At Health Affairs Mathmatica’s Marsha Gold takes a look at the expansion of Medicare PFFS plans. Those are the ones that our friends at AHIP are so keen on, because of all the benefits they bring to poor elderly seniors (stop that sniggering at the back!). My word, is she “fair and balanced”!
Perspectives on current MA trends are largely in the eye–and orientation–of the beholder. If one believes that all choice is good and competition brings prices down, MMA has clearly been successful in expanding choice and competition. Because higher payments are driving the market, beneficiaries who enroll also benefit because benefits, even in the more limited plans, probably compare favorably against those of Medicare alone for not that much more premium. It could be that once attracted to MA, enrollees can be moved to more managed products, as some firms have indicated that they want to do.If one tends to believe less in the market, some aspects of current trends are a concern. Most narrowly, the current expansion is fueled by MA payment rates that exceed what traditional Medicare now pays. At least in the short run, this means that Medicare pays more for each beneficiary that is attracted to MA. The added fiscal burden on Medicare is especially high for PFFS plans, because firms are benefiting from "floor" payments. Although individual enrollees may gain, beneficiaries as a whole may be harmed if higher payments add to the fiscal stress on Medicare, making the program less viable in the long run. Choice also makes demands on beneficiaries’ time, is challenging for many not familiar with the issues or those with cognitive limits, and adds the risk that coverage will be unstable if the forces that facilitate firms’ development of PFFS plans also make it easy for them to exit MA.Do the benefits exceed the risk? Although people will differ in their calculations, I suggest that the answer could well be negative.
The joke is that her piece is called Medicare Advantage In 2006-2007: What Congress Intended?
Err, yes Marsha, it pretty clearly was what Congress (or at least the staffers who wrote the law at AHIP’s behest) intended. We, the taxpayer, meanwhile just need to drop trou and bend over.
I agree that some aspects of the Medicare Advantage program are problematic, and it would not bother me at all if the private FFS option was eliminated because I don’t see how an unmanaged FFS plan can bring about meaningful restructuring of delivery systems (although in fairness, it should be noted that in practice some of the private FFS plans do provide certain types of care management services on a voluntary basis which the traditional Medicare FFS program does not offer).
However, there are two other aspects of the Medicare Advantage program which Matt Holt, the New York Times editorial board, Paul Krugman and other critics of the program don’t want you to know about. First, the average costs incurred by HMO plans in the Medicare Advantage program are actually below the average cost incurred by the traditional Medicare FFS program. Yes, it could be argued that the HMO plans are “overpaid” (because the government’s payments exceed the HMOs’ costs) but even Krugman concedes that roughly half of the overpayments do not flow into the pockets of health plan CEOs or stockholders, instead they are used to subsidize lower out-of-pocket costs for beneficiaries enrolled in the plans.
Secondly, as demonstrated in a very compelling study co-authored by Ken Thorpe (a health economist) of Emory University, it appears to be less expensive to enroll Medicaid-eligble beneficiaries in Medicare Advantage than a traditional dual-eligible (i.e., Medicare/Medicaid) program.
The big mystery is why so many critics of Medicare Advantage become hysterical about “overpayments” to private plans—the standard Left-wing rant about private plans is that they cherry pick healthy enrollees, deny necessary care, pay their CEOs outrageous salaries, etc.—yet despite all of that, the traditional Medicare FFS plan is only 12% less expensive on a per-beneficiary basis than the average private plan under Medicare Advantage. Where’s the scandal?