inequities, without apparent improvements in quality.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.1.w41v1

And…

Payment Policy And The Growth Of Medicare Advantage

Higher MA payment rates have financed a Medicare benefit expansion for MA enrollees, without producing any overall savings for Medicare.

by Carlos Zarabozo and Scott Harrison
Health Affairs
November 24, 2008

The higher MA payment rates have financed what is essentially a Medicare benefit expansion for MA enrollees, without producing any overall savings for the Medicare program, and with increased costs borne by all beneficiaries and taxpayers. At the same time, although plan payments have financed additional benefits for enrollees, the additional payments have not resulted in improved quality among MA plans.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.1.w55v1

And…

Medicare Advantage Plans At A Crossroads—Yet Again

The experience with private-plan contracting shows that assuring stable plan choices and extra benefits requires extra money.

by Robert A. Berenson and Bryan E. Dowd
Health Affairs
November 24, 2008

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.1.w29v1

Comment:

By Don McCanne, MD

These three online reports from Health Affairs give us an update on a decade of experience with private health plan options in the Medicare program. The plans were sold to us as a private sector solution that would provide higher quality care at a lower cost than the traditional public Medicare program.

The results are in. These reports add to the plethora of data that confirm that the private plans have not improved quality, yet they have been considerably more expensive than care provided under the traditional Medicare program for patients of comparable health status. (This comment and those that follow do not refer to integrated health care delivery systems, but only to the private insurance function.)

Since a significant portion of this excess spending was for administrative services that benefit insurers rather than patients, taxpayers should be outraged at this waste of our Medicare funds. The good news is that some of these funds were used to expand benefits for patients in the Medicare Advantage plans, but this is another instance where good news is really more bad news.

Individuals receiving these extra benefits generally did not pay for them, and often paid less in premiums and cost sharing. So where did the money come from? It was paid by all taxpayers (payroll taxes and general revenues) and by patients paying premiums into the traditional Medicare program. So the bad news is that these extra benefits are highly inequitable because they’re granted to individuals in the Medicare Advantage programs but paid by everyone else not in the programs. Tax policies and public programs should be designed to achieve equity, but the Medicare Advantage program achieves the opposite.

Does that mean that the extra Medicare Advantage benefits should be eliminated? No. Instead, those benefits should be added to the traditional Medicare program to make it even better. The Medigap plans that supplement the traditional Medicare program are one of the worst values in health insurance. The benefits provided by the Medigap plans should be rolled into Medicare, and then the wasteful Medigap plans can be eliminated.

Those who contend that we can’t afford to add more benefits to Medicare need to keep in mind that we would merely be shifting private out-of-pocket spending to the public Medicare program, actually reducing total spending by eliminating the waste in the Medigap and Medicare Advantage plans, offset partially by improved access to appropriate services.

There is an interesting comment in the paper by Berenson and Dowd:

“However, a point often overlooked by single-payer advocates is that unilateral monopsonist purchasing power also is inefficient. The optimal market structure is ‘atomistic’ competition among many sellers in markets with many purchasers, but this has proved difficult to achieve in health care. For example, atomistic competition requires aggressive enforcement of antitrust laws in both provider and insurance markets—something that the antitrust enforcement agencies and the courts appear unwilling or unable to do. Thus, reliance on monopsony purchasers, public or private, may be socially desirable.”

Hmmm. Help me with this one. We single payer advocates sometimes do refer to single payer as a beneficent public monopsony, but we also tout its efficiency. Since atomistic competition does not and never will exist in health care, we will never be able to use the market to price health care services efficiently. Thus, as a single public monopsony, we would rely on the efficiency of pricing through a process of negotiation, taking into consideration all legitimate costs and fair profits, and balancing our interests as both patients and taxpayers. Did I miss something here?