Hiding In Plain Sight: Using Medicare To Solve The ‘Public Option’ Conundrum

Barack Obama_addresses_joint_session_of_congress_2-24-09As Senate and House Committee versions of health reform move toward unified legislation and floor votes, the most complex political challenge is how to resolve the “public option” controversy. While one would have thought weightier issues such as the shape of Medicare reform, the taxation required to support coverage subsidies, or the presence or absence of mandates would have been pivotal in this debate, the seemingly peripheral issue of a Medicare-like “public option” might be the hill on which health reform dies.

The reasons are almost completely political. The Democratic base wants to end private health insurance. Single payer advocates view the public option as a down payment on an entirely public health financing system. Public option advocates believe that the plan’s bargaining power will drive private insurers out of business. (I’ve argued in a previous blog posting that, without fully understanding what they are doing, these single payer advocates are probably right.)

Moderate Democrats, who will need independent and some Republican votes to be re-elected next year, cannot afford to be perceived as advocating a further expansion of government influence. After deeply unpopular partial nationalizations of our banking and auto industries, public support for further expansion of government power appears to be waning. Republicans appear ready to capitalize on the growing backlash against deficits and growing government power in the coming Congressional election cycle.

The Varying Flavors Of The Public Option

In reality, no one has a clear idea how a new public option would affect health insurance markets since so much depends on payment strategy. Hard core House advocates have advocated a Medicare “cram down”- forcing providers to accept Medicare rates for the public plan as a condition of continuing to participate in Medicare. The cramdown would trigger a tsunami of cost shifting onto private insurance, frantic re-basing of private insurance provider contracts, and drowning of marginally profitable hospitals and physicians. Providers facing a cramdown will quickly add their thus-far-silent voices to the crescendo of doubt or outright opposition to any final legislation.

More cautious advocates of a public option rely on negotiated rates, or some multiple of Medicare payment, and voluntary physician and hospital enrollment at those rates.

No one knows if the networks that result from negotiated rates will be robust enough to sustain public plan enrollment. The “co-operatives” advocated by some moderates are unlikely to have any meaningful effect either on coverage or cost. Those who advocate a “trigger” leading to state sponsored public plans should be sobered by the fact that states that already have such plans, like Washington, are eviscerating their funding as we speak, leaving safety net providers gasping.

The Solution: Voluntary Early Enrollment In Medicare

The solution to the public option conundrum is so obvious that it’s striking how little discussion there is of it: encourage voluntary early enrollment in Medicare. Unlike the public option, voluntary Medicare buy-in has a significant health policy history. John Kerry included it in his health reform proposals in 2004. Bill Clinton had a more modest proposal (voluntary buy-in after age 62) in his first three budgets. Medicare analysts Marilyn Moon and Christine Cassel have long advocated this approach.

If one is thinking strategically, the most worrisome segment of the uninsured is the 11.3 million aged 45-64, who were the fastest growing age cohort of uncovered folk from 2007-2008. It is one thing to be 22 and immortal and uncovered; it is quite another to be a 52 year old diabetic widow with hypertension, not disabled but thirteen years shy of Medicare and uncovered. The health system and society’s biggest risks among the uncovered are its oldest members. It is these older uninsured people who generate the largest hospital bills, contributing disproportionately to hospitals’ uncompensated care burden.

How It Would Work

We already have a public plan for older Americans. Let’s simply lower the Medicare eligibility age, and encourage the sickest baby boomers voluntarily to join Medicare earlier than age 65. We should waive the two-year wait to enroll in Medicare after obtaining Social Security disability coverage. At the same time, we should let the non-disabled enroll in Medicare after 55 at the program’s estimated actuarial cost.

Employers could fund the premiums at Medicare’s cost for their 55-plus employees. This would have the benefit of lowering the average age and morbidity burden of their remaining privately insured group, and reduce their overall health insurance costs. Individuals with resources could pay their own premiums, which would be substantially cheaper than the individual and small group rates for their age. Those without the means could receive Medicare subsidy help on a sliding scale based on income. Not all of the newly enrolled will leave private markets; they will have the same choice of traditional vs. Medicare Advantage plans that present beneficiaries do.

State And Federal Budgetary Benefits

Money for these subsidies is already included in reform legislation in the form of funding for newly eligible Medicaid adults with incomes below 133% of poverty. A lot of lower income boomers would sooner kill themselves than enroll in Medicaid in any event and will blow off individual mandate penalties, remaining uncovered. Moving the older segment of this group into Medicare would alleviate some of the states’ feared future burden of increased Medicaid spending.

In addition to the prospect of a rapid setup, voluntary Medicare buy-in carries with it scorable out year Medicare savings. In 2007, McWilliams and colleagues reported that uninsured people with previous chronic conditions who enroll in Medicare not only have higher Medicare costs at enrollment, but remain sicker than their age peers as long as seven years after enrollment. This is intuitively obvious; those who cannot afford medication for disease like hypertension, diabetes, asthma and other controllable conditions will be far worse off than their covered age peers. (See also the article by Andrew Wilper and coauthors, published today on the Health Affairs Web site, finding that undiagnosed and uncontrolled chronic illness, which is common among insured people, is even more frequent among the uninsured.)

Unlike the public option, the impact of voluntary Medicare buy-in on private health insurance markets would likely be manageable. One could expect millions (perhaps 3-5 million) but not tens of millions of takers. The inflow of additional Medicare lives would strengthen Medicare’s bargaining power with providers without triggering a wave of cost shifting or a ruinous rebasing of private insurance rates. And, as mentioned earlier, those with satisfactory private plans could remain enrolled through Medicare Advantage.

Medicare could take advantage of the additional group of chronically ill older adults to strengthen its chronic care management capabilities. The “medical home” and disease management pilots proposed in health reform legislation would have a lot of new targets; the highest and best use of these new care models will be to deal with the previously unmanaged chronic conditions in the early Medicare enrollment population, as well as those already enrolled through dual eligibility with Medicaid. Strengthening Medicare’s primary care compensation generally (by far more than just 6-8%) would also be an essential correlate to letting a large new high-risk population into Medicare.

