Cut Medicare, not Medicaid

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As soon as House Republicans’ budget resolution was published, it was clear that almost all of the $880 billion 10-year spending cut target for the Energy and Commerce Committee would have to come out of Medicaid, because Medicaid accounts for 93% of projected 10-year spending under E&C’s purview — excluding Medicare. And Medicare, unlike Medicaid, is a sacred cow.

That’s too bad, because while the cuts that Republican lawmakers are proposing to Medicaid funding will likely cause 10-20 million people to lose coverage, federal payments to private Medicare Advantage plans, which now enroll 54% of Medicare beneficiaries, can and should be cut by something in the neighborhood $880 billion over ten years — a reduction that would still leave the plans overpaid.

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Don’t ask me, ask MedPAC, the Medicare payment advisory commission that reports annually to Congress on Medicare spending. According to MedPAC’s March 2025 report, “In 2025, we estimate that Medicare will spend 20 percent more for MA enrollees than it would spend if those beneficiaries were enrolled in FFS Medicare, a difference that translates into a projected $84 billion.” Projecting that estimate forward, the Committee for a Responsible Federal Budget estimates that MA plans will be overpaid by $1.2 trillion from 2025-2034.

STAT exposes intense pressure for coding intensity at UnitedHealth

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Swell those Wellness Visit codes

It is beyond reasonable doubt that the federal government’s payments to Medicare Advantage plans are grossly inflated by the plans’ gaming of the program’s risk adjustment system, designed to deter plans from cherry-picking health enrollees. The risk adjustment program pays plans more for enrollees with higher “risk scores,” calculated on the basis of enrollees’ diagnosed medical conditions. Plans have various means of inflating enrollees’ risk scores — most notoriously, home risk assessments and chart reviews — a retroactive combing of the enrollee’s medical record to add new diagnoses.

The upcoding has been so egregious for so long that CMS’s is required by statute to cut the plans’ risk scores across the board by 5.9%. It’s not enough. In its March 2024 report to Congress, the Medicare Payment Advisory Commission (MedPAC) estimated that in 2022 MA risk scores were about 18% higher than scores for similar FFS beneficiaries due to higher “coding intensity” — the polite term for inflated risk scores. MedPAC forecast that in 2024, the coding intensity gap would increase to 20%. For the 2024 report, MedPAC adapted the methodology (see Ch. 13) of former CMS official Richard Kronick, who estimated in 2021 that risk adjustment overpayments would total $600 billion from 2023 to 2031 if not adjusted.

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For many years, MedPAC has recommended cutting MA plans’ risk adjustment payments by various means, the most straightforward being to increase the 5.9% across-the-board haircut to plans’ risk scores — a minimum imposed years ago by Congress. But cutting payments to Medicare Advantage plans, which now cover slightly more than half of Medicare enrollees, is politically difficult. This year, CMS cut back for the second year running on another source of overpayment — payment bonuses based on quality ratings, which had been boosted by a pandemic measure — resulting in some plans paring extra benefits and others discontinuing service in some regions. Republicans are certain to demagogue these reductions as Medicare Open Enrollment kicks off.

Compelling statistical evidence that coding intensity is steadily increasing MA overpayment has been manifest for years and hasn’t spurred much corrective action. A STAT* exposé this week of pressure exerted on physicians to increase diagnoses (“upcode”) by UnitedHealth Group, the largest MA insurer, could provide more impetus for change than a bevy of quality statistical studies, as it evidence of intentional, incentivized upcoding. As UnitedHealth also owns physician practices employing 10% of U.S. physicians, it’s in a particularly strong position to pressure doctors to upcode — a win-win for the company on both the provider and insurer side.

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STAT obtained emails from UnitedHealth executives to physicians in one UHC-owned practice exhorting them to diagnose chronic conditions:

the “#1 PRIORITY” became documenting older patients’ chronic illnesses to generate more revenue from the federal government, the emails show.

