Last month, at the Health Access 2018 conference, Elizabeth Warren decried rising out-of-pocket costs required in employer-sponsored health plans and demanded that a new round of healthcare reform "require private insurers to be just as affordable as public insurers like Medicare and Medicaid.” (I discussed the speech at some length here.)
That formulation struck me as problematic in several ways: 1) Medicaid and Medicare offer very different levels of affordability (except where they're merged for dual eligibles); 2) employer-sponsored insurance, on average, is "just as affordable" as Medicare and in fact provides better protection against crushing out-of-pocket costs than traditional Medicare; and 3) Warren bashed insurers alone for price-gouging without mentioning provider payment rates, which would have to be squashed down if commercial insurance were subject to stricter affordability mandates.
Perhaps, though, Warren had some inkling of the Medicare-for-all-who-need-or-want-it plan that was brewing at the Center for American Progress, released yesterday.
The plan puts forward a revamped Medicare, dubbed Medicare Extra, which would ultimately serve everyone who does not get insurance through their employer. Enrollees would be covered by a comprehensive set of benefits, for which they would pay from 0% to 10% of income on a sliding scale. Actuarial value would range from 80% to 100%, also based on income, with only the affluent at the lower end of the AV scale. They in turn could purchase Medigap-like "complementary" coverage.
The private market would survive, but it would be revamped more or less as Warren proposed. Medicare Extra enrollees could opt for private plans structured similarly to the current Medicare Advantage -- except that payment to the plans would be capped at 95% of the premium for the revamped Medicare. That would be the individual market. More notably, employers that chose to continue offering private plans to their employees would be required to offer a level of coverage that's in line with current norms but is currently not universal: the minimum allowable actuarial value would be 80%.
That's not so surprising. As the Medicare Extra plan outline notes, large employers' health plans provide about 85% AV on average. To the extent that Warren's criticism and demands were coherent, she was aiming at the steady erosion of employer-sponsored plan benefits -- out-of-pocket costs that continue to rise because the cost of care continues to rise (15% of $5,000 is more than 15% of $4,000...). And averages cover a lot of variation: plans offered by small businesses and to low-wage workers in particular can be far less affordable than the average.
The provision in the Medicare Extra plan that is designed to stabilize employer-sponsored insurance and mandate decent coverage is one I flagged yesterday: the rule stipulating that in employer-sponsored insurance, "providers that are out of network would be prohibited from charging more than Medicare Extra rates." That, in concert with the payment scheme for private Medicare plans, would render payment rates close to uniform across the entire healthcare system.
Since employees would be free to ditch employer plans for Medicare Extra, the employer plans would have to be at least as good -- that is, offer AV above 80% for most enrollees. The out-of-network billing rule makes that feasible, and so preserves employer-sponsored insurance -- and a good share of the nearly $500 billion employers currently contribute to healthcare financing.
Medicare Extra is designed to preserve a private market in conditions under which it can provide a meaningful competitive check on the public program -- as Medicare Advantage arguably does at present with respect to Medicare -- instead of undermining it . That is, it's designed to cure an American disease and create an equilibrium described by a former Health Minister of Singapore, Khaw Boon in Affordable Excellence: The Singapore Health System (Brookings, 2013, free on Kindle, discussed here):
That formulation struck me as problematic in several ways: 1) Medicaid and Medicare offer very different levels of affordability (except where they're merged for dual eligibles); 2) employer-sponsored insurance, on average, is "just as affordable" as Medicare and in fact provides better protection against crushing out-of-pocket costs than traditional Medicare; and 3) Warren bashed insurers alone for price-gouging without mentioning provider payment rates, which would have to be squashed down if commercial insurance were subject to stricter affordability mandates.
Perhaps, though, Warren had some inkling of the Medicare-for-all-who-need-or-want-it plan that was brewing at the Center for American Progress, released yesterday.
The plan puts forward a revamped Medicare, dubbed Medicare Extra, which would ultimately serve everyone who does not get insurance through their employer. Enrollees would be covered by a comprehensive set of benefits, for which they would pay from 0% to 10% of income on a sliding scale. Actuarial value would range from 80% to 100%, also based on income, with only the affluent at the lower end of the AV scale. They in turn could purchase Medigap-like "complementary" coverage.
The private market would survive, but it would be revamped more or less as Warren proposed. Medicare Extra enrollees could opt for private plans structured similarly to the current Medicare Advantage -- except that payment to the plans would be capped at 95% of the premium for the revamped Medicare. That would be the individual market. More notably, employers that chose to continue offering private plans to their employees would be required to offer a level of coverage that's in line with current norms but is currently not universal: the minimum allowable actuarial value would be 80%.
That's not so surprising. As the Medicare Extra plan outline notes, large employers' health plans provide about 85% AV on average. To the extent that Warren's criticism and demands were coherent, she was aiming at the steady erosion of employer-sponsored plan benefits -- out-of-pocket costs that continue to rise because the cost of care continues to rise (15% of $5,000 is more than 15% of $4,000...). And averages cover a lot of variation: plans offered by small businesses and to low-wage workers in particular can be far less affordable than the average.
The provision in the Medicare Extra plan that is designed to stabilize employer-sponsored insurance and mandate decent coverage is one I flagged yesterday: the rule stipulating that in employer-sponsored insurance, "providers that are out of network would be prohibited from charging more than Medicare Extra rates." That, in concert with the payment scheme for private Medicare plans, would render payment rates close to uniform across the entire healthcare system.
Since employees would be free to ditch employer plans for Medicare Extra, the employer plans would have to be at least as good -- that is, offer AV above 80% for most enrollees. The out-of-network billing rule makes that feasible, and so preserves employer-sponsored insurance -- and a good share of the nearly $500 billion employers currently contribute to healthcare financing.
Medicare Extra is designed to preserve a private market in conditions under which it can provide a meaningful competitive check on the public program -- as Medicare Advantage arguably does at present with respect to Medicare -- instead of undermining it . That is, it's designed to cure an American disease and create an equilibrium described by a former Health Minister of Singapore, Khaw Boon in Affordable Excellence: The Singapore Health System (Brookings, 2013, free on Kindle, discussed here):
Wan has said that the public sector should always play the dominant role in providing care services, but there needs to be a private healthcare system to challenge it. In his view, the public sector is necessary to set the ethos for the entire system— which should not only be about maximization of profits, a primary focus of the private sector. It is the public side that tends to set boundaries and standards for ethics within the system.It's hard to imagine political action that would shrink the tail in American healthcare. But plausible treatment plans are emerging.
Khaw takes the view that where the private sector does dominate, it will inevitably influence the government and public policy to serve its own interests. If the public healthcare system is too small, it becomes the “tail that tries to wag the dog.” Once a private healthcare system becomes the dominant entrenched player, it is very difficult to unwind it— there are many vested interests and many pockets will be hurt. (Location 998--1007).
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