For conservatives seeking to draw the line at no further expansion of public coverage, this solution would not pass political muster. Many of these folks disagree that we have a coverage problem now. Hard core “progressives” won’t let go of the single payer “down payment”, even if it has no chance of passing the Senate. Neither of these groups will provide the swing votes necessary for final passage in any event.

However, for moderates of both parties seeking to cover the high risk segment of the uninsured population with minimum disruption quickly (e.g., without a 3-5 year set up time), early Medicare buy-in would be a much faster, higher impact alternative to the present, speculative alternatives, such as co-ops or state plans triggered by mysterious future events, etc. It would also be cheaper than subsidizing private insurance for the same population, saving crucial subsidy dollars and reducing the tax burden otherwise required.

Maybe it’s too simple a solution to be practical in the present superheated political climate. However, leveraging the public plan we already have might provide a way out of a seemingly intractable political problem that might otherwise crater health reform in 2009. It solves numerous problems: speed to results, reducing disruption to markets, affordability, and a contribution to bending the Medicare cost curve when the boomers flood the program over the next decade. Voluntary Medicare buy-in is worth considering.

Jeff Goldsmith is president of Health Futures Inc. He is also the author of a book released this year titled “The Long Baby Boom: An Optimistic Vision for a Graying Generation.” Health Futures specializes in corporate strategic planning and forecasting future health care trends. This post was first published on the Health Affairs blog.

53 replies »

  1. There is a LOT that “MD as H…” doesn’t know about health care and particularly government entitlements.
    It starts with a common misconception that Medicare (or for that matter SS,) is a separate fund, or even simply reported as such.
    If it were, it would STILL produce a SURPLUS.
    Read the articles, there are some TELLING comments by the CBO – who btw are not known for conspiracy theories.

  2. This makes a great deal of sense as the alternative to a new public option and I have asked this question myself, why not use Medicare if it is all that great as we are told. As one commentator noted is the the most successful example of a public option we have, but its going broke.
    We don’t need a public option to deal with the health care issues we face, but if we are going to have such an option why not use the one we have even with all its faults. Do we need two public options going broke?
    Views on health care and more

  3. “I think there is just as much “fraud” of this type- rampant self dealing- on the private insurance side.”
    Based on what? I process those claims, if I could cut my clients cost 14% overnight just be rewriting our plan docs to not allow any self referral it would have been done years ago. It appears you really don’t know how the majority of the market works. Well over half of all employer insurance is provided through self funded plans. The claims payor/TPA is employed to do just that pay claims. Their are 2000+ of us. We are very interchangable, if your TPA doesn’t do a good job you can fire them and have a new one in place in a matter of weeks. To claim that 2000+ TPAs grasping for any advantage to keep business let alone write more have not seen this opportunity is just stupid. TPAs try things you have never dreamt of to control cost. At an annual conference a couple weeks ago some TPAs where telling us how they replaced PPOs and just pay Medicare or Cost plus. If you think for one second TPAs have gone as far as dropping PPOs and hired attorneys to protect members from balance billing yet overlook something as simple as self referall you have no idea what is going on in the world.
    You can stand by what ever you want but the fact remains you have never presented one fact let alone meaningful data set to back up a single idea. We can save the planet by teleporting instead of burning fossil fuels should we outlaw all present modes of transporation based on a idea that isn’t real? Teleporting actually makes more sense then your move them to Medicare and Private insurance loses more to fraud, atleast telporting hasn’t been disproven.
    Having processed both Medicare and non medicare claims I’m 100% certain there is no mathamitcal way for private fraud to even approach 14%. The claim distribution between professional, inpatient, out patient and Rx eliminates any possibility of self referal equating to 14% fraud. Unless their is a Pharma company that also owns a huge IPO and Hospital I am unaware of your math just doesn’t pencil. Write it out and show us ANY scenrio in which 14% of claims are fradulent in a private system. You would have to have fradulent claim rates approaching 100% in professional or outpatient to reach that figure.

  4. Jeff,
    Medicare is not insurance and is not based on risk, except political risk for unfunding it or telling a beneficiary “no”, which never happens. Expanding Medicare is like expanding a black hole. It will consume more and consume it faster.
    Not until the patient has his own skin in the game will the utilization and therefore the cost change.

  5. As you may know if you’ve read my postings, I’m an outspoken advocate of tightening Medicare fraud and abuse laws. There will be a post on this in a day or two. It’s actually the stuff that’s legal that is the problem: doctors self-referring patients for radiological scans, surgery, hospitals admissions to facilities they have an ownership interest in. I think there is just as much “fraud” of this type- rampant self dealing- on the private insurance side. The scandal is: what’s legal. And I stand by my earlier statement that the big money is in running up the tab on the privately insured, not in Medicare.
    On private insurers’ margins, I’ve never subscribed to the populist garbage about obscene profits. Uwe Reinhardt had an excellent analysis of the Wellpoint 10K the other day in the New York Times. Health insurance is actually not a very good business. Many of these firms would be a lot more profitable if they were better managed, and eliminated a lot of the paper and clerical overburden, and if they were more aggressive in bargaining with providers. Since the same companies process Medicare claims, I don’t see us escaping them. Management in both our private and public systems is mediocre and not improving. (Medicare has been without an Administrator for two years, spanning two administrations).
    It’s really a waste of my time to participate in a philosophical BS argument about government=bad, private sector= good. That sort of ended after college for me. We have a mixed system. I’ve worked in both private and public sectors. If we want to cover the 55 plus population, my best case scenario is for Medicare to assume the insurance risk, and contract with well managed HMO type health plans to actually co-ordinate the care.
    We’ve both spend decades working in this field, Nate- 34 years in my case; I’ve spent most of my time in provider space, and have a much clearer idea than you do about where the waste is. Don’t get me started- if all you’re looking at is claims data, and in essentially one market, believe me, my friend, you don’t know what you don’t know . . .

  6. Medicare is working with two hands tied behind it’s back on fraud. It is mandated to pay within 15 and 30 days, no questions, and it has been allocated very little for fraud investigation/enforcment. The FBI and justice department is now doing much more fraud investigations and prosecutions. Just because fraud is high now, and can be fixed, does not mean that Medicare is a failure. As Jeff said what is the difference between fraud from “legitimate” private medical services over-utilizing and fraud by illegitimate medical crooks?

