HCR -- The Perils of Premium Support for Medicare

This post is not timely. I'm copying it here in case I want it for future reference.

Thanks to Obama's re-election, Paul Ryan's vision for Medicare premium support got put back into a box. Unfortunately it's not a coffin but a storage box, still on the shelf, waiting for the next chance to shine it up and try to sell it again. Meantime, I got an email notice reminding me of a conversation about premium support I had in a comments thread in November, 2011.  Naomi Freundlich is a health policy expert whom I met on line a couple of years ago when she and Maggie Mahar worked and published together elsewhere. She launched her Reforming Health Blog after that.

John Ballard 

Thanks for this. 

My wife and I graduated to Medicare three years ago and it is a very confusing place to be. By the time you sort out the old “alphabet plans” (supplemental private plans) and the other alphabet designations (Parts A, B, C and D), then discover that the A and B are old-fashioned Medicare — and you must pay a premium for Part B) — and Part C means MA (which invalidates your Medicare card altogether) and Part D, which may or may not be coupled with the other plans…. 

It’s a nightmare for a sane person hitting on all cylinders. I can’t imagine what it’s like for a large and growing number of us with cognitive difficulties. 

We had Medicare Advantage the first year because there was no premium! I couldn’t figure out why that was the case, especially since forty miles to the South, in the next county, there was a modest premium. I decided MA must be so good for private, for-profit insurance that they were willing to kidnap customers from Medicare. Those tax dollars must really sparkle in the eyes of the private sector. 

The second year there was no MA available for our area, so we were able to go with regular medicare and one of the supplemental plans. According to the agent, that was possible since MA was not available, but he advised us that once enrolled with Medicare Advantage, if one wants to go back to regular Medicare it’s okay, but any supplemental insurance plan would have to be approved by insurance underwriting. That means, of course, that premiums (or even acceptance?) might be punitive in the aftermath of some expensive medical event. 

Now comes this “premium support” baloney, which I presume is still in the proposal stage, which strikes me as a devious way to ration both care and tax dollars at the same time, with insurance companies being certain to collect their portion in the process. 

Today’s Washington Post column about the wholesale ignorance about PPACA is depressing.

Naomi Freundlich 

Thanks John for your comment, and for finding me here. I am still working out the kinks of setting up my own blog–could use help on improving my Google presence. Check out my latest post re: misinformation about the ACA.
Naomi

wkj said

My wife & I are retired lawyers entering our third Medicare year & I agree entirely with the comments of John Ballard above about complexity and confusion. Also, not mentioned above, is the additional complexity within Part D–three options with different premiums & different formularies. 

Fortunately, neither of us have significant Rx needs at this time. We thought about skipping Part D, but ended up enrolling in the cheapest option (with a skimpy formulary) in order to avoid the late enrollment premium surcharge if and when our Rx needs change and we need to switch to a Part D plan with broader coverage. 

Do you know who thought up this wacky 3-tier Part D structure and why?
I navigated here from HealthBeat and will check in here now.
Thanks

Naomi Freundlich 

WKJ,
Thanks for checking in to my blog and for your comment. I don’t know who thought up the 3-tier Part D structure but it has been a universal method for determining how much private insurers pay for prescription drugs for many years (with generics being the Tier-1 drugs). With literally hundreds of plans available to many seniors it often becomes impossible to choose a Part-D plan without the help of family members or an advocate. If all of Medicare were shifted to this scenario, confusion (and the opportunity to make a poor choice of plan) would be rampant. 

Naomi Freundlich

John Ballard

Medicare Part D is a creature of the Bush years, along with Medicare Advantage as part of the Medicare Modernization and Improvement Act of 2003. 

http://www.nls.org/conf2004/summary-medicare-act-2003.htm 

It was advertized as a great way to allow the private sector to curb healthcare inflation by the magic of market competition. The results have added to an already underway slow-motion train wreck which has only become worse. Along with the fact that Part D was unfunded, believe it or not, Medicare reimbursement rates were pegged to a sustainable growth metric (SGR) which never happened because Congress intervened rather than allow those rates to be smaller than whatever they would have been otherwise. Every year since, somewhere toward the end of the year, the amount of that adjustment has grown to the point that it is now up to about 30%, but it will never happen because one of the unmentioned but obligatory responsibilities of Congress — and both parties are involved — is the so-called “Doc fix” which annually overrides the otherwise legislated Medicare reimbursement cuts mandated by the old “Improvement” Act of 2003. 

