All Hell Hath Broken Loose

All Hell Hath Broken Loose

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I’ve never seen a week in health care policy like last week. The media reports have to be in the thousands, all trying to make sense of the furious debate between Obama and Romney over Medicare.

As someone who has studied this issue for more than 20 years, it has also been more than exasperating for me to watch each side trade claims and for the press to try to make sense of it.

This blog post is quite long because the subject matter is complicated. If you want to cut to the chase, see my conclusion and summary at the end of this post.

Allow me to list a few of the questions people are asking and give you my take on it.

Will current seniors suffer under the Romney-Ryan Medicare plan?

No. Let me start by saying something that will likely surprise you. If I could be king for a day, I would prohibit anyone over the age of 60 from voting in this election. This election is really about the future and the big decisions on the table are about the long-term government spending and entitlement issues that should be made by younger voters who will have to pay for them and will benefit or suffer from them.

Those in their 60s and older are almost surely going to cruise to the end with the benefits they now have.

Whether its Obama’s Medicare plan, based heavily on the Medicare cost control board imbedded in his health reform bill (which doesn’t begin to impact hospital costs until 2020), or the Romney/Ryan Medicare premium support plan (that has no effect on anyone now over the age of 55), today’s seniors’ benefits are insulated from this issue.

Medicare is already evolving. Both Democrats and Republicans want to see changes in the way Medicare pays doctors and hospitals (more for value and less for the volume of services) and that could impact the way providers treat people in the coming years. But in this sense, both sides present seniors with a similar future.

If you are over age 70, there is virtually no chance there will be any significant changes to Medicare benefits in your lifetime. Even if you are over 60, the chances that there will be any major structural changes to Medicare benefits as long as you are around are quite small. As bad off as Medicare is, both Republicans and Democrats have shown no inclination to fool with existing benefits for people now retired or close to retirement—this is about the future of Medicare for people now in their 20s, 30s, 40s, and 50s.

It is ironic that it is today’s seniors, who vote in larger numbers than the people in their 20s and 30s, that seem to be driving this as an election-year issue out of fear of what will happen to their benefits!

I found it fascinating to see a poll recently that said younger people are more supportive of the Romney/Ryan plan than today’s seniors! Apparently, the younger voters don’t think they are going to get anything like their father’s Medicare plan anyway (which is correct) and are happy to hear that Romney and Ryan have a plan to preserve something for them.

While of course I can’t tell seniors not to vote, I would ask them to vote with only the best interests of their children and grandchildren in mind.

Can Medicare, as we know it be preserved for the next generation?

Absolutely not.

Whether we should preserve it for current seniors or not, it seems certain we will. Again, Obama’s cost board doesn’t start doing the heavy lifting until 2020. Romney and Ryan’s Medicare plan wouldn’t begin for ten years and only for those retiring at that time.

I will tell you that Romney and Ryan have taken the more courageous political stand—they say Medicare can’t be preserved and big fixes have to happen. Now, that doesn’t necessarily mean they have the right policy answer only that they are willing to face the problem.

Obama and the Democrats, by saying Romney-Ryan “would end Medicare as we know it,” have taken the safer and more conventional political route by not fiddling with the “third rail” of American politics that are the entitlement programs.

But Obama and the Democrats are being misleading when they say they can preserve Medicare “as we know it.” Yes, Democrats could preserve the traditional structure of Medicare—a defined benefit entitlement guarantee built around a universal pool everyone, rich and poor, is in. But to do that, they need to tell us just what benefit cuts, structural changes, and/or tax increases they are willing to implement. There is no way the current Medicare plan can be sustained without huge changes.

Obama and the Democrats are being disingenuous by trying to use the Romney-Ryan plan to scare voters without facing this tough issue in a direct way themselves.

The Republicans have been harping since the 2010 elections on the $700 billion cuts in Medicare that Obama and the Democrats used to help pay for the Affordable Care Act but doesn’t Ryan have the same Medicare cuts in his budget plan?

Yes.

Obama and the Democrats did cut $500 billion between 2010 and 2019 from what Medicare would have paid during that time when they passed the new health law in 2010 (those same cuts now add up to $700 billion between 2013 and 2022). It is important to note that these are not absolute cuts from the program but rather the slowing of Medicare growth. Before the cuts, Medicare was predicted to grow at an annual rate of 6.8% a year—after the cuts it is projected to grow at an annual rate of 5.6% during the same period.

So, while $700 billion is a lot of money, the Medicare cuts only amount to a very minor reduction in what providers get paid over the ten-year period—it does not directly reduce senior benefits or increase premiums. In fact, doctors–who face the risk of big cuts separate from the new health law–had no cuts. Hospitals agreed to modest cuts in exchange for seeing more patients with insurance. Medicare Advantage plans will see reductions in the payments they were getting that were already in excess of what Medicare pays itself for the same patients.

The Obama Medicare cuts were never going to materially hurt Medicare, as we know it.

