By John E. McDonough and Sherry Glied
The Milbank Quarterly, January 21, 2021

Every US administration since 1966 has had to engage in Medicare policymaking. The program covers 61 million elderly and disabled Americans, accounts for 14% of all federal spending, and, unlike the larger Social Security program, requires myriad legislative and regulatory tweaks each year to continue its operations. The Biden administration, like its predecessors throughout the program’s 55-year history, will need to perform this regular program maintenance. In addition, Congress and the administration will face two kinds of policy challenges. Some prominent Democrats, including many of Biden’s former competitors in the Democratic primary, see Medicare as a critical stepping stone to a unified system of health insurance coverage for all Americans. They will want to see changes to the program that extend its reach. On the other hand, Medicare actuaries and many conservative members of Congress see the program as an underfunded giant hurtling toward insolvency by 2024. While the administration will need to respond to the insolvency problem, it should try to leverage that response to simultaneously achieve progressive gains.

Job number one is to fix the coming Trust Fund budget hole.

While almost all Americans support Medicare’s survival and solvency, neither of the obvious options for achieving that objective – new taxes or funding cuts – is popular.

A key win-win would be action on prescription drug pricing, a policy goal that the Trump Administration pursued aggressively, but with limited success. Some drug price containment strategies can be achieved through Executive branch regulatory actions, but such regulatory savings will not fill the Trust Fund hole. One problem is that Medicare prescription drugs are funded through Parts B (inpatient) and D (outpatient) of the program, which means that savings achieved through lower prices for drugs would not directly improve Part A solvency. A more comprehensive legislative strategy will be needed. For example, imposing effective controls on prices for inpatient hospital and outpatient drugs, which can be achieved legislatively within reconciliation rules, could be combined with a shift of, say, home health services from the Part A to the Part B benefit as David Cutler and co-authors have recommended. This combination would improve the Trust Fund balance while simultaneously offsetting new costs in general revenue-funded Part B with drug cost savings.

Another health policy area in which savings, and program improvements, may be possible is Medicare Advantage (Part C). Currently, 38% of all Medicare enrollees are enrolled in Medicare Advantage private plans, and the fraction has been increasing steadily. Throughout the program’s history, there have been concerns that private plans have been overpaid. In 2010, the ACA made substantial structural changes to Medicare Advantage to reduce such overpayments. The resulting savings helped to extend the fiscal life of the Part A Trust Fund from 2016 to 2030 and also funded a portion of the ACA’s coverage expansions.

Despite the ACA’s reforms, concerns about overpayment in Medicare Advantage (MA) persist. Recent research documents that many MA plans aggressively code their enrollees’ diagnoses to generate higher risk-adjusted payments from the Centers for Medicare and Medicaid Services. Most of the benefits of these coding adjustments, which cost the federal government billions every year, accrue to plans, not beneficiaries. Because Medicare Advantage plans cover both Part A and Part B benefits, legislative changes in the payment formula for Medicare Advantage would contribute to Trust Fund solvency. These could be combined with improvements to traditional Medicare that would enhance the financial protection available to those who do not participate in Medicare Advantage, such as a cap on out-of-pocket spending.

Slim majorities in Congress will make it hard for the Biden administration to pursue plans that expand Medicare eligibility. But improving the existing program may advance progressive agendas. A curious feature of the Democratic presidential primary debate around “Medicare for All” is that the “Medicare” option promoted by candidates was not the existing Medicare program. The existing program’s flaws make it a less-than-ideal base for expansion. Fixing the Trust Fund budget hole, improving the efficiency of program payments, and, most importantly, extending financial protections that traditional Medicare offers its beneficiaries would make the existing Medicare program a more viable option and framework for future expansion.

https://www.milbank.org…

Comment:

By Don McCanne, M.D.

In our quest for single payer Medicare for All, we frequently speak of an improved Medicare for All. The current Medicare program is not satisfactory. At a minimum, we need additional coverage such as a Medigap plan to cover the deficiencies in the traditional Medicare Program, particularly the lack of an out-of-pocket cap on spending.

Actually Medigap Plan F had many features that if they were rolled into the traditional Medicare program would go a long way toward establishing the improved Medicare that we want. In fact, it was so good that Congress outlawed non-grandfathered Plan F plans when they established the Affordable Care Act, since Congress has always catered to the private insurance industry, and Plan F competed very favorably with the private Medicare Advantage plans, except the premium was too high.

Folding in the Plan F benefits would have been much more efficient, reducing the administrative costs considerably. As it is, the claims are processed twice, once by the Medicare administrator and again by the private Medigap insurance plans. These plans, of course, are designed to provide profits to the insurers, so they must charge high premiums to cover not only the medical benefits but also the extensive administrative costs and also the profits. We would be much better off with the benefits rolled into the plans and paid for through equitable taxes. Plus we would not be billed separately for deductibles, coinsurance and lack on caps on out-of-pocket spending. There are several other measures, such as covering long term care and drugs directly, that would improve Medicare that we will not go into here.

