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Deforming Medicare into a Competitive Bidding System (part 1)

For lambert, who asks for a takedown of this JAMA article, Potential Consequences of Reforming Medicare Into a Competitive Bidding System.

The article is behind a paywall but you can buy one day's access to it for $30 if you want to read it. I'm not going to give them 2 weeks' worth of my catfood money, so rather than writing a rebuttal of that particular article, I'll happily make your eyes glaze over with lots of stuff on privatizing Medicare in general.

First, a couple of definitions...

Vouchers. The government hands everyone the same amount of money and says to them: Here, go buy any insurance plan you want. If the insurance you want cost more than this, you'll have to pay rest of it yourself, out of your own money.

Premium support. This a lot like vouchers, but the government picks one basic insurance plan that's offered on the market and says: We'll pay X% of the premium of this plan and if you want a different, more expensive plan, you'll have to pay the rest of it yourself, out of your own money. Which sounds exactly like vouchers, and which it almost is. But "premium supposrt" allows politicians to devise a sliding scale of payment and say shit like: Look! We're subsidizing ONE HUNDRED PERCENT of the premiums for poor people! Of course, they may choose to subsidize 100% of the premium of only the most basic plan, which would then leave even the poorest of the poor stuck paying for (or forgoing) all the medical care that the plan doesn't cover.

Competitive bidding. In theory, the government says to the insurance companies: This is the population (old people and disabled people) we want you provide insurance for, and this is how healthy (or unhealthy) they are. In theory, insurance company A says to the government: We'll do that for $X, insurance company B says to the government: We'll do that for $Y, and insurance company C says to the government: We'll do that for $Z. In theory, the government then picks the lowest bidder and everybody lives happily aver after. Yeah, riiiiiight.

Moving onward, to visualize some of the potential consequences....

What would a fully-privatized Medicare (or a mostly-privatized-but-with-a-public-option Medicare) look like? We can't know for sure without actually ditching Medicare as we know it and trying this new-fangled way, but we can look at the Federal Employees Health Benefits Plan (FEHBP) and the currently-privatized portion of Medicare for clues.

Medicare Advantage (private insurance) already uses competitive bidding [oops, not quite correct; more later] and it's holding down spending.

Well, no, not really. Medicare Advantage plans appear to do well, but they're doing so because they're gaming the system, not because of competitive bidding. Some of this gamesmanship includes cherry-picking only the healthy (or less sick) patients, or getting paid to provide health care to veterans who are also getting some (or sometimes all) of their care paid for by the Veterans Administration. PNHP policy researchers have made an attempt to quantify some of this and you can read their report here.

You say you want choices in your health care?

Now I’d like to address choice.

We need to get real on choice. If there’s a single payer, everyone takes it. I looked up my choice with my current plan (Aetna FEHB) versus traditional non-privatized Medicare. I looked up my choices in two places: Wilkes-Barre PA and zip 10025 on UWS Manhattan where I live and work. In both places I had more choices of doctors in a range of specialties with Medicare. Sometimes Medicare recipients had over four times as many doctors to choose from as I did. No, I didn’t get “just the best”, most everyone on Aetna also took Medicare.

I also know about choice available with private versus public Medicare from the range of referral options I discovered I had for my patients at Bellevue. Want cancer care at Sloan Kettering or deep brain stimulation neurosurgery for Parkinson’s at Columbia? You better have “real” public Medicare, not one of the privatized “Advantage” plans, because they don’t take them.

Private insurance offers the false “choice” of picking which for-profit shareholder accountable entity will get to limit your choices. Let me say it again. Private insurance means limited choices. Single payer means you choose to see anyone you want.

So, insurance companies can save the government money by only paying for your care if you use the cheapest doctors and cheapest hospitals, and also by refusing to pay for some care entirely. But hey, you get to choose from hundreds of insurance plans!

But we'll have hundreds of insurance plans to choose from!

Finally, there is the vaunted “consumer choice”that a program such a FEHBP would offer. Over time there have been fewer and fewer choices offered in FEHBP. The number of participating plans has dropped by 50 percent in the past five years. In the New York City area, for instance, employees have the choice of just four major insurers — Aetna, Blue Cross, GHI, or HIP – along with several firms set up originally to serve postal workers but now offered to any Federal employee.Other areas of the country have even fewer.

FEHBP requires that all plans cover the same medical services. In spite of this, some plans offer more dental and vision coverage than others. However, the primary “choice” is whether to pay now or pay later. Those who choose plans with lower premiums (taken out of biweekly or monthly pay-checks) face higher deductibles and co-payments when they actually need medical care. Often this results in higher overall cost to those who choose what looks like a less-expensive plan. Seeing physicians “out of network” costs more in a “basic”plan than in a “standard” or “high option” plan. We know from many studies that higher co-payments lead low- and even middle-income people to postpone needed medical care. Since FEHBP premiums are independent of the employee’s income, lower-wage workers are likely to choose a “basic” plan and thus face the barrier of higher costs when they have to seek care. And many, of course, will not be able to afford to pay for any plan.