Democrats also played games by double counting those cuts when they were allowed, under arcane federal budget rules, to both reduce the price tag for the new health law and extend the solvency of the Medicare program.

And, it is true that Ryan did assume those same cuts would continue over the life of his latest budget fix—which passed the House on a party-line vote. That is hypocritical of Republicans who blasted these same cuts in the 2010 elections. But Ryan supporters also argue that while he would continue those cuts, he would only count them once. Because he would repeal the Affordable Care Act, those cuts in future spending would be used solely to extend the life of the Medicare trust fund.

Ryan makes a credible point regarding how he would use the money. But, if Obama is hurting Medicare by reducing Medicare’s 10-year growth rate from 6.8% per year to 5.6% per year, then so is Ryan.

It is also important to remember that Ryan’s big premium support Medicare reforms would not begin for ten years. So these Medicare spending reductions, between now and then, have nothing to do with his “premium support” proposals.

Romney has now said that if he is elected he will reverse these Medicare cuts. OK, but he is going to have to find another $700 billion in federal spending cuts to replace them if he is going to hit the deficit reduction targets and Medicare trust fund goals in the House budget bill.

Both sides are making the same cuts and have really been playing games with this one.

Republicans are using the success of the Medicare Prescription Drug Plan as evidence that the market can control health care costs. Is this evidence on their side?

Not in any kind of clear cut way.

It is true that the Medicare drug plan costs are coming in way below what the Congressional Budget Office (CBO) said they would be in when the new benefit was created in 2003.

However, all drug costs (employer plans, Medicaid, traditional Medicare) have been coming in much lower that were expected. At the time the Medicare drug plan passed, prescription drug costs were exploding. Since then a number of factors, such as far greater use of generic drugs and fewer new expensive drugs in the pipeline, have dramatically reduced drug spending and the Medicare drug plan has benefited.

Medicare Part D costs are also coming in lower than expected because enrollment has been less than originally expected.

So, the evidence is very mixed and a lot more complicated making it a questionable piece of evidence in this debate.

Romney and Ryan say their plan will include the traditional Medicare plan as one of the options. But critics say there is a good chance Medicare will end up with the sickest seniors, while rich people are able to buy the private plans, thereby destroying the Medicare program everyone has enjoyed. Is this true?

Probably not.

The Romney/Ryan Medicare plan promises to continue the level of Medicare premium support seniors have today for the purchase of the second lowest cost plan in your market—be it private or traditional Medicare. All plans would have to provide at least the Medicare benefits you get today and the only cost to you would be what we know now as the Part B Premium. If a senior buys the lowest cost plan, there would actually be a cash refund for the difference. If a senior buys a plan costing more then the second lowest cost plan, the difference would be paid for out of the senior’s pocket.

Under the more detailed Wyden-Ryan Medicare plan with its better consumer protections, if a health plan gets a disproportionate number of the sick people, it gets more money to offset its costs—a device know as risk adjustment—that protects Medicare or any other plan. So, it is not clear to me how, if the traditional Medicare plan got sicker people, it would make it more expensive for consumers after these inter-plan adjustments.

The Romney/Ryan plan relies on the marketplace to control costs but there is no evidence that the market does a better job than government-run plans?

That is right, but Romney and Ryan are calling for a different kind of health plan market.

Democrats are right that there is not a lot of evidence that what we have done in the market so far will solve our cost problems. For example, about a fourth of seniors are now in Medicare Advantage plans but these plans have historically been paid more to cover seniors than the government paid to its own traditional Medicare plan. The rate at which health care costs have escalated from year to year has been lower in recent years for Medicare than for private health insurance for those under age-65–but we also know that providers often shift costs to private health plans to offset the lower Medicare reimbursement they get.

But, no matter which side you accept, overall Medicare costs are still unsustainable as more people retire. The status quo, for Medicare or for private insurance, is not an option.

Most health policy experts believe that we must fundamentally change the health care delivery system from the current fee-for-service system that largely pays for quantity, to one that pays for quality and cost control. The Democratic health care reform law has lots of pilot programs in it to test these new ideas. It is also likely that the new Medicare cost board, enacted as part of the new health law, will end up requiring providers to get their payments through these new payment programs in order to get costs under control.

Republicans also embrace these same ideas that rely on things like Accountable Care Organizations (ACOs) that pay providers a fixed payment for a population’s health care needs. These new payment systems would also take much more advantage of electronic patient management systems and administrative simplification. Both Republicans and Democrats generally agree with these efforts.

All of these ideas, generally accepted by Democrats and Republicans, have yet to be proven.

While most Democrats rightly argue that there is no proof the market has controlled costs, it is also true we have never tried a market like the one Romney and Ryan propose.

In Medicare Advantage, the private plans are reimbursed by the government with a fixed payment that is unilaterally determined by the government for each market. The result has been a system the private Medicare plans have too often just gamed—concentrate on the markets that have the best payments and make money off of them. More recently, health plans appear to have made better progress toward controlling costs but the use of private health insurance plans is still very controversial.