Another more immediate concern is the overpayment that we taxpayers make to the private Medicare Advantage plans. Not only are the MA plans being overpaid, funds which they keep, they also are using insurer gimmicks to improve their returns – cherry picking and lemon dropping, limited provider networks, upcoding to expand payments, using prior authorization to deny benefits, passing costs on to surprise bills – measures that reduce benefits but increase their profits. and part of that is paid by us through general tax revenues rather than just by the plan beneficiaries. We are paying them their administrative costs used to cheat patients out of their benefits and to cheat taxpayers out of their dollars. UnitedHealth just reported $15.4 billion in profits alone for 2020. We would be much better off without them.

Generally, incrementalism is a bad idea. However, without a favorable political climate, we might consider taking a transitional step of improving Medicare so that it can later serve as the basis of a comprehensive, efficient, equitable single payer, Medicare for All. As the authors state, that “would make the existing Medicare program a more viable option and framework for future expansion.” First we would try to enact an improved Medicare for All. If that doesn’t work with a president who is opposed, we could then be working on fixing our current Medicare so it would serve as a viable framework for future expansion.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By Joseph R. Biden Jr.
Inaugural Address, January 20, 2021

I understand that many of my fellow Americans view the future with fear and trepidation. I understand they worry about their jobs. I understand like my dad, they lay in bed wondering, can I keep my health care, can I pay my mortgage. Thinking about their families, about what comes next. I promise you, I get it.

https://abc7news.com…

Comment:

By Don McCanne, M.D.

Show us. Please.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

An increase in subsidies could drive millions to enroll in Obamacare marketplaces, experts say.

By Sarah Kliff
The New York Times, January 16, 2021

Tucked into President-elect Biden’s $1.9 trillion stimulus plan is a one-sentence provision that could drive billions in federal subsidies to help people afford to buy health insurance.

The proposal would do two things: make upper-middle-income Americans newly eligible for premium subsidies on Obamacare marketplaces, and increase the financial help that already goes to lower-income enrollees. Taken together, some experts expect these changes to drive more sign-ups for Healthcare.gov plans after they fell in the Trump era.

Mr. Biden’s plan tackles one of the Affordable Care Act’s biggest weaknesses: affordability. Surveys of uninsured Americans and those with Healthcare.gov plans routinely find that affordability of premiums ranks as a top complaint.

The affordability challenges are a result of how drafters wrote the health law. They limited premium subsidies to those earning less than 400 percent of the federal poverty line: $51,520 for an individual and $106,000 for a family of four in 2021.

The Biden plan would create a new cap — 8.5 percent of an individual or family’s income on premium contributions — for midlevel health plans. This policy would mostly affect higher-earning Americans who do not currently qualify for subsidies.

The Biden proposal also describes a second policy that appears to be aimed at increasing subsidies for those who already qualify.

NYT Reader Comment:

By Don McCanne, M.D.

It is our private insurance industry that is charging us exorbitant amounts to take away coverage through high deductibles and other cost sharing and through narrow provider networks, while at the same time they are placing a tremendous administrative burden on the professionals and hospitals that provide the care – an administrative burden that we also pay for.

A well designed, single payer, improved Medicare for All is what we need, not more of the administratively burdensome private insurance industry that Biden wants to pay for with even more of our taxes. By condemning Medicare for All, he is missing the opportunity to finally fix our system so it works for everyone.

https://www.nytimes.com…

Comment:

By Don McCanne, M.D.

When affordability is a problem, Biden wants to spend even more through our taxes and give it to the private insurance industry – the source of our profound administrative waste, along with the administrative burden they place on the delivery system.

The private insurance industry is selling us services we don’t want – deductibles and other cost sharing, maintenance of narrow networks, prior authorization administrative costs, while ducking out on paying for surprise bills and other denied benefits.

The tragedy is that a well designed, single payer, Medicare for All program would eliminate the costs of these excessive and unwanted administrative services, but Biden has ruled this out. What is the matter with him? Everyone could be covered at a lower cost if we would just get rid of the private insurers. That is our money they are holding onto, and for that we are giving them up to 15% when our traditional Medicare takes less than 2%? Exorbitant profits for the industry when it is us who are paying the bills.

It doesn’t make sense. We are paying more but getting less, and now Biden wants to give the insurers even more – not exactly the way private markets are intended to work.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

If he saw the issues of poverty and income inequality that exist today, he would be greatly disappointed.

By Martin Luther King III
The New York Times, January 18, 2021, Martin Luther King Jr. Day

Martin Luther King Jr.: “There is nothing new about poverty. What is new is we now have the techniques and the resources to get rid of poverty. The real question is whether we have the will.”

https://www.nytimes.com…

Comment:

By Don McCanne, M.D.

Over half a century later, we still have the techniques and the resources to get rid of poverty. The question still remains, “Do we have the will?”

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By Katherine Baicker, Ph.D.
JAMA Health Forum, January 14, 2021

The importance of access to health care and the financial protections that insurance should provide have never been more salient, and the potential consequences of the costs and gaps within the patchwork system in the US have never been more dire. Would the US population be better off with a simple, single-payer, uniform Medicare-for-all–type of insurance plan?

