By Stuart M. Butler, Ph.D.
JAMA Health Forum, July 30, 2020
The coronavirus disease 2019 (COVID-19) pandemic is forcing a much-needed questioning of the US health system. What is the right balance of authority between the federal government and the states? How should the profound inequities and gaps in the system be better addressed? Should emergency regulations, like those allowing more telemedicine and flexible funding, become permanent features of the system?
Hopefully, this reassessment will encompass a constructive conversation about the basic structure of the US health system and how it can be based on a more robust chassis. What should that guiding framework be? Although I view the system though a center-right lens, I believe a variant of the Medicare-for-all idea could prove to be a new chassis that can attract broad support.
In practice, unlike most high-income countries, the US has several different health systems for different segments of the population—each with distinctive rules, subsidy arrangements, and eligibility criteria. There is 1 system for poor individuals; an employment-based system for most working individuals and their families; and yet another for elderly individuals. Transitioning between these systems, as almost all US residents must do at some point, often means disruptions in coverage and care. Millions also continue to fall through gaps between these systems. Moreover, the amount of assistance available to individuals seeking coverage differs greatly depending on such circumstances as geography and work status.
Many progressives have responded to this patchwork by calling for Medicare to become the chassis for the whole system. However, the Medicare-for-all proposals advanced by such politicians as Sen Bernie Sanders (I, Vermont) and Sen Elizabeth Warren (D, Massachusetts) have encountered skepticism from many liberals, as well as heavy criticism from conservatives.
Concerns About Medicare for All
One objection is the enormous increase in federal expenditure that would be involved in such a switch, and although supporters point to the large savings in private expenditures, the net costs depend on many considerations and design features.
Another concern, applying to some versions of Medicare for all, is that although the Medicare benefit package is comprehensive, traditional Medicare has significant out-of-pocket costs for all but the lowest income beneficiaries (who qualify as “duals” for overlapping Medicaid coverage). This feature effectively requires seniors to purchase private “Medigap” coverage as a supplement.
A third concern is disruption. This is the other side of the coin associated with having multiple health systems in the US; Medicare for all would mean big changes for most individuals with existing coverage.
However, it is important to remember that even Medicare is really 2 distinct systems. The focus of Medicare-for-all proposals is traditional Medicare, which is a fee-for-service program with a detailed payment schedule administered by the government. But in parallel with this is Medicare Advantage, which operates differently from traditional Medicare with private plans receiving a single capitated payment for each beneficiary enrolled in their plan, adjusted according to the beneficiary’s general health condition.
Medicare Advantage as the Framework
Medicare Advantage for all could be a good starting point for a bipartisan discussion on creating a new framework for the US health system. Unlike the higher-profile Medicare-for-all approach, a Medicare Advantage–for-all approach would have several advantages. For instance:
Medicare Advantage has wide popular support as well as broad political support. Medicare Advantage enrollment has been growing rapidly, doubling in the last decade, with the proportion of Medicare beneficiaries in such plans now exceeding 34% and rising. Moreover, Republicans as well as Democrats have supported and expanded Medicare Advantage, and the idea of making Medicare Advantage plans available to younger US residents has begun to intrigue some reformers on the right.
The capitation system permits competing Medicare Advantage plans to offer a variety of benefits beyond a required core of basic benefits. Moreover, in contrast to traditional Medicare’s rigid and detailed payments system, it allows plans to explore different payments as a means of achieving greater efficiency and beneficiary satisfaction.
In contrast with the design of traditional Medicare, Medicare Advantage plans are generally consistent with the growing managed care pattern in nonelderly coverage, including within the employer-based system. Today, about 90% of Medicaid beneficiaries are enrolled in some form of managed care. Meanwhile, about two-thirds of workers with employment-based plans are enrolled in health maintenance organizations or other network coverage that is similar to most Medicare Advantage plans. Medicare’s income-adjusted premiums are also broadly compatible with the structure of income-based subsidies available for plans in state health insurance exchanges, and many insurers offer Medicare Advantage and health insurance exchange plans that have similar designs. Thus, for a large proportion of households, transitioning from their existing coverage to coverage more like Medicare Advantage plans would not involve a big adjustment.
Recent changes in laws and regulations allow Medicare Advantage plans to include more nonclinical services that can influence health, such as nonurgent transportation, nutritional services, and even some simple home modifications to reduce the risk of injuries. This reflects the growing interest in addressing so-called social determinants of health.
Gradual, Not Radical
Choosing Medicare Advantage as the organizing theme for reforming the whole US system does not necessarily imply there must be radical legislation that literally replaces all existing coverage with the current Medicare Advantage program. That would be unnecessarily disruptive and regimented. Rather, it should mean gradually adapting existing forms of coverage so that over time they become very similar to Medicare Advantage, and there would essentially be no change in coverage as individuals change jobs, lose their jobs, or retire.