Romney and Ryan are now proposing a very different system where health plans have to bid their price in each market. They argue that competitive bidding will result in real competition in the market and, with consumers now having a greater incentive to shop their limited premium support payment from the government, costs can be controlled.

They see a senior market where health plans, including the traditional Medicare program, will have no choice but to work harder to manage costs by using all of these new devices and payment systems where millions of seniors will be intently looking for affordable care.

What do Obama and the Democrats propose as an alternative to Romney and Ryan?

The Democrats have taken the safer political path by letting the other guys make controversial proposals and saying little about how they see Medicare operating differently in ten years.

Democrats point to the Medicare cost control board, a part of the new health law, that gives an appointed board of experts the power to change the way providers are paid by Medicare—but not the power to change senior benefits or premiums. That board begins its work in 2015—but not until 2020 for the largest category of costs, the hospitals.

While Republicans criticize the Medicare cost board as nothing more than a “non-elected bunch of bureaucrats,” the fact is that the Congress—Republican or Democratic—has not shown the political courage to make the tough decisions to reform Medicare.

I am personally optimistic that the Medicare cost board could do a lot of good toward pushing the Medicare program to more sustainable payment models. But if the Board is to be successful in remaking Medicare into something that is sustainable, the Medicare it does drive us to will not be the old Medicare program as we have come to know it—and the Democrats claim they can preserve.

I am also personally optimistic that a system of competitive bidding and consumer choice could push the Medicare system towards more sustainability.

And, both are untried solutions and controversial among the experts.

Obama says that Paul Ryan’s Medicare plan will increase a senior’s health care costs by $6,400 a year. Is this accurate?

No. That estimate is based upon a Congressional Budget Office (CBO) estimate of an earlier version of Ryan’s plan.

Again, remember that Ryan’s premium support plan would only impact those retiring in 2013, or later.

This year, Paul Ryan updated and improved his first Medicare premium support plan, offered in 2011. He increased the rate at which the federal Medicare premium support payment would grow and he opened his plan up by allowing traditional Medicare to continue to be offered.

In another change from the earlier plan, he would also guarantee that every senior would have enough money coming from the government to be able to buy the second lowest cost plan in their market. That plan (and all plans) would have to offer at least the current Medicare benefits and the government would pay the same share of that plan that government pays today. If the senior bought the cheapest plan, there would actually be a refund to the senior. If the senior bought a higher priced plan, the senior would have to come up with the additional premiums. The traditional government-run Medicare plan could be the cheapest, the second lowest, or a more expensive plan—no one can estimate that.

So, while all seniors would be assured that they could afford at least the two lowest priced plans on the same basis as Medicare subsidizes them today–at no increased cost to them, there is no way to tell which two plans they would be—other than to say these plans would have to offer at least the traditional Medicare benefits.

This was a big change from Ryan’s 2011 plan and President Obama should be doing any comparisons to the new version. The CBO has not yet done any similar estimates on the new plan.

Whose Medicare plan will work?

My sense is that either could work. It all depends upon how they are implemented.

I will suggest that if you put a conservative and a liberal, both of good will, in a room, gave both of them all the facts about Medicare and health care spending, what has and hasn’t worked in government and the market, and then asked them to come to a conclusion, the liberal would like the Democratic approach that relies on government and the conservative would come out on the side of consumer choice and markets.

We are, in a political sense, a left brain/right brain country. Conservatives have far more faith in market freedom and consumer choice and liberals have far more faith in the government and regulation. They will both look at the same set of facts and come out in a fairly predictable way.

Who should we believe? Who should I vote for?

In the end, trust your instincts.

When its all over, after you have read all of the confusing articles and been frustrated by all of the counter claims and political spin, I will suggest it will come down to your instincts. I don’t see a reliable fact-based way to predict with anything close to certainty which philosophy would do the better job–we can’t run both systems in tandem to find out!

Do you trust government more, or your own judgement and the market?

Whichever way we go, there will be no pure market or government approach. The market approach, even the one touted by Paul Ryan, will have lots of government oversight and consumer protections. Even in a single payer system, where government controls the insurance system, there will be choice when it comes to which provider you use and perhaps which insurance company you buy your supplemental insurance from.

It is also notable that both Paul Ryan and President Obama have called for eventually capping annual Medicare spending at the country’s rate of economic growth, plus one-half percent. They would both spend the same amount of money—less than the historic average rate of growth for the program—but manage that more finite amount of money very differently.

Government will always be involved in senior health care—very few seniors could afford to pay the actual per capita cost of Medicare by themselves. Medicare, at some level, will always be a social benefit—largely supported by the federal tax system with the sick and the healthy in some of form of common pool.

Anyone who says Republicans want to throw you to the market dogs is just trying to scare you. Anyone who says Democrats wants to take your freedoms away and dump everyone into a Medicare program that will eventually look more like Medicaid is no better.