  7. 430 billion paid with 60 billion lost to fraud is 14% fraud rate, guess I need to update my argument.
    The one lady has been telling Medicare for 6 years people are submitting false bills and still nothing done.
    Brillant idea Jeff, lets add another 3-6 million people to this mess and celebrate we didn’t add tens of millions. As to;
    “Finally, about the 10% waste and fraud in Medicare, as someone who spends way too much time with employers and not enough with the actual care system, Nate might be unaware that the BIG MONEY in fraud and abuse is in the privately insured populations.”
    care to reward who is unaware of basic facts and which one of use as the basics down? The left is void of ideas and common sense.

  8. Phillip,
    you are a moron apparently incapable of reading. I make my entire living off taking business away from insurance companies. Thanks to me my clients reduce the premium they pay to evil insurance companies 30-60% and have net savings of 10-20%+. I know your not smart enough to grasp this, let alone somehow make a feeble dimwitted insult out of it but try to get the basic facts right.
    Jeff care to comment on the new 60 minutes story on Medicare Fraud and the AP story about 2.2% profit margins? Both pretty clearly kill your entire post.

  9. Margalit,
    You don’t have to buy car insurance. You just have to have financial responsibility for your liabilities. You don’t have to have either one if you don’t have a car.
    What is it with you and class warfare? I am in a class… If you really read what I write, I am all about freedom. I am for the government reigning in its own out of control spending and political promises and leaving the private sector private. I am not salaried, so what I make is demand driven. I do no big procedures that are elective, so I am not driven by unnecessary referrals. As an emergency physician my charges are driven by unnecessary utilization by people with all sorts of different reasons for being in the ED. An occasional patient has an emergency. Most don’t. Yet when healthcare reform emboldens more and more people to get attention they do not need and would not seek if they had to pay their own bills, then I will make even more money, not less.
    Nothing about reform is directed at the patient and their addiction to medical attention.
    If insurance were strictly for actuarial occurrences and not for discretionary spending, the premiums would go down, the patient demand for unnecessary care would go down and the total cost of healthcare would go down. More people could afford coverage against the nondiscretionary big ticket costs. Whether or not they bought the new, affordable coverage should still be up to the individual and not mandated by the government.
    As for patient care, none of this discussion and nothing about so-called reform is about patient care. Their is a vast distance between “coverage” and “care”.
    As for your study, if you read the study it is about purchasing power. It does not include overhead costs, taxes paid out of that income, the cost of getting the education for the job and it does not include how hard you have to work for your money. The same study also showed that American nurses were more highly paid than most of the rest of the world, too. Nothing is too surprising here, since Americans spend more than the rest of the world on everything.
    And, finally, Phillip, I give away a lot of care. I am happy to do it. I am not happy to have is stolen from me. No one is entitled to steal service from anyone. Drive off without paying for gas and you will be chased and prosecuted. Fail to pay your doctor bill and you will receive great care the nest time, too. You will not be arrested, even though in any other field you will have committed a felony.
    Funny that healthcare reform will monetize the care that is simply stolen now. Totally keeping with the government SOP, i.e totally screwing up.

  10. MD as HELL,
    You only seem to ever talk about money and not patient care. You clearly do what you do to make money. That seems to be your first priority. You likely represent a class of doctors and an industry that makes way to much money for what you do. You should learn a thing or two from many of the health professionals around the world, who are not sucked into this U.S. idea that it is a god given right that medical practionners should get rich doing what they do. U.S. doctors are the highest paid, by far, in the world. You are part of the problem.
    You are an healthcare insurance worker. We know where you come from. You rip people off every day and then you come on this blog and continually suggest there is no healthcare problem in the U.S. Yeah, the system works great for you, but it is failing this country.

  11. No!!! But…. 🙂
    We encounter the federal government every single day. Obviously, we all pay taxes, some of them for Medicare which everybody will encounter once they reach 65 years of age.
    I’ve been ponying up for many things ordered by the government and so have you. Food stamps, wars, bank bailouts, etc.
    I really don’t see how ponying up for universal healthcare is any different. If you are referring to the mandate to buy health insurance, then, I agree, it is rather strange, even though they mandate that I buy car insurance too.
    I would prefer to be taxed for universal care (not necessarily government run). At least that way there’s a better chance that everybody will pay their fair share. I don’t really understand the proposed penalty for opting out of health insurance. Either we have universal care, or we don’t. Half measures will not work.

  12. Never before has there been a requirement simply because you were in the country. Something other than existence had to happen to have an encounter with the federal government. Not with this proposal. Now you are derelict if you do not pony up for something ordered by the government. If they can do that, then they can order you to live in a certain place and work in a certain place and meet any other arbitrary and random requirements. Does that sound like “general welfare” to you , Margalit? Please say “no”.

  13. MD as HELL,
    I guess the smoldering view is largely dependent on how one defines the phrase “promote the general Welfare”, and the word “general” in particular.

  14. Margalit,
    You have the right to yell “Fire!” in a crowded theatre if it IS on fire. Our Constitution is smoldering right now.

  15. Jeff,
    I’ll start with the easy shots, our decaded+ of Administering a Medciare Supplement sorta kills your argument I don’t know where the fraud and waste is. You might want to read a couple of the annual GAO and CMS studies on Medicare and Medicaid fraud, private insurance fraud is less then 1/5th that of Medicare.
    No oncologist is ordering PET scans every three months on any of my plans. The limited fraud and abuse we do have is mainly from government tying our hands, i.e. Mental Health Parity laws.
    Jeff my 50-65 population is not running anything close to $12,000 a year either. Basic logic implies my pre 65 population would have lower claims, I have wellness, nurse lines, disease management and other programs to control cost which Medicare has none of. My groups are either pissing away a lot of money for BS wellness or we are doing better then Medicare could ever dream of.
    Jeff why would you put the sickest people in the plan with the least cost containment? This lack of logic is enough to dismiss your argument alone. Give one good argument for putting the population most in need of management in an unmanaged program?
    Medicare beneficiares living longer is good for the person living longer but terrible for the financial health of the system, any argument counter that is void of all economic principals.
    The cost of a nursing home alone negates any savings from avoiding serious illness earlier in life. An early cancer death is far cheaper then 5 years in a nursing home for someone living into their 90s.
    How long will providers be allowed to drop out of Medicare? Hospitals receiving any federal money are prohibited. The government already repealled their promise to pay a fair price it is not that far of a stretch to see compulsary participation.

