A Bipartisan Way Forward on Medicare

By Ron Wyden and Paul Ryan
The Wall Street Journal, December 15, 2011

Our plan would strengthen traditional Medicare by permanently maintaining it as a guaranteed and viable option for all of our nation’s retirees. At the same time, our plan would expand choice for seniors by allowing the private sector to compete with Medicare in an effort to offer seniors better-quality and more affordable health-care choices.

Under our plan, Americans currently over the age of 55 would see no changes to the Medicare system. For future retirees, starting in 2022, our plan would introduce a “premium support” system that would empower Medicare beneficiaries to choose either a traditional Medicare plan or a Medicare-approved private plan. Unlike Medicare Advantage, these private plans would compete head-to-head with traditional, fee-for-service Medicare on a federally regulated Medicare exchange.

Low-income seniors who qualify for both Medicare and Medicaid would continue to have Medicaid pay for their out-of-pocket expenses. Other lower-income seniors would receive fully funded savings accounts to help offset any increased out-of-pocket costs, while wealthier seniors would receive less help.

In the event that these efforts did not stem the rising tide of Medicare spending, there would be a cap on the program’s rate of growth. But unlike other proposals, spending that exceeds the cap would neither be addressed through bureaucratic cuts nor passed on to seniors by default as higher premiums.

Instead, Congress would be required to do its job: Determine why the costs exceeded the cap and – when the evidence merits – reduce payments to providers, drug companies, or others who may be responsible for escalating costs.

Our plan would also expand health-care options for working Americans by giving smaller businesses the opportunity to empower their employees to make their own health-care choices. Under this “free choice option,” employees take the amount that their employer was contributing toward their employer-provided health coverage and use it to purchase their own health insurance instead. The cost to the employer – and the tax-free benefit to the worker – would remain the same.

Yes, these are ambitious reforms, and while we are hopeful for the future, we are under no illusions that they will pass tomorrow. Nevertheless, we offer this plan as proof that Democrats and Republicans don’t have to spend next year making Medicare reform more difficult. Instead, our parties can work together on bipartisan reforms to save and strengthen Medicare.

(Mr. Wyden, a Democrat, is a U.S. senator from Oregon. Mr. Ryan, a Republican, is a U.S. representative from Wisconsin.)

http://online.wsj.com/article/SB10001424052970203893404577098681919780636.html

Press release:
http://wyden.senate.gov/newsroom/press/release/?id=02334291-9c60-4020-9a8d-e2b9d0f37422

White paper (13 pages):
http://budget.house.gov/UploadedFiles/WydenRyan.pdf

Although Sen. Ron Wyden (D-Oregon) and Rep. Paul Ryan (R-Wisconsin) have released their white paper on a proposal for reforming Medicare, there is no intent on their part to follow it up with legislation during this session of Congress. Their stated intent is to initiate a bipartisan discussion on Medicare reform, but it appears instead that other political considerations prompted this proposal.

Paul Ryan was stung by the response to his original proposal to end the traditional Medicare program and replace it with a premium support (voucher) program of private health plans. The Congressional Budget Office reported that his plan would cause a major shift of costs from the government to Medicare beneficiaries, and his own constituents beat up on him back home. Also, the Republicans in the House of Representatives are now on record as having voted for the Ryan premium support plan, and the Democrats have made it clear that they will make this a major issue in the coming elections.

This white paper gives the Republicans an out. They can now claim that this is better than the original Ryan proposal because it protects Medicare by leaving it as an option while providing more choices of competing private plans. Obviously this takes away the sting of the Democrats’ attack.

Why would Ron Wyden cooperate with Paul Ryan in this effort to defuse the Democrats’ strategy of using the premium support vote against the Republicans? It is because he is more supportive of his own previous proposal for health care reform than he is for the Democrats to prevail in the next election. His Healthy Americans Act that he pushed throughout the reform process called for an individual mandate to purchase private plans, shifting the tax benefit from employers to individuals (a concept included in this white paper). He has said that Democrats want universal coverage, Republicans want choice, and his plan, and now the Ryan-Wyden proposal, would enable both.