But both offer very different paths based upon their ideologies.

Generally, do you believe in yourself and the market to better manage health care, or in government?

Should seniors have more personal responsibility for the cost and quality of their health care and be able to make very different choices in the range of health plans they buy, or should Medicare remain largely a government-managed program built around one kind of universal insurance both the rich and the poor have to share?

Just answer these questions and I think you will know for whom you will vote in November.

Since I think either approach could work, I plan to vote for the candidates that are, first, doing the best job telling the truth about what they will ultimately be forced to do and, second, who appear to me to have the best chance of actually implementing their plan in an effective way.

Elections matter. And, so should the truth about what needs to be done, an ability to get those reforms passed, and to make them work.

Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

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46 Comments on "All Hell Hath Broken Loose"


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Pat
Sep 24, 2012

Death Penalty lite with physician assisted suicide sounds like most efficient cure for Medicare burdens, but isn’t it silly to debate abortion in that case?

When life is expendable because of costs to live……there will be few Medicare costs to worry about. If physicians are ever found to be subject to malpractice, a death with dignity law lets them off the hook, and might be called murder-lite – just as most people predicted with Dr. Kevorkian.

Why did he go to jail for suspected murder while states are passing Death with Dignity Laws. My how times change!

Guest
Aug 25, 2012

The ACA included an extremely timid cost reduction plan for Medicare — and it cost the Democrats dearly in 2010.

Ryan has a Medicare plan that would exempt nearly everyone over 55– and it may cost the Republicans dearly in 2012.

The third rail theory still seems operative. It takes incredibly little to move the senior electorate. Also see Robert Samuelson’s piece in the Wash Post on seniors as a protected political class.

Just to back up Matt Holt’s observation:

Most of the people who oppose the ACA have secure, inexpensive, and highly subsidized health insurance of their own. You do not see anyone burning their Medicare cards at a Tea Party rally.

Seems like a case where white people’s welfare is good, and other kinds of welfare are bad.

Boib Hertz, The Health Care Crusade

Guest
Aug 25, 2012

As long as the name of Paul Ryan keeps coming up and he is running to be vice-president should the GOP win the presidential election, everyone owes it to themselves to learn as much about him as possible.

The New Republic has an excellent introspective analysis of Paul Ryan. It’s about three and a half thousand words but I have been vain enough to write a shorter introduction if any readers here are interested.

http://newhogarchive.blogspot.com/2012/08/poisonous-vows.html

Guest
Barry Carol
Aug 22, 2012

“for the most part you will have more choices of doctors and hospitals as well as an easier time dealing with any problems that occur when you are traveling out of area.”

Pat S. —

That’s the main reason my wife and I chose standard Medicare. We’re out of our area traveling fairly often and I just like the idea of maximum provider choice, especially with respect to hospitals, even if it costs more. I’ve never been a fan of HMO’s. People have different needs and priorities which is why choice as opposed to one size fits all is a good thing, again even if it costs a bit more. Choice is also a better fit with our culture, I think.

Guest
Pat S
Aug 22, 2012

There are HMO’s and there are HMO’s.

Much of the bad rep of HMO’s with people who have been around for a while comes from the excesses of the late 80’s and 90’s, when HMO’s were springing up in every abandoned gas station and being run by every insurance plan that could hire a medical director. Problems abounded, especially with undercapitalization leading to outright failure, people who hadn’t done their homework issuing fiats on how medical care should be practiced, and opponents of HMO’s jumping on real, imagined, and just plain wrong supposed faults of the HMO’s. Insurers rushed in with plans designed to be “anti-HMO’s” (“with us, you can get that MRI.”) The whole thing collapsed like a soufflé taken out of the oven too soon.

But some of the pioneer bellwether HMO’s did survive, hired better CEO’s and managers, got their acts together in terms of research and science, and have emerged as being among the best systems in the country, and provide care that is significantly above norms. Others have arisen more recently. These are not thick on the ground, but if you happen to live in a place where one of them exists you would be making a mistake not to enroll if you can, since you will get better care and you will be becoming part of the solution, not part of the problem.

I will name names: as I said above, Group Health Cooperative of Puget Sound, Gunderson Clinic’s Senior Care program in La Crosse and Southwestern Wisconin, Marshfield Clinic’s Advocare in Central Wisconsin, Baystate Health’s Health New England in Western Massachusetts, Martin’s Point Health Care’s Generations Advantage in Maine, and the Kaiser programs in Northern California, Oregon and southern Washington, Hawaii, and Colorado.

There are some other programs that are close but not quite there that might be worth investigating as well.

As it happens, I live in an area that does not offer that quality of program, but does have a really good large health system I want to use, therefore I and my wife also use conventional Medicare.

What it boils down to is knowing what you are buying, just like anything else. If you have access to one of the really good MA programs, by all means enroll. I am really happy my mother is in one. If not, conventional Medicare is the way to go and offers you access to fine care if you do a little checking around.

