Imagine a Medicare Advantage (MA) policy which increases the quality of health care for seniors, saves the government money, brings MA to the few remaining places that don’t have it, and puts checks in the hands of senior citizens. What you are about to read should do all that, in theory. However, I’m sure there are practical issues that I am overlooking, and I am hoping to attract comments noting those issues that, as Woody Allen once said, can take this from being a notion to an idea, and eventually a concept.
First, each county would have a “default” plan that would automatically enroll people on their 65th birthday, rather than have the traditional plan serve as the default option. (Those of us already in an HMO with a Medicare option can stay in it, seamlessly, rather than join the default plan.) Anyone could still opt out into the traditional plan or another MA plan, of course, at any time.
The default plan is chosen based partly on its Stars rating, but partly on a bid process, in which plans offer to pay the government for the right to be this default plan. The payment would be substantial for three reasons:
1. In some highly populous counties, MA is profitable enough to support fifteen or twenty plans, far more than would survive in a competitive market with market-based pricing. Much of this “excess profit” would be bid back to the government by the default plan, in exchange for access to many more enrollees;
2. Member acquisition costs for the default (“opt-out”) plan would be a small fraction of the $500- $1000 that a new member costs in today’s opt-in MA environment. Much of this savings would be included in the bid;
3. The bid would be calculated not based on just on one year’s profit, but rather on the expected lifetime value of a member, taking into account projected member retention and any scheduled or anticipated relative reductions in reimbursement.
The final part of the proposal is to ensure acceptability to seniors, via a rebate check. People who stay in any MA plan for one year get a check from the government, paid out of the bid proceeds. (Most people who stay in an MA plan for a year don’t later go back to fee-for-service, so a satisfactory first year should create a customer-for life.)
A brief review shows that perhaps we can have it all:
· Quality should increase because the Stars ratings –already a priority for many plans – would now have “teeth” beyond today’s small annual bonuses. It would be difficult to imagine low-rated plans routinely out-bidding higher rated plans. (If this happens, the bid formula should be changed to increase the importance of quality relative to the bid.)
· The Savings is obvious and immediate: the government receives checks capturing a chunk of the net present value of profits plus the savings in member acquisition costs. In addition, the government receives the biggest checks in the markets where the current pricing model generates the most profit. This phenomenon creates a “shadow price” that brings market forces to bear in areas where the federal pricing formulas are overly generous.
· Access is not a major issue any more, but counties in which no bids are made could be grouped together into one national contract, that would certainly reach the scale needed to attract bidders.
· And finally, satisfaction, already high in Medicare Advantage due to the better economics, would increase because of the rebate checks. The rebate checks should blunt or silence any objections by the AARP or any other organization purporting to represent seniors. Tough to argue against a policy in which participation is totally voluntary, quality increases, and checks are mailed out.
There are some logistical issues. One that comes to mind right away is that the default plan might have a higher premium than other plans in the market. People would be free to move to other plans. “Default” means just that — the choice still belongs to the member.
So where would the opposition come from? Well, we’ll see soon enough from the posted comments whose oxen are gored. Since excess profit is squeezed out of the private sector, some opposition will ironically come from health plans, especially those with low Stars ratings and high profitability – the ones who would be need to, and be likely to, submit the highest bids. More members joining a “default” plan will increase the plan’s contracting leverage, meaning that doctors and hospitals will make less money. The only beneficiaries of this idea are the seniors themselves and taxpayers, two constituencies not well-represented on THCB.
Al Lewis, called “the country’s leading outcomes measurement guru” in the 9th Annual Report on the Disease Management and Wellness Industries, is president of the Disease Management Purchasing Consortium, www.dismgmt.com. He was founder and first president of the Care Continuum Alliance. An excerpt from his forthcoming book Why Nobody Believes the Numbers: The Outcomes Measurement Guide for Grown-Ups may be downloaded here.