The problem for single payer supporters is that this is a digression that shoves the concept of an improved Medicare for all further into the background. The substance of the debate will be over converting the Medicare Advantage plan into a voucherized program competing on price. Single payer supporters will not be welcome participants in that debate, nor should we.

We shouldn’t waste our resources on countering premium support. That’s the wrong debate. We need to continue with a very strong message on countering private, corporate control of health care, while promoting a publicly-financed and publicly-administered Medicare for everyone. That’s the message that America needs to hear.

by Bacchus Barua, Mark Rovere and Brett J. Skinner
Fraser Institute, December 2011

This edition of Waiting Your Turn indicates that waiting times for elective medical treatment have increased since last year. Specialist physicians surveyed across 12 specialties and 10 Canadian provinces report a total waiting time of 19.0 weeks between referral from a general practitioner and receipt of elective treatment.

http://www.fraserinstitute.org/uploadedFiles/fraser-ca/Content/research-news/research/publications/waiting-your-turn-2011.pdf

And…

Wait Times in Canada—A Comparison by Province, 2011

Canadian Institute for Health Information (CIHI)

At least 8 out of 10 Canadian patients are receiving priority area procedures, such as hip replacements, cataract surgery and cancer radiation treatment, within medically recommended wait times, according to a new study from the Canadian Institute for Health Information (CIHI). The study provides the first comprehensive national picture of how long Canadians wait for care in priority areas as compared with evidence-based benchmarks of acceptable waits.

http://www.cihi.ca/cihi-ext-portal/internet/en/document/health+system+performance/access+and+wait+times/release_21mar11

Comment: 

By Don McCanne, MD

The Fraser Institute has released its 21st annual report on wait times for health care in Canada. This report is used widely to condemn Canada’s reliance on their single payer medicare program for the financing of health care. It helps to fulfill the Fraser Institute’s libertarian agenda of advocating for privatization of their health care system. Today’s comment takes a critical look at this report.

The findings in the report are based on the solicited opinions of Canadian physicians. Questionnaires were sent to 10,737 of the 68,000 active Canadian physicians. Of these, 1,696 physicians responded (15.8% response rate). Distributing these responses amongst the 12 specialties and ten provinces results in single digit tallies for 63 percent of the categories, and often only one physician falling into a given category. For instance, only one specialist in internal medicine represented the views of all internists in the province of Prince Edward.

Besides questioning whether these numbers are adequate to represent the views of all Canadian physicians, there are two other factors that may have skewed the results.

As an enticement to return the questionnaires the physicians were given the chance to win $2000. Physicians with an entrepreneurial mentality – those who more likely favor privatization of health care – might be more favorably inclined to try for this reward. More altruistic physicians who really care about the problem of queues might be insulted by this attempt to buy responses with a prize.

A great many Canadian physicians strongly support their medicare program and oppose the current efforts to privatize both the delivery system and the health insurance system. These physicians are acutely aware of the agenda of the Fraser Institute and would be much less likely to cooperate in their biased studies.

Thus it is unlikely that the sampling truly represents the views of mainstream Canadian physicians.

Another important consideration is that this study was heavily weighted toward elective surgeries. Emergency conditions were not included. Patients in Canada have excellent access when a true emergency exists. So this study is not looking at acute, urgent conditions.

Instead, this study was looking more at patients with chronic conditions which are usually managed over a long period of time, sometimes for a lifetime. Yet the authors imply that the disorders for which they are treated began at a single point in time in the generalist’s office.

In reality, when the physician and patient decide that it is time to consider more options for managing a chronic problem, often a decision is made to obtain a specialist’s consultation. These are not emergencies so a routine appointment is scheduled. Except for a few specialties, most of these appointments are within a reasonable time interval.

Once the patient sees the specialist, more time is consumed for appropriate comprehensive evaluation of the problem before a decision is made on definitive management. Again, these time intervals are mostly reasonable.

Once the decision is made to schedule the elective surgery or other procedure, then excessive waiting times can be more objectionable. But how long are these waiting times?

The specialists were asked what a reasonable waiting time was for their given procedures, and how long their patients had to wait. With the exception of plastic surgery and orthopedics, most waiting times were very close to those that the specialists considered to be reasonable. (Internal medicine was also an outlier for endoscopy and non-urgent angiography.)