However, buying into a cut rate insurance program that offers low cost in exchange for high co-pays and deductibles and considerable restriction on choices of care, which seems to me to be what Ryan-Romney is offering, does not seem like a good deal for a large fraction of seniors, some of whom already face fairly high care costs, and most of whom could become high cost patients with one slip in the bathroom or one errant piece of plaque getting loose in their bloodstream. That is a gamble that is not worth it, unless of course you have $105 million in your IRA to backstop the risk.

Guest
tcoyote
Aug 25, 2012

Don’t forget Harvard PIlgrim in New England, SCAN and CareMore in LA,
HealthPartners in Minneapolis, Geisinger in central PA, Capital District Physicians Health Plan in Albany, NY, Henry Ford’s plan in Detroit . . .
There are actually a lot of great HMO’s, many of which were provider sponsored.

Guest
Pat S
Aug 25, 2012

The nine that I mentioned are the nine that have earned the five star rating from Medicare as being exceptional in terms of value and performance.

As you note, there may be many others worth examining as well, but they have just not yet attained the level of excellence that the five star groups have. I expect the five star list to expand as other groups improve.

Guest

Appreciate the reminder and clarification on HMOs. Too many incorrectly assume HMO industry-wide failure. Nothing could be further from the truth. The ones that did fail are largely the over-reach of a Wall Street fueled, top line (we’ll integrate them later) acquisition feeding frenzy.

I recount two seminal marker events: (1) the beginning = Maxicare rolls out ‘the window project’ seeding IPAs via understaffed, overworked and poorly capitalized MSOs, and (2) the end = when United HealthGroup decided to kill the gatekeeper model and allow direct access to specialists.

Thus, HMOs that grew from group practice cultures have and continue to practice and refine best in class integrated care, some of which you mention. Those that failed where absent the group practice DNA that enabled an integrated care culture to survive and prosper. The fatal flaw was the believe that you could graft IPA (accountable) medicine onto mainstream (fee for service) medicine and managed the network via contracting, withholds and/or medical director referral oversight.

Clearly there are model HMOs that operate today, and were it not for shadow premium pricing, and the associated sand bagging that occurs today, their cost basis would be even lower than the 75% efficiency index recently calculated for California integrated delivery systems.

Guest
tcoyote
Aug 22, 2012

Medicare Advantage is a great deal for retirees and about 40% of boomers are choosing it. It isn’t just no out of pocket risk (like Medicare supp), and additional benefits. It’s also WAY less paperwork. MA consolidates the blizzard of paper that afflicts anyone in regular Medicare. AND MA plans are beginning to reach out to their beneficiaries to remind them to do things
(like renewing their meds) that regular Medicare cannot. I’ll be choosing MA when I enroll next year.

Regular Medicare is like a 1970 Ford Torino- it’s an antique, gas guzzler.
There’s a lot of nostalgia attached to it, but it’s really a crappy, badly designed benefit.

MA margins about 5% per beneficiary per year, or about $45 EBIT per member per month, according to Carl McDonald of Citigroup. THe 14% margin number is bullshit.

Guest
Aug 22, 2012

Nobody said that the margin was 14%. MA is (was) costing the taxpayer more than FFS Medicare by that much.
I am only asking where is that money going? If MA is so much more efficient, if care is so much better and presumably there is less of it because they got rid of unneeded care, and if provider payments are in line with Medicare or lower due to narrow and selective networks, what happens to the financial gains realized by all this efficiency? Does it all go to gym memberships for the elderly? Or is all that efficiency also bullshit?
Besides, managing costs down in order to pass the difference up to executive pay and real estate purchasing, while raising prices by as much as possible year after year, is not exactly my definition of efficiency, although I am certain others would disagree.

Guest
tcoyote
Aug 23, 2012

The inflated salaries and incomes are mostly in the delivery system. Check what your local hospital monopoly is paying their CFO’s or CIO’s these days, let alone the $3 million CEO salaries. There are only a handful of investor owned health plans. There are hundreds of hospital “systems”.

My progressive friends get all twisted in knots over what Aetna pays its CEOs, but give the alleged “non-profits” in their own back yards a pass. Check out the CEO salaries of Northwestern in Chicago or UPMC in Pittsburgh (who’s CEO flies around in a $60 million Global Express executive jet). They are no more “accountable” than the health plans are for passing their costs on to us.

Guest

Jeff, so called nonprofit, ie, tax exempt,hospital systems haven’t gotten a pass on my watch. Their behavior is virtually indistinguishable from the for profit breatheren. 990s full of questionable items that ostensibly serve community benefit. Upcoming hearing should prove interesting: http://www.latimes.com/business/money/la-fi-mo-nonprofit-hospitals-20120814,0,2668747.story

Guest
Aug 23, 2012

I can only speak for myself but I for one don’t give any non-profits a pass. I’m an old-fashioned Liberal who never bought the “progressive” label (I hate having the term Liberal used as an epithet) but after working for five years in one of those “non-profit” healthcare systems and following the healthcare reform debate for the last eight or ten years, I have a more jaundiced view.