Here ya go - wade through this website as though you were a federal employee and see what plans you would be eligible for, always remembering that where you live affects what plan you can have. If you enjoyed this trip, you'll love the new health insurance exchanges being brought to you in 2014!

Snowbirds beware!

If you’re a snowbird or sunbird who migrates to another part of the country for several months of the year, here are some tips for ensuring that you get the medical services you need under Medicare, in whatever state you happen to be in at the time:

  • Choose the traditional Medicare program to receive your benefits. Under this program you can use your Medicare card to obtain Medicare-covered treatment at any provider (doctor, specialist, hospital, lab, etc.) that accepts Medicare patients, anywhere in the country.
  • Beware of enrolling in a Medicare HMO or PPO. These private plans—part of the Medicare Advantage program that provides an alternative to traditional Medicare—operate within specific regions and localities, sometimes no larger than a county or ZIP code and have their own regulations.
  • HMOs typically require you to go to doctors and hospitals within their networks and will not cover your bills outside of their service areas except in emergencies. (A few insurers, however, offer six-month “guest memberships” at other HMOs for snowbirds.)
  • PPOs allow you to see out-of-network providers, but usually for much higher copays, except in emergencies. So your costs for any regular services while at your second home could be significantly more.

So, if you want to spend part of the year in sunny Florida and part of the year in snowy Maine, or even if you just want to travel across the country to visit your grandchildren, you might or might not be able to afford to get sick if you have private insurance.

But Medicare Private Fee-For-Service (PFFS) is good anywhere in the country and I can go to any doctor or hospital I want. Plus, all my co-pays and premiums are lower.

Note: Information on this page is for the following Medicare Advantage Plan: PFFS (Private Fee For Service)

Q: Can I use the plan anywhere?
A: Yes, as long as the provider accepts Medicare and the plan. This is especially beneficial to seniors who travel a lot or snowbirds who go to Florida in the winter.

Q: How can I have such a low or ZERO premium?
A: The federal government pays a subsidy to the PFFS (Private Fee For Service) plan at a cost of 119% of original Medicare. Therefore, the company passes the savings on to you. The plan acts like original Medicare with a Medicare supplement except for very low doctor and hospital co-pays.

and

How PFFS Currently Work

PFFS are popular amongst consumers because they allow Medicare beneficiaries to choose their own healthcare providers, rather than having to select their providers from a limited number of in-network of Medicare-approved providers. Beneficiaries can see any provider, as long as the provider agrees to charge based on the PFFS fee schedule. This fee schedule is the same as the Medicare schedule.

PFFS MAOs have yearly contracts with the Centers for Medicare and Medicaid Services to provide Medicare beneficiaries with their Medicare benefits as well as additional benefits that a company opts to provide. Essentially, the PFFS provider pays for healthcare instead of Medicare when a beneficiary has such a plan.

The main benefit (which makes PFFS so popular) is that individuals who join PFFS MAOs are not required to use providers within a network and can, therefore, see any provider as long as the provider is able to receive payment from Medicare and the PFFS MAO.

More Changes to PFFS Plans

In addition to the decreased government reimbursement amount for PFFS plans, PFFS plans will be required to develop healthcare provider networks beginning in 2011. The change will force PFFS beneficiaries to select their healthcare providers from within the plan network, limiting their freedom to see providers that they prefer.

Experts predict that more healthcare insurance providers will follow Coventry and WellCare by dropping their PFFS plans in coming months. Individuals should contact their healthcare insurance providers if they are currently enrolled in a PFFS or are considering enrolling in a PFFS to get more information about how their provider will respond to the upcoming PFFS changes.

Well, it used to be true that PFFS was good anywhere in the country, and that you could go to any doctor or any hospital, and that your care was practically free at the point of service, but no longer. Medicare is beginning to refuse to pay the insurance companies some of that extra 19% for your primo care. And what is the insurance industry's response to the lower government payments? Why, to stop offering these more expensive plans, of course.

So, if the government is going to spend less and less money on Medicare in the future by giving you a voucher (or premium support), do you really think these gold-plated plans are going to be available to you?

Why was Medicare created in the first place?

(You might note that the asker of this question is a poster named Tea Party Express!)

Resolved Question
Why was Medicare was Created????????

What reasons was it made in the 1st place??

Best Answer - Chosen by Asker
Real answer here, because insurance companies wouldn't insure older people at a reasonable rate, and older people were losing their homes and all their savings paying for hospitals and ending up penniless.
There wasn't Medicaid either back then.

I lived through it with my grandmother. When you see a woman left without a penny after eighty seven years of working, you don't really like to see some of the political answers from people who don't know what they are talking about.