The Fraser report is very deceptive because they add to the time between scheduling a procedure and completing a procedure the time for the routine request by a generalist for a consultation, and the time for the specialist to complete the full evaluation before deciding on the specific management. If you separate these out, most of the intervals are quite reasonable. The 19 week wait reported by Fraser has little meaning, since it does not represent the time between scheduling a procedure and completing it.

The much more credible study from the Canadian Institute for Health Information confirms that Canada is doing quite well in delivering care within medically recommended wait times.

This does not mean that there are no problems. There is a very major problem, and it is political. Conservative politicians who currently control much of the government would like to privatize the health care system. Their approach is to abandon their role as stewards of the health care system, deliberately allowing longer queues to develop. Then the public is told that the only way to fix these outrageous delays that are killing people is to turn to the private health care markets in order to bypass the queues. As this view gains traction there is greater support for what amounts to a two-tiered system – the best of care for the relatively wealthy, and an under-funded public program for the masses.

Sound familiar? Only we’re far ahead of them in fragmenting our system.

Waiting Your Turn: Wait Times for Health Care in Canada – 2011 Report

by Bacchus Barua, Mark Rovere and Brett J. Skinner
Fraser Institute, December 2011

This edition of Waiting Your Turn indicates that waiting times for elective medical treatment have increased since last year. Specialist physicians surveyed across 12 specialties and 10 Canadian provinces report a total waiting time of 19.0 weeks between referral from a general practitioner and receipt of elective treatment.

http://www.fraserinstitute.org/uploadedFiles/fraser-ca/Content/research-news/research/publications/waiting-your-turn-2011.pdf

And…

Wait Times in Canada—A Comparison by Province, 2011

Canadian Institute for Health Information (CIHI)

At least 8 out of 10 Canadian patients are receiving priority area procedures, such as hip replacements, cataract surgery and cancer radiation treatment, within medically recommended wait times, according to a new study from the Canadian Institute for Health Information (CIHI). The study provides the first comprehensive national picture of how long Canadians wait for care in priority areas as compared with evidence-based benchmarks of acceptable waits.

http://www.cihi.ca/cihi-ext-portal/internet/en/document/health+system+performance/access+and+wait+times/release_21mar11

The Fraser Institute has released its 21st annual report on wait times for health care in Canada. This report is used widely to condemn Canada’s reliance on their single payer medicare program for the financing of health care. It helps to fulfill the Fraser Institute’s libertarian agenda of advocating for privatization of their health care system. Today’s comment takes a critical look at this report.

The findings in the report are based on the solicited opinions of Canadian physicians. Questionnaires were sent to 10,737 of the 68,000 active Canadian physicians. Of these, 1,696 physicians responded (15.8% response rate). Distributing these responses amongst the 12 specialties and ten provinces results in single digit tallies for 63 percent of the categories, and often only one physician falling into a given category. For instance, only one specialist in internal medicine represented the views of all internists in the province of Prince Edward.

Besides questioning whether these numbers are adequate to represent the views of all Canadian physicians, there are two other factors that may have skewed the results.

As an enticement to return the questionnaires the physicians were given the chance to win $2000. Physicians with an entrepreneurial mentality – those who more likely favor privatization of health care – might be more favorably inclined to try for this reward. More altruistic physicians who really care about the problem of queues might be insulted by this attempt to buy responses with a prize.

A great many Canadian physicians strongly support their medicare program and oppose the current efforts to privatize both the delivery system and the health insurance system. These physicians are acutely aware of the agenda of the Fraser Institute and would be much less likely to cooperate in their biased studies.

Thus it is unlikely that the sampling truly represents the views of mainstream Canadian physicians.

Another important consideration is that this study was heavily weighted toward elective surgeries. Emergency conditions were not included. Patients in Canada have excellent access when a true emergency exists. So this study is not looking at acute, urgent conditions.

Instead, this study was looking more at patients with chronic conditions which are usually managed over a long period of time, sometimes for a lifetime. Yet the authors imply that the disorders for which they are treated began at a single point in time in the generalist’s office.

