As Paul Ryan revs up Republican engines for Medicare privatization, Nancy Pelosi vows to Greg Sargent that Democrats will fight it to the death:
At present, there's a pretty specific answer: for 95% of seniors, the federal government will pay about 85% of the premiums for insurance that covers a bit more than 80% of the average user's medical costs. That's what traditional Medicare does right now, via Parts A, B and D, for those whose incomes are below $85,000 for a single person or $170,000 for a couple.
Put another way, the federal government pays a bit more than two thirds of the average senior's total medical costs. Low income beneficiaries have all or part of their premiums and out-of-pocket costs paid by Medicaid, though a variety of programs. High income seniors pay higher shares of their premiums, with the percentage stepped up through several income brackets.
To unpack that calculation a bit, Medicare Part A, hospital coverage, has $0 premium for almost all beneficiaries, i.e., anyone who paid Medicare taxes while working, or has a spouse who did. For Part B, physician and outpatient coverage, beneficiaries under the $85/170k cutoff pay 25% of the premium. For Part D, prescription drug coverage, enrollee premiums are designed to cover 25.5% of costs. Medicare Parts A and B have an actuarial value (AV) of 84%*, according to one analysis -- meaning that Parts A and B combined cover 84% of the average user's hospital and physician costs.
Part D covers a lower percentage of prescription drug costs, starting with 75% of costs up to $3,700 after a $400 deductible in a standard plan (see the note at bottom for more details*). As drug costs represent about 17% of total costs for the average Medicare beneficiary, I'm assuming that Part D modestly reduces the overall AV of traditional Medicare, leaving it over 80%.
Private Medicare Advantage plans offer comparable value to traditional Medicare, with some tradeoffs -- for example, an MA enrollee might accept a limited provider network in exchange for annual caps on out-of-pocket spending, or vision, hearing and/or dental coverage. At present, 31% of Medicare enrollees are in MA plans, a share that has been rising steadily.
Keeping the Medicare guarantee sustainable requires keeping a lid on the rates that Medicare -- and Medicare Advantage -- pay to healthcare providers. At present, Medicare has the pricing power to do that. In a post I published yesterday on medicareresources.org, sister pub to healthinsurance.org, I argue that Ryan's "premium support" plan would have the government abdicate much of that power in favor of the magic of market competition. The shift from government rate-setting to market rate-setting requires a leap of faith -- a faith that today's Republican party possesses in ample supply.
Update, 12/1: The calculations above suggest that Medicare pays about 69% of the average enrollee's medical costs. In a subsequent post, I calculate that the subsidy for the average subsidized enrollee in the ACA private plan marketplace is about 59% -- on a steeply sliding scale. In Tom Price's ACA repeal/replace plan, the average subsidy would at most be about 35% -- a subsidy level he'd probably also ultimately aim for in Medicare.
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* Here is the Kaiser Family Foundation's summary of the standard Part D benefit:
Pelosi adamantly stated that Democrats would not give any ground on the core ideological dispute here, which is over whether to maintain a government coverage guarantee. “We are not going to a casino — this is a guarantee,” Pelosi said. “This is a value system for us, and we will fight for it. Is it a guarantee, or not?”This raises a question: what precisely is the Medicare guarantee?
At present, there's a pretty specific answer: for 95% of seniors, the federal government will pay about 85% of the premiums for insurance that covers a bit more than 80% of the average user's medical costs. That's what traditional Medicare does right now, via Parts A, B and D, for those whose incomes are below $85,000 for a single person or $170,000 for a couple.
Put another way, the federal government pays a bit more than two thirds of the average senior's total medical costs. Low income beneficiaries have all or part of their premiums and out-of-pocket costs paid by Medicaid, though a variety of programs. High income seniors pay higher shares of their premiums, with the percentage stepped up through several income brackets.
To unpack that calculation a bit, Medicare Part A, hospital coverage, has $0 premium for almost all beneficiaries, i.e., anyone who paid Medicare taxes while working, or has a spouse who did. For Part B, physician and outpatient coverage, beneficiaries under the $85/170k cutoff pay 25% of the premium. For Part D, prescription drug coverage, enrollee premiums are designed to cover 25.5% of costs. Medicare Parts A and B have an actuarial value (AV) of 84%*, according to one analysis -- meaning that Parts A and B combined cover 84% of the average user's hospital and physician costs.
Part D covers a lower percentage of prescription drug costs, starting with 75% of costs up to $3,700 after a $400 deductible in a standard plan (see the note at bottom for more details*). As drug costs represent about 17% of total costs for the average Medicare beneficiary, I'm assuming that Part D modestly reduces the overall AV of traditional Medicare, leaving it over 80%.
Private Medicare Advantage plans offer comparable value to traditional Medicare, with some tradeoffs -- for example, an MA enrollee might accept a limited provider network in exchange for annual caps on out-of-pocket spending, or vision, hearing and/or dental coverage. At present, 31% of Medicare enrollees are in MA plans, a share that has been rising steadily.
Keeping the Medicare guarantee sustainable requires keeping a lid on the rates that Medicare -- and Medicare Advantage -- pay to healthcare providers. At present, Medicare has the pricing power to do that. In a post I published yesterday on medicareresources.org, sister pub to healthinsurance.org, I argue that Ryan's "premium support" plan would have the government abdicate much of that power in favor of the magic of market competition. The shift from government rate-setting to market rate-setting requires a leap of faith -- a faith that today's Republican party possesses in ample supply.
Update, 12/1: The calculations above suggest that Medicare pays about 69% of the average enrollee's medical costs. In a subsequent post, I calculate that the subsidy for the average subsidized enrollee in the ACA private plan marketplace is about 59% -- on a steeply sliding scale. In Tom Price's ACA repeal/replace plan, the average subsidy would at most be about 35% -- a subsidy level he'd probably also ultimately aim for in Medicare.
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* Here is the Kaiser Family Foundation's summary of the standard Part D benefit:
In 2017, the Part D standard benefit has a $400 deductible and 25% coinsurance up to an initial coverage limit of $3,700 in total drug costs, followed by a coverage gap. During the gap, enrollees are responsible for a larger share of their total drug costs than in the initial coverage period, until their total out-of-pocket spending in 2017 reaches $4,950...After enrollees reach the catastrophic coverage threshold, Medicare pays for most (80%) of their drug costs, plans pay 15%, and enrollees pay either 5% of total drug costs or $3.30/$8.25 for each generic and brand-name drug, respectively. The standard benefit amounts are indexed to change annually by rate of Part D per capita spending growth, and, with the exception of 2014, have increased each year since 2006.
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