There are authentic non-profits, I’m sure, but the medical-industrial complex for the most part uses big non-profits as money laundering centers for profit-driven private practices, clinics, labs and specialty centers infesting and clustering around their campuses like ants at a picnic.

Tax money and insurance premiums (more from corporate group than private policies) are the main revenue streams and patients and their families regard medical care much the same way that patrons at all-you-can-eat restaurants regard buffets. Once the co-pay is met there is no reason to say “stop… enough is enough.” Instead the message is “Do whatever it takes, doctor. I’m covered.” And medical professionals, like good servers working for tips, are more than happy to oblige.

Guest
Aug 23, 2012

True, but two wrongs don’t make a right.

Guest
Pat S
Aug 22, 2012

TC —

When you enroll, be sure to check the rating for MA programs in your area. If you happen to live in one of the areas served by one of the nine 5 star MA programs, run, do not walk, to enroll. However, if you find a program is rated 3 star or less, you would be better off with regular Medicare, since performance and outcomes are better and since for the most part you will have more choices of doctors and hospitals as well as an easier time dealing with any problems that occur when you are traveling out of area.

Guest
tcoyote
Aug 23, 2012

Good advice on STAR ratings, Pat. I will TOTALLY trade premium cost for a narrower network, however. There are folks in my area I will never use again, and if I don’t have to pay for access to them, it’s all good. I travel everywhere, so it’s hard to plan where I’ll be getting sick. Prayer and working out six days a week are my only viable strategies.

Guest
Barry Carol
Aug 22, 2012

Margalit –

Thanks for the MEDPac link. That’s very helpful.

There were a couple of things that struck me that I wasn’t aware of before. First MA plan enrollees have an average risk score slightly above 1.0. While part of that may be attributable to more accurate coding by providers vs. coding under the FFS plan, it doesn’t exactly suggest rampant cherry picking as people can’t turn people down. I also think it’s good that CMS will start to base MA risk scoring on MA utilization rather than FFS utilization.

Two other important points that we haven’t noted so far are (1) enrollees generally receive extra benefits beyond what standard Medicare covers and many enrollees find those benefits attractive and worthwhile and (2) MA enrollees don’t need a supplemental plan. My wife and I both have Medicare supplemental plans which cost $200 per month including Part D coverage for each of us. That’s a meaningful amount of money for a lot of retirees. As we debate what will happen to enrollee out-of-pocket costs under Romney-Ryan vs. the Obama approach, which includes squeezing MA plans, we shouldn’t underestimate the value beneficiaries derive from not having to purchase a supplemental plan. Indeed, under the rules governing MA plans, they couldn’t buy one even if they wanted to. The MA plans are especially attractive to lower income beneficiaries.

Pat S. – According to an article in Health Affairs that I saw within the last year, private insurers reimburse providers at about 102% of Medicare for their MA plans and privately managed Medicaid plans reimburse at essentially the same as the member’s state Medicaid rate. Even if administrative costs are somewhat higher than under FFS Medicare, MA is an attractive option which more and more people are signing up for each year.

Finally, there is one other accounting issue that I wonder about. CMS paid MA plans $124 billion to insure 12.1 million beneficiaries in the most recent year or $10,247 per year each. When the CBO reports total Medicare spending each month, though, the beneficiary premium of $99.90 per month for Part B services plus the IRMAA surcharge paid by high income people counts as an offsetting receipt so only the net spending is reported. So, it appears that we’re talking about gross payments to insurers when talking about MA plans but only net payments after offsetting receipts when talking about total Medicare spending and FFS spending. My bottom line is that MA plans are worth what we are spending for them and should remain an option for seniors.

Guest
steve
Aug 22, 2012

I think you should assume the insurance companies are very good at assessing risk. One of the first things I learned on the management side of medicine is that you have to code to include everything. For profits and insurance companies are very good at this. Whenever they get investigated, upcoding is nearly always present.

Steve

Guest
Pat S
Aug 22, 2012

I agree that high quality Medicare Advantage plans are worth continuing. In fact, the ACA planned all along to continue 4 and 5 star plans and to actually pay an extra bonus for 5 star plans. There has been a supposedly temporary extension for 3 star plans as well. As of now, cuts will only apply to 2 star and lower programs.

In fact, 5 star plans — there are nine of them in the US — are models for health care for the elderly and deserve widespread copying. The extra money paid to them is more than returned in improved performance and results, with enrollees enjoying superior care and better health. My mom is fortunate to live where she can enroll in one (Group Health Cooperative of Puget Sound,) and she and I would both be upset were that program become unavailable to her.

Guest
Aug 22, 2012

Hey that’s really interesting information.,loved reading it.

Guest
Aug 21, 2012

I could quibble with Bob’s analysis & I certainly agree with Barry that income support & risk adjustment (and I’d add a hard global budget) should be part of any attempt at a market driven consumer plan…but sadly we’re not in Holland.