  16. Have been offline for a few days, believe it or not, and couldn’t do this by iPhone.
    Nate’s early post contains a number of assertions that should be challenged, though I agree with him about Kim’s idea about FEHPB- tying that preMedicare population to Congressional benefits has a lot to recommend it.
    I think Nate is full of crap about private coverage being cheaper than Medicare for the 55 plus bunch. Remember the problem: they are NOT part of a group. Medicare costs are not measured by averages, which incorporate the 85 year old “gomer” types. When people looked at this a few years ago, the costs for late 50’s/early 60’s types were more like $4000 a year- I’m sure it’s going to be more now, but not triple. The older uninsured have to buy in the individual and small group market, where they are simply raped. I’m paying $1600 a month for family coverage (I’m 61). I think Medicare will be at MOST half of that, though I’d have to find coverage somewhere for my immortal 20 year old daughter.
    On the sickest people coming in, that’s exactly what we want. Getting those folks generic beta blockers and statins would be a huge help. It would also be a great excuse for markedly strengthening the chronic care management capacity of the program, something I think we will see shortly regardless of what health reform does. And as others have pointed out in this space, it would have a salutary effect on the risk profile of the remaining privately insured population if some presently insured private folk moved into the Medicare pool.
    On people living longer if you help them earlier, that’s the fucking point, dude.
    Delaying expense is a win for the Medicare program and avoiding avoidable illness is a huge win for everyone in society. I’m OK with delaying avoidable illness from a fiscal standpoint as well, because it helps us surmount the 14 year demographic “valley of death” called GenX. If we can push a lot of illness off, we begin getting the increased fiscal capacity of the far larger GenY population, more than 110 million and growing by 4 million a year, reaching their prime earning years, and we will be better able to afford the costs. Also, healthier people who live longer cost less at the end of life than unhealthy people. There are a lot of myths here, into which Nate has uncritically bought without looking at the evidence. See my book, The Long Baby Boom (Johns Hopkins Press, 2008) for an explanation of this dynamic.
    On Medicare setting rates by fiat and not “bargaining”, true enough, but as our intemperate friend MD as Hell has told us, they do have the power to just drop Medicare patients, and that is my forecast if we don’t do something meaningful about the absurdly low payment rates for many vital specialties. Plus, more young people will simply opt to be dermatologists or for completely elective boutique practices. There are market boundaries to what Medicare can do. . .
    Finally, about the 10% waste and fraud in Medicare, as someone who spends way too much time with employers and not enough with the actual care system, Nate might be unaware that the BIG MONEY in fraud and abuse is in the privately insured populations. All the self-referral and self dealing that Atul Gawande documented in his excellent New Yorker article (about which see more in a future THCB post) is magnified and intensified in the almost completely unsupervised private insurance sector: oncologists bringing their patients back every three months for PET scans, you name it. The big money for physician owned hospitals is in “mining” the privately insured patients.
    That’s just a partial response. There’s more . . .

  17. “I’d hate to see it become another goverment-run inefficient and costly industry.”
    Assuming what we have now is cost effective and efficient. Just using Medicare as the public option will not fix healthcare, a lot more will have to be done to control costs. The suggestion, “Setting standard all-payer (including Medicare) fee schedules to eliminate cost-shifting;” is one of the necessary steps at universal cost control. Using MD’s analogy of the Titanic to explain why Medicare alone will not save us; Medicare is one of the life boats, except it is tied to the stern and doomed just the same. The reason Medicare is not being considered as the “public option” is the fear of providers that it’s size and financial clout will dent their lucrative money machine and actually bring down costs.

  18. The Medicare Part B premium, currently $96.40 per month for most seniors, is set by law to cover approximately 25% of total Part B costs. The other 75%, or about $290 per month, is paid for by taxpayers out of general federal revenue. Part A, which covers hospital related expenses, consumes 45%-50% of Medicare spending and is paid for by working people in the form of a 2.9% payroll taxes split evenly between the employer and employee which applies to all wages with no income cap. Most economists will tell you that employees actually pay for the employer’s share as well in the form of lower wages than they would have otherwise been paid. About 10% of Medicare’s spending or a bit less is for the Part D prescription drug program. The average premium paid by seniors for this benefit is in the $30 – $35 per month range. The fact that the vast majority of seniors pay only a tiny percentage of total Medicare costs in the form of premiums largely accounts for its popularity. As a group, they are not paying much in income taxes either and, if they are retired and no longer in the workforce, they pay nothing in payroll taxes. What’s not to like for seniors? For the rest of us, it’s an increasingly onerous financial burden with lots of fraud and out of control costs.

  19. Medicare for Everyone you need to go back to the books and read up some more. There is Medicare A and B both of which cover around 80% or less. $96.4 is part B premium, you forgot part A which is by far the more expensive part. The Medigap covers 20%+ of both. oops you blew that one.

  20. You are still trying to figure out how to cover everyone on the Titanic. Actually, everyone on Titanic had coverage (a ticket). It was designed and built by people who made invalid assumptions. It was on fire when it left port. It was being run by people with a selfish agenda incompatible with the safety of the passengers, but the passengers were thrilled; they thought they were getting to their destination in an impressive and boastful record time. They did not know how unsafe it really was.