And that’s just one small part of what ACA was passed to correct. But as every schoolboy knows,loud cries are calling for that to be repealed. (I don’t think it will happen because too many people in the right places know better). Be sure to look at Naomi’s other post about the Kaiser survey. The depth of ignorance about the new law is breathtaking.

Barry Carol 

John Ballard correctly notes that under most circumstances, anyone who has a Medicare Advantage plan and wants to switch back to standard Medicare will be subject to medical underwriting to purchase a Medigap supplemental coverage plan. With Medicare Advantage though, you not only don’t need a supplemental plan but you can’t buy one even if you wanted to. What wasn’t mentioned in the post or the comments is that the MA plans are especially popular among lower income seniors because it eliminates the need for a supplemental plan which they usually can’t afford anyway and they often include additional benefits beyond the standard Medicare offering in exchange for some limitations on provider choice. 

I’m in the process of signing up for standard Medicare to start on 1/1/2012 following my retirement. The United / AARP supplemental plan “F” (most comprehensive) will cost $157.00 per month at my age. While I can easily afford that, it’s a lot of money to a low income person – an inconvenient truth that liberals choose to ignore. This is a good part of the reason why MA plans continue to increase their penetration rate even though the government payments are being phased down toward the average for standard Medicare. 

With respect to Part D, I found that I could go on http://www.medicare.gov, put in my zip code and the prescriptions I currently take, and get a list of Part D plans available in my county listed in ascending order of estimated out-of-pocket costs for the premium plus the co-pays. I can also find out whether all of my drugs are on the formulary or not and, if not, which ones are excluded. It was surprisingly user friendly and uncomplicated.

John Ballard

Thanks for your follow-up. Even a healthy person who enrolls in MA is taking a chance that he or she will not have a serious medical event until the next open enrollment period, so taking a chance on underwriting approval is something of a crapshoot. That’s why my wife and I are sticking with Medicare, but we opted for supplemental Plan N.. We also found that Walmart’s Humana plan is very economical for our few prescription needs. 

I’m hopeful that over the next few years, barring passage of the catastrophic disruptions driving the GOP presidential rhetoric, some of the chaos surrounding Medicare will clear up. Some of the alphabet plans went extinct a few years ago and MA is having to adjust to progressive capitation haircuts. And if CMS succeeds in getting prescriptions for Medicare priced comparable with what Medicaid pays that burden will ease up a lot. 

Before I started looking closer at the crazy mess we call health care I had no idea it was so chaotic. My wish list includes a return to the time when direct-to-consumer ads for medicine were unheard-of. Also, an end to for-profit companies’ literally giving away durable equipment because they are billing Medicare and Medicaid enough that they can cover advertising and freebies and still make profits. (I’ve seen some of this from the VA as well.) And Dr. Wachter’s post at The Health Care Blog reporting on his observations of Britain’s NHS describes a dream world for GPs with specialties (they call the “ologists”) is not a perfect template but it sure describes a lot to think about 

http://thehealthcareblog.com/blog/2011/11/29/the-british-primary-care-system-and-its-lessons-for-america/#more-34867 

Hopefully our grandchildren will live in a place where some of today’s wrinkles will have been ironed out.

lhf said

I don’t see how you control the cost of Medicare without rationing. The rationing can be done by government or by the market. For myself, as a middle class (not wealthy) Medicare recipient, I would prefer the market. 

Right now, it’s not easy to find a gp (or a gynecologist) who will take a new Medicare patient. I would rather pay more out of pocket (maybe health savings accounts?) and be able to choose the doctor I go to and the types of screenings, medications, and treatments I will pay for.
Not all old people are afraid of Paul Ryan, although the Rivlin plan sounds better to me.