One step toward that outcome would be to merge state exchange plans with Medicare Advantage plans in the state. Another would be to slowly reconcile the subsidy system available for exchange plans with the tax benefits for employer-sponsored insurance, such that a similar structure of income-related subsidies would apply to everyone enrolling in insurance. Seniors would continue to receive assistance toward the cost of coverage that is reflective of the payroll taxes they paid and the national commitment to their health care, at least until there was agreement on a more comprehensive revenue and financing system, and the state-federal share of support would continue for lower-income households. A third step would be to move further toward the place of work being just a convenient location to facilitate plan selection, with employers handling the mechanics of government subsidies and payments by workers, and to move away from employers as plan sponsors.
None of these steps are small details, of course. They are major issues and would involve contentious debate. But to reach eventual agreement on big changes in society, it is necessary to have a framework in mind that is likely to command broad support and that the current system could evolve toward with minimum disruption. Medicare Advantage for all is such a framework. Medicare for all is not.
Medicare Advantage is a Shell Game
By Stephen Kemble, M.D., Physicians for a National Health Program
JAMA Published Comment, July 31, 2020
A fundamental problem with competing private plans in health care is that too much of the per-beneficiary financial risk is predictable due to pre-existing conditions and social determinants of health, so that the primary driver of competition is to avoid risk. This means “cherry picking” the healthy and “lemon dropping” sicker and costlier patients from Medicare Advantage (MA) plans. Risk adjustment is far too crude to prevent this, and efforts to make it more accurate encounter prohibitive complexity and administrative cost. There is pervasive evidence that MA plans do selectively enroll healthier-than-average Medicare beneficiaries, and sicker, more complex patients selectively disenroll from MA plans. There is also extensive evidence of increased coding intensity in MA plans to beat risk adjustment formulas, and MA plans carry much higher administrative cost than traditional Medicare. The outcome is that the MA program has never saved money for the Medicare program as a whole, and MA claims of more cost-effective care are much better explained by the favorable risk pool the MA plans have been able to secure.
By Don McCanne, M.D.
In response to the strong support of single payer Medicare for All there have been several sources recommending instead Medicare Advantage for All – using private insurance instead of a public insurance program based on an improved version of the traditional Medicare program. This particular article is important because of its author, Stuart Butler.
Stuart Butler was the primary architect of the Heritage reform proposal that led to the Patient Protection and Affordable Care Act (ACA), aka Obamacare. Butler’s views are more moderate than those of the conservative Heritage Foundation and thus he transferred to the centrist Brookings Institution. In this JAMA article, he labels himself as viewing the system through “a center-right lens.” As his article indicates, he rejects a publicly-administered Medicare for All program but rather supports a market of competing private plans. His primary innovation for ACA was the exchanges (marketplace) for the private plans that would receive government subsidies to make them more affordable. The market of private Medicare Advantage plans have far more similarities with the ACA exchanges than there are differences.
There are a great multitude of reasons why the private Medicare Advantage plans are vastly inferior to a well designed improvement in the traditional Medicare program. The JAMA comment provided by Stephen Kemble explains probably the most fundamental flaw, and it’s a matter of ethics. Medicare Advantage plans have profited by enrolling healthier, less expensive patients, and by gaming risk adjustment to qualify them for higher payments. The U.S. is noted for the profound administrative waste in its financing system, and Medicare Advantage plans add significantly to that waste, not only for their own excessive costs but also for the heavy financial burden they place on the health care delivery system.
Amongst other reasons that Medicare Advantage plans are inferior include: their restricted provider networks frequently do not allow access to the care that you need; coverage may be unstable as plans enter and leave markets at their will; rules may prohibit enrolling in supplemental Medigap plans if returning to traditional Medicare; plans may profit by withholding beneficial care that you did not know was available and appropriate for your circumstances; plans may not have contracts with centers of excellence; etc., etc.
Responding to a few additional points made by Stuart Butler:
- Butler says that Medicare for All has encountered skepticism from many liberals, but it is really some of the neoliberals and not the progressives who prefer market solutions who have been less supportive; the majority of Americans support Medicare for All
- Butler cites the objection to the increase in federal expenditures, but he concedes the offset of the large savings in private expenditures
- He notes that traditional Medicare has significant out-of-pocket costs requiring the purchase of Medigap plans, but a well designed Medicare for All program folds in the benefits of Medigap plans plus adds other important benefits, eliminating most out-of-pocket costs (except for the equitable taxes used to fund the system)
- He states that Medicare for All is disruptive, but, like John Lewis has said, this is good trouble – patients have their full choice of providers while eliminating financial barriers to care; that’s disruption we would all like to have
- He states that Medicare Advantage has popular support, but that is primarily because Congress provided an unfair competitive edge to private plans by enabling them to offer their plans at low premiums – virtually all enrollees would prefer traditional Medicare free at the time of service with a full choice of providers, if it were available, as it would be with Medicare for All
- He notes that Medicare Advantage can offer additional benefits beyond the core benefits, but if they are benefits that should be covered with taxpayer funds, then, in fairness, Congress should offer the same benefits through the traditional Medicare program
- He describes Medicare Advantage managed care as being advantageous, not acknowledging the managed care backlash of the 1990s
- He suggests merging ACA exchange plans with Medicare Advantage plans – of course he would
In conclusion, we tried Stuart Butler’s previous proposal, and we have a very expensive mess on our hands. Let’s not do that again. Let’s go straight to single payer improved Medicare for All. We need some good trouble.
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