Rolling the dice
According to the Department of Health and Human Services (HHS), Medicare Advantage (MA) enrollment is anticipated to grow 11 percent. Regardless of the politics behind the message, more beneficiaries than ever will be enrolled in MA products. Most organizations cannot keep up with all of CMS' requirements. As evidenced in their best practice reviews of 5-star plans, no plan is perfect. Common findings included improper formulary administration, denial of transition fills, and lack of an effective monitoring and auditing system. These findings have a high impact on MA enrollees.
I, like other consultants, am often asked what the financial penalty is for non-compliance. While we have a reach into many clients and colleagues, the answer is not simple and we anticipate it never will be.
Within the last twelve months, for example, we have seen CMS impose financial penalties on organizations who did not comply with marketing requirements. We also know that some organizations have been subject to Immediate Correction is Required (ICARs). These are situations where CMS deems ICARs are necessary while the audit occurs or soon after the exit conference. It is a challenge to put a dollar amount on a situation where a department needs to drop everything and fix something immediately, as the ICAR must be completed within 72 hours. It's one thing to update a work flow to ensure members are contacted about their Coverage Determinations; it is another thing entirely to re-vamp Part D claims payment logic.
Medicare Compliance Officers who attended CMS' Compliance Officer Training in April have the list of compliance actions that CMS can take, in order of severity. To evaluate how those steps translate into dollars is not easy, but it's just like many other things we interpret. Various suppressions and exclusions could be short or long term. A Corrective Action Plan could take weeks or months.
The moral of the story is: don't let non-compliance get to that point. If an organization has an effective system to detect, correct, and prevent, then chances of enforcement actions are reduced. If one of the pitfalls is a lack of an effective monitoring and auditing system (whether due to expertise, outdated technology, or something else), consider it a high risk. The cost of this can roughly be translated into lower quality scores, CMS compliance actions, and poor retention, with membership going to well-performing counterparts. Why gamble when the stakes are that high?
Selling Season is Nearly Here, Now what?
Most plans are in the process of onboarding their agents and preparing them to sell. Meanwhile, they've invested marketing dollars across various channels and different media. Now it's time to turn marketing dollars into members. With another AEP just around the corner, here are a few GHG best practice tips to keep in mind this season to help get the most bang for your buck out of those incoming leads.
- Cut down on lead distribution times as much as possible. This is one area that cannot be stressed enough; beneficiaries are not waiting for follow ups, if leads are not quickly & efficiently being converted into appointments another carrier could potentially get that all-important first meeting on the schedule faster. The industry is much too competitive, and the cost per lead is far too expensive to let any leads sit in today's marketplace. Statistics show that close ratios improve the faster the lead can be converted to an appointment and the quicker that meeting can be conducted by the agent. In an industry where the little details can matter, if this process is managed effectively there are additional members to be had.
- Once agent in-home appointments are in full swing, make sure to collect and document a disposition from the agent for EVERY meeting. A lot of good information can be collected about why a potential beneficiary chose to enroll or not enroll in a particular plan. That information doesn't only apply to the sales team. Share it with the benefit design team too, it will provide a real world perspective on why beneficiaries join, or more importantly, why they don't. Most plans are good at tracking dispositions for their employed sales force, but lack integrated systems to capture this for some independents. Consider adopting a mobile technology to capture the rest of the picture from the independent agents.
- Make every possible enrollment avenue available for potential beneficiaries. This means having a telesales unit, deploying a nimble sales force in the field, and finally in today's world, utilizing (hopefully creating one if not) the online enrollment process. The aging in Baby Boomer population requires us to provide a diverse number of channels for prospects to enroll. Missing one avenue could be detrimental to your sales numbers!
- Learn from your successes….and your mistakes! Improvement in years to come is only possible if there is an understanding of the effectiveness of current marketing campaigns, where enrollments are coming from, what return on investment various channels have yielded, and many more variables in play. Track…measure…assess….adjust…repeat!
As always, stay tuned to the GHG Blog and to the Point for more selling season tips later this month.