Trade-offs abound in policy decisions about health insurance. Although the advantages of moving to such a single-payer plan might be appealing, there are large hidden costs that must be considered.

First, having a single health insurance plan to cover the heterogeneous US population can actually make people worse off than tailoring the generosity of benefits to different people’s needs and preferences. In work I carried out with Mark Shepard, PhD, now at the Kennedy School at Harvard University, and Jonathan Skinner, PhD, at Dartmouth College, we highlight that the costs of having a uniform public insurance benefit have increased dramatically since Medicare’s advent in 1965.

One reason for the sharp increase in the costs of having a uniform public insurance benefit is the dramatic advances in health care within the last half century, with many more intensive—and costly—treatments now available. Providing all the care that might possibly be available is a much more expensive proposition now, necessitating forgoing many other things. A second reason is the substantial growth of income inequality. A person with a high income might be willing to devote resources to expensive care of only minimal health benefit, whereas a person with a lower income may need to devote those same resources to housing or education. A third reason is that, as tax rates have risen, the economic cost of raising funds to cover public insurance programs has become much larger.

All of this means that providing the same public insurance plan to everyone would leave segments of the population worse off. This could be higher-income groups, if the public benefit is limited and they are prohibited from going around it; or lower-income groups, if the benefit is comprehensive and too few resources are left to be devoted elsewhere. An alternative that might be better for everyone would be a basic public health plan available to all coupled with increased spending on other social insurance programs for lower-income groups, with the option to augment those benefits with privately purchased wraparound plans—more like the Medicaid-for-all who want it proposal.

A second factor in evaluating the costs and benefits of having a single plan is the trade-offs that are inherent to insurance plan design. Different people value different features in their health insurance, even if the overall generosity of the plan is held constant. Of course, most would prefer lower costs and broader coverage, all else being equal. Although most want the same care but at a lower price, lower cost sharing means higher premiums, whereas narrower networks can lower premiums.

Amitabh Chandra, PhD, at the Kennedy School and the Business School at Harvard University and I explored the answers given by a nationally representative survey sample about what features in a health insurance plan were most important to those surveyed, focusing on the trade-offs among elements such as lower co-payments, more expansive networks, lower premiums, and more comprehensive coverage. People were remarkably divided in their preferences about those dimensions, and given the option, they would make different choices about their insurance coverage.

The impetus for a single-payer plan is often not only the hope of reducing costs but also the goal of expanding coverage. The same survey suggests that altruistic concern for other individuals’ access to care, encouragingly, cuts across the political aisle. Faith in whether the government or the private sector is best able to effectively provide that care is much more sharply divided.

Another potential drawback of having a single plan is that competition among plans has the potential to drive down costs and accelerate innovation. This requires true competition within the insurer market, as well as among clinicians, hospitals, and other health care facilities, which is not the case in many parts of the country. There is genuine debate to be had about the potential for the introduction of a public option to increase choice and competition to promote higher value.

The costs of a single, expansive public program point to the potential benefits of giving enrollees a choice among insurance options—free or heavily subsidized for lower-income populations—to expand coverage while allowing people to make choices that reflect their priorities and drive value. There is an example along these lines in the Medicare Advantage system already in place, and most patients enrolled in Medicaid receive their insurance through privately managed plans.

None of this is meant to say that the current system is serving the US population well now. Individuals are paying more and getting less than they should—and this is particularly true for vulnerable populations. Instead, acknowledging the societal value of expanding coverage and increasing affordability, as well as the unavoidable trade-offs involved in the design of public programs, would move the country toward implementing a fiscally sustainable, high-value public insurance safety net.

Katherine Baicker, PhD, is dean of the Harris School of Public Policy, University of Chicago.

https://jamanetwork.com…

Comment:

By Don McCanne, M.D.

Are there really trade-offs in accepting single payer Medicare for All? What are the hidden costs, if any?

Katherine Baicker says that having a single plan can make people worse off because their needs and preferences are different. Needs and preferences may be different but that is why you need a single plan which can cover all reasonable needs and preferences. You often cannot predict a year in advance what the needs will be.

She states that the costs of having a uniform benefit has increased since Medicare’s advent in 1965, but essentially all costs have increased since then. That is what inflation does, though maybe there is also a disproportionate increase due to increased volume. But if those services are beneficial, we should keep them. We can afford them.

She also mentions the increase in tax rates, though Trump recently reduced tax rates for the wealthy. She says that it might be better to have a basic health plan for everybody coupled to increased spending on other social programs for lower-income groups. It is true that taxes should be progressive to pay for social programs, but that does not mean that benefits should be arbitrarily sorted out for health care coverage. All essential benefits should be included.

She states that premiums, co-payments, provider networks, and comprehensiveness of benefits could be made variable by providing different insurance coverage plans, but those are insurance gimmicks that should have no place in a universal public plan financed by progressive taxes.

She expresses concern that a single plan would forgo the benefits of competition, but that is fine since what we really want instead is cooperation.

But then she concludes with the statement, “None of this is meant to say that the current system is serving the US population well now.” That is correct, and that is why we should want a single, comprehensive program that covers everyone – a single payer, improved Medicare for All – a plan that would serve us all well.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.