• The Domenici-Rivlin Protect Medicare Act, with competitive bidding

    Here’s a very brief PDF summary of the Domenici-Rivlin Medicare proposal to the supercommittee.

    Note, in particular, that the proposal is based on competitive bidding among Medicare-participating private plans and FFS Medicare (the public option). Above the bidding mechanism is an overall cap constrained to grow no higher than GDP+1%. The way I guess this would work is that competitive bidding sets the benchmark subsidy rate and a percentage of it is paid as premium support where that percentage is set so that overall spending is within the GDP+1% cap. This is a lot like the ACA exchanges, but with a public option.

    Also note that the GDP+1% growth cap is established by averaging five years of GDP growth figures, addressing a concern I raised recently.

    For more on the work of the Debt Reduction Task Force, headed up by Pete Domenici and Alice Rivlin, go here.

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    • At least we are seeing some movement at a fairly high level toward budget caps.

      Like a broken clock, Paul Ryan can still be right twice a day, and the
      Domineci-Rivlin proposal is in the Ryan spirit.

      I see two major problems in this proposal:

      – If all competing plans have to cover the same services, I would think that all their costs will go up.

      I would favor more wide-open competition — let some plans have a $5000 deductible, let some plans not pay for PSA tests, let some plans encourage assisted suicide, etc.

      This will never happen overnite, because someone will make a wrong choice of plans and their relatives will sue like crazy — but it is the direction to go.

      And —

      Private insurance companies will not take long to realize that the way to have lower costs is to have better demographics. How they do this without medical underwriting will be complex and hidden, but it will happen.

      This will produce so much inequality that we may long for old-fashioned Medicare that excludes private insurers.

      Bob Hertz, The Health Care Crusade

    • in reply to Bob – your concerns about private plans cherry picking the healthier consumers can be mitigated by the use of risk adjustment. this is already done in Medicare Advantage – CMS uses the medical claims histories of each plan’s enrollees to predict how costly their enrollees will be. in theory, plans that get healthier enrollees will be paid less. it isn’t perfect, though.