UnitedHealth shared with doctors in the practice a dashboard comparing the percentage of chronic diseases they found among their Medicare Advantage patients to other practices within the company. Those who completed the most appointments with older patients got a “SHOUT OUT!!” in the messages and were eligible for up to $10,000 in bonuses. “We can do this!!” another email said, encouraging doctors who were falling behind.

One focus of the documents obtained by STAT was the Medicare annual wellness visit, a free preventive service that, like home-based health risk assessments, can be used as an opportunity to pile on diagnoses:

One document ranked clinicians based on how many annual wellness visits they had completed with Medicare Advantage patients, and cheered those in the lead. “TOP 10 IN AWVs TOTAL!! SHOUT OUT!!,” the email blared, listing the doctors with the most visits. The message also listed bonuses for conducting more visits and explained the weekend clinics were a “win” for patients and providers because they helped increase coding of chronic conditions such as peripheral artery disease, or PAD, a narrowing of the arteries that bring blood to the arms and legs…

the documents show that UnitedHealth’s doctors diagnosed PAD in 47% of their Medicare Advantage patients — three to four times the estimated prevalence of the condition in older Americans. Each diagnosis generates about $3,000 a year in extra payments from Medicare [the STAT reporters have a prior article about UnitedHealth goosing PAD screening].

In 2023, CMS proposed and then passed in somewhat watered-down form adjustments to the risk adjustment program designed to curb “coding intensity” by removing some 75 diagnosis codes “where there is wid[e] variation in diagnosing and coding” — i.e., more opportunity for upcoding. Richard Kronick, perhaps the most trenchant critic of the MA risk adjustment program deemed the adjustments “baby steps,” though he told me, ““I am delighted that CMS has its nose in the tent.” My May 2023 conversation with Kronick delves into the history of MA risk adjustment, the effects, and various proposed solutions, including adjusting the annual haircut to reflect the full extent of coding intensity as calculated by his methodology, which MedPAC subsequently adopted, albeit with adjustments enabled by their unique access to “complete enrollment, demographic, and risk-score data (beneficiary-level risk-score data are available to the Commission but not generally available to researchers) for MA and FFS beneficiaries with both Part A and Part B.”**

- - -

* The story is by Stat News reporters Tara Bannow, Bob Herman, Casey Ross, and Lizzy Lawrence. Casey and Herman are recent Loeb Award winners (and Pulitzer finalists) for a prior exposé of UnitedHealth subsidiary NaviHealth’s use of algorithms to deny post-acute care to patients in MA plans. Increase diagnoses, reduce expensive treatments: that’s MA’s winning formula.

** Limiting the risk comparison on the FFS Medicare side to enrollees who are enrolled in Medicare Parts A and B (omitting those enrolled in only one of the two) is important and reduces the coding intensity estimate significantly, because enrollees in Part A alone in particular tend to be healthier than the vast majority who enroll in both parts (many Part A-only enrollees are still employed). See this post for a look at two views of the effects of excluding single-part Medicare enrollees from the risk calculation.

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Can the risk adjustment gravy train for Medicare Advantage be slowed or stopped? A conversation with Richard Kronick

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This past March, as in many Marches previous, MedPAC’s annual report to Congress found that a) the federal government is paying Medicare Advantage plans more than it would pay to cover the same enrollees in traditional, fee-for-service Medicare; b) that excess payment is widening (from 104% in 2022 to 106% this year); c) almost all the excess payment (almost 5 percentage points) stems from a risk adjustment system that enables MA plans inflating their enrollees’ risk scores, and d) the risk score gap between MA enrollees and FFS enrollees is also widening.

Sum it all up, and risk adjustment stands out as the engine by which MA is swallowing FFS Medicare. 2023 is the first year in which more Medicare enrollees are enrolled in MA than in FFS. MedPAC raises the possibility that in some counties at least FFS may no longer serve as a reliable benchmark for CMS’s capitated payment rates to MA plans. Those benchmarks - -which, according to MedPAC, also require adjustment — are the tether that hold MA provider payment rates close to those set by FFS Medicare. That tether is basically the only effective control on provider payment rates.