We Love Us Some Kitzhaber...Medicaid Reform Genius
It's happy days for us when Sarah Kliff at WaPo, one of our favorite bloggers, posts a great "get" with Oregon Governor John Kitzhaber, MD -- one of our favorite Medicaid reformers. It was such a terrific interview I wanted to reprint it here, with thanks to both for an illuminating discussion of the way forward on reforming entitlements:
Interview: Gov. John Kitzhaber on Oregon's $1.9 billion Medicaid experiment
"Oregon is in the middle of a multibillion-dollar Medicaid experiment. It has promised the Obama administration it can slow the program's growth to a rate comparable to the rest of the economy over the next two years. That means reducing Medicaid cost growth, on a per capita basis, by 2 percent.
If Oregon can't pull it off, the state stands to lose $1.9 billion in federal funds meant to jump start that process. As Oregon Gov. John Kitzhaber (D) put it, his state has "to change how you do business in order to survive."
The new business plan, he says, is to pay doctors for the quality of health care they provide, rather than the quantity. The idea is to eliminate expensive care that doesn't improve health care — a readmission, for example, for an issue that should have been solved on a first hospital visit. The structure is similar to the Accountable Care Organizations that the Affordable Care Act created in Medicare.
Oregon's revamped Medicaid program launched at the start of this month. We spoke at length about the risks involved in the new project, how it's going and whether it can be expected to improve the health of Oregon's Medicaid recipients. What follows is a transcript, lightly edited for grammar and content.
Sarah Kliff: What's changing on the ground right now in Oregon about how Medicaid patients receive their care?
Gov. John Kitzhaber: The Coordinated Care Organizations have only been up since Sept. 1, but essentially the model is a patient-centered medical home. Each person will have a single point of contact with the delivery system, some sort of a care manager. We'll increase our use of home health workers to essentially try to manage chronic conditions at home. Then there will be financial incentives. If hospitals can, for example, reduce admission rates by five per thousand, those cost savings get shared within the system. They don't go off to a third party.
SK: The Obama administration has given you an additional $1.9 billion to put toward improving your system for this project. How is that money being spent?
JK: We had a big hole in our budget. Providers did take an 11 percent cut, notwithstanding this money. This basically prevents any further cuts to the system. It gives us five years to get the delivery model up and running and realize the savings. It's like changing a car tire while you're driving down the road. You have to maintain the current delivery system while changing it. It gives us the resources to do that.
SK: What's at stake for Oregon here? If you don't hit the cost metrics that you've promised, what happens?
JK: The $1.9 billion is contingent on this gradually ramping down of costs. Chunks of those resources go away if we don't achieve those cost metrics. There will be resources pulled out of the system which will make it more difficult. The real incentive is if we don't transform the system, we go back to the 40 percent cut. There's no more money. This is one where you really have to change how you do business in order to survive. I think the system appreciates that. The grand bargain was they give us the flexibility, they give us $1.9 billion, we reduce the Medicaid cost trend by 2 percent points per member by the end of the second year and improve health outcomes. That's the grand bargain.
SK: How will the administration measure what counts as higher quality care? How do you safeguard against providers skimping on care?
JK: There are metrics we're developing with [the Center for Medicare Services] about patient outcomes and population health metrics. So this is clearly unlike an old HMO, which could save costs by skimping on care.
There will be some things we won't do, but they will be things that don't have an impact on health outcomes. If you can manage someone with congestive heart failure in their home, which is not that hard to do, you save $50,000 every time you avoid them going into the hospital.
There will be clear, specific outcome measures and they're around access, they're around relationship to outcomes. Right now, payment is all about quantity. The more you do, the more you get paid. We're shifting to outcomes-based and performance based-funding.
SK: You're looking at a two-year timeline that you'll be measured on both spending reductions and quality improvements. What kind of health care outcomes can you change in that relatively short time span?
JK: I think what you're going to see is some significant improvements in access. You may see some reductions in low-birth weight infants. If you provide good prenatal care, you can actually see that return pretty quick. Hopefully we'll see an increase in the number of kids who are immunized.
The real big cost savings we're probably not going to see until the end of the second year. Those will be the results of reducing hospitalizations and better managing chronic conditions at home. One of the metrics might be how many times someone with a chronic condition has come had to go to the hospital.
SK: I want to talk a bit about how your proposal compares to the idea of a block grant that some of your Republican counterparts have proposed. Both essentially make a trade off, saying the state could spend less if it's given more flexibility. What do you see as the key differences?
