As we begin the national debate over what to do about Medicare's unsustainable costs, I will suggest that the HLC proposal gives us one, of what will have to be many, outlines for discussion.
Their recommendations include:
- Creating a new Medicare Exchange, beginning in 2018, where beneficiaries would have the choice of private Medicare plans as well as the traditional Medicare plan. The HLC proposal would be a defined contribution program much like the Republican Ryan plan but would differ from Paul Ryan’s in a couple of key ways. First, in the HLC proposal traditional Medicare would continue to be one of the options. Second, the annual increase in the beneficiary support premium would be more generous—the HLC is proposing an annual premium support increase equal to GDP plus 1%.
- Gradually increasing the Medicare eligibility age from 65 to 67—starting in 2014.
- Reforming Medicare’s cost sharing structure by increasing deductibles and co-pays as well as requiring high-income beneficiaries to pay the full cost of Medicare Part B.
- Implementing medical liability reform including a cap on non-economic damages, a one-year statute of limitations, and a “fair share” provision that would limit damages commensurate with responsibility for the injury.
The HLC’s suggestions have merit but, I will suggest, make the same fundamental mistake the Republican adopted Paul Ryan proposal made: They put all the onus for Medicare savings on the beneficiary—not the providers and not the insurance companies.
No Medicare reform proposal can be enacted if it does not protect Medicare beneficiaries by assuring them that it can achieve affordable costs.
The HLC would create a Medicare premium support based upon the average cost of a Medicare plan—and then increase that by GDP+1% in each subsequent year. That makes sense—the beneficiary support starts where costs are at inception and then increases by a factor (GDP+1%), which is reasonable for beneficiaries and providers and sustainable for the country.
In fact, I will suggest, that any final Medicare reform proposal will likely contain a cap of GDP+1% both because it gives the country an affordable objective and because it preserves spending at current levels plus a reasonable rate of growth.
But the problem with the HLC proposal is just what risk and responsibility does it transfer to health care providers and insurers? If the government premium support isn’t enough, providers can just demand more from insurers, and insurers in turn can just make up the difference by increasing premiums for seniors. There is certainly some upward limit on what people can pay, but the tension will always be to shift costs to the beneficiary as costs escalated.
More, the system would almost certainly become even more tiered than it is today. The Medicare option could easily look more and more like Medicaid as those able to afford better coverage fled to the more expensive private plans and those unable to pay the free market increases would have no alternative but the Medicare fee-for-service plan that stayed viable by paying providers less—and as a result looked more and more like Medicaid.
The HLC’s suggestion to increase the eligibility age for Medicare beginning in 2014 is a non-starter. The Congress might end up increasing the Medicare eligibility age at some point. But it won’t be done for people nearing retirement age—who have done their retirement planning presuming an age-65 eligibility. The Super Committee must come up with savings in the 10-year budget window—and that is too soon for any Medicare eligibility age change.
There is also growing evidence that pushing back the retirement age simply shifts costs to the pre-retirement market at an even higher cost than what it costs for Medicare to cover these beneficiaries.
The HLC's means testing recommendations call for more cost sharing as a strategy to focus seniors attention on cost control. As a concept, this makes sense and could well be part of any final Super Committee plan--but it all depends upon the details.
The HLC’s tort reform ideas are far too incremental—they call for capping payments on what is a fundamentally flawed system. Why not fix the system rather than Band-Aid it? Proposals for health courts and no-fault resolution that emphasize data collection and quality improvement would have been more the kind of proposals I would have expected from the HLC.
The Health Leadership Council’s recommendations do create a structure that gives seniors more incentives to purchase the most efficient health plans, put a reasonable limit on what our country can spend on the Medicare entitlement, and recognize that more cost sharing, particularly for higher income beneficiaries, and a later eligibility age, will ultimately be part of the solution.
But just what are all the insurance companies and drug companies that are part of this group willing to do to put some of their “skin” in the game?
For those convinced that just putting the market in charge will control costs and produce affordable premiums, a recent post: Inconvenient Facts for Both Republicans and Democrats—Neither Side’s Health Care Proposals Are Supported By Past Performance