A modest proposal: Revenue-neutral risk adjustment in MA

MA insurers’ inflation of their enrollees’ risk scores is so obvious and pervasive that CMS is statutorily required to shave a minimum of 5.9% off of MA risk scores. It’s not enough. MedPAC estimates that in 2022 MA risk scores exceeded the scores that MA enrollees would be ascribed in FFS Medicare by 10.8%. In November 2021, Richard Kronick, a former CMS official and current professor at UCSD, and F. Michael Chua, also of UCSD, pegged the MA coding excess at 20% — almost double the MedPAC estimate — and estimated that the resulting overpayments would total $600 billion from 2023 to 2031 if not adjusted.

How deep is public support for a broad public option in health insurance?

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In polling about U.S. healthcare, the prospect of a “public option” for health insurance, open to all Americans regardless of whether they have access to employer-sponsored insurance, generally scores high. Here is the top-line response to a Kaiser Family Foundation tracking poll conducted in January 2020:

Looking beneath the hood of that apparent relative consensus, a research team led by Adrianna McIntyre of Harvard’s Chan School of Public Health conducted a poll in November/December 2020 that probed attitudes toward government that underlie responses to health reforms including a public option — specifically, a Medicare buy-in for people under age 65. The researchers published an analysis* in Milbank Quarterly this month. While top-line results were similar to KFF’s, the researchers note:

An overwhelming majority of Democrats (86%) report believing that it is the government’s responsibility to ensure universal health insurance coverage; only 11% of Republicans hold the same view. Most Democrats (71%) also report that they would prefer a health insurance system run mostly by the government, while a similar share of Republicans (78%) would prefer a system based mostly on private health insurance. Two-thirds of Democrats (67%) believe the federal government should be more involved in health care in the future, but over half of their Republican counterparts (56%) believe it should be less involved. Prior work has also found that while a large majority of Democrats (65%) believe the government would do a better job than private health insurance plans at reducing the nation’s health care costs, significantly fewer Republicans (25%) hold that view.

Healthcare access in the U.S.: 2022 in review

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It's been a year of crosscurrents in the healthcare industry -- and of reporters exposing those crosscurrents, often with a ten- or twenty-year look-back. We have seen fantastic investigative reporting on hospitals unleashing hellhounds on indebted patients; hospital systems disinvesting in low income neighborhoods and shifting resources to wealthy ones; private equity degrading and pillaging selected healthcare industry segments (1, 2); hospitals prioritizing VIPs in the emergency room; and insurers finding synergies in what used to be conflicts. Provider consolidation continues apace; Medicare Advantage threatens to swallow fee-for-service Medicare, while its profit-maximizing methods are introduced into fee-for-service Medicare; and MA gaming of risk adjustment goes as yet unchecked, or rather inadequately checked. As for our response to Covid (oy), it’s not really my bailiwick, but see the note at bottom.

On the upside, the federal government got its first toehold in negotiating prescription drug prices; a national prohibition on most medical balance-billing went into effect; the FTC under Lina Khan challenged four hospital mergers; with federal prompting, the number of states providing or soon to provide a year of post-partum Medicaid enrollment rose to 34; CMS proposed a rule designed to smooth Medicaid enrollment on multiple fronts, including limiting renewals (and so, disenrollments) to once every twelve months; the ARPA boosts to ACA premium subsidies were extended through 2025, and marketplace enrollment is on track for a second consecutive year of double-digit growth; and the uninsured rate is at an all-time low (though threatened by the pending end of the moratorium on Medicaid disenrollments).

As in past years, xpostfactoid (and my writings elsewhere) focused mainly on the ACA marketplace, with some forays into Medicaid and Medicare, particularly on the causes and impact of Medicare Advantage’s accelerating gains in market share. As always, I closely examined ACA enrollment patterns, with special attention to the complexities that lead enrollees to suboptimal outcomes.

Below, a few posts from 2022 that went over biggest with…me. I’ve limited selections to the period before I ported xpostfactoid to Substack in late September, as the posts on that site are readily skimmed.

