Friday, March 22, 2019

Medicare for America might let private insurance thrive

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The Medicare for America Act, soon to be updated and reintroduced by Reps Rosa DeLauro and Jean Schakowsky, is a true "Medicare for anyone" bill. Any employer can buy in* by paying 8% of payroll, and any individual can opt in and pay between $0 and 9.69% of income (on a siding scale) for a plan to be accepted by all providers who accept current Medicare -- i.e. virtually all providers.

While the bill allows employers to keep providing insurance and preserves Medicare Advantage in the individual market, some people appear to read the bill as a phase-out of private insurance.   Kirsten Gillibrand, for example, in a town hall earlier this week, touted a Medicare buy-in for anyone at "4-5% of income" and suggested, "Those insurers -- I don't think they're going to compete...over a couple of years, you're going to transition into single payer."

That would not likely be the case if Medicare for America were to become law, at least not in its current iteration. While low income workers would probably mostly end up in the public program, the bill creates conditions under which employers might still find a competitive advantage in offering top-drawer coverage to higher-paid workers. It also creates conditions under which Medicare Advantage and Medigap policies might compete.

The bill offers free public insurance to everyone with an income up to 200% of the Federal Poverty Level (FPL), and a sliding scale of premium subsidies and out-of-pocket cost reduction, both as yet unspecified, for those with incomes in the 200-600% FPL range. Premiums are capped at 9.69% of income for anyone, including those with incomes over 600% FPL. Out-of-pocket costs (OOP) are capped at $3,500 per individual/$5,000 per family, though that cap apparently does not apply at incomes over 600% FPL. The public plan pays 80% of the enrollee's billed costs, and 100% for chronic disease management and generic drugs, up to the OOP cap, if there is one. DeLauro has tweeted that in the updated version, there will be no deductibles -- and in fact, that tweet indicates that the top-line OOP caps apply over 600% FPL as well in the updated version.

The public plan would pay providers 110% of current Medicare rates, with an additional 20% step-up for primary care providers and a boost for hospitals in underserved areas, at HHS's discretion.  Here's the provision that might well preclude a phase-out of private insurance:
As a condition of participation in the program, participating providers shall accept Medicare for America rates paid by employer-sponsored insurance plans and Medicare Advantage plans. (Section 2206(b)(3)(C), p. 32)
While the revamped Medicare in this bill provides generous coverage, a significant fraction of employer plans currently offer still more generous coverage -- particularly at incomes over 600% FPL.  The bill rather pointedly does not stipulate actuarial values: 80% reimbursement with the low OOP caps (and 100% coverage for chronic disease management and generic drugs)  translates to AV higher than 80%, I assume. But top-drawer employer coverage can be over 90% AV. And the option to pay public insurance rates makes it feasible -- indeed, much cheaper than at present -- to continue offering really comprehensive coverage, with all-but-unlimited choice of providers. In fact, the option to pay (new) Medicare rates also provides an opening to pay somewhat more in exchange for preferred coverage. At present, some 97% of physicians accept Medicare; a preferred employer or possibly even Medicare Advantage market could shrink that number somewhat.

On the other end of the spectrum, as people with incomes up to 200% FPL pay $0 for public coverage and $0 for OOP expenses in Medicare for America, employers probably couldn't lure them into ESI if they tried. That's probably true some way up the spectrum toward 600% FPL too. Since employers pay nothing for employees who opt into the public plan if they offer affordable coverage (minimum AV 80%, minimum employer contribution 70%), some will have an incentive to offer the minimum and pay for as few employees as possible. There's a rather vague provision prohibiting employers from steering employees to the public plan, but in many cases, salary levels will do the job for them.

Postscript: Medicare Advantage will lose its chief current "advantage" -- the lack of an OOP cap in fee-for-service Medicare. Also, the bill bans prior authorization and step therapy. 80% of MA plans use prior authorization to control costs.

* Small employers can buy in as of 2022 (in the 2018 iteration), and large employers as of 2026.

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