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Subject: qotd: Health Affairs articles on Medicare reform options
Date: Tue, 7 May 2013 13:26:51 -0700
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>
Health Affairs
May 2013
Tackling the Cost Conundrum
Medicare Essential: An Option To Promote Better Care And Curb Spending
Growth
By Karen Davis, Cathy Schoen and Stuart Guterman
We describe a new option we call Medicare Essential, which would combine
Medicare's hospital, physician, and prescription drug coverage into an
integrated benefit with an annual limit on out-of-pocket expenses for
covered benefits. Cost sharing would be reduced for enrollees who seek
care from high-quality low-cost providers. Out-of-pocket savings from
lower premiums and health care costs for a Medicare Essential enrollee
could be $173 per month, compared to what an enrollee would pay with
traditional Medicare, prescription drug and private supplemental
coverage. Financed by a budget-neutral premium, we estimate that this
new plan choice could reduce total health spending relative to current
projections by $180 billion and reduce employer retiree spending by $90
billion during 2014–23. Given its potential, such an alternative should
be a part of the debate over the future of Medicare.
http://content.healthaffairs.org/content/32/5/900.abstract
Supplemental Coverage Associated With More Rapid Spending Growth For
Medicare Beneficiaries
By Ezra Golberstein, Kayo Walsh, Yulei He and Michael E. Chernew
Supplemental coverage makes health care more affordable for
beneficiaries but also makes beneficiaries insensitive to the cost of
their care, thereby increasing the demand for care. We found that
supplemental insurance coverage was associated with significantly higher
rates of overall spending growth. Specifically, employer-sponsored and
self-purchased supplemental coverage were associated with annual total
spending growth rates of 7.17 percent and 7.18 percent, respectively,
compared to 6.08 percent annual growth for beneficiaries without
supplemental coverage. Results for Medicare program spending were more
equivocal, however. Our results are consistent with the belief that
current trends away from generous employer-sponsored supplemental
coverage and efforts to restrict the generosity of supplemental coverage
may slow spending growth.
http://content.healthaffairs.org/content/32/5/873.abstract
Public Financing Of The Medicare Program Will Make Its Uniform Structure
Increasingly Costly To Sustain
By Katherine Baicker, Mark Shepard and Jonathan Skinner
In this article we describe a model incorporating the benefits of public
programs and the cost of tax financing. The model implies that the
"one-size-fits-all" Medicare program, with everyone covered by the same
insurance policy, will be increasingly difficult to sustain. We show
that a Medicare program with guaranteed basic benefits and the option to
purchase additional coverage could lead to more unequal health spending
but slower growth in taxation, greater overall well-being, and more
rapid growth of gross domestic product.
Our model thus helps explain the rapid growth in US health care
expenditures relative to other countries. More important, the model
highlights the trade-offs in different approaches to reining in public
spending — from the current approach of providing a uniform benefit that
increasingly crowds out other programs, to a less egalitarian model that
guarantees only a basic benefit and redirects some redistribution toward
other programs.
Our analysis suggests that the policy of providing a uniform benefit to all
— rather than a basic benefit that higher-income residents can augment
— may be increasingly untenable if health care expenditures continue to
rise.
Other excerpts:
Why has the United States diverged so dramatically from its
counterparts? This divergence is probably not explained by commonly
cited factors such as administrative costs — already high by the 1980s —
or physician salaries, which have stagnated over the past decade.
The implications of our model are not dissimilar to the idea of
voucher-type premium support suggested over the years by Ezekiel Emanuel
and Victor Fuchs, Henry Aaron and Robert Reischauer, and Rep. Paul Ryan
(R-WI). Indeed, it may appear that this plan most closely resembles a
Ryan-style premium support plan.
Our "basic" plan does not correspond so much to a high-deductible or
higher-cost-sharing plan, but rather to one that covers a more limited
set of treatments or providers. Unlike high-deductible plans, the basic
plan need not expose poorer households to the risk of substantial cost
sharing. Instead, it is designed to limit coverage to treatments with
proven effectiveness at a reasonable cost. Of course, identifying which
treatments are of high value — and for which patients — poses
substantial challenges.
Perhaps the greatest challenge to offering this kind of plan choice more
widely in Medicare is that it would require setting aside the
egalitarian goals enshrined in the Medicare legislation of 1965.