John Ballard

The market you want is wide open. It’s called “concierge practices.” They have opted not to accept Medicare patients because their patients can afford to pay market prices. The HSA option you mentioned is still available. No one is forced to participate in Medicare. 

Medicare money is payroll tax money. We all face a dilemma — as beneficiaries we all want as much as we can get. But as citizens/taxpayers we want our tax dollars not to be “wasted.” Call it curbing waste or rationing or whatever you wish. In the final analysis the amount available is finite and somebody has to divide the pie according to what’s available. 

(If you are not afraid of Ryan you better have deep pockets. I’m not informed about Rivlin, but I sense she is probably more open to negotiation than Ryan. In any case, unless and until the system is changed, discussions about politics are just that. Discussions. Until then we are stuck with a very dysfunctional system. Which includes rationing, incidentally — according to how much money you have. Those who can afford the best of care get it. And those without settle for less, in many cases much less. If you want a good example of how the private sector handles an issue with little or not government intervention take a look at dental care. Plenty of people have dentures and the notion of crowns, root canals and cosmetic dental care is as alien to poor people as paid housekeepers or trading every year for a new car.)

lhf said

“In the final analysis the amount available is finite and somebody has to divide the pie according to what’s available.” 

Rationing. Someone has to do it. Might as well call it what it is. 

There will always be inequities in the distribution/availability of health care. In Britain, there is a basic national health program, but people who have the means buy private health insurance and don’t have to wait for things like hip replacements. I don’t know how you get around this unless you prohibit people with money from buying better care. And this problem is not unique to medical care, obviously. Rich people are going to have more and better everything. Doesn’t really matter whether it is bankers or Soviet bureaucrats with daschas. 

I don’t know what the answer is, but I know my Medicare will pay for certain screenings, but not others. As an older recipient, the screenings it pays for (mammograms) are less valuable to me than those it doesn’t (vitamin d levels). People get all the “free” screenings because they are “free” whether or not they produce a benefit. I would rather have a “screenings budget” that, in conjunction with my doctor, can be used for screenings that make sense for me. Something like that might be a small market change that could reduce costs in the long run. If I want additional screenings beyond my screenings budget, I would have to pay for them or pay for insurance that covers them. 

I know older people who spend a lot of time visiting doctors at public expense just because they want attention. I know others who go get body scans at the David Drew clinic because their insurance will cover it, never mind that analysis shows these screenings don’t help the vast majority who get them. I don’t know how to control for these cost drivers except to put a greater burden on consumers – who then must inform themselves or find a gp they can trust.
Those who claim the Affordable Care Act will control costs are blowing moke. It retained the fee for service model. It added large numbers of people to the pool that must be covered without coming up with a way to pay for them. A good example is that an individual’s premiums can’t be raised due to a preexisting condition, but the premiums on everyone can be raised to be sure that the additional risk is covered. That’s one reason why premiums for private insurance keep rising and will keep on rising. 

I have yet to see a proposal that I think will work. I wouldn’t object to a national health system that provided basic care – very basic – to everyone. But what are we going to do about the millions spent on saving the lives of marginal preemies, exotic childhood diseases, and keeping old people alive beyond their natural life cycle? When the lobbies for various disease sufferers plead for money for research or coverage for treatment, how will we respond? All these questions will have to be faced but our cowardly politicians (of both parties) refuse to do so.

John Ballard

Good observations and comment. You’re correct. Rationing by any other name is still rationing, and those with enough personal resources will always be better cared for than those without. Assisted living and private duty caregivers are two items that come to mind that are expensive extras unavailable to many, if not most families, as well as high-end long-term care facilities. CCRCs (Continuing Care Retirement Communities) are another environment it takes a lot to join — something like country clubs for the elderly where one can start with a nice home and matriculate as needed to independent apartment, assisted living and long-term care, even Alzheimer’s care, if needed. (I think Canadian Medicare, unlike the UK’s NHS, is the sole clearing house for care in that country. Private insurance is not allowed there.) 