At The American Prospect
How the Texas Legislature Learned to Stop Worrying and Love the ACA Marketplace - 4/21/22
Ground zero for rooted reflexive hostility to the Affordable Care Act is Texas. Or was. While the state still wriggles, writhes and resists expanding Medicaid — which would cut its uninsured rate in half — this year the state legislature unanimously passed legislation that massively boosts subsidies in the ACA marketplace — with the cost borne entirely by the federal government. An amazing tale of bipartisan comity in…Texas.

At healthinsurance.org
Silver, Bronze, or Gold? Choosing a Metal Level in the ACA Marketplace - 4/25/22
The ACA marketplace purports to associate metal level with value. But Cost Sharing Reduction subsidies, which attach only to silver plans, make a hash of purported metal value. So, a guide to marketplace shopping in different income brackets. Relatedly…
Applying for ACA coverage? Know the ropes (between income levels) - 11/28/22
Understanding how small differences in projected income can have a large impact on your health plan costs can be key to obtaining affordable coverage.

At xpostfactoid 

In New Mexico, a Midas Touch has a double edge - 2/9/22
A look at the downside as well as the much bigger upside of a market in which gold plans are cheaper than silver.

In ACA marketplace in 2022, too much underinsurance (bronze plan selection) at low incomes - 3/23/22
In March 2022, the American Rescue Plan made silver plans with strong CSR free-to-low-cost at incomes up to 200% of the Federal Poverty Level. In 2022, too many low income enrollees bought bronze plans.

11 states where high-income marketplace enrollees went for cheap gold plans - 3/28/22
A look at markets where gold plans cost less than benchmark silver

The high-income surge in ACA marketplace enrollment - 4/7/22
ARPA’s removal of the income cap on ACA premium subsidies had its effect.

Is avoiding overpayment of Medicare Advantage plans beyond U.S. government capacity? - 6/3/22
A dive mainly into MedPAC complaints and proposals. See also “To whose advantage is Medicare Advantage? Parts 1 and 2 (here on Substack).

Average weighted actuarial value in the ACA marketplace - 7/20/22
It’s considerably lower than the average in employer-sponsored insurance, and down somewhat from 2016, thanks mainly to silver loading.

U.S. uninsured rate hits an all-time low - 8/3/22
I’d been expecting such a finding for about a year.

Democrats have twelve years of healthcare accomplishment to run on - 8/31/22
They do, really.
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* Note: On the pandemic front, I am no expert, but I credit those who accuse the U.S. of having failed miserably to institute policies and messaging that would reduce Covid infections and fatalities, make resumption of normal activities safer, protect workers, and ease the stress on healthcare systems. Accordingly the U.S. has the highest Covid deaths per 100,000 ratio among peer nations. I lament failures to mandate paid sick leave and workplace safety measures; facilitate, incentivize, and in some cases mandate vaccine boosters; make rapid tests and N-95 masks widely available and free or close to free; institute widespread indoor air quality control; mandate indoor masking when cases spike; provide effective, unified, up-to-date public health messaging; and facilitate equitable global vaccine distribution. Above all, to my mind, the failure to appropriate fresh funds to fight Covid and prepare for future pandemics is unfathomable. You can blame Republicans for blocking requested funding, but neither Democrats in Congress nor the Biden administration fought hard enough to overcome resistance when they might.

On the plus side, legislation providing economic relief led to a near-miraculous economic recovery from the pandemic’s initial shock and prevented a surge in the uninsured rate. And the swift development of effective vaccines was miraculous. 

On adding an out-of-pocket cost cap to traditional Medicare

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Medicare's annual Open Enrollment Period is in progress, and enrollment in Medicare Advantage (MA) is poised to exceed enrollment in traditional, fee-for-service (FFS) Medicare for the first time in 2023. Stat's Bob Herman spotlights advocates' case for erasing MA's most consequential competitive advantage by adding an annual out-of-pocket cost cap (OOP cap) to traditional, fee-for-service Medicare:

At least 1 in 5 people* who choose Medicare Advantage — the alternative to traditional Medicare that is operated by health insurance companies — say they choose it because of the out-of-pocket limits that insurers offer, according to a new survey from the Commonwealth Fund.