JK: Let's say you have 100 people and a block grant that allows you to spend $100 per person. Let's say the auto industry goes belly-up and now instead of 100 people, you've got 200 people. Now you're only spending $50 per person.
There's no relationship between the block grant and the cost of the care you're trying to provide. It's a meat ax approach that just saves money. It's not designed to improve health outcomes.
What we're doing is we're establishing a per person, per year amount that will grow at a fixed rate. If you add 10 people, they still get that amount. The cost savings are in the rate of inflation. The only way you can achieve that is change your delivery model.
One of the conversations we had at the White House, was they said, ‘let's say we give Oregon this $1.9 billion and increased flexibility. What's to keep us from giving this to other states?' I said, "well, if another state came to you — lets say New Jersey."
Let's say Gov. [Chris] Christie came you and said, "We will promise you that if you give us X amount of money, we will reduce our medicaid inflation rate to 3.5 percent. We'll increase access, we'll improve outcomes." I'd say, give them the money because if every state did what Oregon is doing, the total saving is $1.5 trillion over five years.
SK: Have you heard from other states who want to try the approach you're taking?
JK: Right after we got the money, we had about 10 states call us up and say how'd you get that money. We haven't had anyone else follow up and say, we want to do it too. I think part of it is due to the election cycle. After the election, when states are faced again with dealing with stuff, I think a lot of states will look at what we're doing. It's actually up now.
Part of this is just good communication. This is hard. It's a big paradigm shift. You need to sit down together so you don't feel like you're all by yourself. You need to figure out what's working and what isn't. What can the state do to facilitate this.
SK: What are the biggest obstacles to making this work?
The biggest challenge is the old business model. People are used to having this unfettered flow of cash that increases every year coming into the health care
What we've signed up for is basically a cap on spending. Even if you figure out a way to raise more money, you can't spend it in the Medicaid program. We're getting there slowly with that. The other big piece is making sure that the private sector knows its in their interest to align their purchasing power with the 900,000 people we have or else some of this is going to be a cost-shift onto them.
SK: How did you get hospitals on board with this? Why should they get behind the idea of essentially capping the amount they can earn from Medicaid?
JK: At the end of the day, they know this isn't working…The lack of resources is what's really driving and motivating people to change. They know the alternative is worse than this.
The interesting thing is, I have to remind them of this all the time, and say let's not do this, then what's your world like? It doesn't look good at all. You have to continually remind them that the alternative is just a whole lot worse for them.
Newbies Slow Dual Eligible Expansion in Key States
After last week's AHIP conference on Medicare and Medicaid and MANY coffees and cocktails later, a picture emerged that the only thing slowing the movement of dual eligibles into health plans isn't nervous advocacy groups or overstretched regulators -- it's newbies to the game of caring for the nation's most vulnerable patients.
Dual-eligible expansion has slowed in key states due to the influx of a number of inexperienced plans in states like Florida and New York — Florida in particular, where provider-sponsored plans and other late-comers are popping up like mushrooms in response to the state's long-term care integration RFP. Ohio has selected its plans in a tortured process, but many are newcomers to duals and many influential providers are in disarray, slowing momentum. By contrast, California is moving apace — in counties with experienced plans like Orange and Los Angeles, while delaying implementation in counties covered by plans with little or no track record.
Some interesting challenges lay ahead for Melanie Bella's Office of Federal/State Integration at CMS, which has handled the surge admirably but now needs to balance quality priorities against Medicaid agencies that want fewer strings attached despite the flood of newbies. At this stage CMS's pipeline and market intel suggests the following states to watch:
|
Year |
Early Adopter States |
|
2013 |
MA, CA, FL, IL, OH, MN, WI |
|
2014 |
AZ, HI, NY, TN, TX, WA, ID, MI, OR, RI, SC, VA |
To address the "newbie" phenomenon, I suspect in many of these states some very strange bedfellows will emerge, like Blue Cross/Blue Shield plans partnering with large provider systems or traditional Medicaid-focused plans. Stay tuned — it ain't easy getting a $200 billion market off the ground among companies with precious little track record in serving those who need their services the most. The launch of Part D will seem like a milk run once this transition is complete.
