Wednesday, June 13, 2018

Medicare expansion: An elastic idea for Democrats

Politico's Jennifer Haberkorn reports that Democratic candidates are avoiding the term "single payer" when staking out their healthcare positions. That's not only because Republicans use the term as a bogey signaling socialized medicine and socialism generally (they did the same with the much more conservative ACA).  More substantively:
Early last year, the DCCC shared verbal guidance with candidates and political consultants about the liabilities of supporting single payer, including polls that showed support for the idea declined once voters heard that it would likely come with significant tax increases and the potential loss of private health coverage many Americans have today, according to sources who saw the guidance.
Instead, Democrats are being urged to embrace the term "Medicare for All" -- which, taken literally, is single payer. Some candidates speak more cautiously of "a path to Medicare for all," however -- a term that's justifiably ambiguous. Any path to universal coverage in the U.S. is likely to be long, and include several stages and potential branchings -- including toward a system in which a public program is available to all, but some choose other options. A number of Democratic bills and proposals reflect this reality. In recent years, many forms of Medicare expansion have been proposed. They include the following, ranked from the most limited to the most expansive.

1. Medicare option in ACA marketplace for people aged 55-64.* A Medicare buy-in for this age cohort was briefly added to the Senate bill that became the ACA in late 2009, before Senator Joe Lieberman killed it. Hillary Clinton proposed adding such a buy-in option in 2016, without (so far as I can tell) providing any detail.  Presumably, ACA premium tax credits could be used to help pay for the buy-in. Whether "Medicare" for this age group would be configured to conform to the ACA metal levels is unclear. Medicare coverage is roughly equivalent to ACA gold plans, though traditional Medicare lacks a cap on enrollees' yearly out-of-pocket costs, which is included in all ACA plans.

2. A strong public option, tied to Medicare, for everyone in ACA marketplace. The three major Democratic candidates for president in 2007-2008 all put forward healthcare reform plans that were structurally similar to the ACA, with one key difference: each envisioned private insurers competing with a "public option," or government-run health plan. Hillary Clinton's proposal promised, "In addition to the broad array of private options that Americans can choose from, they will be offered the choice of a public plan option similar to Medicare." Such a plan would presumably pay healthcare providers at Medicare rates -- a key difference  from commercial insurance, which generally pays providers considerably more. Some "strong" public option proposals included a requirement that providers that accept Medicare also accept the new public plan. A strong public option of this sort would transform the ACA marketplace, where narrow networks are the rule.

Last fall Michael Bennet (D-CO) and Tim Kaine (D-VA) introduced legislation featuring a program they called Medicare X,  a strong public option that would be phased in in stages: first offered only in regions with weak ACA marketplace competition; then, in 2023, in all ACA marketplace regions;  in 2024, in the small business marketplace. Kaine raised the possibility that the plan might eventually be offered to large employers as well. That last step -- the real Rubicon for shaking up the status quo -- is not in the bill. It is in more sweeping proposals described below, however.

3. A strong public option that any individual can buy into or that employers can opt into. Creating open competition between employer-sponsored insurance and public insurance may be the key that enables transition to single payer or affordable universal coverage. That's because the major barrier to really sweeping reform in the United States is employer-sponsored insurance, which covers about 150 million people.  This mammoth component of the U.S. economy has deeply invested stakeholders: employers, who regard good health insurance as a major means of attracting and retaining good employees; employees and their families, most of whom are satisfied with their coverage and loathe to lose it (though satisfaction has deteriorated somewhat as out-of-pocket costs have mounted; insurers, for whom employers represent a major revenue source (though they earn the majority of their revenue in Medicare and Medicaid); and, perhaps most deeply invested, healthcare providers, who are paid at much higher rates by private than by public insurers.

In February of this year, the Center for American progress released its Medicare Extra plan, offering a revamped Medicare to Americans of all ages, and after a few years automatically enrolling all newborns. Crucially, the plan would enable both employers and employees to opt into the revamped "Medicare," with individuals paying a percentage of income on a sliding scale for comprehensive coverage.  Employers would be free to maintain private coverage; if they do so, a provision limiting balance billing would draw their provider payment rates close to those of the public program.

These proposals hark back to early, pre-ACA versions of the public option  such as Helen
Halpin's CHOICE program (2003) and Jacob Hacker's Health Care for America plan (2007) both of which also allowed employers to buy in via a payroll tax (as did Rep. Pete Stark's Americare plan, introduced in 2006).  Halpin anticipated employer insurance withering on the vine; Hacker, in contrast, envisioned robust competition between employer-sponsored insurance and the public plan.

