Free the Seniors!
When Medicare began, the program copied the popular Blue Cross insurance plan. So for a while, seniors and non-seniors had basically the same health insurance. But since one plan was controlled by the marketplace and the other by politicians, the two plans diverged over time. Practically all of the structural problems of Medicare stem from this divergence.
Seniors are the only people in our society who must buy a second health plan (Medigap) to fill in holes in their primary plan (Medicare). Also, millions of seniors are paying a third premium to a third plan (Medicare Part D) to get the drug coverage non-seniors have. Even then, many face "donut hole" gaps that no one else faces.
Paying three premiums to three plans is extremely wasteful. In fact, two studies by Milliman & Robertson showed that if Medicare and Medigap funds alone were combined, seniors could have the same coverage non-seniors have – at least in principle.
This is where Medicare Advantage plans come in. They offer seniors comprehensive coverage, comparable to what the rest of America has.
In the early years, health economist Ken Thorpe found that these plans attracted low- and moderate-income seniors who did not have Medigap coverage. In return for a premium of about $250 a year or less, these enrollees got $1,034 worth of extra benefits, including drug coverage. A social problem solved, at minimal cost to taxpayers.
With the introduction of (subsidized) Part D coverage, this trend has continued. Medicare administrators report that:
- 86% of Medicare beneficiaries have the opportunity to join a Medicare Advantage plan with no premium charged for drug coverage.
- In addition to free drug coverage, enrollees often get such extra benefits as hearing aids, vision and preventive care.
- Half of Medicare Advantage enrollees have incomes below $20,000.
- About 27% of Medicare Advantage plan members are minority enrollees.
An AHIP study also found that these plans are especially beneficial for low-income and minority enrollees. In fact, almost 7 in 10 minority enrollees have incomes less than $20,000.
There are special needs Medicare Advantage plans (for those with several chronic illnesses) and medical savings account plans (for those who want to manage some of their own healthcare dollars). Also, several studies have found that Medicare Advantage enrollees get higher quality care than those in standard Medicare.
In all of its guises, Medicare Advantage plans take a rigid, inflexible Medicare benefit and use those same dollars to create more benefits better suited to senior citizen needs.
Given this success, we should build on it. Let the market for senior care be wide open, with the government offering premium support for seniors who choose from a much wider range of options – including remaining in, and paying premiums to, a former employer's plan.
Unfortunately, some reactionary souls want to turn the clock back. Congressman Pete Stark (D – CA) wants to do away with the Medicare Advantage program altogether. Go figure.
For the AHIP study: Low-Income and Minority Beneficiaries in Medicare Advantage Plans
For the Consensus Group / Galen Report
An informative, enlightening report of information. For completeness, one should also examine the downside of the MA Plans for potential purchasers. Few seniors are equipped to evaluate this alternative to Medicare, Medigap and Medicare Part D plans. I suspect that neither approach is risk-free or politics-free in the short or long run.
In short, the whole process of choice is simply overwhelming for most seniors regardless of their economic resources.
Great piece, John.
Mr. Goodman,
I am all for free market alternatives to Medicare.
However, from my perspective as a physician in
California the Medicare Advantage plans have been a
disaster. I am specifically referring to the
predominant HMO capitated version of the Advantage
plans.
As an ophthalmologist I have seen how their perverse
incentive system encourgages many eye surgeons to
defer needed cataract surgery. In my practice I see
patients regularly with advanced cataracts who were
told by their previous ophthalmologist that their
cataracts “were not ripe” or similar nonsense. So
seniors in my community quite commonly are not gettng
the one surgery that would make a huge difference in
their quality of life (more than any other procedure
in medicine) because physician are very strongly
incentivized not to perform it.
This is capitation at work and it poisons the Medicare
HMOs from top to bottom. A few people have done well
with it- i.e. enterprising physician executives who
started IPAs who siphon of 20% of the Medicare dollar
before it even gets to patient care. And the HMOs
themselves who siphon off another 12% before it gets
to patient care. So I am not quite sure why you would
advocating a system which promotes deceptive and
hidden rationing and spends 30-40% of the Medicare
premium on administrative and adverstising costs via
the IPA/HMO. And the rationing is hidden. Patients
have no clue that their physicians have strong
financial incentives not to order tests, do surgery,
or even see them in their office. And the Medicare
HMOs with their no or low copay structure gives
patients the exact opposite incentives. So you have an
immediate conflict between patients and physicians.
And guess who wins? “No, Mrs. Jones. You really do not
need cataract surgery. I understand you cannot see to
drive. But cataract surgery is very delicate and you
simply are not ready for it. Oh, yes. Thank you. You
are right. I am the doctor and I know best”.