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Comments

Submitted by hipparchia on

well, ok, i won't be right back, gotta go do rl stuff for a while.

lambert has provided a link to the entire jama article. i'll read it and post any rewrites i may have later tonight.

nihil obstet's picture
Submitted by nihil obstet on

Who enjoys insurance shopping? I've never really understood why the emphasis on choice is always presented as such a good thing, when in fact, most people hate it. People really think about specific subjects only when they have to. If ads broke the "choice is what you want" happy jingles for "care is what you get", I suspect they'd be successful.

Submitted by hipparchia on

presenting "insurance plan choice" as a good thing goes over well with several groups of people.

1. people who want to guarantee that they can keep their favorite doctor, hospital, etc think that by having several plans to choose from they are also choosing their doctors, etc. these people may or may not realize that once they choose a plan, their preferred doctor or hospital or other provider may be dropped from that plan at any time, but they (the patient) will still be stuck in that plan.

2. people who don't want to (or can't afford to) pay high premiums like to have the option of paying a small premium (for a high-deductible plan). these people may or may not realize just how much that decision could cost them if they get really, expensively sick later on.

3. people who know (or expect) that they will need lots of medical care and who can afford the higher premiums like being able to guarantee that there will be no surprises (huge, unexpected bills) down the road. these people may or may not know (or guess) that the intricacies of "provider networks" and "benefits not covered" and so forth will probably mean huge bills anyway it they need lots of care.

4. people who don't want "their" money paying for care for "those" people (women who have sex; people whose skin is a darker color; alcoholics, drug addicts, criminals and other "irresponsibles;" fill-in-the-blank...) want to think that they can choose a plan that doesn't give money to "undesirables."

a single national health plan, financed by taxes, would vastly improve life (and health care) for the first three groups. the fourth group would feel like their religious or civil or other liberties were being trod upon. betcha can't guess which group is currently being encouraged to be most vocal in the health care debate.... ;)

Submitted by jawbone on

regular Medicare with supplement compared to the Medicare Advantage plans. I spent over two months trying to get straight answers from the Medicare Advantage plans about what would be covered or not covered, how much co-pays would be, etc. I never got firm answers and often got differing responses.

Actually it was so similar to working with the private for-profit HMO's that had driven me crazy in recent years that I ran in terror from the Medicare Advantage plans. And good thing, too, as i had no idea my bad back would act up again. Co-pays for the physical therapy would have meant I could not have afforded PT.

Also, recently, when my friend who had the stroke was moved to the sub-acute care, his roommate was being kicked out of the skilled nursing/rehab faclity for 1) not making progress and 2) for making so much progress no more treatment was necessary. How these two things can both be true is amazing to me.

This guy could not bend his left knee after surgeries for a badly broken thigh bone. The muscles or whatever had "frozen" and the therapy he'd had at the good rehab hospital was making very good progress, but then the Medicare HMO demanded he be sent to the sub-acute care facility, where, alas, his rehab therapy was not as rigorous and he made no new progress, actually regressed. Then was sent home with an immovable knee.

He'll probably have falls and will be back. He will probably get the shaft again until he hurries up and dies.

That's how it works in for-profit insurance land.

And last week, after 7 days at the sub-acute facility, my friend S, suffering from short-term memory loss and tunnel vision, was cut off rehab therapy by his for-profit private insurer through his job. He's now on Medicare, but this means cost shifting from the for=-profit company onto Medicare. And it lessens the number of days S has for therapy....

Yes, I'm appealing, but that is a very dicey thing to accomplish without the facility going to bat for him.

Our health insurance system: Privatize profits; socialize losses.

When the losses cannot be socialized, the lack of care will be personalized and individuals without resources will die or live in misery.

And screw health care as an objective.

He'll probably have falls and will be hospitalized again. Rinsce, lather, and repeat. He will probably get the shaft again until he hurries up and dies.

Submitted by lambert on

... but if I get a diagnosis, and the diagnosis permits this, I''ll for a hunger strike in my front yard with a big sign for single payer. If I'm going to "hurry up and die" it's going to to be on my own terms, not this evil and degrading system.

Please keep us posted on your friend because this is a good thing that you're doing, and it's good to share the practical experience.

Alexa's picture
Submitted by Alexa on

are standardized now, if that's what you mean by: "FEHBP requires that all plans cover the same medical services."

Back in the 70s, 80s, and early 90s, that wasn't the case with Dept of Defense (DOD) civilian health insurance plans. That's one reason that I was NOT impressed when our congressmen ran around boasting that we would have the same insurance they have.

The system that they were describing (as I knew it, from years ago, that is) was very unequal. Your coverage depended upon your income and ability to pay the premium, and ranged (then) from bare bones "hospitalization" policies, to major medical, to major medical with dental and eye coverage, etc.

Guess the PtB just can't stomach the concept of the Medicare program: "The CEO and the custodian are treated equally."

Thank you so much for all the useful information, hipparchia.