With Presidential Election Static, Senate Slips from GOP's Grip
The most frequent question I get is "what will the elections mean to Medicare and Medicaid?" We've said here the Republicans' only hope of repealing the Affordable Care Act and enacting entitlement reform comes from making President Obama a one-termer, maintaining their majority in the House, and retaking the Senate. At the moment the Presidential race remains largely unchanged, with Mitt Romney getting a disappointing bounce from the GOP convention; Republicans will likely hold the House, but their grip on retaking the US Senate is slipping -- and with it, any chance of ObamaCare repeal or major changes to Medicare and Medicaid.
Earlier this year it seemed a foregone conclusion that Democrats would lose the Senate, defending 23 of 33 seats up this year. But now it's anything but sure, with some wild developments in races thought over and in the books -- just look at Todd Akin's epic "legitimate rape" fail in Missouri, emperiling his shot to knock off Claire McCaskill, and in doing so, possibly control of the Senate.
BusinessWeek got the scoop when GOP master strategist Karl Rove gave a briefing at the Republican convention that gave the best picture yet on the Senate math. Republicans need four seats to retake the Senate, and Rove said he's hopeful the party can pick up three from Nebraska, North Dakota, Wisconsin and Virginia. Between New Mexico, Hawaii and Connecticut, he added, "we've got a shot to take at least one." That's political shorthand for "too close to call."
But Rove also painted a picture where the GOP remains the Senate minority party: if they lose in Maine (Charlie Summers is getting crushed by Independent Angus King) and Massachusetts (Senator Scott Brown is in a dogfight with liberal crusader Elizabeth Warren), where the Republican candidates face headwinds. "But we're gonna lose, either [Summers] or Scott Brown—we can't afford to lose both," Rove said ominously. "If we win both, we're in great shape. If we lose one, it starts to get a little bit edgy. If we lose two, we're in real difficulty."
While the Presidential race remains stuck, it's these "down-ticket" races that really matter in terms of the post-election outlook for Medicare and Medicaid. It doesn't appear Romney gave his GOP colleagues any help down-ticket with Paul Ryan's selection. So unless Akin and Brown manage to pull ahead -- and there's still two months left, folks -- it looks like the Dems may hold the Senate. In doing so, they may assure ObamaCare stays as the law of the land, and major reforms to Medicare and Medicaid unlikely.
Romney's Budget Promises on Medicare Cannot Be True
The political jiu-jitsu on Medicare since the selection of Paul Ryan as the GOP Vice Presidential candidate has been amazing to watch. Democrats shriek Romney/Ryan will "end Medicare as we know it." Romney/Ryan countered by charging that health reform was funded by $716 Billion in Medicare cuts -- it's Obama who is the threat to the program. At the moment they're fighting to a draw in the polls on the issue. But the fact is that Romney's budget would restore the ACA cuts to Medicare -- and require everything else the Federal government does except Social Security and defense to be cut by a catastrophic 40% as a result. Which means Romney's budget proposal isn't worth the paper it's on.
As he prepared to keynote the Republican Convention Romney issued a statement: "A Romney-Ryan Administration will restore the funding to Medicare, ensure that no changes are made to the program for those 55 or older, and implement the reforms that they have proposed to strengthen it for future generations." Avik Roy, a health-care policy adviser to Romney, doubled down. "Whatever you think of Obamacare's cuts to Medicare, the fact is that a Romney administration would repeal them," he writes.
Restoring the ACA's Medicare cuts -- which Ryan's own budget proposals don't dare do -- means that if Romney is elected, by his third year in office, every federal program that is not Medicare, Social Security, or defense, will be cut, on average, by 40 percent. That means everything -- roads and bridges, farm aid, foreign aid, food stamps, the works. EVERYTHING. It means cuts far deeper than even what his running-mate has proposed. Mushroom cloud on the American economy.
One of my all-time favorite bloggers, Ezra Klen at the Washington Post, summed it up best:
"Consider what Romney has promised. By 2016, he says federal spending will be below 20 percent of GDP, and at least 4 percent of that will be defense spending. At that point, he will cap federal spending at 20 percent of GDP, meaning it can never rise above that level.
"All that's hard enough. Romney will have to cut federal spending by between $6 and $7 trillion over the next decade to hit those targets. As my colleague Suzy Khimm has detailed, those budget promises already require cuts far in excess of what even Paul Ryan's budget proposes.