According to a Kaiser Family Foundation estimate, as of 2018, about one in six FFS Medicare enrollees (counting only those enrolled in both Part A and Part B**) lacked an OOP cap and were thus exposed to potentially catastrophic out-of-pocket costs. That comes to about 5 million enrollees in 2022. The other 25 million FFS enrollees in Parts A  and B have access to OOP caps -- usually quite low --  via either Medigap, an employer-sponsored supplemental plan, or dual eligibility in Medicare and Medicaid.

In a study commissioned by America's Health Insurance Plans (AHIP), Wakely actuaries calculated that adding a $6,700 OOP cap to FFS Medicare Parts A and B would increase per-person spending by 3.5%. Wakely cast that estimate as conservative, as it does not include an estimate of "induced demand"-- i.e., enrollees using more care because it's more affordable. A June 2022 Urban Institute analysis bears that out. Urban estimated the cost of a $7,550 cap -- the highest currently allowable by MA plans for in-network care -- at $25 billion per year, a 5% increase. But that cap is inclusive of Part D, which according to Urban's estimate accounts for about 18% of cost increases. A $7,550 cap for Parts A and B alone would presumably increase FFS costs by about 4%. Urban estimates that induced demand triggered by a $7,550 cap will increase total spending by all payers by $8 billion, or 1.6% (perhaps 1.3% with Part D omitted).  That added cost (not accounted for by Wakely) does seem to bring the Urban and Wakely estimates more or less in line. 

AHIP's hooray for Medicare Advantage: Apples-to-candied-apples, and an open question

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Bob Herman of Stat casts a cold eye on a new claim from AHIP that Medicare Advantage provides superior value to the federal government:

America’s Health Insurance Plans, the industry’s primary lobbying group, funded a new report that was conducted by actuaries at Wakely Consulting Group. AHIP claims the report proves Medicare Advantage...is “saving Americans billions of dollars every year.” The actuaries, however, never use that language in the report.

STAT spoke with several independent Medicare policy experts, all of whom said AHIP’s report was incomplete at best and refuted by other studies that analyzed the same data. 

AHIP's press release asserts that "in 2019, rather than being 2% more expensive than original Medicare, on an apples-to-apples basis, average MA spending was actually about 7% lower than original Medicare."

That conclusion is based on two claims grounded in the Wakely analysis: 

To Whose advantage is Medicare Advantage? Part 2

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"They have to authorize this"

To whose advantage is Medicare Advantage? Part 1 of this inquiry overviewed the tradeoffs for enrollees and the primary payer -- the federal government. In this post, we'll hear from professionals who deal with MA enrollees and plans.

First, a recap of the issues overviewed in Part 1, based mainly on analysis from MedPAC, the Kaiser Family Foundation, and comments on MA recently solicited by CMS.

To whose advantage is Medicare Advantage? Part 1

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Note: Enrollment in Medicare Advantage plans is poised to surpass enrollment in traditional, fee-for-service (FFS) Medicare in 2023. MA's rapid growth raises major questions about the shape of Medicare coverage going forward. This is the first of two posts examining the pros and cons of Medicare Advantage. This post outlines the major issues as framed by MedPAC and select researchers, along with the basic economic tradeoffs for enrollees. Part 2 will report the experience of a hospitalist, brokers, and various stakeholders who responded to a CMS request for feedback about the MA program.

There is a slipknot quality to attempts to compare the value and utility of traditional, fee-for-service (FFS) Medicare and Medicare Advantage.

Medicare Advantage plans generally place bids to CMS far below CMS benchmarks, which are based on an adjusted estimate of what it costs to provide FFS Medicare to enrollees in the plan's geographic area. On average, according to the 2022 MedPAC report, MA plans spend 15% less to provide Part A and B benefits than FFS Medicare would spend.  But CMS pays Medicare Advantage plans an average of 104% of what it would pay for FFS Medicare coverage for the same enrollees. But MA plans use the excess payment to provide an estimated $2,000 per member in surplus benefits or out-of-pocket cost relief. But, according to MedPAC, the value of MA-furnished extra services as actually used by enrollees is elusive, because of inadequate reporting requirements, and the quality ratings that increase payments to MA plans do a poor job measuring quality.

