Wednesday, March 31, 2010
Tuesday, March 30, 2010
Monday, March 29, 2010
Friday, March 26, 2010
Thursday, March 25, 2010
Wednesday, March 24, 2010
Tuesday, March 23, 2010
Monday, March 22, 2010
Friday, March 19, 2010
Thursday, March 18, 2010
Wednesday, March 17, 2010
Tuesday, March 16, 2010
Monday, March 15, 2010
Actuarial Value: A Method for Comparing Health Plan Benefits
By Roland McDevitt, Ph.D., Director of Health Research, Watson Wyatt
Actuarial value is a summary measure of likely payments by a plan. It
measures the percentage of medical expenses paid by a health plan for a
standard population, ranging from 0.00 for a plan that pays nothing to
1.00 for a plan that pays all medical expenses.
Actuarial value only measures benefit payments. To fully assess whether
a plan is a good purchase, consumers would want to know both the premium
and the actuarial value. They may also want to consider other aspects of
the plan, such as whether specific benefits like maternity are covered,
whether the plan offers a broad choice of providers, and whether the
plan has a good record of administrative performance.
0.86 - $194
0.83 - $289
0.83 - $242
0.82 - $204
0.70 - $257
0.69 - $198
0.67 - $56
0.67 - $448
0.64 - $186
0.63 - $110
0.62 - $62
0.62 - $403
0.59 - $244
0.58 - $222
0.57 - $81
0.56 - $50
0.56 - $69
0.49 - $193
0.49 - $283
0.47 - $244
0.46 - $83
0.46 - $111
0.46 - $278
0.46 - $87
0.45 - $77
0.44 - $298
0.44 - $72
0.44 - $166
0.41 - $93
0.41 - $60
0.39 - $149
0.34 - $75
If the policy goal is to provide a single number that consumers can use
to compare the relative value of different benefit packages, actuarial
value presents a more robust measure than any single cost-sharing provision.
House of Representatives
March --, 2010
To provide for reconciliation...
Table of premium percentage limits and actuarial value percentages based
on income tier
Family income of 350% through 400% of federal poverty level (FPL)
Final premium percentage - 11%
Actuarial value percentage - 70%
Reference premium amount - average premium for the 3 basic plans in the
area for the plan year with the lowest premium levels
Comment: An important finding in this Watson Wyatt report is that the
premium paid for a private insurance plan has a very poor correlation
with the percentage of medical expenses that are paid by that plan on
average, as represented by the actuarial value. In this list from 2006,
a plan that paid 86% of the medical expenses had a premium of $194,
whereas another plan that paid 44% of expenses had a premium of $298.
Another important observation is that most of these plans in the
individual market have a comparatively low actuarial value. Almost half
of them don't even pay one-half of the medical expenses on average.
Think of the burden on the typical family of a year's worth of premiums
plus one-half of all medical expenses.
Although following the numbers reminds you of a shell game, it is
instructive to look at the reconciliation bill released by the House
Budget Committee last night (link above). With a family income of 350%
to 400% of the federal poverty level, the family would be required to
purchase a plan with an actuarial value of 70%, and they would be
required to pay up to 11% of their income for the premium. Thus the
family would be responsible for 11% of their income plus, on average,
30% of the medical expenses covered by the plan, plus all other costs
not covered by the plan.
That family also would be limited to providers selected by the private
insurer. In addition, that 11% of income cap on premiums applies only to
the average of the three cheapest plans with a 70% actuarial value.
Seeing the poor correlation with actuarial value, the family may feel
compelled to purchase a much more expensive plan with the same 70%
actuarial value if the cheapest plans do not include their personal
health care professionals with whom they have an established relationship.
Furthermore, most would prefer to have a plan that has benefits closer
to typical employer-sponsored plans which until now have had an
actuarial value of about 80%, and sometimes more. The family would be
responsible for the full additional costs of any such plan if they
should upgrade. (Upgrade really isn't the best choice of terms since all
trends today actually constitute a downgrade from the traditional standard.)
The bottom line is that a family at 400% FPL is being priced out of
health care, and a major factor contributing to this is that we are
relying on an incompetent private insurance industry that can't even
price its products properly. And Congress is... yes... cramming that
down our throats!
Friday, March 12, 2010
March 9, 2010
Grayson Introduces Public Option Act
Congressman Alan Grayson, D-Fla., today introduced a bill (H.R. 4789)
which would give the option to buy into Medicare to every citizen of the
United States. The "Public Option Act," also known as the "Medicare You
Can Buy Into Act," would open up the Medicare network to anyone who can
pay for it.
Congressman Grayson said, "Obviously, America wants and needs more
competition in health coverage, and a public option offers that. But
it's just as important that we offer people not just another choice, but
another kind of choice. A lot of people don't want to be at the mercy
of greedy insurance companies that will make money by denying them the
care that they need to stay healthy, or to stay alive. We deserve to
have a real alternative."