  21. While Medicare only pays a large portion of a medical bill, it IS almost always supplemented by private Medigap coverage. I agree, making Medicare supplemented by Medigap coverage is a very antiquated design.
    A senior citizen pays $96.40 a month for 80% Medicare coverage. Then they have to pay $122.17 a month for 20% Medigap coverage. When you look at what they’re paying ($96.40 for 80% vs $122.17 for 20%), they’re being ripped off! If a market for pre-65 Medigap would be developed, I’m sure the spread would be even further. The vast majority of uninsured 45-64 year old people will not be able to afford Medigap insurance.
    Congress did not want the Medicare program to be totally administered by the federal government. Instead, it devised a public program run by many competing private plans to supplement the 20%. That is a very antiquated design.
    And in the political payback deal of the century, Congress created the Medicare Part D prescription drug benefit, guaranteeing premium pricing for pharmaceuticals, by prohibiting Medicare from negotiating drug prices while it provided hundreds of billions of dollars in U.S. taxpayer subsidies to pay for these premium drug costs by subsidizing private insurance Medicare plans.
    I see what Kim means by saying “not upsetting private sector fans.” If you’re relying on so-called consumer-directed health plans to stem the tide, good luck, their costs went up astronomically also.

  22. The comments about Medicare NOT being a role model for health care efficiency and cost management ring true. Back in 2007 I attended one of the state CMS Cornerstones of Health Care Reform session and sat next to the NE Regional Administrator for CMS. During the meal which preceded the HHS secretary’s speech, the subject matter turned to preventive health. My comment to my CMS colleague was that CMS should consider support of private health plan and state initiatives because as these individuals aged, CMS would clearly benefit from improved health risk management and risk reduction. The remark was met with silence.
    As are many in this blog, I’m reluctant to place too much reliance on a government-run health insurance program as being a panacea. I see little or no evidence that this would lead to expanded coverage and lower cost.
    On the other hand, there is great opportunity to streamline the administrative and regulatory side of health care. Some of the directions I’d favor include the following:
    Moving to national regulation vs fifty different state regulations for health plans;
    Not making CMS the de facto standard setting body for administrative requirements;
    Improving the individual and small group markets through a combination of income-based subsidies and mandatory participation;
    Setting standard all-payer (including Medicare) fee schedules to eliminate cost-shifting;
    Incentives to increase the coverage options for “high-risk” individuals.
    There is so much opportunity to improve the US health care system that I’d hate to see it become another goverment-run inefficient and costly industry.

  23. Its like every time a lefty opens their mouth the whole movement loses another brain sell. People that usually comment with some inteligence are talking like this is their first exposure to any of this.
    “IMHO, in the current system, private payers are actually yelling “fire” in a crowded theater. Their combined behavior is infringing on the well being, and sometimes the lives, of other people.”
    Margalit in your IMHO please explain how I have been yelling fire. I am a private payor, I make between 120-240 per employee per year. If it wasn’t for me 1000s of people literally would not have insurance. If I didn’t help small employers reduce their premium to insurance companies and manage their claims they would have dropped all insurance coverage. How is this infringing on anyone’s well being? For all the good discussions we have you still tend to lapse into some really ignorant partisan BS.
    anon your just an idiot, some states collect more then 3% of premium in tax alone, how can someone then administer a plan with a 97% loss ratio. It was idiots like you that designed medicare, do you have any idea how much a good disease management program cost? Tomorrow I am dropping off payroll inserts for a client to distribute to their employees discussing flu season, and other health care issues to raise the HC education level. THose aren’t free. 24 hour nurse lines aren’t free to staff. Medicare has a 97% loss ratio and their claims are through the roof and they lose 10% to fraud. that’s why we need to shut the morons up. Take two seconds to think before you post senseless garbage.
    “Assuming employer plans don’t fund over 65s and near deads, serious cronic illness that would leave a person unable to work, and I assume that the employer gets to finagle the mix of worker ages and illness to some extent even if that is illegal.”
    Peter has your head been up your backside that long? Ever hear of spouses and children, we have near deads and chronic illness that prevents people from working every day. Some states we are required to cover disabeled children to 30. Also this little obscure law called COBRA that sticks us with all sorts of sick and dieing people. Again do shut yur brain off when you start to type? And FYI yes a self funded plan in middle America is as efficient as any nationalized plan in any industrialized country. As I have told you countless times our poor cost comparison is the result of Medicare and liberal plans in MA and similar states. We only have a cost problem where the democrats run the show.

  24. Peter,
    Regarding self-funded employers’ healthcare costs, we are talking about hospital charges, physician and professional fees, prescription drugs, labs, imaging, durable medical equipment and administrative costs. Combined, these categories account for between 70% and 75% of healthcare costs. Employer costs generally do not include routine dental and vision care, unless covered under a separate policy, long term custodial skilled nursing or home healthcare, public health initiatives, research and development, and investments in structures and equipment. Moreover, member out-of-pocket costs for deductibles, co-pays, and non-covered expenses are not part of employers’ costs but are included in aggregate nationwide healthcare spending statistics. Also, for Medicare eligible retirees, the employer plan is the equivalent of a Medigap policy with Medicare as the primary insurer. For Medicare eligible people who are still working, at least at my employer, the company plan is the primary insurer and Medicare is the secondary. I often wondered about the extent to which international spending comparisons are completely “apples to apples.”
    Separately, I think it was you maybe a year or two back who pointed out that about 45% of healthcare spending in Canada is on the 65 and older population. I suspect that percentage is comparable or even somewhat higher here but I have never seen any data that breaks out spending by age group.
    Thanks for the link to the FEHBP data. I’ll take a closer look at it. It does appear, however, that even the cheapest family plan is still expensive in most states and would be even more costly if a significant number of 50-64 year old near retirees were added to the pool.

  25. Barry, here is what i am looking at:
    The Aetna HMO is the cheapest plan everywhere, but since it is part of the FEHBP, I assume it’s respectable.
    Granted, since it is a high deductible plan, the household expenses, in some cases may be a lot higher, but still, I would like to understand….
    In Missouri, as a small employer, you can provide zero deductible, top notch coverage for two adults and their children, for about $1000 per month. I assume the local Anthem is not losing money either.
    So, if someone can explain this, I would be very interested….

  26. Another government program with the opportunity for buy in would be the Veterans Administration. Under President Bush some veterans became ineligible for care at the VA, and they remain ineligible now. Not only is opening up the VA to all veterans with honorable discharges the right thing to do, it would provide another potential access point. In addition, but more radical, would be opening up the VA to all VA employees and their families who are nonveterans (and perhaps elected officials and other government workers). This would be a good demonstration project allowing us to evaluate government run healthcare as a competitor to the private sector, provide a quality of care incentive to the VA, and force government workers and elected officials to put their money where their mouth is. Speaking as a government employee I ask “Why not start by providing a government option to those who work in the government?”