In reality, when the physician and patient decide that it is time to consider more options for managing a chronic problem, often a decision is made to obtain a specialist’s consultation. These are not emergencies so a routine appointment is scheduled. Except for a few specialties, most of these appointments are within a reasonable time interval.

Once the patient sees the specialist, more time is consumed for appropriate comprehensive evaluation of the problem before a decision is made on definitive management. Again, these time intervals are mostly reasonable.

Once the decision is made to schedule the elective surgery or other procedure, then excessive waiting times can be more objectionable. But how long are these waiting times?

The specialists were asked what a reasonable waiting time was for their given procedures, and how long their patients had to wait. With the exception of plastic surgery and orthopedics, most waiting times were very close to those that the specialists considered to be reasonable. (Internal medicine was also an outlier for endoscopy and non-urgent angiography.)

The Fraser report is very deceptive because they add to the time between scheduling a procedure and completing a procedure the time for the routine request by a generalist for a consultation, and the time for the specialist to complete the full evaluation before deciding on the specific management. If you separate these out, most of the intervals are quite reasonable. The 19 week wait reported by Fraser has little meaning, since it does not represent the time between scheduling a procedure and completing it.

The much more credible study from the Canadian Institute for Health Information confirms that Canada is doing quite well in delivering care within medically recommended wait times.

This does not mean that there are no problems. There is a very major problem, and it is political. Conservative politicians who currently control much of the government would like to privatize the health care system. Their approach is to abandon their role as stewards of the health care system, deliberately allowing longer queues to develop. Then the public is told that the only way to fix these outrageous delays that are killing people is to turn to the private health care markets in order to bypass the queues. As this view gains traction there is greater support for what amounts to a two-tiered system – the best of care for the relatively wealthy, and an under-funded public program for the masses.

Sound familiar? Only we’re far ahead of them in fragmenting our system.

By Edwin Park
Center on Budget and Policy Priorities, December 12, 2011

Risk adjustment is one of the critical elements of health reform (i.e., the Affordable Care Act, or ACA) that’s designed to encourage insurers to compete based on price and quality – not on attracting the healthiest enrollees and deterring those in poorer health, as they typically do today in the individual and small-group insurance markets.

Under the ACA’s risk adjustment provision, insurers in the individual and small-group markets with sicker-than-average overall enrollment will receive payments to compensate them for their resulting higher costs. The payments will come from plans that enroll healthier-than-average people who do not cost as much to cover. By compensating insurers that enroll people in poorer health, risk adjustment reduces the incentive for insurers to “cherry pick” the healthy and avoid enrolling people with chronic illnesses and other serious health conditions.

To implement this “risk adjustment” provision, the federal government proposes that the entities administering risk adjustment – states or the U.S. Department of Health and Human Services (HHS) – determine the health status of plan enrollees based on data that insurers submit to them, which is similar to how risk adjustment in Medicare works today. But some insurance companies, as well as some House Republicans, are urging the federal government to allow insurers to measure the health status of their enrollees themselves without submitting any data.

Some insurance companies are mounting strong opposition to the HHS proposal on risk adjustment data submission. Instead, they are pushing HHS to adopt a “distributed” approach to the collection of risk adjustment data.

Under a distributed approach, insurers would standardize their data (according to federal and state specifications), themselves apply the risk adjustment methodology and calculate their own risk scores and then simply submit those scores to the entity administering risk adjustment. Insurance companies would not provide the risk adjustment entity with any of the underlying claims and encounter data needed to determine whether the data are reliable and valid and whether the risk scores have been accurately calculated. (Insurers would be expected to make a sample of that data available after the fact for retrospective audits.)

