I spent an enjoyable train ride into work reading Daniel Kessler’s National Affairs piece Real Medicare Reform (h/t Reihan Salam). There is much in it I agree with, and I’m especially pleased to see a fellow health-focused economist write so insightfully about the political problems that befall the program and potential reforms to it. I have just a few comments, but please go read Kessler’s piece in full:
- As is standard practice, Kessler contrasts the ACA’s Independent Payment Advisory Board (IPAB) with an idealized version of premium support. I have two issues with this.
- First, the approaches are not mutually exclusive. If premium support includes FFS Medicare, then that arm of the program must be governed somehow. Why not by the IPAB, flawed though it may be? The same goes for the rest of the ACA’s payment reforms. They apply to FFS Medicare, and there is no reason they cannot be maintained in competition with private plans. If private plans outcompete the ACA-driven FFS arm, then the latter will whither away. If not, the former will. Either way, a stronger Medicare emerges.
- Second, do not expect the version of premium support articulated at this stage to be the one that would become law. Kessler argues convincingly that Medicare has been battered by political meddling. The same would be true of a premium support proposal. There’s a reason Medicare Advantage plans are overpaid. There’s a reason the program’s drug benefit is so favorable to the insurance industry and pharma. There’s a reason the ACA’s Medicare Advantage quality bonus program is rewarding even mediocre plans. In all cases, powerful interest groups did what they always do, help politicians and regulators tilt the law and rules in their favor. Expect the same of premium support. It won’t come out the way it goes in. Comparing it to the post-sausage-making ACA is, in this sense, unfair, a bit like comparing a charismatic presidential challenger to an incumbent president. One has tested his promises against the political machine and bent as is necessary to accomplish anything. The other’s promises are yet to be tested.
- Providers game Medicare to maximize revenue. No argument. Is there any reason to believe they don’t or wouldn’t do the same with respect to private plans? (If you’re already thinking about fraud control, read this.)
- I’m far less certain than Kessler that insurers and beneficiaries are favorable to premium support. The former have resisted any form of competitive bidding for years. The latter are famously resistant to structural change.
- Kessler enumerated some, but not all, of the risks of premium support. In my view, the best way to address them is not to argue they won’t exist, but to build in safeguards in case they do.
For all that, I did like the piece a lot. My points above are fairly minor relative to the main thrust of Kessler’s argument. For what it’s worth, my view of a complete premium support proposal is here and my analysis of a version of premium support — strengths, limitations, and all — is here.