  27. Margalit,
    I’m not familiar with Aetna’s FEHBP offerings. I do know that whichever plan a federal employee chooses, the employee pays 25%-30% of the premium and the government (taxpayers) contributes 70%-75% of the cost. I have no idea what the deductibles are and whether the $600 per month cost you cite is the total cost of the plan or just the employee’s share. UnitedHealth tells me that their high deductible plans cost, on average, 15%-20% less than their comprehensive plans and the profit margin and medical cost ratios are comparable for both. I think it’s a virtual certainty that if you had an insurance pool consisting of every person in the country between 50 and 64 or even 45 and 64, their healthcare claims would be well north of $4,000 per person per year but considerably below the $11,000 per person incurred by Medicare beneficiaries. Health insurance, despite what you may have heard, is a highly competitive business with few secrets or sustainable advantages within a single company. If it were possible to offer a respectable health insurance plan for $500 per month for family coverage without having to pass medical underwriting first, it would be widely available and highly popular. Perhaps one of the insurance experts out there can enlighten us further on this.

  28. Jeff Goldsmith has articulated what smart nurse executives have been whispering about over coffee for months now . . . “Why would we try to re-invent the wheel creating a new public option system when we could just allow an early buy-in to a system that is already in place?”
    We will concede that Medicare needs some tweaking. We certainly need to implement the universal precautions it would take to prevent the inevitable opportunistic parasitic infections such as those seen in the case study of McAllen, Texas. Creating a public option, if the idea is even feasible, is not something that would ever be implemented in our lifetimes. The Medicare voluntary buy-in option perhaps makes too much common sense to ever be taken seriously as a solution.
    I’ve been a registered nurse for 20 years, received a graduate degree in business, and have worked everywhere in healthcare from the trenches to the C-suite. I usually have a certain amount of disdain for ivory tower healthcare thought leaders that haven’t spent a significant amount of time getting their hands dirty in healthcare. Jeff Goldsmith is one of the few who understands Medicare and the deep, complex and interwoven issues that must be addressed in any real-world debate about healthcare reform.

  29. “Most large, self-funded employer plans, which have very low administrative costs, spend about $4,000 per member per year on average.”
    Barry, that figure makes it seem as if self-funded employer plans operate at costs better than Canada’s single-pay. The cost of Canada’s plan includes all ages and all degrees of illness and end of life care. Assuming employer plans don’t fund over 65s and near deads, serious cronic illness that would leave a person unable to work, and I assume that the employer gets to finagle the mix of worker ages and illness to some extent even if that is illegal. Also do employees get to choose their own doctor and treatment and how much would deductibles and co-pays be?

  30. MD as HELL, freedom is great; freedom is to die for. However freedom has its limitations. Freedom of speech does not allow one to yell “Fire” in a packed theater, for example. Freedom is regulated so one’s freedom does not harm another. Otherwise it’s just anarchy.
    Capitalism is regulated as well, at least in its current form in this country, and it always has been.
    Unless you are advocating no government intervention in the economy, then the only debate we are having here is to what degree should the government regulate healthcare. There is no question that it should.
    IMHO, in the current system, private payers are actually yelling “fire” in a crowded theater. Their combined behavior is infringing on the well being, and sometimes the lives, of other people. You may disagree with the remedies proposed, but the status quo cannot be allowed to continue.

  31. anon,
    Are you the same poster as “annon”?
    The interesting fact for me is that I will make more with reform, since with all the “theft-by-legislation”, coerced contracts and self pay, I only collect 25%. It should be a lot better when the self pay are covered. And they will come out in droves for their healthcare. So take your class warfare and your hate and find a new game to play.
    It really is about winning for you, isn’t it. “Emerge as winners.” Just what is it you will have won? It doesn’t matter to you that you will have coverage for a service that is not available. Just win the fight. Get all the rich people as miserable as you are. Well, the rich will not be miserable. They will adapt and still be rich, and you will still be miserable. And we as Americans will eject from power all who threaten our freedom in the name of some contrived noble social good. There are countries like that. Why don’t you move to one?

  32. Barry, I think I am misunderstanding some numbers here.
    Looking at the non-postal FEHBP premiums for 2009, it seems that in most states Aetna is offering a basic HDHP plan for less than $600 per month/per family.
    I would assume that Aetna is making a reasonable profit on these plans. So deducting profit and some operations’ expenses, such as large salaries, marketing, sales, etc., why can’t we cover families for about half of what you are quoting above?

  33. “vituperative” says MD as HELL. Lacking “personal responsibility” and “take a swipe” says Nate. Ho hum. I will let your words and tone speak for themselves. Keep on digging.
    Here’s a video that explores the age old question, “if you call a tail a leg, how many legs does a dog have?”
    The solutions follow some basic guidelines.
    It should be illegal to operate at a loss ratio of less than 97%. We defund the private insurance industry, or force it to operate as a regulated public utility. You take a dollar in for health care, you pay 97 cents of that for health care, year in, year out, or you are out of business. This business of risk pooling and health care payments is a public trust, not your path to a mansion.
    We apply Medicare style cost control measures.
    Obviously we eliminate underwriting and all the risk selection games.
    We make McCallen Texas style health care delivery systems a thing of the past
    http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande and we force cajole and require doctors /hospitals to organize themselves into rational delivery systems that focus on outcomes and eliminate perverse incentives for additional care.
    We could also do with a reorientation of the system toward more primary care and physician assistants and paraprofessionals. Our physician class as a whole is probably over trained and over specialized.
    We make it possible for people to have access through low cost delivery modes so I can see a PA or NP for my routine health care needs.
    In general we stop spending on health care as if health care spending was an efficient way to produce health, and start worrying more about GDP growth and public health and employment and social equality, all of which also drive population health.
    In the end, it is about taking money away from a sector that is eating up our national treasure and producing nothing of value for the future. Some people need to lose so that we can all win, and people like Doctor MD as HELL and Insurance Man Nate are probably prime representatives of the class of folks who need to lose so that the vast majority of us and our nation as a whole can emerge as winners. Nate, MD as Hell, we understand your pain at the prospect of losing, but we find it difficult to summon a great deal of sympathy when so many are losing right now because of the ideas and power structures that you represent.