"But Ryan's budget includes more than $700 billion in Medicare cuts over the next decade, Romney's budget won't. And Romney promises that there will be no other changes to Social Security or Medicare for those over 55, which means neither program can be cut for the next 10 years. But once you add up Medicare, Social Security and defense and you've got more than half of the federal budget. So Romney is going to make the largest spending cuts in history while protecting or increasing spending on more than half of the budget.
"The Center on Budget and Policy Priorities indulged this idea back in May. If Social Security and Medicare are spared from cuts, then to get federal spending under 20 percent of GDP while holding defense spending at 4 percent of GDP, "all other programs — including Medicaid, veterans' benefits, education, environmental protection, transportation, and SSI — would have to be cut by an average of 40 percent in 2016 and 57 percent in 2022."
"That's not even remotely plausible. The consequences would be catastrophic. The outcry would be deafening. And Romney has shown no stomach for selling such severe cuts.
"Consider that, even as we speak, Romney is running away from the unpopular bits of the Ryan budget, which delivers far less devastating cuts than what Romney is promising. Does anyone really believe that he will take office and cut education by 40 percent? That he will take office and, after running away from specifics during the campaign, propose what would surely be the most unpopular budget in American history?
"And does anyone believe that the real Romney is the guy who made these outlandish budget promises in order to win a Republican primary, rather than the guy who is disavowing Ryan's Medicare cuts mere days after naming him to the ticket?
"This is simply not a credible budget plan, and Romney's fast retreat from Ryan's most unpopular cuts makes it even less credible. And yet Romney, who has never released the specific cuts that would make his numbers add up, repeatedly touts it on the campaign trail, and the media dutifully reports his promises to cut federal spending by more than $500 billion in 2016, and in fact to balance the budget by the end of his second term, which would require far larger cuts than what I've outlined here, despite the fact that everyone basically knows these cuts aren't credible and will never happen.
"I'm not sure what alternative there is, exactly, except to say, as clearly as possible, Romney's budget plan is a fantasy, and it will never happen. I would revise that opinion if Romney released a list of specific cuts that achieved his spending goals and showed himself willing and able to take the heat for them. But I don't think that's going to happen."
Woo. And Amen. It certainly seems as if the Emperor-Aspirant wears no clothes on the centerpiece of his campaign.
I'm a Ryan Fan on Medicare, But He Dropped Some Whoppers at the Convention
As we've said here before, we're fans of Rep. Paul Ryan's Medicare reform plans with Senator Ron Wyden (D-OR). Ryan's the first Gen-Xer on a major party ticket, and he's just so freakin' earnest he's hard not to admire. He did a nice job of rallying the faithful in his speech to the Republican National Convention. But man, he dropped some whoppers you just gotta call him out on, because they undermine his credibility as a brave standard-bearer for big ideas, especially on Medicare.
Ryan made his reputation in large part by advancing an unpopular plan to dramatically cut and restructure Medicare two years ago. While he didn't mention his own plan once on Wednesday, he included it in his last two budgets, both of which preserved the Affordable Care Act's cuts to Medicare — taken mostly from health plans and and hospitals. Instead, Ryan once again accused President Obama of being the true threat to Medicare.
"You see, even with all the hidden taxes to pay for the health care takeover, even with new taxes on nearly a million small businesses, the planners in Washington still didn't have enough money. They needed more. They needed hundreds of billions more. So, they just took it all away from Medicare. Seven hundred and sixteen billion dollars, funneled out of Medicare by President Obama. An obligation we have to our parents and grandparents is being sacrificed, all to pay for a new entitlement we didn't even ask for. The greatest threat to Medicare is Obamacare, and we're going to stop it."
Obama did use those Medicare savings — in the form of targeted cuts in payments to providers, not in benefits to seniors — to pay for the health care law. Ryan's budget calls for using them to finance tax cuts for wealthy Americans, and deficit reduction. But by now calling to restore that spending commitment to Medicare, Ryan and Romney would accelerate Medicare's insolvency by several years.
