Don Taylor and I have kicked Howard Gleckman’s post back and forth for a day, with me feeling like I’ve got nothing to add, and him thinking he might comment. So far, neither of us has done anything. I’ve got a few minutes, so I’m jumping in.
Gleckman points out that the Ryan-Rivlin plan for “voucherizing” Medicare bears a striking resemblance to the ACA’s health care insurance exchanges.
For vouchers to work, insurance companies would have to sell coverage at an affordable price to all, regardless of health status. Seniors would need a way to shop for insurance. To keep premiums reasonably priced, consumers would have to be required, or at least very strongly nudged, to buy coverage before they got sick. Finally, since premiums would still be expensive for older buyers, the government would have to provide seniors with a significant subsidy to make the product affordable.
As it happens, the first three elements are exactly the model of the ACA. The law includes insurance exchanges, a requirement that private insurers make coverage available to everyone regardless of health status, and the obligation that everyone have at least basic coverage. It even includes subsidies for some low-income buyers. Additional premium support for seniors would be the final piece of the puzzle.
From a cost-control perspective, there’s a lot to like about the idea, provided it is augmented with a competitive bidding system to set voucher levels. Otherwise, in terms of cost control, what distinguishes it from Medicare Advantage, which is not a model of cost control we should want to broaden (more on this by Coulam, Feldman, and Dowd)? Also, FFS Medicare could participate in that bidding system and, in some rural areas, would outbid private plans due to the inability of private plans to establish any meaningful leverage through selective contracting in such areas.
In a post in January I attempted to explain how competitive bidding really protects beneficiaries, not just taxpayers. In doing so, I contrasted it with “premium support” in general, which does not include all the protections of competitive bidding.
One reason premium support frightens people is that no such proposal (or none I’ve seen) includes any plausible means to protect voucher levels from being adjusted upwards arbitrarily by Congress, just as they’ve raised Medicare Advantage payments in the past. This type of cost control is no more believable than that included in the ACA. It depends on the commitment of future Congresses.
The second reason some fear a voucher program is that it could leave beneficiaries with far greater cost risk than they have today. They’d be on the hook for every dollar increase in coverage above voucher levels, even for a standardized, constant level of benefits. That’s very different than current Medicare. Since people are averse to change, especially at their expense, they’re not keen on this idea. [...]
Then there’s competitive bidding, which is different. The version I’ve written about
could save 8% or about $50 billion per year (based on a 2010 Medicare cost estimate) through a competitive pricing system in which all plans, fee-for-service [FFS, the public option] included, offer bids for a standardized set of benefits and the government pays all plans based on the lowest of these cost estimates.
That is, voucher levels are set by the market and at the lowest offered price. They’re large enough so that every beneficiary could enroll in some plan (for standard Medicare benefits) at no additional out-of-pocket cost. If a beneficiary prefers FFS Medicare, that’s an option, though perhaps at a higher premium. If a beneficiary wants additional coverage for enhanced benefits, the market could offer that, but at an additional cost to the beneficiary, not the government. Meanwhile, voucher levels are not set by a political process, but by the market. Thus, both of the concerns about premiums support plans I described above are addressed. Voucher levels are both sufficient to purchase coverage and are not set directly by Congress. Moreover, taxpayers pay no more than is necessary to provide the basic set of benefits.
It is important to note that neither competitive bidding, nor any voucher program, can solve all our health care system problems. I made this point in a Kaiser Health News column last September.
Competitive bidding can save money, but it is not a panacea for all of Medicare’s ills, and it doesn’t address every issue associated with the program. It cannot tell us what the standard, required set of benefits upon which plans bid ought to be — only that we need consensus on such a benefit. It would mean that the beneficiary cost of fee-for-service coverage, as well as private plan coverage, would vary across markets, a feature some might consider inequitable. It also cannot, by itself, change the growth rate of health care costs. For that, further reforms to how fee-for-service and Advantage plans pay for care would be required, as well as changes system-wide, well beyond Medicare. However, bidding would ensure that taxpayers get the best value per dollar within the framework of the program’s hybrid public and private structure.
Should I say more about the Ryan-Rivlin plan? Perhaps you’ll agree, I’ve said plenty already.