  34. Margalit,
    Most large, self-funded employer plans, which have very low administrative costs, spend about $4,000 per member per year on average. That includes the employees’ children and spouses. Companies with older workforces spend more and those with younger work forces spend somewhat less. For a family of three, that works out to $12,000 per year for family coverage. The 50-64 age group would likely account for a disproportionate share of that spending assuming the group does not include a large number of retirees. The principal of community rating that reformers want to embrace would have everyone, both young and old, pay the same rate. There are proposals that would allow up to a 4 to 1 differential based on age. There is a 2 to 1 differential in Massachusetts today. The other complicating wrinkle is that a relatively small percentage of members account for a disproportionate share of the costs. Harvard Pilgrim, for example, tells us that 9% of its members account for 60% of its claims costs. Within Medicare, the top 5% of beneficiaries account for 43% of costs, the top 10% account for 63% and the bottom 50% (22.5 million people) account for a mere 4% of the program’s costs or less than $1,000 each.
    Any way you look at it, health insurance is expensive because health care costs (and claims) are expensive. As Peter says, if we want to lower costs, people are going to have to use less care and expect less. While I don’t think Medicare’s dictated price approach is the right one, I do think there are some services, tests, procedures and drugs that we shouldn’t pay for because they cost too much. Also, some doctors and hospitals practice more cost-effectively than others and achieve comparable or better outcomes. Patients who want to go to the more expensive providers should be charged a higher co-pay for the privilege just as they are now if they want a brand name drug when a cheaper generic or comparable but less expensive brand is available. If we want to drive down healthcare utilization, the best way to do it is with changes in payment policy that create the right incentives for both providers and patients. Payment policy reform, coupled with tort reform, a more aggressive attack on fraud, a more sensible approach to end of life care, investment in electronic records and robust price and quality transparency tools are all reasonable strategies if we want to bend the medical cost growth curve.

  35. Canada spends about US $3,678 per-capita for health care, the US about twice that. Unless Americans accept the reality that they will have to use less, accept less, and charge less for healthcare we will not solve the cost issue. New insurance models with subsidies and clever ways to shift risk will not bring down system costs. I don’t see how a new bureaucracy in a public option with little to no financial clout in the marketplace will make healthcare cost less. Just open up Medicare at affordable rates and allow it to negotiate/set reimbursements – that will have system changing effects that will finally start to get costs down. Hospitals that go broke because of this are not part of the solution and docs who think they’re worth more will just have to find another career or take an extra job to make ends meet just as they expect everyone else to hit by hard economic times.
    Getting Congress to use any system they force us to use is a great idea, but we know that will not happen, if we could then healthcare would have been solved a long time ago.

  36. Hello
    You have given really good information..I also agree with some of your points.Thank you very much for giving such a good information.I like it.

  37. annon,
    Your vitriolic comments are obviously from a person who is very stressed from dealing with a tough situation. My moniker is nothing more than a play on my profession and the movie “Network”. It does reflect my total exasperation with the government and the insurers and the EHR people and the hospital and JCAHO. It does not mean I am not a nice doc. You probably would find that I am very nice, if you were my patient.
    Perhaps you should consider what I said for what it was, namely a declaration of independence from the control of the government over my practice of medicine.
    Thanks to the government, I cannot take care of anyone without charging them the same as I charge Medicare for care. I am allowed to accept less, but not charge less. Yes. it is crazy wordsmithing BS, but it was created by the government. Doctors used to provide a lot of free care to a lot of different people. Now it is illegal. The government wanted to be the good guy by getting you care from greedy bastards like me and get the credit for it.
    Now they want to tell you and me we have to buy a certain product or be penalized. This is as un-American as can be. It really has nothing to do with health care. Rather it is cover for the inevitable political pain of the Medicare trust fund going belly up. It will then be politically bad to be in power, to be responsible for real cuts in benefits. If they can control ALL of health care and ALL the money, they can manage the politics more safely. Oh, they still don’t care about care. They just won’t get booted out of power for screwing up Medicare.
    Sometimes people need a break without having to fill out forms or qualify for this or that program. Real docs still find a way to help, even if we are mad as hell and not going to take it anymore.
    I wish you well, annon.
    TMK “MD as HELL”

  38. Actually Flea if you look at the facts the vast majority of the time it is personal responsbility. If you look at the uninsured or those claiming they can’t afford the healthcare they need they exhibit the following traits a greater percentage of the time then those that do not;
    over weight
    further supporting the claim most have cell phones, cable TV, and other luxories that a responsible person would purchase after their healthcare needs are meet.
    No confusion I am quit clear on the facts.
    From personal experience someone that takes a swipe at someone else like annon’s last couple lines are usually the ilresponsible ones that always blame others for their problems, no facts to back that up just opinion.
    ” I don’t see any reason why we can’t insure an average family for 5 to 6 thousand dollars per year. ”
    wow Margalit, how about because they spend more then that on claims?

  39. Barry, I don’t see why younger people joining Medicare should pay premiums based on the actuarial value calculated for a population older than 65.
    Personally, I think we should allow everybody that wants to, or needs to, to buy into Medicare, with no age limit. In this case there should be a different calculation for premiums. My guess would be about half the current Medicare expense.
    The number you have there for FEHPB is the best plan in the state of New York, I presume. There are basic, HDHP plans that run half as much, and that includes payor profit.
    I don’t see any reason why we can’t insure an average family for 5 to 6 thousand dollars per year. That is a lot of money as well, particularly considering that you also have to pay the first big chunk out of pocket.
    If you are employed and the employer pays most of the premium, that is fine, but if you have to pay it all yourself, as would be the case with the currently uninsured and underinsured, that is still a big problem for most people.
    Not that anybody will agree, but the only equitable solution is permanent, universal care funded by taxation, regardless of your employment, or health, situation. I don’t care if it’s a publicly administered plan, or privately administered multiple plans, as long as the basic (comprehensive) option is the same across the board and there is no “lower” versions allowed. Go ahead and compete on the perks.