But to ignore the other aspects of Ryan’s plan by concentrating only on Medicare as Bob has done is borderline wink malpractice.

The ACA for all its faults will get people left out of the system into it by either premium support or Medicare expansion. Ryan wants to undo the first and eviscerate Medicaid. Uninsurance in his world would look like Texas– if we were lucky.

Do we want a country with 100 million uninsured? That’s what a vote for.Romney would be asking for.

But as Bob points out, the elderly vote and the poor don’t. So the Republicans can say, screw ’em and get away with it.

Guest
tcoyote
Aug 22, 2012

As usual, Matt cuts to the heart of the matter. The big social risk is what happens to Medicaid. Ryan cuts the federal spend on Medicaid by 20% (!!) over ten years, and cuts the states loose to “restructure” the program. The “restructuring” will basically involve slashing safety net provider payments and throwing people out of the program- the program will shrink eligibility in the next recession (the one that’s already starting). 100 million uninsured is a bit hyperbolic, Matt but, hey, 60 million is easily within reach.

If you compare the Ryan budget to the current (unsustainable) course set in ACA, there’s about a $1.8 TRILLION subtraction of resources from the health system over ten years under Ryan: the ACA coverage expansion goes away, there are another $250 billion in Medicare payment reductions and $750 billion in Medicaid cuts. That plus probably a tripling of Medicare and Medicaid patients in managed care plans.

Romney has walked back on confiscating the ACA’s Medicare cuts.
You cannot criticize the the President for cutting Medicare and keep the money. But he is committed to killing the ACA’s coverage expansion without telling us what he’s replace it with, if anything.

There is HUGE political event risk for the health system, even for the health plans, in all this. I think Robert did an excellent job of cutting thru the crap on Medicare. Too bad the mainstream media is simply following all the campaign talking points. . .

Guest
Aug 22, 2012

Seems to me Republicans are getting away with saying a helluva lot these days. The official platform no only opposed clinical abortion but pharmaceutical contraception as well.
Can anyone imagine what would happen if every fertilized embryo were protected to become a newborn?
The medical challenges alone for the beginning of life would make end-of-life issues look like trips to a minute-clinic.

Guest
Barry Carol
Aug 21, 2012

Margalit –

There are a couple of key pieces of information that we need to know more about. First, within a given county, how much does the Medicare Advantage payment for a particular person vary based on that individual’s risk score? Second, how does the average of Medicare Advantage spending per person in a particular county compare to average per person spending for standard Medicare in that same county? Most Medicare Advantage insurers compete in some states but not others and within a state where they sell policies, they may serve some counties but not others depending on how well built out their network is and other factors. So, to take an extreme example, if a Medicare Advantage insurer is selling policies in high cost Miami-Dade County in FL, its payments from Medicare and its spending on medical claims could be less than standard Medicare spending per person in that county even assuming risk scores are comparable on average but both standard Medicare and MA would be spending well above the average cost of Medicare per person across the entire country. There is a lot of room to mislead and obfuscate numbers on this issue. I don’t know whether or not the supposed premium above standard Medicare that MA advantage insurers are receiving is in comparison to average spending across the entire country or whether it’s a county by county calculation. Maybe one of the other blog readers can explain it to both of us.

Guest
Aug 21, 2012

This may help, Barry. I’m pretty sure it’s the latest one…

http://www.medpac.gov/chapters/Mar12_Ch12.pdf

Numbers look a little better for 2012, but with all the bonus money thrown out there, I don’t know that anything has really changed.

Guest
Pat S
Aug 21, 2012

Barry —

You and I both know that no matter how you try to parse it, private insurers cost more than Medicare in terms of overhead and in terms of payment to providers.

In the overhead issue, some insurance programs get closer than others, but none of them close the gap completely, and with insurance for the individual market — and remember that every single senior policy sold under the R-R plan will be an individual market policy — they don’t even get close. Underwriting, sales costs, and the costs involved in hand picking enrollees to minimize payouts all cost money that Medicare leaves in the bank.

On payments to providers and hospitals, private insurance often spends not just more, but actual multiples of the costs of Medicare. Of course Medicare is now able to “cheat” by offering take it or leave it prices. If R-R succeed in weakening Medicare enough, those savings may be lost, driving up US health care costs even more.

The CBO estimates that R-R may be able to save the government money on health care costs, but that the overall costs of US health care will be driven up by these changes, with the balance coming out of the pockets of individual enrollees regardless of ability to pay.

Guest
Peter1
Aug 21, 2012

“this is about the future of Medicare for people now in their 20s, 30s, 40s, and 50s.”

“It is ironic that it is today’s seniors, who vote in larger numbers than the people in their 20s and 30s, that seem to be driving this as an election-year issue out of fear of what will happen to their benefits!”

“they are going to get anything like their father’s Medicare plan anyway (which is correct) and are happy to hear that Romney and Ryan have a plan to preserve something for them.”