Publicly providing only basic coverage would implicitly recognize that
higher-income households would probably elect to procure more generous
coverage — and, ultimately, to obtain more health care and possibly
better health outcomes.
http://content.healthaffairs.org/content/32/5/882.abstract
Background paper (40 pages): "Optimal Healthcare Spending with
Redistributive Financing"
http://www.dartmouthatlas.org/downloads/papers/ShepardBaickerSkinner_OptimalHealthSpending.pdf
Three Large-Scale Changes To The Medicare Program Could Curb Its Costs
But Also Reduce Enrollment
By Christine Eibner, Dana P. Goldman, Jeffrey Sullivan and Alan M. Garber
With Medicare spending projected to increase to 24 percent of all
federal spending and to equal 6 percent of the gross domestic product by
2037, policy makers are again considering ways to curb the program's
spending growth. We used a microsimulation approach to estimate three
scenarios: imposing a means-tested premium for Part A hospital
insurance, introducing a premium support credit to purchase health
insurance, and increasing the eligibility age to sixty-seven. We found
that the scenarios would lead to reductions in cumulative Medicare
spending in 2012–36 of 2.4–24.0 percent. However, the scenarios also
would increase out-of-pocket spending for enrollees and, in some cases,
cause millions of seniors not to enroll in the program and to be left
without coverage.
http://content.healthaffairs.org/content/32/5/891.abstract
Additional Reductions In Medicare Spending Growth Will Likely Require
Shifting Costs To Beneficiaries
By Michael E. Chernew
The Affordable Care Act created a projected trajectory for Medicare
spending per beneficiary that is lower than historical growth rates.
Although opportunities for one-time savings exist, any long-term savings
from Medicare, beyond those already forecast, will probably require a
shift in spending from taxpayers to beneficiaries via higher beneficiary
premium contributions (overall or via means testing), changes in
eligibility, or greater cost sharing at the point of service.
http://content.healthaffairs.org/content/32/5/859.abstract
Comment: At a time when our politicians have decided to open
discussions on reducing government spending in Medicare, it likely is no
coincidence that this cluster of articles on ways of reforming the
financing of Medicare appears in the leading journal of health policy -
Health Affairs. But beware; the thrust of most of the articles should
raise our concerns.
The most alarming articles are the pair from Katherine Baicker and her
colleagues. They support unlimited care with "better health outcomes"
for higher-income households, with only "basic" care for for the rest of
us, even though they note that defining basic care "poses substantial
challenges." Class division in health care seems to be a uniquely
American concept. "It would require setting aside the egalitarian goals
enshrined in the Medicare legislation of 1965."
The article by Ezra Golberstein and his colleagues calls for diminishing
the financial protection offered by supplemental Medigap and retiree
health benefits "to restrict the generosity of supplemental coverage,"
making beneficiaries more sensitive to the cost of their care, even
though "results for Medicare program spending were more equivocal."
Feeling the pain of their health care spending seems to be the policy
goal even if the total reduction in Medicare spending is only nominal.
Christine Eibner and her colleagues propose, "imposing a means-tested
premium for Part A hospital insurance, introducing a premium support
credit to purchase health insurance, and increasing the eligibility age
to sixty-seven" as three means of reducing overall Medicare spending,
even though these measures would shift costs to the beneficiaries and
cause perhaps millions of them to withdraw from Medicare and remain
uninsured.
Michael Chernew keeps it simple. Lowering the projected trajectory for
Medicare spending "will probably require a shift in spending from
taxpayers to beneficiaries via higher beneficiary premium contributions
(overall or via means testing), changes in eligibility, or greater cost
sharing at the point of service." In other words, reduce the tax
transfer by sticking it to the seniors.
We can thank Karen Davis, Cathy Schoen and Stuart Guterman for not
causing us to lose all hope. Their proposal - "Medicare Essential" - is
designed to increase the coverage and efficiency of Medicare. They would
combine the hospital Part A, physician Part B, and drug Part D programs
into a single program with less administrative complexity. They would
also add much needed catastrophic coverage by placing a maximum on
out-of-pocket expenses. They would also fold in the benefits of
supplemental plans eliminating the need for wasteful, superfluous
Medigap and retiree health plans. Their proposal would actually reduce
spending for most Medicare beneficiaries while enhancing the benefits.
They would leave in place the flawed Medicare Advantage plans, although
competing with a truly superior public plan could make them obsolete -
the goal of "the public option." They would have the deductible apply to
Part A, opening the treacherous territory of a path for more cost
shifting to beneficiaries. Also they do not mention that Medicare
Essential could eventually be expanded to include everyone, becoming an
improved Medicare for all. There are many other important features of
the PNHP version of the single payer model that they do not address, and
that we won't mention here. Suffice it to say, that Medicare Essential
is only a tiny though important step in the direction in which we should
be headed.
For incrementalists, Medicare Essential should captivate you. For those
of us who are impassioned single payer supporters, we should continue to
advocate for moving the political process forward toward achieving an
Improved Medicare for All single payer program as soon as possible.