The bill would require the Secretary of Health and Human Services to
establish enrollment periods, coverage guidelines, and premiums for the
program. Because premiums would be equal to cost, the program would pay
"The government spent billions of dollars creating a Medicare network of
providers that is only open to one-eighth of the population. That's
like saying, 'Only people 65 and over can use federal highways.' It is
a waste of a very valuable resource and it is not fair. This idea is
simple, it makes sense, and it deserves an up-or-down vote," Congressman
H.R. 4789 - "Public Option Act" or "Medicare You Can Buy Into Act":
http://thomas.loc.gov/ Click Bill Number. Enter H.R. 4789. Click
Search. From there you can access the text of the legislation (very
short bill), cosponsors, and other information.
Video of Grayson's introduction of H.R. 4789 to House (5 minutes):
Article XVIII, Sec. 1818
Article XVIII, Sec. 1818A
Medicare premiums for 2010
Comment: Throughout the reform process members of Congress have been
fighting over whether or not the reform legislation should include the
option of purchasing a government-sponsored plan through the proposed
insurance exchanges - the so-called "public option." Since Congressman
Alan Grayson introduced the "Public Option Act" or "Medicare You Can Buy
Into Act" three days ago, a wave of enthusiastic support has been
generated based on the perception that this is the perfect solution.
Today's comment briefly discusses this legislation, and it will sound
really great at first blush, but do not draw any firm conclusions until
you read through to the end.
Okay. What does this bill do? It simply allows any legal resident of the
United States under age 65 to buy into Medicare. The program will be
paid for by the premiums to be collected from the individuals purchasing
the coverage. Six age brackets are established for purposes of pooling
funds. This reduces the financial burden on younger, healthier
individuals by requiring older individuals to pay the higher premiums
that would be required to fully fund their less healthy risk pool.
Many are not aware of this, but Medicare already has a buy-in program.
Under Title XVIII, Sec. 1818, individuals over 65 who have fewer than 40
quarters of Medicare-covered employment who would otherwise not be
eligible for Medicare can still participate by paying a full premium for
Part A coverage (hospital) or a reduced premium if they have 30 to 39
quarters of Medicare-covered employment. Likewise, under Sec. 1818A,
disabled individuals whose entitlement ends due to having earnings that
exceed the qualification level can also purchase Medicare Part A.
Grayson's bill adds a new Sec. 1818B to Title XVIII to expand the buy-in
option to anyone under 65.
For 2010, the premium under Sec. 1818 and Sec. 1818A to buy into
Medicare Part A is $461 per month. The premium for Part B (supplemental
medical) is the same as for qualified retirees - $110.50 and up, based
on income (ignoring the hold harmless exception). Thus the buy-in is
about $571 per month, or more for those with higher incomes.
Although Medicare beneficiaries have a high rate of chronic disease plus
the costs of end-of-life care, the risk pool is diluted with a very
large number of healthy seniors, thus the premiums are not as high as
one might think. On the other hand, it is likely that the risk pools for
the older but still under 65 age groups in the Grayson proposal would be
subject to adverse selection. Since the premiums must pay all costs,
they may be higher, perhaps much higher, than the diluted post 65 risk
pool. Grayson has not included any risk adjustment mechanism to
compensate for this.
At any rate, the Grayson proposal seems to be the true public option,
run by the government, that progressives have been fighting for. So what
could be wrong with it?
The greatest concern of all is that it still does not fix our
outrageously expensive, administratively wasteful, highly inequitable,
fragmented method of financing health care. It merely provides another
expensive option in our very sick system of paying for health care.
Providing yet one more option that people can't afford really hasn't
moved the process.
Although Medicare is a very popular program, it is highly flawed. It has
an oppressive central bureaucracy. It fails to use more efficient
financing systems such as global budgeting for hospitals and negotiation
to obtain greater value in health care purchasing. There are serious
questions about whether Medicare funds are being distributed equitably
and in a manner to promote greater efficiency. Its benefit package is
relatively poor, covering only about half of health care costs for our
seniors. Most Medicare beneficiaries feel that they essentially are
forced either to purchase Medigap plans, which provide the worst value
of all private health plans, or to enroll in Medicare Advantage plans,
which waste too many tax and premium dollars. It would be both much less
expensive for all of us and better for Medicare beneficiaries if the
extra benefits of these private plans were rolled into the traditional
Medicare program. Part D should be stripped of its private market
administrative and profit excesses and also be rolled into the
traditional program. Medicare also has failed to introduce beneficial
innovative programs such as the British NICE system, which would improve
both quality and value in our health care.
When we advocate for an improved Medicare for all, we really aren't
advocating for Medicare with a few tweaks. We are advocating for
replacing Medicare with a single payer national health program that
covers everyone, which we can still call Medicare, just as the Canadians
do. Adding another buy-in program to the two buy-in programs that
already exist in our highly dysfunctional system will do virtually
nothing to fix these flaws we now have. It does nothing to slow the
growth in our national health expenditures, and the high premiums for a
package of mediocre benefits will do little to reduce the numbers of
For those who say that a Medicare buy-in is an incremental step towards
health care utopia, explain precisely how that is going to work. Explain
each problem that it solves. Explain how it is going to morph into a
universal or near universal system in which each individual is paying
the full actuarial value of the coverage. It won't happen.
Playing with a Medicare buy-in is an unnecessary diversion at a time
that we need to get serious about reform. We need to fix Medicare and
expand it to cover everyone. Nothing less will do.