• The Seniors’ Choice Act

    As Don blogged yesterday, Senator Richard Burr (R-NC) and Tom Coburn (R-OK) have introduced The Seniors’ Choice Act. It includes a variant of premium support and a whole lot more. As with all these things, the devil is in the details and not all the details are clear from what’s been released. Several documents describe various aspects of The Seniors’ Choice Act (h/t Avik Roy):

    Here’s my quick reaction to some of the provisions:
    1. Add an out-of-pocket maximum.  An out-of-pocket maximum has long been sought and is one reason supplements are popular.
    2. Increased cost-sharing for wealthy seniorsUnify the deductible and cost-sharing across Parts A and B. Prohibit first dollar coverage by Medigap plans. I’ve bundled these together because they all pertain to cost-sharing. There are good reasons to reform cost-sharing under Medicare and Medicare supplements. However, it is worth considering how to do so to in a way that reflects the philosophy and the science of value-based insurance design. For example, it may be that nobody (even wealthy people) should pay cost-sharing for certain services because using them prevents future more costly care. It’s well documented in the research literature that copayments decrease utilization, which is the point but shouldn’t be the aim for care that offsets higher, future costs. Allowing some board to oversee how cost-sharing evolves as we learn more about the value of health treatments might be worth considering. Also, it’s not clear to me why Medigap isn’t just eliminated entirely and replaced with unified plans (either a beefed up traditional Medicare option or Medicare Advantage).
    3. Require millionaires to pay full premiums. More means-testing of premiums is a way to reduce costs to government but could also erode support for the program.
    4. Repeal IPAB. To be honest, I don’t understand what this is doing in the proposal. The very fact that Congress has been unable to reform Medicare in sensible ways is an argument for the IPAB. If the IPAB really proves problematic, why not repeal it later? I’d like to see it given a chance. Tit-for-tat repeal, and especially with no information on how the “other side’s” reform functions, doesn’t strike me as a sound way to govern.
    5. Increase the Medicare eligibility age. We’ve already written a great deal about this on this blog. In truth, this won’t save very much money, and, at typical rates of health care inflation, the savings will be overtaken in a matter of months. What do we do then? Raise the age even further? This just doesn’t seem to be a fruitful dimension for reform.
    6. Introduce a voluntary care coordination program. I’m not sure what this would involve. If it saves money and improves outcomes, maybe it shouldn’t be voluntary. I know that sounds harsh to libertarian ears, but we’re talking about a taxpayer financed program. Good stewardship may justify requiring care coordination for beneficiaries with complex, chronic conditions. Having said that, I am not familiar with the totality of the literature on whether coordination programs do, in fact, save money or improve outcomes. What’s the consensus? I do know that there are some programs that have failed to do either.
    7. Premium support with competitive bidding in 2016. Plan would bid regionally and traditional Medicare would be included among the plans. Plans would be required to offer benefits actuarially equivalent to the prior year’s Medicare benefit. The level of premium support would be “tied to” the (enrollment) weighted average bid, would be risk-adjusted, and vary by income. The arrangement would be overseen by a new Medicare Consumers’ Protection Agency. Note that setting premium support by a weighted average of bids will not save nearly as much as setting it at the lowest bid. The graph here, based on the work of Coulam, Feldman, and Dowd makes this clear. There are lots of strengths and limitations to competitive bidding premium support. You’ll find all the important ones covered in my series on the subject. Henry Aaron and I also wrote a NEJM paper recently in which we suggest we should let the current Medicare reforms play out before coming to any conclusion about whether premium support is appropriate for Medicare.

    The Burr-Coburn proposal does not include any type of backstop to ensure that the Medicare cost (spending) curve is bent. Moreover, it says that premium support is “tied to” average bids but doesn’t spell out what “tied to” means. (Or did I miss it?) Taken together, this could provide beneficiaries with a lot of protection (no cost shifting), but it’s hard to tell. Other recent proposals (Domenici-Rivlin, Wyden-Ryan) cap growth at GDP+1%, as does current law. Since no such cap is in the proposal and it uses a rather weak form of bidding (among other vagueness), it is not at all clear the Burr-Coburn plan would save anything relative to current law. This may be a liability in terms of obtaining a CBO score that would be viewed favorably by a Congress fixated on deficit reduction.

    In summary, the plan contains some ideas worth considering, some ideas that should be put aside, and not enough detail to really evaluate it. In other words, it’s a pretty typical proposal.

    AF

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    • I agree with not allowing supplements to provide first dollar coverage to completely circumvent cost sharing, but isn’t this philosophically odd in a Republican proposal? If it’s so wrong for the government to tell us what we must buy with the mandate, isn’t it also wrong for the government to tell us that we can’t buy something that the free market would sell us?

    • Changes are needed however changes that further cause financial hardship are counter productive. The plan under this Senior Choice Act could easily result in a $8050.00 out of pocket cost for an individual each year. Those on limited income would be placed in a financial crises unless they are able to purchase a Supplemental policy to Medicare. I totally agree with you that an individual should be able to purchase a supplemental policy to offset the Medicare deductables. I do not understand the Bill’s reasoning on that point. As to the Medicare Consumers Protection Agency, is that not another Government Agency? The scary part of that is the appointees to that agency must be confirmed by the Senate giving them control of the philosophy of decisions they would render.