Ryan also criticized the president as failing to act on the recommendations of the bipartisan debt commission that Obama had created. "They came back with an urgent report," Ryan said in his speech. "He thanked them, sent them on their way, and then did exactly nothing." He was referring to the Simpson-Bowles commission — which Ryan served on, but whose plan he ultimately opposed, saying it would raise taxes and not cut enough from health programs. Ryan's opposition put Simpson-Bowles in the ground, since it soured other House Republicans on the proposal.
And in an extended critique of the president's stimulus plan, Ryan said: "What did taxpayers get out of the Obama stimulus? More debt." He didn't mention that a third of the stimulus was in the form of tax cuts, and that he sought stimulus funding for his own district.
Near the end of his speech, Ryan claimed the campaign's top priority is protecting the poor. "We have responsibilities, one to another — we do not each face the world alone," he said. "And the greatest of all responsibilities is that of the strong to protect the weak." But just under two-thirds of the cuts in Ryan's budget target programs that benefit low-income people, while calling for large tax breaks for the wealthy.
I know it's delusional to think we'd get straight talk in an election year. I just hate to see an effective advocate for Medicare reform like Ryan diminish himself for applause lines no one will remember in 30 days -- when the big fight on Medicare is coming in 2013. The country needs this guy to keep his facts straight and distortions narrow.
Sales Oversight & Thoughts on CMS Updated Agent Training Guidelines
As you likely noticed, CMS recently released its updated Guidelines for Agent Broker Training and Testing for CY 2013 on August 21. Our in-house compliance experts have cross-walked the new regulations with the old ones from last year and here's our take: for the most part, the updated guidelines should be business as usual. However, it is interesting to take note of where CMS is going to greater lengths to provide additional clarity or requirements.
Here's our take on a few additions:
- Under the Beneficiary Protections section, new requirements were added on the education of agents on Aggressive Marketing. More specifically, you'll see requisites on things like what the potential consequences will be for engaging in Aggressive Marketing activities, report requirements, plan disciplinary actions, termination rules, and compensation forfeiture guidelines. Again, while this isn't new, it's now part of the training requirements and necessitates additional preparation, as plans now need to inform the agents about their specific disciplinary process up front. Agents now need to be educated on scenarios that clearly define, "if agent does X, the penalty is X." Plans should take the time to create an offense ranking matrix and a disciplinary scale that escalates based on number of infractions or severity, and educate their agents ahead of time. Of course there will always be new situations that pop up, but this is not a process that should be created on the go.
- There are quite a few updates focused on "do's and don'ts". We saw these added under Marketing for things such as scripts, health screenings, and contact information and again under a new section on Rewards and Incentives. This is in place to educate agents on what the process should look like in order to help identify any plans that try to get a little too "creative" in some of these areas.
Both of these additions are all about starting to compare processes across some of the (historically) more challenging areas for sales & marketing and compliance departments to manage. CMS fully encourages plans to forge their own respective path when it comes to agent oversight. They recognize it's not a one-size-fits-all solution, but with information like this now more accessible, it also allows them to start identifying more instances of what's working and what's not.
Stay tuned for the latest analysis on the updated training and testing guidelines. As always, contact us with questions and be sure to check out the Point -- launching in October.
Obama, Ryan, and the Myth of Competition
Both the exchanges at the heart of ObamaCare, and the competing plans in the Ryan Medicare reform proposal rely on competition among health insurance plans to reduce the upward trend in the costs of health care. But health insurance isn't health care.
With the consolidation of health care providers that is happening throughout the US, more and more health care is being purchased in non-competitive markets. Health insurers are faced with large systems that must be included in the carriers' networks if they, the insurers, are to offer a competitive product in the market. Consumers expect access to the big systems, and insurers must include them. That is the description of an oligopolistic market for health care. Nothing that happens in the exchanges or among the Ryan-esque Medicare plans will change that dynamic. Eighty to eighty-five percent of the cost of health insurance is driven by the cost of health care. Costs determined by the health care oligopolists will inexorably drive up the costs of health insurance.
A 2011 RAND study found that "hospital markets are much less competitive than health plan markets nationally and, importantly for consumers, that hospitals operating with little competition are able to charge health plans much higher prices, which are passed on to consumers in the form of higher insurance premiums."