With regard to outcomes, MA plans employ treatment protocols that do minimize some so-called low-value care and, in some cases at least, boost usage of preventive care that, according to some studies, can reduce cardiac events, foot amputations for diabetics, ER trips, hospital admittances, and other conditions and services. But there is also good evidence that MA plans inhibit or impede access to needed or high-value care, introduce expensive and sometimes dangerous bureaucratic hurdles to obtaining needed care, and drive enrollees with intense medical needs back to FFS. 

Most notoriously, by multiple accounts, MA plans often impede, block, limit options and reduce the duration of post-acute care. Comments about MA that CMS recently solicited from stakeholders detail these complaints (from physician and hospital associations, practitioners, acute care personnel, patients, brokers and others) again and again and again. A major strain in these complaints is from state employees forced into MA plans by retirement benefit packages.

This month, the Kaiser Family Foundation published a report, based on a literature review of 62 studies published since 2016, comparing "Beneficiary Experience, Affordability, Utilization, and Quality in Medicare Advantage and Traditional Medicare." The authors' conclusions are...inconclusive:

Is avoiding overpayment of Medicare Advantage plans beyond U.S. government capacity?

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In the telling of MedPAC (the Medicare Payment Advisory Commission, a Congressional agency), the premise governing the government's creation and support of Medicare Advantage, and predecessor private Medicare programs, has always functioned as a kind of slipknot.

The premise is that by managing care efficiently, private insurers will serve Medicare enrollees more cheaply than does FFS Medicare while improving (or at least not worsening) outcomes -- and also pass a good portion of the savings to enrollees in the form of reduced out-of-pocket costs and additional services.

MA plans do serve enrollees more cheaply, in the sense that they pay out less to providers per enrollee. They also pass about $2,000 in annual savings to members in the form of reduced out-of-pocket costs and added coverage, such as (variously limited) dental, hearing and vision care.

What they don't do -- ever -- is save the government (i.e., taxpayers) money, at least not in an absolute sense. By MedPAC's estimate, covering enrollees through MA currently costs about 104% of the cost of covering the same enrollees through traditional fee-for-service (FFS) Medicare.  

Will Medicare Advantage swallow fee-for-service Medicare?

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Medicare Advantage, the private-plan alternative to traditional fee-for-service (FFS) Medicare, is threatening to swallow the program. MA enrollment has been growing by leaps and bounds and is projected to surpass 50% of total Medicare enrollment by next year.

That raises the danger, as J. Michael McWilliams points out in Health Affairs, that traditional fee-for-service (FFS) Medicare will lose its capacity to serve as a reliable benchmark for MA pricing.  At present, the federal government pays MA plans a per-enrollee fee that's based, with regional variations and a complex array of adjustments, on the per-enrollee cost of FFS Medicare.  Thanks to that tether, MA plans pay providers roughly what FFS Medicare pays them. And FFS Medicare pays rates set by the federal Center for Medicare and Medicaid Services, albeit with arguably too much influence from powerful physician groups* that help set Part B (physician) rates.

How will Medicare enhancement change the current public-private Medicare ecosystem?

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Democrats' aspirations to add dental, hearing and vision benefits to Medicare raises questions about the interactions between tradition, fee-for service (FFS) Medicare, Medicare Advantage (MA), and Medigap. These center on MA's growing market share, its funding mechanism, the gaps in FFS Medicare coverage that MA plans partially fill, and the value of Medigap for those who can afford it (or whose employers fund it).

Below, a brief outline (distilled mainly from KFF briefs) of how the three programs (FFS, MA and Medigap) interact/compete at present, followed by questions about how pending legislation may alter the ecosystem.

Will 60-64 year-olds have a choice between Medicare and Obamacare? What will that look like?

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I turned 62 recently. Yesterday, for the first time, I took seriously the possibility that my wife and I might be enrolled in Medicare before we turn 65.

