By Ken Janda and Vivian Ho
The Hill, August 27, 2019
The recent Democratic debates confirmed that universal access to health care insurance is a core issue for the 2020 election, although it’s difficult keeping up with all the proposals. “Medicare for All” gets the most press, but its cost may be prohibitive, and has no chance of surviving the health care industry lobbying in Congress.
Former Vice President Joe Biden and Mayor Pete Buttigieg want to bolster the Affordable Care Act by creating a new “public option” within it. Sen. Kamala Harris has introduced a proposal to include Medicare Advantage alongside the publicly run Medicare program.
All of these suggestions seem to involve huge risks, making a complex system even more so. And from the Republican side, we have absolutely no proposals. So where is the bold new idea that could actually happen? How do we build on what’s already working well, cover everyone, simplify administration and find a path that limits cost increases to the same rate as GDP growth or lower? Maybe it’s time for “Medicare Advantage for All.”
Currently over 20 million Americans who are eligible for Medicare have chosen the private insurance alternative to traditional Medicare called Medicare Advantage. That’s about 35 percent of all Medicare-eligible seniors, and this percentage rises every year. Most Republicans support Medicare Advantage, including the Trump administration. Let’s build on that popular program’s success.
Medicare Advantage plans are individually selected by people based on cost, personal risk tolerance, network provider options and customer service. Americans like choices, and Medicare Advantage offers multiple choices along with a minimum safety net level of coverage. Medicare Advantage plans avoid the confusion of Medicare Part A, Part B, Part D and Medicare supplements since they cover all those elements and usually more. Most seniors have more than a dozen Medicare Advantage options to choose from. These plans cover all the services and benefits of Medicare, often with lower deductibles and copayments plus enhanced benefits. It’s no wonder these plans are popular. The primary trade-off for the consumer is a requirement to utilize the carrier’s contracted provider network, similar to what virtually all employer-sponsored insurance requires. In fact, Medicare Advantage HMO or PPO plans are offered by the same companies that provide individual and employer-sponsored insurance around the country.
The second rapidly growing segment of American health insurance is the individual marketplace under the ACA. The benefits offered in the marketplace, the companies offering those plans and the way the Center for Medicare and Medicaid Services regulates those plans is similar to Medicare Advantage. These markets could easily be merged.
New federal regulations beginning in January 2020 will allow employers to move away from picking a “one size fits all” group insurance plan for their employees to a “defined contribution” approach. Employees would use employer funds via a health reimbursement account to purchase an individual policy under the ACA’s marketplace that, again, looks a lot like a Medicare Advantage plan.
Over 80 percent of all Medicaid recipients are currently enrolled in Medicaid managed care, where they choose a private insurance company to provide all Medicaid benefits via an HMO network that, you guessed it, looks a lot like a Medicare Advantage plan with limited or no cost-sharing.
We are already on our way to Medicare Advantage for All, but we are not doing it systematically or thoughtfully. A move to Medicare Advantage for All is achievable in a relatively short time frame, without the disruption and risk of Medicare for All, or without the confusion of even more options and funding mechanisms. The majority of Americans who have employer-sponsored insurance would still have it. And Medicaid becomes mainstream.
All Americans would have multiple choices of networks, carriers and benefit levels. All Americans would have incentives for consumerism and healthy behaviors. Cost growth would slow, as more people would receive coverage under Medicare, with an average annual growth rate per enrollee of 1.5 percent since 2010 versus 4.5 percent for the privately insured.
No big tax increases would be needed. Employers would continue to fund much of the cost, just as they do in defined contribution retirement plans. We could dramatically reduce the administrative burdens on patients and providers, as the processes would be the same whether you are young, old, rich, poor, subsidized or not.
With Medicare Advantage for All, we would be building on and improving the current system rather than blowing it all up and starting over. We could cover everyone, improve health outcomes, improve patient experience and stop the increase in health costs under Medicare Advantage for All. Republicans should love the free market approach, Democrats should embrace the opportunity to improve the ACA and Americans of all stripes should support a pragmatic and achievable path to universal coverage. We hope something this reasonable will survive our current political process.
Ken Janda is the principal of Houston-based consulting firm Wild Blue Health Solutions, adjunct professor at Rice University’s Jones Graduate School of Business and a former health insurance CEO. Vivian Ho is the James A. Baker III Institute Chair in Health Economics at Rice’s Baker Institute for Public Policy, director of the institute’s Center for Health and Biosciences and a professor of economics at Rice.
Comment:
By Don McCanne, M.D.
It has long been the dream of conservatives and some moderates to convert Medicare into a “premium support” program. Basically, the government would provide the Medicare beneficiary with the equivalent of a voucher – the premium support – a defined amount of funds that would be combined with the beneficiary’s own funds to purchase a plan from a market of private Medicare Advnstage plans. This would convert Medicare from the traditional defined benefit health program into a defined contribution. This would allow the government to limit its health care spending to the defined contribution while passing the risk of increasing health care costs onto the beneficiaries.
We are already partway there. The private Medicare Advantage plans were established to become the market in which the premium support vouchers could be used. Great efforts have been made to promote these plans by overpaying them for the additional benefits that they use to attract Medicare beneficiaries, including a reduction in cost sharing requirements plus the establishment of a limit on catastrophic spending that the traditional program does not have. The plans have further benefited by marketing to healthier, less costly beneficiaries, and by upcoding to increase the risk adjustment payments. They now cover up to 40 percent of those eligible and that is increasing, so it should not be too long before they can introduce the premium support phase of the scheme.
Although the label “Medicare for All” was designed to refer to a single payer version of an improved and expanded Medicare program that covered everyone, it has now been usurped by those supporting other versions of health care financing reform. Particularly, there has been a strong drive to rally support for including in reform the traditional health plans, especially employer-sponsored plans. Some have suggested that these traditional plans could become private Medicare Advantage plans. Also there has been some support for building on the Affordable Care Act by improving the exchanges (marketplaces) established by the legislation. It has been noted that such markets also resemble the Medicare Advantage markets and thus they also could be included in a unified market.
Last week, in a Quote of the Day message, an effort was made to raise the alarm about the Trump administration’s new rule ordering more flexibility in employers’ use of health reimbursement arrangements (HRAs), making them ideal for defined contribution financing of plans selected from the non-group market. Once again it has been noted in today’s article that Medicare Advantage plans would be ideal to fulfill that role, as well while touting the defined contribution approach.
The authors of today’s op-ed also contend that, since much of Medicaid has already been converted into Medicaid managed care plans, they already resemble Medicare Advantage plans.
See a pattern here? Shift traditional Medicare into the private Medicare Advantage market and fund it with defined contribution premium support vouchers. Shift Medicaid managed care into this market. Move employer-sponsored plans into the Medicare Advantage market, funded through defined contribution HRAs. Move the ACA plans into the Medicare Advantage market. Then you will have 18 percent of our economy becoming part of The Great Risk Shift (Hacker) – shifting more of the cost of health care to the masses while relieving the very wealthy of their moral obligation to return some of their excess wealth that they accumulated by extracting “rents” from the workers responsible for our increased national productivity.
That is beside the fact that Medicare Advantage for All would perpetuate the profound administrative waste, inefficiencies, excessive cost sharing, narrow provider networks, and other inequities of a system that would be affordable only for the wealthiest of us. But this is the clear path we are already headed down, and our momentum is building as we shoot ever faster down this path. We can still convert to a single payer version of Medicare for All, but the difficulty of doing so is compounding day by day because the incremental changes taking place are locking in policies that support the private Medicare Advantage for All model, or something very close to it.
Caveat emptor.
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