• Capretta on Medicare Advantage

    In a Kaiser Health News column today, James Capretta misunderstands my prior critique of Medicare Advantage (MA), a critique that I believe applies to Rep. Paul Ryan’s voucher plan (which his own staff has admitted to me). Capretta wrote,

    Critics say Medicare Advantage plans — the private insurance options offered to beneficiaries — are inefficient and costly. But those same critics oppose vouchers for Medicare — even though that would set up a direct competition between the private plans and the traditional fee-for-service program. …

    After all, if the case critics (see Austin Frakt’s August 19 KHN column) make is correct and private insurers simply can’t do the hard work of cost control as well as the government, then Medicare’s “public option” would presumably win this contest.

    Kinda makes it sound like I’m one of those critics, that I think private insurers are incapable of reducing costs. Where did I write that? What I really wrote was this,

    The politics of Medicare are such that Ryan’s idea, paying for care entirely through private plans, costs more. That’s not due to a market failure, but a political one. Congress likes to spend money; insurers, providers and beneficiaries like to receive it. Congress spends even more when it can satisfy those interests under the guise of a seemingly pro-market, pro-competitive program.

    MA plans have a political problem. They are paid above FFS cost whether they can achieve below-FFS cost or not. The same political problem would befall Rep. Ryan’s voucher program because under his plan the HHS secretary has the discretion to set voucher levels. We can do better than that.

    In a post on August 23 I followed up on this idea and described a voucher plan that does not suffer this problem. If an independent body, shielded from politics, is in control of voucher levels and other conditions described in that post are met, I would support a voucher plan. Moreover, I am in favor of a competitive bidding system (I’ve written about it in many posts going back a year or more) with a level playing field, as described in my August 24 post. I’ll describe it more fully next week.

    Capretta clearly didn’t read all my writing on this topic. He just presumed I was anti-private plan. I never wrote that. I hope he’ll read my post next week on competitive bidding and be in touch if there is any uncertainty about my position.

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    • Whether or not *you* are anti-private plan, it is clear that many people don’t want a voucher-like system in which Medicare FFS competes as one of several options. That seems to be the salient point.

      • @Reihan – I agree with you. However, Capretta should not have linked to me in the context in which he did, or he should have made it clear what my views are. It would not have been hard. They’ve been on my blog, and recently. I’m also only an e-mail away.

        @steve – This is my understanding: With the exception of PFFS plans, which may use the FFS payment schedule if they wish, MA plans negotiate with providers. But this is probably done, at least in part in aggregation with other products from the same firm. So, from a high level, one may not actually see a difference between MA plan payments and other private plan payments by the same firm.

        In many markets MA plans obtain better rates than FFS Medicare. That’s why their costs are lower. But taxpayer costs are not. I have a problem with that, which is why I highlight taxpayer costs in my discourse on the matter and advocate a competitive bidding system that will set payments to all plans at the lowest cost option, FFS included, with beneficiaries paying the difference for more expensive plans or enhanced benefits.

    • ” it is clear that many people don’t want a voucher-like system in which Medicare FFS competes as one of several options”

      Many of us dont want the voucher systems that have so far been described. A voucher system has merits, just design a good one.

      Steve

    • “This is my understanding: With the exception of PFFS plans, which may use the FFS payment schedule if they wish, MA plans negotiate with providers. But this is probably done, at least in part in aggregation with other products from the same firm.”

      Thx for this. We have never actually negotiated any MA fee, but they all pay at least standard FFS rates.

      Steve