According to the Wall Street Journal's Stephanie Amour and Kristina Peterson, the Democrats' next healthcare initiative, envisioned for spring 2022, is likely to contain

measures to reduce drug prices and expand health coverage, lawmakers said. Proposals to expand Medicare eligibility from age 65 to 60 and to enable the federal government to negotiate drug prices in the health program for seniors—both of which President Biden supported on the campaign trail—are also likely to be included.

I can think of a lot of reasons these measures -- paired so that the prescription drug savings will finance the expanded eligibility -- may not happen.  But the odds that they will be enacted are not negligible. Democrats' success holding together to pass the $1.9 trillion Covid relief package have made a lot of bold initiatives seem possible.

If Democrats do manage to drop the Medicare eligibility age, they are also likely to make permanent the major increases to premium subsidies in the ACA marketplace enacted through 2022 in the Covid relief bill, the American Rescue Plan Act. And the two initiatives could overlap -- or clash -- to some degree.

The possibility of passing all of the above raises questions: will Medicare be offered to 60-65 year-olds on the same terms as Medicare for people over age 65?  Will enrollment delayed past age 60 be penalized on the same terms as enrollment delayed past age 65 at present? If enrollment at 60-65 is optional, will those who lack access to employer-sponsored insurance also be eligible for subsidized ACA marketplace coverage? -- will they have a choice between the two programs?

If Medicare is indeed subsidized as heavily at ages 60-64 as at age 65 and over, and if enrollment is optional, and if the ARPA subsidy schedule for the ACA marketplace (or something close to it) becomes permanent, some 60-65 year-olds will have a tough choice to make between Medicare and marketplace coverage. 

Broadly speaking, those with incomes up to 200% of the Federal Poverty Level (FPL) will likely find lower costs in the marketplace -- if they're not dually eligible for Medicare and Medicaid. Those with incomes over 400% FPL will likely favor Medicare.  In between is a gray area, with tradeoffs that are charted and discussed below.

Privatizing Medicare: Paul Ryan's soul goes marching on

ICYM the prior post on Trump's executive order aiming to advance the privatization of Medicare on multiple fronts, I've had the chance to refine it twice, on BlueWaveNJ and at medicareresources.org (hence the blogging drought here).

The short version (from the medicareresources.org post):

Issued on October 3, Trump’s order instructs the Secretary of Health and Human Services (HHS) to take steps aiming to

• “Voucherize” Medicare in the manner proposed by Paul Ryan – that is, let private Medicare Advantage plans set prices for traditional Medicare, rather than vice versa as at present.

• Create a private insurance market outside of Medicare for wealthy seniors that would likely lure doctors away from participation in Medicare.

• Subject Medicare enrollees to the joys of “balance billing” – getting billed by providers for amount in excess of their normal share of the Medicare bill.

Trump's bid to destroy Medicare

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It's clear that Trump is working to destroy U.S. democracy -- selling U.S. aid and favors to countries in exchange for pursuing trumped-up charges against his political opponents.

Now he's following up via executive order with a bid to destroy Medicare.

In the runaway train that is U.S. healthcare costs, Medicare (and Medicaid) is the only substantial brake, in that the government sets prices paid to providers, albeit with outsized provider input. Medicare hospital rates are about half* those paid on average by commercial insurers. Rates paid to physicians average about 78% of commercial rates -- and in high-demand specialties and regions with few providers, commercial insurers often pay four, five and six times Medicare rates.

In countries that successfully offer universal coverage, the government either serves as the sole payer, sets rates for all payers, or oversees all-payer negotiations. The U.S. alone leaves commercial insurers to be divided and conquered by payers. That's the main reason U.S. healthcare costs average about double the OECD average.

In an executive order that begins with a deranged preamble slandering Medicare for All proposals, Trump orders the Department of Health and Human Services to prepare the ground for ending Medicare rate-setting:

Should the U.S. ditch private insurance?