“While of course I can’t tell seniors not to vote, I would ask them to vote with only the best interests of their children and grandchildren in mind.”

Divide and conquer. I wonder if we should be making the same arguments about education and how the old are carrying the young? Who’s future does that benefit and how are the 20 and 30 year olds going to pay it back.

Be assured the back room debate is about how to preserve private sector profits and incomes and shifting risk and costs. As usual the young don’t look too far ahead (don’t vote, no insurance) and will be sorry if they embrace a voucher health care system.

Guest
Barry Carol
Aug 21, 2012

“with Ryan, private corporations get to extract 20 cents on each Medicare dollar for private profit.”

Margalit –

Starting in 2014, all insurers selling Medicare Advantage plans will have to spend at least 85% of premiums collected on healthcare with only 15% left over for administrative costs + profit. As I noted in another thread, Humana, one of the two largest MA insurers, builds a 5% PRETAX profit margin into its bids each year and it’s been doing that for years. To suggest that MA insurers are extracting 20% in profits from this business is inaccurate to put it mildly.

Guest
Aug 21, 2012

Barry,
If that’s the case, then insurers are very poor business people. MA plans cost us about 14% more than regular Medicare. The comparison itself is flawed because they are limiting utilization and they are coding “more accurately” to make their population look sicker, things that regular Medicare does not engage in, so I would say that the 14% is grossly underestimated. Where is the money going?

Guest
Aug 21, 2012

I read somewhere that before the Sixties all hospitals were non-profit. Many, along with local “old folks homes” were also subsidized by the areas served. That was back when family doctors on TV were role models.

The advent of Medicare (and to some extent Medicaid) attracted profit-minded investors into medical care like ants to a picnic. Since then the only segment of the much-worshiped private sector attracting public money — second only to the military-industrial complex — getting fat as ticks on a hound, has been the medical-pharmaceutical-industrial complex. And with very few exceptions any so-called “not-for-profit” operations are nothing but money-laundering centers for very profitable practices, clinics and specialty centers clustered in and around their campuses.

These are just the impressions of a layman who has been trying to make sense of the health care debate.

I would like to know how the VA stacks up against the private sector operationally. The numbers would not be really comparable since the VA patient population is by definition responsible for battle-field and other non-typical medical challenges. But from what I’ve read the VA does a very good job taking care of their beneficiaries, including dependents. I know a handful of people with VA coverage and they are very pleased with their service.

I may be way off base, but if it is what I think it is the VA would be an excellent model for an American National Health Service. And the private sector, insurance and all, could still go on about it’s business as they do in the UK — but operating with private sector money, not taxes.

Could the Medicare payroll taxes support such an arrangement?
What about with the Part B contribution from beneficiaries?
What if the taxed earnings cap were raising or removed?

Just an old guy daydreaming…
I don’t expect it to happen in my lifetime, but I’d like for the idea to get into the conversation as the ticks continue to swell.

Guest
steve
Aug 21, 2012

Ask, and ye shall receive. First an older piece with some history.

http://www.time.com/time/magazine/article/0,9171,1376238-1,00.html

A more recent paper, but just looking at quality.

http://www.ncbi.nlm.nih.gov/pubmed/21422951

Steve

Guest
Aug 22, 2012

Many thanks. That makes me feel less Quixotic. I was an Army medic long ago, trained OJT to become an x-ray tech, which gave me a glimpse of life behind the military wall. I saw a lot that shocked me but even then the approach to medical care was totally focused, devoid, of course, of any concern about profitability. Thrift and efficiency, yes. But making profits? Of course not.

That six-year old link says Until the early 1990s, care at VA hospitals was so substandard that Congress considered shutting down the entire system and giving ex-G.I.s vouchers for treatment at private facilities. Today it’s a very different story. The VA runs the largest integrated health-care system in the country, with more than 1,400 hospitals, clinics and nursing homes employing 14,800 doctors and 61,000 nurses. And by a number of measures, this government-managed health-care program–socialized medicine on a small scale–is beating the marketplace. For the sixth year in a row, VA hospitals last year scored higher than private facilities on the University of Michigan’s American Customer Satisfaction Index, based on patient surveys on the quality of care received. The VA scored 83 out of 100; private institutions, 71. Males 65 years and older receiving VA care had about a 40% lower risk of death than those enrolled in Medicare Advantage, whose care is provided through private health plans or HMOs, according to a study published in the April edition of Medical Care. Harvard University just gave the VA its Innovations in American Government Award for the agency’s work in computerizing patient records.

I cannot imagine conditions have done anything but improve since. Maybe the current debate is close to the end of Churchill’s observation that “Americans can always be counted on to do the right thing…after they have exhausted all other possibilities.”

Guest
DeterminedMD
Aug 21, 2012

No one mentions what is going on in Japan with their elderly population skyrocketing and the burdens on the young under 30. Is avoidance really a long term defense mechanism of value? I think not!