Premium support proposal and critique: Objection 2, political reality

This post is part of a series. If you haven’t read the prior posts in the series, you really should. The introduction explains what I’m doing and links to all posts to date. I’m assuming you read them.

Consideration of the likely political dynamics is another powerful critique of the style of premium support I outlined. Though in principle, one could orchestrate a program that provides a level playing field between private and public plans, in practice that may be hard to achieve or maintain due to political factors. Those factors are more likely to tilt things in favor of private plans.

It’s not terribly hard to see why. Like it or not, US politics runs on money. Traditional Medicare (TM) doesn’t have any to lend in service of political campaigns or campaign issues. Insurance companies and those who work for and profit from them do. Sure, beneficiary groups like AARP could be a powerful force in support of TM, but I don’t think they’re any match for health insurers.

Additionally, provider groups are more likely to support private plans since there is a perception they pay higher rates than TM. Not all of them actually do so in all markets, but relative to how Medicare rates are expected to trend under current law, private plans may ultimately be more generous than TM. So, all in all, there will be considerable pressure for Congress to tilt the playing field in favor of private plans.

To some, this is obviously a problem because it would further erode enrollment in TM. That it is a problem requires one to believe that TM offers unique features that we must maintain (like these or these) even though competitive bidding would still ensure efficient provision of the Medicare benefit without TM in the mix. To others, political favoritism toward private plans is not a problem at all. It’s what they want. Is it any surprise the two sides don’t trust each other’s policy motives?

Having said all that, there’s something a bit inconsistent about a claim that Congress won’t be able to resist political pressure from insurers and providers. If that is true (and, I believe it is), then the game is already over. In time those groups will eventually win. Look what’s happening in Medicare today. Private plans are as popular as they’ve ever been. That’s likely to change as payments to Medicare Advantage plans decline. However, they’ll probably be ratcheted up again by another administration (unless we go to competitive bidding). Even the current administration hasn’t held the line as tightly as they could have.

Finally, a way to help with this problem of political meddling is to protect the whole arrangement by handing it over to an IPAB-like board. That won’t afford it perfect protection, but it should be some cushion from political forces since board members won’t be running for reelection and don’t need massive campaign war chests.

Still, it will require future Congresses to support the IPAB-like board for all this to work. Why should they do that? Given all this, it isn’t hard to see why proponents of TM don’t want to endorse anything that increases the risk of its demise. It’s why a competitive bidding-type premium support concept is not appealing to them even if, on paper, it establishes a level playing field. Given politics, the field is not likely to stay level.


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