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Elizabeth Warren has gotten tight with Ady Barkan, a brave ALS patient and advocate for Medicare for All. In the July 30 debate, she told his tale:

The guy who has ALS, this isn’t this is somebody who has health insurance and dying. Every month he has about $9,000 in medical bills that his insurance company won’t cover. His wife Rachel is on the phone for hours and hours and hours begging the insurance company please cover what the doctors say he needs.

Barkan, in his turn, tweeted during the next night's debate: 

Every candidate on stage who doesn’t want to get rid of private insurance should have to explain what a company like Aetna adds to our health care system. How do they make patients’ lives better? #DemDebate

— Ady Barkan🔥🌹 (@AdyBarkan) August 1, 2019

Fair enough. Whether to preserve private insurance, and how to reform it if so, are the questions that divide Democratic candidates' approaches to healthcare reform, at least theoretically (what each of them would truly aim to accomplish via legislation introduced in 2021, and how they would balance their healthcare goals with other priorities, are questions they should be asked). 

In any case, let's look at the rap sheet against insurance companies -- and set it against their claims to add value to our healthcare system.

The raps

• Divided and conquered: All but uniquely among wealthy countries, the U.S. leaves private insurers to each separately negotiate payment rates with healthcare providers. The fragmented payer universe gives providers outsized bargaining leverage, particularly in areas with dominant hospital systems or provider shortages.  Accordingly, commercial insurers pay hospitals about 189% of Medicare rates, according to a Congressional Budget Office estimate, and 241% Medicare according to a more recent RAND study. Commercial rates for doctors are about 128% Medicare, according to MEDPAC. 

Seniors' costs under Medicare for America, continued

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In my last post I noted that while the revamped and expanded Medicare available to all under the Medicare for America Act of 2019 would serve most Americans very well, some people who turn 65 after full enactment would pay more in premium than they would today for traditional Medicare Parts B and D, or comparably priced Medicare Advantage.

They would get far more for the money -- most notably, long-term care insurance, dental, visual and hearing coverage, and 100% coverage for a host of vital services like chronic disease management, addiction and mental health treatment, and care for the medically frail. Still, higher premiums for seniors with incomes above about $50,000 for an individual or $80,000 for a couple is a political problem that needs to be thought out.  Here, I have a bit more data to sketch in.

If Medicare for America passes, some seniors would pay more (and get more) than at present

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Medicare for America,  the bill that would allow anyone at any age to buy into a revamped Medicare at an income-adjusted price (e.g., $0 for the bottom 30% of the income distribution), would be a clear benefit to anyone under 65. Even for those who continue to get insured through their employers, it would offer the true freedom from job-lock that the ACA promised and largely failed to deliver.

Most seniors who turn 65 after the new program would come into full effect (2023 were it to pass this year) would be gainers too (those enrolled in current Medicare before the new program launches would have the option of continuing to pay their then-current premiums). A fair number of new enrollees, however, would pay far more in premium than they would for existing fee-for-service Medicare or a Medicare Advantage plan. They would get more for their money. But the expectation that when you turn 65 you can get reliable insurance for under $200 per month is pretty hard-wired into Americans, I suspect. Violating that expectation for a substantial subset of the 3-4 million people who age into Medicare in year one (and every year following) is a political problem to be reckoned with.

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.

Would a public option mean fewer claims denials?

Here I'm going to pose a question for which I don't yet have good answers.

One strong appeal of the public option in various Medicare expansion bills -- e.g.,  Medicare X, Choose Medicare, Medicare at 50, Medicare for America -- is access to an all-but-unlimited provider network (effectively eliminating balance billing as well as limited choice of provider). My question To what extent does a national public option also promise to strongly reduce the agony inflicted on patients by coverage denials? And secondarily, to what extent would minimizing denials weaken legitimate cost control?

Pieces of the puzzle are provided by studies of denial rates in various markets and public programs. These studies are based on partial or not-so-partial data sets and may be measuring different things. One question that's often unclear to me when reading them is how many or what kinds of denials directly affect patients, and which are eaten by providers or represent (or trigger) a de facto negotiation between provider and payer. Not to mention how many are justified...

With that caveat, a few data points: