Medicare Extra: A Comprehensive Benefit Option For Medicare Beneficiaries
By Karen Davis, Marilyn Moon, Barbara Cooper, Cathy Schoen
Health Affairs
October 4, 2005
Abstract
The proposed Part E, Medicare Extra, outlined in this paper adds a comprehensive benefit option to Medicare, eliminating the need for beneficiaries to purchase a private drug plan and Medigap supplemental coverage. Financed by a budget-neutral beneficiary premium, it has the advantages of greater simplicity, efficiency, and value without adding to federal costs. Beneficiaries now enrolled in Medigap plans would save money, as could employers by choosing a lower-cost alternative to current retiree health plans. Eliminating some of the excess payments to Medicare Advantage plans would yield savings that could be used to help finance premium subsidies for low-income beneficiaries.
Concluding Comments
Medicare beneficiaries have consistently expressed higher satisfaction with their coverage than nonelderly enrollees in employer health plans have. They are much more confident that they will be able to obtain care when needed, and they report fewer problems obtaining access to care. They are less likely than people with employer coverage to report negative insurance experiences and problems paying medical bills. Improving Medicare’s benefits should build on this record and permit those beneficiaries who are genuinely pleased with the traditional FFS program to consolidate their benefits there.
A comprehensive Part E benefit offered by traditional Medicare would have strong advantages for beneficiaries. Beneficiaries would get the benefits they want at lower cost and with much less confusion and complexity. It would create choices for beneficiaries and a genuine choice between Medicare Extra and MA plans. A strong role would remain for private insurers, both offering MA plans and serving as fiscal intermediaries in paying claims for basic Medicare and Medicare Extra. But savings also would be achieved, by having the government assume fiscal risk and negotiating rates with providers. In addition, employers could save money on retiree health benefits. Such an alternative should be a part of the debate over the future of Medicare and any midcourse corrections to the new drug benefit.
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.442v1
For a brief description of this proposal from The Commonwealth Fund:
http://www.cmwf.org/publications/publications_show.htm?doc_id=302930&#doc302930
Comment: Although Medicare is the most popular insurance program in the United States, it does have some deficiencies.
Part A covers hospitalization and Part B covers physicians and other services, but with cost sharing. In order to reduce the financial vulnerability caused by Medicare cost sharing, Medigap plans were introduced into the private market. Unfortunately, these plans represent one of the worst values in health insurance. Not only are they overpriced considering the minimal benefits offered, they also compound the administrative burden of our fragmented system of funding health care. The Medicare Part E proposal would expand Medicare Parts A and B by rolling in the function of the Medigap plans, thereby eliminating the tremendous waste inherent in this supplemental coverage.
Medicare Part D establishes the principle that drugs are an essential part of health care and must be included as a Medicare benefit, but it is one the worst designed public insurance programs ever devised. Without listing the major flaws, we’ll simply state that, for Medicare Part E, many of the Part D defects are corrected and then this drug benefit is folded in as well.
The Medicare Advantage plans are private plans that can be selected by opting out of the traditional Medicare program. At present, the private plans are able to offer more generous coverage for two reasons. Plans have successfully marketed healthier sectors of the population, but Congress has continued to ignore adverse selection and has continued to compensate the plans as if they were covering their share of high-cost patients. Even worse, to encourage a greater shift to the private insurance market, Congress has authorized huge bonuses for the private plans to provide them with a perverse competitive advantage over the traditional providers. What an abusive use of our tax dollars! If Congress were a private corporate board, the SEC would have all of them in prison. If required to compete on an equal dollar basis, with full Medicare benefits and appropriate risk adjustment, the Medicare Advantage plans would walk away. And they should, once we allow the traditional Medicare program to include a bona fide prescription benefit.
Medicare Part E then is a combination of Medicare Parts A, B and an improved D, and the expansion would be funded mostly by eliminating the waste of Medigap and Medicare Advantage plans.
For incrementalists, Medicare Part E would be a dramatic step forward. For single payer supporters, Part E would fall far short. We must not let up on our message of affordable, high quality, comprehensive health care coverage for everyone. Until we are there, and we will be, we can support the efforts of those who would improve our system through beneficial, incremental steps. Under incrementalism, all parameters of our health care system are worse, but the fact that we are pushed two steps back doesn’t mean that we shouldn’t take one step forward when we can.
Single payer supporters may want to become actively involved in the Part E process. We could advocate for additional improvements that characterize the single payer model. Once an ideal Part E Medicare were established, we could advocate for expanding it to cover everyone. That would provide smug complacency to those in our movement who believe that we should be using the label, “Medicare for All.” I’m quite willing to give them that, as long as we end up with a single payer system.