So as I am no fan of Pete Stark I understand the anger
people have toward the Medicare Advantage plans. They
have the HMOs consumed a huge subsidy above and beyond
FFS Medicare and squandered it on advertising, IPA
administrators, and HMO executive suites all the while
delivering poor care that pits patients and against
physicians. And if you have any doubts about what I
have said I encourage you to randomly dial ten
ophthalmologist in California and ask them if they
would enroll their own mother in an Medicare HMO plan.
And then do the same for every specialist you can
think of. I believe their response would be
educational.
So if you are going to promote Medicare Advantage
plans as a true “free market” alternative to Medicare
I would not lump in HMOs alongside HSAs or even PPOs.
Medicare HMOs are about the farthest thing from a free
market I could think of: hidden capitated fee
structures with huge government subsidies that have
increased dramatically beyond FFS Medicare. I really
believe you have underestimated the rage people feel
toward Medicare HMOs. I hear this rage daily from
patients and physicians. We need to admit they have
been a total failure both medically and financially.
I believe the way forward is with HSAs. And advocating
for both HSAs and its complete opposite in Medicare
HMOs makes no sense. You do not want to be cast in the
role as defender of Medicare HMOs- if you do then
everything else you are advocating will not be taken
seriously and people will question who really is
behind your organization.
Thanks for your time,
John J. McDermott III, M.D.
Fellow of the American Academy of Ophthalmology
The ultimate interaction that counts in health care is between the physician and the patient unless one believes that physicians are fungible and all patient complaints are identical. Under those circumstances one would not need physicians and could substitute them for competent computer technicians. Until that time arises I think the physician patient interaction needs to be foremost in our minds.
We have seen what happens with the use of intermediaries such as Medicare HMO’s and now seem to be substituting something with the same apparent flaws though its greater complexity can confuse the mind leading us to believe that we are adding a marketplace to Medicare. The only market or competition that we are we are really adding is between third parties that will spend as much money as necessary to game the system and subvert the physician’s intellectual honesty. If you like capitated HMO’s you will certainly like Medicare advantage because it has so many more moving parts. I hope that additional emphasis is focused on the physician and his relationship with the patient instead of simply looking at the bottom line and a bunch of empty assumptions. As a physician I have no fear of competition and support high deductibles, but I do fear the insidious ways these third party payers have destroyed the intellectual honesty of my profession.
Thank you for reading my comments.
Sounds like a winner.
My word. Is it possible that Pete Stark thinks that he represents the taxpayer? And is it possible that all the bleetings from the AHIP sponsored crowd in the AEI, NCPA, Galen et al have managed to ignore the minor fact that the MA program shafts the taxpayer.
But I’m sure glad to see that you’re all so so concerned about the financial well being of poor seniors. After all that tracks so well with the rest of your combined political philosophies!
As a general principal, people should always be aware of alternatives. Society would become unbearable if there were no competition, even in health care. Without investigating the details of this particular option to Medicare, I think that ANY competition will ultimately help the consumer, which can only be a good thing.
We have socialized medicine in this country, the VA Hospitals, Military Hospitals and prison medicine are socialized with government owned hospitals, and government employed physicians and staff. Single payer interstate health insurance based on Medicare simply withdraws the massive government subsidies (Communistic) from private insurance company’s (Oligarchs) thereby forcing them into bankruptcy. Once the private insurance companies declare chapter 11, all USA citizens can be insured through Medicare. Physicians and hospitals would remain private. Money saved from the giant private insurance corporate bureaucracy ($500 Billion/yr) would be applied to insure all Americans. With medical and preventative outcomes measured via a single integrated EMR and prescription software system, healthy capitalistic competition between Hospitals and physicians would exist. In addition, Medicare could use it’s size to bid down the price of drugs on its formulary to levels equal to that of what the rest of the world pays. The actuarial based health rationing currently employed by private health insurance companies would be replaced by free market competition and epidemiological health outcome data for suggested clinical guidelines. Underperforming doctors, hospitals, therapists and pharmaceuticals could be identified rapidly and clinical information provided to improve their outcomes. Personal injury lawyers would not be privy to this data in order to educate doctors and hospitals and therefore prevent unproductive lawsuits.
If either one of Blue Shield Blue Cross, Aetna, Cigna, KP, or Humana Inc’s could offer better rates of morbidity (sickness) and lower rates of mortality (death) at decreased costs via their health care rationing criteria, then we could choose one of these private companies to be the single payer. However, alas, the Emperor has no clothes, private insurance Co’s cure rates are lower and their death rates are higher than Medicare Ins aged matched populations, therefore, we go with Medicare.
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