I just wanted to be sure to highlight some very useful pieces on this from the last few days, all relating to numerous posts I’ve done of this debate.
First, Henry Aaron has a very thorough amplification of this point I dinged the WaPo on the other day: the notion that changes to health care policy proposed by Rom/Ry will have no impact on those 55 and up (like me!).
Aaron’s first point is that once they move to their voucher plan, adverse selection has the potential to whack anyone in staying in Medicare:
The premium for those who stay in traditional Medicare under the Ryan plan would be calculated as under current law, but the average cost of serving those who remain in traditional Medicare would go up as private insurance companies market selectively to those with relatively low anticipated costs. The average cost of those who remain in traditional Medicare would therefore increase. As a result of this gap, the financing for traditional Medicare would become progressively less adequate, throwing into doubt the very survival of the program.
Second, the loss of current and future benefits to 55+’ers in the ACA (which Rom/Ry would repeal):
- Health reform closes in the infamous “donut hole” in Medicare drug coverage—the gap of thousands of dollars of drug costs that the original drug benefit left open. If health reform is repealed, that benefit vanishes.
- Gone also would be health reform’s coverage of cost sharing for prevention services.
- Gone would be the subsidies that will eventually cover 75 percent of the cost of generic drugs.
- Gone would be Medicaid benefits for millions of older Americans, working and retired, who would be newly covered by Medicaid expansions under the Affordable Care Act.
- Until enactment of the Affordable Care Act, a 60-year-old who did not work for an employer that offered group health coverage had to pay high or unaffordable premiums for individual coverage or go uninsured. If health reform is repealed, they will return to that intolerable predicament.
- The savings that are to be achieved under health reform would vanish. As a result, the Hospital Insurance Trust Fund would be exhausted in 2016 rather than in 2024, as projected under current law.
Aaron, a sage and long-time participant in health care policy scrums, concludes that older Americans “have a whole kennel full of dogs in this fight.”
Another veteran health policy wonk is David Cutler, a guy I’ve referenced in recent posts where I claimed his findings were being misused to argue that Medicare’s experience with Medicare Advantage programs show that private competition will save money, just like the voucher advocates say it will.
His new piece is called “Hey Republicans! Stop Misusing My Medicare Study!”
The central question Cutler et al were asking in their study was not does competition save money in health coverage—an important and tricky question. It was whether premium support as proposed by Rep Ryan would increase out-of-pocket costs for coverage by seniors.
Yes, according to their findings:
We found that 24 million seniors, or about two-thirds of the people presently enrolled in the traditional Medicare program, would have to pay more—specifically, an average of $64 per month or $768 per year. Some seniors already enroll in private plans, as part of the “Medicare Advantage” [MA] option that has existed, in one form or another, for many years. About 7 million seniors or more than 90 percent of that group would have to pay more.
What happened next is that some voucher supporters claimed that if senior enrolled in MA plans are paying less than traditional Medicare, than surely vouchers will save money.
Cutler called this a “distortion” of his findings. First, costs are different than payments, and the data are clear that MA payments—which is what it costs the Medicare system, i.e., us—have been “overpayments” for years now (see chart here).
But the more potent critique is this:
…determining whether the private plans are really more efficient than traditional Medicare requires more than just knowing that they bid less. The question is why private plans come in cheaper…
…it’s possible that the private plans are cheaper because they really do offer the same benefits at a lower cost. It’s also possible that the private plans are cheaper because the insurers are very good at attracting the best risks—that is, the healthiest seniors least likely to run up medical bills—or because they don’t also subsidize other parts of our health care system, such as medical education. In effect, they may be gaming the system. At this point, we really don’t know which answer is correct, although it’s entirely possible all three are true, to an extent.
Making the wrong assumption here could be fatal, particularly to those seniors with the gravest health needs. If managed care plans are able to select healthier enrollees—by skimping on benefits in ways that get around whatever regulations (if any) the Romney-Ryan plan put in place—traditional Medicare will end up with less healthy seniors, driving up its costs. The system will spiral out of control.
That’s the same adverse selection warning from Aaron, btw.
Finally, a good piece in the NYT today on how Gov Romney’s promise to restore Medicare cuts would actually damage the life of the program. I’ve written about that a lot here and need to run, but take a look.
One expert points out that:
…restoring the $716 billion in Medicare savings would increase premiums and co-payments for beneficiaries by $342 a year on average over the next decade; in 2022, the average increase would be $577.
Beneficiaries, through their premiums and co-payments, share the cost of Medicare with the government. If Medicare’s costs increase — for instance, by raising payments to health care providers — so, too, do beneficiaries’ contributions.
And those costs would be on top of the costs involved with a full repeal of the health care law, which would eliminate expanded coverage of prescription drugs, free wellness care and preventive checkups.
And this is from the folks who claim the D’s refuse to tackle the hard fiscal choices on entitlements.