Risk adjustment is an essential element of the Affordable Care Act. Letting insurers calculate their own risk scores without having to submit the underlying data needed to make sure those calculations are accurate would place the health reform law’s risk adjustment system at substantial risk of error, upcoding, and fraud, threatening the long-term success of the exchanges and the major health insurance market reforms scheduled to take effect in 2014.

http://www.cbpp.org/cms/index.cfm?fa=view&id=3640&emailView=1

And…

Letter to Centers for Medicare & Medicaid Services

Re: Proposed Rule for Standards Related to Reinsurance, Risk Corridors and Risk Adjustment (CMS-9975-P)

BlueCross BlueShield Association
October 31, 2011

We strongly recommend that HHS use a distributed model for accessing risk adjustment data. Our recommended model: 1) alleviates members’ privacy concerns since States will not be collecting confidential, individually identifiable health information; 2) retains issuers’ control of proprietary data that has strategic importance; and 3) allows States/HHS to maintain the same control over the process while alleviating the burden of creating, securing, maintaining and updating a large costly centralized multi-payer database.

http://www.regulations.gov/#!documentDetail;D=HHS-OS-2011-0022-0543

And…

National Bureau of Economic Research report on risk adjustment in the Medicare Advantage Program:

Thus the authors conclude that the Medicare Advantage program both increased total Medicare spending and transferred Medicare resources from the relatively sick to the relatively healthy, and that risk-adjustment was not able to address either of these problems.

https://pnhp.org/blog/2011/10/03/private-medicare-plans-shockingly-game-risk-adjustment/

Comment: 

By Don McCanne, MD

Insurers that corner the market of healthy individuals have an unfair advantage over insurers that cover a greater number of high cost, sicker patients. To protect those insurers with high costs from failing in the markets, risk adjustment corrects for the market distortions by taking funds from the insurers with low cost patients and transferring them to the insurers with high cost patients.

Risk adjustment may be a great theory, but in practice it doesn’t work very well. As an example, even though prohibited from selectively enrolling healthier patients, Medicare Advantage plans have been very successful at selectively marketing to the healthy. Insurers end up with significantly lower costs, even though they are paid higher amounts than are paid for patients in the traditional Medicare program.

In 2004, Medicare began to adjust for risk, but the Medicare Advantage insurers gamed the system, as was demonstrated in an NBER report (link above), further increasing the unfair differential to about $3000 per patient. The Medicare-supervised risk adjustment was ineffective, not due to the incompetence of Medicare, but rather due to the deviousness of the Medicare Advantage plans in coding patients with just a touch of illness, making them appear as being more seriously ill than they were.

Now the insurers want to do their own “distributed model” of risk adjustment, preventing federal or state bureaucrats from looking over their shoulders as they do their dirty deeds. This applies not only to Medicare Advantage plans but to all plans in and out of the exchanges, except for grandfathered plans. They claim that this secrecy is necessary to maintain patient privacy and to protect the insurers’ proprietary data, but risk adjustment of the Medicare Advantage program has demonstrated that these are not valid concerns.

Risk adjustment does not work, as the insurers will always game the system. The insurers’ solution is to allow them to do it in greater secrecy, with a “trust us” attitude that certainly has not been earned based on their previous behavior.

A solution that would benefit all of us would be to totally eliminate the need for risk adjustment. How do you do that? You simply eliminate multiple risk pools by eliminating the private insurer middlemen, and then establish a single, universal risk pool – an improved Medicare for all. There would never be a need for Medicare to risk adjust itself.

Allowing Insurers to Withhold Data on Enrollees’ Health Status Could Undermine Key Part of Health Reform

By Edwin Park
Center on Budget and Policy Priorities, December 12, 2011

Risk adjustment is one of the critical elements of health reform (i.e., the Affordable Care Act, or ACA) that’s designed to encourage insurers to compete based on price and quality – not on attracting the healthiest enrollees and deterring those in poorer health, as they typically do today in the individual and small-group insurance markets.

Under the ACA’s risk adjustment provision, insurers in the individual and small-group markets with sicker-than-average overall enrollment will receive payments to compensate them for their resulting higher costs. The payments will come from plans that enroll healthier-than-average people who do not cost as much to cover. By compensating insurers that enroll people in poorer health, risk adjustment reduces the incentive for insurers to “cherry pick” the healthy and avoid enrolling people with chronic illnesses and other serious health conditions.

To implement this “risk adjustment” provision, the federal government proposes that the entities administering risk adjustment – states or the U.S. Department of Health and Human Services (HHS) – determine the health status of plan enrollees based on data that insurers submit to them, which is similar to how risk adjustment in Medicare works today. But some insurance companies, as well as some House Republicans, are urging the federal government to allow insurers to measure the health status of their enrollees themselves without submitting any data.

Some insurance companies are mounting strong opposition to the HHS proposal on risk adjustment data submission. Instead, they are pushing HHS to adopt a “distributed” approach to the collection of risk adjustment data.

Under a distributed approach, insurers would standardize their data (according to federal and state specifications), themselves apply the risk adjustment methodology and calculate their own risk scores and then simply submit those scores to the entity administering risk adjustment. Insurance companies would not provide the risk adjustment entity with any of the underlying claims and encounter data needed to determine whether the data are reliable and valid and whether the risk scores have been accurately calculated. (Insurers would be expected to make a sample of that data available after the fact for retrospective audits.)

Risk adjustment is an essential element of the Affordable Care Act. Letting insurers calculate their own risk scores without having to submit the underlying data needed to make sure those calculations are accurate would place the health reform law’s risk adjustment system at substantial risk of error, upcoding, and fraud, threatening the long-term success of the exchanges and the major health insurance market reforms scheduled to take effect in 2014.

http://www.cbpp.org/cms/index.cfm?fa=view&id=3640&emailView=1

And…

Letter to Centers for Medicare & Medicaid Services

Re: Proposed Rule for Standards Related to Reinsurance, Risk Corridors and Risk Adjustment (CMS-9975-P)

BlueCross BlueShield Association
October 31, 2011

We strongly recommend that HHS use a distributed model for accessing risk adjustment data. Our recommended model: 1) alleviates members’ privacy concerns since States will not be collecting confidential, individually identifiable health information; 2) retains issuers’ control of proprietary data that has strategic importance; and 3) allows States/HHS to maintain the same control over the process while alleviating the burden of creating, securing, maintaining and updating a large costly centralized multi-payer database.

http://www.regulations.gov/#!documentDetail;D=HHS-OS-2011-0022-0543

And…

National Bureau of Economic Research report on risk adjustment in the Medicare Advantage Program:

Thus the authors conclude that the Medicare Advantage program both increased total Medicare spending and transferred Medicare resources from the relatively sick to the relatively healthy, and that risk-adjustment was not able to address either of these problems.

https://pnhp.org/blog/2011/10/03/private-medicare-plans-shockingly-game-risk-adjustment/

Insurers that corner the market of healthy individuals have an unfair advantage over insurers that cover a greater number of high cost, sicker patients. To protect those insurers with high costs from failing in the markets, risk adjustment corrects for the market distortions by taking funds from the insurers with low cost patients and transferring them to the insurers with high cost patients.

Risk adjustment may be a great theory, but in practice it doesn’t work very well. As an example, even though prohibited from selectively enrolling healthier patients, Medicare Advantage plans have been very successful at selectively marketing to the healthy. Insurers end up with significantly lower costs, even though they are paid higher amounts than are paid for patients in the traditional Medicare program.

In 2004, Medicare began to adjust for risk, but the Medicare Advantage insurers gamed the system, as was demonstrated in an NBER report (link above), further increasing the unfair differential to about $3000 per patient. The Medicare-supervised risk adjustment was ineffective, not due to the incompetence of Medicare, but rather due to the deviousness of the Medicare Advantage plans in coding patients with just a touch of illness, making them appear as being more seriously ill than they were.

Now the insurers want to do their own “distributed model” of risk adjustment, preventing federal or state bureaucrats from looking over their shoulders as they do their dirty deeds. This applies not only to Medicare Advantage plans but to all plans in and out of the exchanges, except for grandfathered plans. They claim that this secrecy is necessary to maintain patient privacy and to protect the insurers’ proprietary data, but risk adjustment of the Medicare Advantage program has demonstrated that these are not valid concerns.

Risk adjustment does not work, as the insurers will always game the system. The insurers’ solution is to allow them to do it in greater secrecy, with a “trust us” attitude that certainly has not been earned based on their previous behavior.

A solution that would benefit all of us would be to totally eliminate the need for risk adjustment. How do you do that? You simply eliminate multiple risk pools by eliminating the private insurer middlemen, and then establish a single, universal risk pool – an improved Medicare for all. There would never be a need for Medicare to risk adjust itself.