This is interesting, and sadly I don’t have the time tonight to do much more than point at a couple of things written. The first is a new brief by Cato’s Michael Cannon. Remember kids, he wants Medicare to go to total cash accounts (although to be fair, within some stipulations). What he does not want is P4P in mainstream Medicare (which I and the rest of the wishwashy centrists do want in some form or other). In his new piece Pay-for-Performance: Is Medicare a Good Candidate? Michael says:
Medicare, the federal health care program for the elderly and disabled, has begun experimenting with provider-focused P4P incentives. Yet Medicare faces additional challenges beyond those confronting private third-party purchasers. Given Medicare’s patient population, size, and sensitivity to interest group lobbying, any harm that could result from a P4P scheme would be more likely to occur within traditional Medicare than elsewhere in the health care system.
And in that he’s clearly right. In my perfect (or slightly less rotten) P4P world, providers would have to be incented somehow to do the right thing. I think that it’s a choice between that or just tossing them all the (limited amount of) money and telling them to get on with it, but there’d be no more money (fixed budget) and you’d have to cover everyone (universal coverage)—then they’d get into organizations that figure out how to do that (e.g. a mixed single payer/kaiser model).
In the real world, however—and this is the thing Cannon fears—anything that’s introduced into the current Medicare system will be gamed, possibly to death, by the providers—especially if Congress couldn’t hold firm on turning back on the spigot of funding (which both I and Michael think is unlikely) in the face of grannies mobilized by the AMA et al. After all they’re not showing much resolve now! Presumably cannon thinks that the MSA/HSA baby would be thrown out with the P4P bathwater.
So Cannon would rather than any of the P4P nonsense be kept in that minority program, Medicare Advantage, while the real solution (form his end) of mandated Medicare cash accounts—the end of social insurance—out of which recipients would have to buy HDHPs, gets introduced to the main FFS program, and also snuck into the Medicare Advantage program, which you may know is currently flush with cash to give away (or at least is handing out gym memberships and other goodies) because it enrolls healthier than average people. I assume Cannon thinks that there’s be enough cash for the private plans to start up MSA/HSAs there and get the whole thing rolling.
Congress can realize the potential of provider-focused P4P incentives, while reducing the likelihood of harm, by confining provider-focused P4P to private Medicare Advantage plans and by encouraging greater participation in those plans. Further, P4P financial incentives can be targeted at patients as well as providers. Patient-focused financial incentives would offer greater transparency and allow patients and their doctors to deviate from treatment guidelines when doing so is in the patient’s interest.
So private plans hand out money, and as long as P4P doesn’t foul up the overall reform bathwater, the market can work for Medicare. I personally think that this is all rather academic, but then again I never thought the US would be stupid enough to invade Iraq….so this might happen in one guise or another.
But there is one little point that this all runs into, if we are expecting Medicare Advantage to introduce the private market through the back door either in the form of HMOs or as Cannon wants in the, to-come-soon-unless-the-Dems-win-the-house in 06, MSAs for Medicare. And of course this isn’t my idea, it’s been sent in by an understandably anonymous wonk working for a big private insurer.
Our health plan that was moving forward with plans to offer a MA MSA so we got involved in auditing our MSA modeling and projections. I will be very interested in seeing if any MA plans actually decide to offer a Medicare MSA. The risk adjustment makes it very difficult for the math to work out. You assume that the enrollees are the younger aged beneficiaries (65 to possibly 70) probably not originally disabled or institutionalized, and by law not currently on medicaid and almost certainly not on medicaid the year before. This means that using the new enrollee risk score your at ~ a 0.54 to 0.65 average risk score for your plan. The real risk for these people may be much better than that (i would hope so if they are choosing this product – depending on where they live if they anticipate having any real medical costs then they are better off buying a Plan F medsupp plan) This does not get reflected in the first year of enrollment into medicare (any plan doing this better be damn sure that all of the dx data is successfullly getting to CMS’s system) So one potential area where the health plan would make money off of this is the initial difference between the new enrollee score and the "real" risk score. Once the payment is based on their actual experience the risk scores could be as low as 0.3-0.5 The amount that you have to offer as a deposit in the MSA for it to be attractive to people ends up being large part of the payment with less and less left over for the high deductible premium and admin/margin for the health plan. This has been an option for a while and I don’t see how the tweaks they have made for their "demonstration" really make it more viable – offering more benefits before the deductible? Having deductible/coinsurance/OOP max option and adding a network option? Possibly tiering deposits for risk levels – but that seems very operationally difficult. In general I just don’t see how with risk adjustment this plan works. I wonder if whoever is trying to push these plans has really gone through the math with risk adjustment and thought about whether this seems that reasonable. The MSA/HSA idea would have worked much better before risk adjustment – but the whole point of moving to a fully risk adjusted system was to minimize the sort of cherry picking that this plan is tailor made to produce.
The other bizarre thing to me is the idea of paying private health insurance plans (more than it would cost under regular FFS Medicare) to offer a FFS plan. If there is such a demand for different benefit structures while using the same reimbursement and essentially the same medical management as FFS medicare why doesn’t CMS just offer it themselves. I seem to recall that the genesis of PFFS plans was some rural senator’s wife wanting to be able to have a M+C plan.
What we do know is what happens if payment rates in the private side on Medicare Advantage fall because, say, Congress gets some cojones about the deficit. The private sector bales out—we saw that movie in the late 1990s. I suspect that risk adjustment is about to be the re-reun of it, which will probably mean going back to square one. And I suspect square one is command and control price cuts in P4P clothing.
But I’m not quite sure what the connection between that and Medicare MSA/HSAs is in Cannon’s mind, other than they’re both reforms that providers will try to strangle at birth. Of course perhaps that means that I should read more than his press release! So I’ll reserve judgment till I do!