4. Medicare for All:  Bernie Sanders' Big Rock Candy Mountain.  Sanders' Medicare for All plan, a centerpiece of his 2016 presidential campaign and introduced as legislation last September,
stands apart, not only for enrolling all Americans in Medicare, but for transforming Medicare so that there are no out-of-pocket costs, with the minor late-added exception of up to $200 annually for certain drugs. It would provide the most generous coverage in the world, with vision, hearing, and dental included along with the ACA's essential health benefits. Employers would be barred from offering private coverage. This all-encompassing public program would doubtless require a massive payroll tax to finance -- though arguably that tax would cost most employers and employees less than what they currently pay for health insurance and healthcare.

The near-absence of out-of-pocket costs for individuals lends a Utopian hue to the Sanders plan. You don't have to be a "skin in the game" enthusiast to suspect that affordable out-of-pocket costs put some useful brake on unnecessary care. As for the political prospects, ending commercial (mainly employer-sponsored) insurance is the massive disruption that most U.S. elected officials are unwilling to undertake, in one fell swoop at least, as the stakeholders encompass roughly half the population as well as one sixth of the economy.
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While there may be a real divide between Democrats who spotlight "Medicare for all" as a goal and those who speak of a path that could lead there, an open-ended stance on this front can be intellectually honest, not merely an expedient hedge. As noted, the earliest proponents of a strong public option were of two minds as to whether employer insurance would phase out or compete more or less permanently.

When the public option is sufficiently empowered, that pushes private competitors toward paying providers rates comparable to those paid by the public plan -- and there are more concrete means of promoting rate convergence, such as requiring services provided out-of-network to private plan enrollees to bill no more than the public plan rates.  Many countries achieve universal coverage while filtering payment through private insurers, though in most such systems, the basic benefit package at least has to be offered on a nonprofit basis. In virtually every country that has achieved universal coverage, however, government exerts strong control, directly or indirectly, over rates paid to providers. The U.S. is unique in its every-payer-for-itself system -- and consequently in the prices paid for care.

Democrats can truthfully mean a lot of things when they talk about expanding Medicare. For example Tom Malinowski, winner of the Democratic primary in the race to represent New Jersey's 7th District in Congress, declares himself open to a plan like Medicare Extra, and essentially agnostic about longer term transition to single payer:
On healthcare, Malinowski said he “does not support Medicare for all, but the idea of a Medicare option for all is worth exploring.” He said he’s spoken to many people who appreciate having healthcare options and he “would not force anyone to give up private health insurance which many Americans are happy with,” though he added that expanding a Medicare option could eventually lead to a single-payer type of system if people chose it voluntarily.
In an enterprise as massive as transforming one sixth of the U.S. economy, this kind of willingness to learn from experience as we go forward bespeaks an appropriate humility.

* Back in 1998, President Bill Clinton proposed letting people aged 62-65 buy into Medicare, paying the full premium without subsidy. To highlight the need, Clinton pointed out that the individual insurance market "often denies coverage or charges excessive premiums to older, sicker Americans."  In 2008, the Congressional Budget Office estimated the buy-in cost, with Part D (drug coverage) included, at $633 per month in 2011; that would translate to a bit over $700 per month today. That's not cheap -- but it's cheaper than what's available in today's individual market to most sixty-somethings who earn too much to qualify for ACA subsidies.  CBO estimated that about 300,000 would take advantage of the buy-in -- about 1% of the country's uninsured.

Medicare for (almost) all, brought to earth
The public option is inside out

1 comment:

  1. Well done as always, but let me raise an additional point:

    The advocates of a public option have been almost entirely silent on hos premiums would be determined. (and I am going back to 2009)

    In a sense anyone can design an attractive health plan for the first year
    The hard choices begin in the second year, if claims exceed premiums.

    Will premiums be allowed to rise, in other words will premiums be determined actuarially?

    Or will premiums be held down to stay affordable, and government subsidies be allowed to pay off the losses? In other words will premiums be determined politically? (as happens with Mwdicare)

    The ACA is in trouble because private insurers have to react to losses.
    If the public option plans can ignore losses, they will take over the market. (and this is not a bad thing)

    But if public option plans have to recognize and adjust to underwriting losses, they will not be much better than what we have today.