  40. Jeff,
    Medicare is projected to spend approximately $500 billion this year to cover about 45 million elderly and disabled people. That works out to roughly $11,000 PER PERSON for one year of coverage. Since Medicare Part B requires a 20% co-pay for covered services with no out-of-pocket maximum, seniors who can afford to feel compelled to buy a Medigap policy that can easily cost another $2-$3K per year. The vast majority of uninsured 45-64 year old people would not be able to afford to buy into Medicare for a premium that reflects its full actuarial value. They probably would not be able to afford to buy into the FEHBP plan either at $13K for family coverage without massive subsidies. Moreover, if this age cohort were allowed to buy into either Medicare or the FEHBP on a guaranteed issue basis but without an effective mandate to purchase coverage, they will wait until they are sick and need expensive care to apply for coverage and pay for it with a combination of savings, subsidies and, perhaps, help from family members. That’s a recipe for adverse selection on steroids.
    My own employer allows its non-union pre-Medicare eligible retirees to buy into the company’s plan at the group rate which is currently about $1,250 per month for a couple in the NYC metropolitan area. That’s not exactly an affordable option for most people. The bottom line is that there is no easy, cheap or painless solution to the healthcare and health insurance conundrum. If there were, we would have implemented it a long time ago.

  41. “Annon if you can’t afford the $60 to go see the NP at Walgreens or CVS you obviously have other issues besides the quality of your insurance, I would guess personal responsibility.”
    This is a mystifying response. Why does lack of funds indicate lack of personal responsibility? There are lots of folks out there who work many more hours than 40 a week and can’t afford to pay for themselves to see a health practitioner of any kind because they’re using their income to pay for food, rent, and health care for the rest of their family members. It’s not responsibility that they lack, it’s access to affordable care. Nate, you seem to have confused the two.

  42. Nate, A significant part of my household budget is tied up in caring for a child with an expensive chronic condition, (who would have been dropped in a second if not for government mandated continuity coverage following my last employer based insurance coverage, but is not adequately covered still.) I’ve probably been spending too much on my child. I now understand that I must learn to be more responsible. The fact that my income has dropped and I’ve been under-employed for the last year and am struggling to provide for my family in other ways is probably all due to my lack of personal responsibility too. It’s good to know that experts like you have it all figured out.

  43. Couple corrections Jeff,
    “Employers could fund the premiums at Medicare’s cost for their 55-plus employees. “
    Employer plans already cover 55 year olds cheaper then Medicare, the only people they would want to push off are the extremely sick. Medicare is already 34 trillion in the red it can’t take on more charity cases. You might have noticed the federal government has spent the last 10 years pushing people off Medicare back onto employer plans, they are doing that because they are broke.
    “voluntary Medicare buy-in carries with it scorable out year Medicare savings.”
    This is incorrect, if you cure them younger they live longer, the longer they live the more they spend, your annual cost per member at that age might decrease but your total cost will skyrocket as you have people living 5-10 years longer then they otherwise would. I’m not saying that is bad but it won’t save money.
    “The inflow of additional Medicare lives would strengthen Medicare’s bargaining power with providers”
    There is no such thing as bargaining power when reimbursement is set by fiat
    “The “medical home” and disease management pilots proposed in health reform legislation would have a lot of new targets;”
    Medicare hasn’t hit the broad side of a barn with cost containment yet and you want to feed in more fodder. I could make a stronger argument that everyone with chronic conditions should be kicked out of Medicare and moved into private insurance where we do a considerably better job managing such cases.
    “It would also be cheaper than subsidizing private insurance for the same population,” How does a plan with 10% fraud and waste and no cost management save money? MA plans deliver Medicare benefits for 97-98% of the cost as Medicare does. Best case scenario your plans would only cost 2-3% more then private subsidies, most likely a minimum 10%.
    Kim’s plan is actually the best I have heard so far.
    Annon if you can’t afford the $60 to go see the NP at Walgreens or CVS you obviously have other issues besides the quality of your insurance, I would guess personal responsibility.

  44. “Or maybe I’ll have PA’s see the government class. There is a pay hit, but so what. ”
    Cool! You mean I could actually see a PA if I paid for Medicare? That’s sounds like an improvement over my current situation to me.
    At age 50, with really bad high deductible private insurance on the individual market, I can’t afford to see any health care professional at all on a routine basis.
    I’d love to be able to buy Medicare at cost and get occasional routine access to a PA or licensed nurse practitioner… they usually are a lot nicer than the docs anyway, particularly the kind that sign themselves “MD as HELL.”

  45. Adverse selection–the sick enrolling disproportionately in such a plan–would kill this quickly. Thus the idea is simple to the point of impracticality, as the options for addressing it are limited: Setting rates for enrollees <65 at high levels that few can afford, increasing tax revenues (politically implausible), or letting the Medicare system as a whole face bankruptcy quickly.

  46. We have to keep in mind that Medicare is almost always supplemented by medigap (or Medicaid, or Medicare advantage), as by itself Medicare is a very antiquated design. There is no current market for pre-65 medigap.
    Instead of Medicare, with its inherent coverage, provider payment and unfunded liability issues, why not let pre-65 people to enroll in FEHB, thus (a) assuring access, (b) not upsetting private sector fans, (c) directly impacting legislators (through higher premiums) if adverse selection does occur?

  47. I am ready to dump Medicare participation. Push me a little farther and I will be private pay only. Thre are a lot of docs who will still take it…more and more they cannot spell “Jones” or “Smith” or “Washington” or “Lincoln”. I don’t need to kill myself trying to keep up with the demand for time. I will simply make less. I will be taxed less.
    Or maybe I’ll have PA’s see the government class. There is a pay hit, but so what.
    Medicare is a political program, which is why costs are out of control. Doctors are not politicians and have no role in controlling utilization or choosing cheaper alternatives for a patient. The patient must do that. They (the patients) will not, until given a price point that directly affects them economically.
    And I will not incur unfunded liability for cheaper care choices.
    So, you can cover everyone, who will access fewer docs, who may see them eventually and give them cheap care. But it will not be me.