Anna Wilde Mathews, writing in the August 27, 2012 Wall Street Journal cites hospital acquisition of physician practices as another cost driver that is immune to health insurance competition. She notes that prices for procedures can double after an acquisition, sometimes even when the procedure is performed by the same people in the same facility with the same equipment.
The Health Care Cost Institute published a study of health care costs in May of 2012, based on an analysis of commercial insurance claims from over 33 million beneficiaries of several large carriers. The Institute found that "the increase in per capita health care expenditures from 2009 to 2010 was primarily driven by higher unit prices and not by the utilization (amount) or intensity (mix) of services." This was in the wake of the Great Recession, when competitive pressure should have been driving prices down, as in other markets. But competition among the major carriers who provided the data for this study had no apparent effect on prices charged for care.
In this study, increases in the cost of care determine increases in the cost of health insurance, in a way that competition, even among major insurance carriers, could not alter.
The policies of both parties regarding affordability of health care are built on a myth. Expecting competition among health insurers to control the cost of health care is akin to expecting competition among auto manufacturers to control the price of gasoline.
Politics Distort Similarities Between RomneyCare, ObamaCare and RyanCare
I was quoted in Monday's New York Times story on the success private plans are having in Medicare, pointing out the similarities between RomneyCare, ObamaCare, and RyanCare -- Paul Ryan's proposal for Medicare reform, now receiving unprecedented scrutiny following his selection as Vice Presidential candidate. When you remove the distortion of election-year politics, it's easy to see the three approaches share the same DNA.
Only in an election year could you see a conservative advance a proposal for Medicare reform with a liberal pedigree and get demagogued for it. The same could be said for Obama -- a liberal advancing health reform with conservative concepts. Consider:
- RyanCare's premium support or vouchers resemble the subsidies of Romney's Massachusetts' health reform and Obama's Affordable Care Act. All three proposals have roots extending to President Clinton's and subsequent bipartisan entitlement reform commissions, as well as to conservative think tanks like the American Enterprise Institute and the Heritage Foundation.
- All three feature a government-regulated insurance exchange, modeled after Medicare Advantage and Part D, as the central marketplace where consumers will choose the coverage that fits best.
- All three feature critical insurance reforms and foster regulated competition among payers and providers at their core. To be clear, Ryan's second Medicare proposal with Senator Ron Wyden (D-OR) features much stronger consumer protections.
Medicare really wasn't a leading issue in the election; now it is with Ryan's selection, especially in senior-heavy swing states like Florida and Pennsylvania. Both camps are jockeying to define the other, with Ryan the Democrat's poster boy for "Medi-Scare" or "Medagoguery" tactics. An honest debate over Medicare is delusional in an election year -- but will be unavoidable in 2013 as the "fiscal cliff" looms and the deficit debate comes to the fore again.
My concern is that Democrats and Republicans will stake out positions during the election cycle that prevent them from having the thoughtful discussion the country needs about Medicare's future next year. We must first agree that Medicare in its current form is unsustainable. The most recent Medicare Trustee's report stated the Part A Trust Fund will be bankrupt in 2024 under a rosy outlook, and we know the program is a major contributor to deficit projections. We can't go on this way.
Ryan-Wyden lays out a carefully considered approach shown to be successful in Medicare Advantage and Part D. Without Ryan-Wyden's kind of structural reform, we have no hope of getting our debt under control. Ryan-Wyden was a significant improvement over "Ryan 1" -- his first, draconian Medicare reform proposal two years ago -- and it shows Wyden's liberal, former Gray Panthers fingerprints. It keeps traditional Medicare as an option, with heavily-regulated competition at its core. Ryan-Wyden is adequately funded whereas Ryan 1 pegged subsidy growth to inflation, which would result in a huge cost shift to beneficiaries. Ryan-Wyden's subsidies are pegged to the second-lowest bid or traditional Medicare, whichever is cheaper. Seniors who choose a plan above the benchmark would pay the difference, just like in Part D. It calls for the formation of a Medicare exchange modeled after www.Medicare.gov, and even adds a new catastrophic benefit, also like in Part D. It is inextricably related to both RomneyCare and ObamaCare.
The fundamental difference between the parties is what we'd do with the savings, and that's what elections are for. My hope is that it doesn't get so nasty that battle lines harden and Ryan-Wyden doesn't get its moment.