Thursday, May 23, 2019

"Medicare for all who want it" raises the kludge question

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Given the "triple veto" imposed on legislators by the U.S. Constitution, U.S. policy is doomed to kludge. Policy design that's logical and internally coherent often can't survive the legislative process.

On the healthcare front, it's been evident since the early aughts that the logical, feasible, appropriately incremental way to improve access and control costs without throwing multiple healthcare industries into chaos and swiftly transitioning 150 million people out of employer-sponsored insurance is to offer a public plan on affordable terms to both employers and employees -- leaving employer insurance to either compete effectively or die on the vine.

Early iterations of such a "public option" included Helen Halpin's CHOICE program (2003), Rep Peter Stark's Americare bill (2006),and Jacob Hacker's Health Care for America plan (2007). All of these enabled any individual to buy in on an income-adjusted basis regardless of whether her employer offered insurance, and gave employers the option of paying into the public plan (e.g., via a payroll tax) rather than offering their own plans.  Instead we got the ACA -- with subsidy eligibility limited to those without access to employer insurance deemed "affordable" (by dubious standards), inadequate subsidies, and dependence on the whims, pricing, negotiated provider payment rates and plan designs of private insurers.

Now we're back to the future with the Medicare for America Act, introduced in late 2018 by Reps Rosa DeLauro and Jan Schakowsky and reintroduced last month. Medicare for America offers a revamped "Medicare" on affordable terms to any citizen or legally present noncitizen who opts in.

The kludge question: Does offering a truly comprehensive and affordable plan on affordable terms to anyone who wants it necessarily entail ending our existing mammoth and Byzantine public health insurance programs, Medicaid and as-currently-structured Medicare? Medicare for America's creators answered "yes."

In the Medicare for America bill, provider payment rates are based on current Medicare, boosted modestly and adjusted.  Benefits are expanded and streamlined and include a full range of disability and home and community-based long-term care. Premiums and cost-sharing are both set at zero for everyone with income under 200% of the Federal Poverty Level -- about 30% of the population. Premiums top out at 8% of income for people over 600% FPL (about $72k for an individual), with a sliding scale at 200-600% FPL. Employers can opt in via an 8% payroll tax or continue to offer private insurance. Employees with access to employer-sponsored plans can instead opt into "Medicare" on an income-adjusted basis.

That employer/employee buy-in option is the pivot point, the key to system transformation -- especially since healthcare providers are required to accept the payment rates set for the public plan from private insurers as well. That creates a de facto "all-payer" rate controlled by the government, the sine qua non of effective cost control deployed by one means or another by every country that provides universal healthcare (with the recent exception of Holland, where several large insurers maintain an equilibrium). The public plan offers access to virtually all providers, provides truly comprehensive coverage, and caps out-of-pocket costs at low levels. Private plans (employer and Medicare Advantage) compete on terms in one sense favorable -- they can pay "Medicare" rates to providers, who have to accept those rates -- and in another sense challenging, in that the public plan price/benefit package is tough to beat.

Passing a strong public option like this would be a very heavy political lift, both because the cost would be substantial (though it might reduce total healthcare spending while shifting much of it to government) and because the threat to healthcare providers' incomes would be substantial, as the realm of commercial insurance would likely shrink. The various healthcare industries have already combined forces to fight any expansion of the footprint of government-run (and paid) insurance, including introduction of a public option in the ACA marketplace alone (open on a subsidized basis only to those who lack access to other insurance) -- a proposition far more limited than Medicare for America.

Yet Medicare for America aims to do far more than establish a strong public option available to those who also have access to employer-sponsored insurance. It would auto-enroll all newborns; absorb Medicaid, which is administered by the states; and end existing Medicare as we know it, streamlining and expanding coverage (most notably to encompass long-term care) but also substantially boosting premiums on more affluent seniors.

That's an enormous amount of change -- fundamentally changing coverage for 60 million people on Medicare and over 70 million on Medicaid. Full implementation would take eight years -- which would almost require Democratic control of presidency and at least one house of Congress for that period.

This is where structural coherence may collide with political reality. The bill's commitment to providing comprehensive, affordable coverage to all virtually compels absorbing Medicaid -- else you'd have narrow networks for the low income population, including the disabled, and virtually unlimited provider access for everyone else. Making coverage truly comprehensive at ages below 65 virtually compels doing the same for seniors, and so overhauling the jerry-built, 3-part, gap-ridden current Medicare structure. But offering the same streamlined benefit structure to all ages also entails offering the same subsidy structure -- or so at least it appeared to the bill's creators.

Offering a strong public option to all under age 65 who choose to opt in while preserving existing Medicare and Medicaid would bring us back to kludge. So would offering the new public option on a subsidized basis to those with access to employer insurance but not to those who are eligible for Medicaid. In fact, folding in Medicaid might be a necessary concession to providers, as the new program would pay higher rates than Medicaid, partly offsetting the shrinking of commercial insurance and reductions of commercial payment rates.

The logic of a really strong public option might demand streamlining and consolidating all public insurance. But the political reality might demand a kludge, and preservation of more of the status quo.

More on Medicare for America
Folding Medicaid into Medicare for America: Will states pay their share?
Seniors' costs under Medicare for America, cont.
If Medicare for America passes, some seniors will pay more
Would Medicare for America phase out employer-sponsored insurance?
A major fix in Medicare for America 2.0
Which healthcare reform bills offer the most affordable coverage to the most people?

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