America’s challenge is how best to craft a meaningful and humane safety net for those at the low end of the economy. Medicaid, another term meaning welfare, is a mixed bag which varies widely from state to state. And at some point Medicare beneficiaries often sink to Medicaid status as they “spend down” their net worth to that point, typically when and if they require long-term care (which runs from sixty-five thousand a year and up) and is not covered by Medicare after 100 days.

cmaime55 said

What’s your biggest argument against privatizing medicare? I think for me it would be the inability to control price increases.

John Ballard

My biggest argument to privatizing Medicare is that like Social Security I, and everybody else who spends a working lifetime being taxed for the support of those programs, have been in he club from the first dollar “contributed.” (Don’t you love how those taxes are called contributions?) There is no reason that when I arrive at the time when I need the benefit AND stop working AND am facing whatever lies ahead in my final years — I should suddenly be expected to submit myself to the cold-blooded profit-seeking vagaries of the market place,for something as essential as basic medical care. 

Privatization is nothing but another word for destroying the program. America has three social safety nets. (1.) Social Security is a supplemental lifetime income and modest benefits program for those too old, dependent on others or damaged to work. It’s not enough to supply every need, but that’s all there is for many. (2.) Medicare is a health care safety net in addition to the assets of that same group, but like Social Security, that’s all there is for many. And finally, (3.) Medicaid is the ultimate safety net for that same population when all other resources are completely gone. And for that group. Medicaid literally IS all that stands between them and death. 

Privatizing Medicare means removing Safety Net #2.
As a Medicare beneficiary I am keenly aware that many of my peers have more generous health care benefits than I. Veterans, railroad retirees and their spouses, and those with company-paid medical benefits in their retirement packages come to mind. All of them get more medical benefits than I, often including dental care, at little or no out of pocket expense. Medicare, despite all the hoopla, is by no means a luxurious place to be. 

If Medicare and other medical expenses are to be lowered the answer lies not with rationing but with the reduction of the numerous non-medical expenses sucking the system for other purposes. Here are a few more expenses, all of which have but one revenue stream — medical
bills. 

§ TV ads — some of the most expensive air time for some of the most costly
productions in the ad industry.
§ Mammoth executive bonuses and golden parachutes for both health care
administrators and insurance companies
§ Facilities with manicured landscaping, marble floors, lived plants, flat-screen
TVs in every room, and concierge food service
§ Elaborate accounting arrangements by which large so-called “not
for profit” health care systems, often augmented by equally large,
embedded insurance companies (BCBS comes to mind) launder bills mostly
for the benefit of very profitable clinics, specialty practices and
device manufacturers.
§ ”Free scooters” advertised for Medicare beneficiaries. Sometimes
comes with a free recipe book or lighted magnifier “just for making the
call!”
§ Catered meals and other treats for hungry office staffs,
compliments of your favorite drug or other supplies sales
representative.
§ And speaking of sales, don’t forget the sales bonuses for high
performers. The only people in America with no limit to how much they
might earn are not in medicine or other specialties, but in sales.
(Investment bankers are in the running, of course, but they are in fact
limited by how much capital and/or credit they have. Enterprising sales
people have only transportation, cosmetics and a few other expenses.
§ Don’t let’s leave out some red meat for the tort reform crowd —
legal and accounting services, and a grey area often called “defensive
medicine.”
With the exception of a dedicated group of community volunteers who provide a few ancillary goods and services, every dime of all that has but two sources:
1.) Medical bills
2.) Government grants for teaching hospitals and research by NIH. (taxes)
What am I missing?
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* Yes, of course. I almost forgot — MEDICAL CARE! 

Don’t you love watching those ED ads where the whole landscape goes tumescent?

That’s a really great special effect, huh?
Makes you all horny just watching.
Sorry. Don’t try to sell me private “health care” insurance in my sunset years until some of the other NON-health care expenses are removed.

Vanessa Elizebeth said

Get rid of insurance companies, convert Medicare to a national single-payer system like the rest of the industrial world and that will translate into savings for everyone.

John Ballard

Great idea. I’ll add that to my Christmas list along with the new pony.