Cheers

Obviously, we should achieve savings in Mcare if we can do so without hurting quality. But that’s not the same as showing the lower bids cost less than Mcare. Orszag cites evidence of a large selection bias at work that risk adjustments aren’t accounting for.

Note also, as I point out, that one of the authors of the study the Samuelson is citing (David Cutler) endorses the numbers in the bar chart in my post.

As to whether the cost of the 2nd highest bid reveals that competition is a cost saver for Medicare, as Samuelson claims, see this piece by Peter Orszag. He argues that even the 2nd lowest bid numbers are biased down by insufficient risk adjustment.

The money quote is “Medicare Advantage has cost less for identical coverage. From 2006 to 2009, the gap averaged 11 percent between traditional Medicare and voucher plans that, under the proposal by Ryan and Sen. Ron Wyden (D-Ore.), would serve as a price “benchmark.”

Samuelson references a very recent publication by Zirui Song, PhD; David M. Cutler, PhD and Michael E. Chernew, PhD http://jama.jamanetwork.com/article.aspx?articleid=1273025

Can you reconcile the detail Samuelson is quoting with the figure that you have presented?

Cutting overpayments to MA plans and competitive bidding are the same type of “cut” to Medicare. You can’t simultaneously argue that one doesn’t affect beneficiaries and the other does. While they both will affect some beneficiaries, they do so by lowering overpayments to less efficient insurance providers. If we can provide the full Medicare entitlement benefit for less with no effect on the quality of care, we should. We have a hybrid public/private system, which will be the case for the foreseeable future, so we should run it as efficiently as possible. The Cutler, et al study tells this story as well.

It’s very misleading to discuss the cost of MA plans without mentioning that they provide the same benefits for less money in many counties (and for less, on average, overall).

Sincerely,
David