A response to Medicare Advantage for All

Billy Wynne has written a Health Affairs essay on the desirability of a Medicare Advantage for All design. I am methods agnostic towards the goal of universal coverage at a decent actuarial value level and reasonable costs.  I think Medicare Advantage for All is a good concept.  It is a concept that, if all of the relevant decision makers agreed on the core problem in the US healthcare system is a lack of affordable coverage for everyone, policy wonks, legislative language writers and relevant private sector stakeholders including high level systems architects could lock themselves in a nice beach front resort with several kegs of very good beer and come out with a workable design once the kegs were empty.  But this essay does not lay out a well thought out case.

I have several issues with this piece on a political level and a pragmatic level. Politically the issue that I see with this piece is an underlying assumption that everyone with power in Washington agrees on the fundamental problem definition. In this article, the fundamental problem definition that all stakeholders agree on is that uninsurance is a bad thing. From here, the essayist reduces the problem to a neat set of mechanics.

And then I have a serious issue with the mechanics. This section is driving me nuts:

the starting point for considering how much will be paid for health care services under MAPSA is the weighted average of the rates all of these various payers currently provide; that is, what providers and other stakeholders currently receive.

So a key weakness of single payer, under this approach, becomes one of its greatest strengths. Reimbursement for health care services remains strong but the cross-subsidizing acrobatics that providers currently perform to balance their finances would go away. For example, commercial rates are hiked, often stratospherically, to compensate for typically insufficient Medicaid reimbursement.

There are access (and moral) implications here too: Historical Medicaid enrollees will now be able to see the same doctors and go to all of the same facilities as those who currently have generous employer plans. There will no longer be any perverse incentive for providers to turn them away.

Finally, if you’re like me, your provider friends (and maybe spouses…) have complained interminably about their frustration with the current multipayer system. This is not just an issue with varying claims requirements and payment delays; it’s about caregivers being pulled in several different directions by multiple quality reporting and value-based purchasing programs that can often incentivize conflicting behaviors and clinical standards.

While the Medicare Advantage market would need to be expanded to ensure adequate consumer choice and plan competition, having all payers participate in a single, unified program will substantially alleviate this redundancy and frustration in our current system. Now, please stop asking me to fill out a paper-based intake form every time I come see you.

As soon as I see someone make a cost shifting argument ( “commercial rates are hiked…” ) I get suspicious.

This is Austin Frakt’s bailiwick so I’ll just let his New York Times link fest do this justice:

some hospital executives tell it, they have to make up payment shortfalls from Medicaid and Medicare by charging higher prices to privately insured patients. How else could a hospital stay afloat if it didn’t?

But this logic is flawed.

Study after study in recent years has cast doubt on the idea that hospitals increase prices to privately insured patients because the government lowers reimbursements from Medicare and Medicaid.

Indeed, one recent study found that from 1995 to 2009, a 10 percent reduction in Medicare payments was associated with a nearly 8 percent reduction in private prices. Another study found that a $1 reduction in Medicare inpatient revenue was associated with an even larger reduction — $1.55 — in total revenue….

Another weakness of the cost shifting theory is that it runs counter to basic economics. Hospitals that maximize profits, or even maximize revenue to fund charity care, would not raise private prices in response to lower public ones. In fact, such a hospital would already be charging the highest possible prices to all payers. And, instead of raising them to one insurer if another paid less, they’d do exactly the opposite. Prices charged to two types of customers would move together, not in opposition, for the same reason it does so in other industries….

The second major area that just strikes me as wrong is the entire digression into networks.  Some Medicaid networks are super skinny and painful to use.  Some are fairly broad.  When I worked at UPMC Health Plan, our Medicaid network including the leading pediatric hospitals and the major academic medical center.  As I left, they were trying to get more hospitals into the network in more areas with reasonable success.

Network size varies in Medicare Advantage as well.  Some Medicare Advantage networks are massive, others plans have super skinny networks.  My parents will most likely buy a nationwide Blue Cross/Blue Shield Medicare Advantage policy to get coverage from Massachusetts to North Carolina and everywhere in between as they do the grandkid visiting tour multiple times per year.  Medstar in Washington DC offers a Medicare Advantage plan that only has two hospitals in network within the district.  Access is an issue as Medicaid pays too little but satisfaction is nearly identical between people covered by Medicaid and people covered by far more expensive employer sponsored insurance.

Network is a major differentiators that drives premiums.  People who are buying a Medicare Advantage for All plan will still be dealing with networks unless they buy a plan that has no network beyond all Medicare registered providers. Every patient will still be receiving a website that may or may not be updated frequently and accurately enough and telephone book sized directories will be mailed on request with stale data.   It will still be confusing for patients and it still will be confusing for providers except that their billing will be more straightforward as this proposal is effectively all payer rate setting like that already occurring in Maryland.

Doctors and hospitals will have to hit their Medicare Advantage quality metrics so this will be a bit simpler.   But every carrier will ask for their own data elements too.  Every carrier will think that they have an analytics edge and some special sauce that their unique variables will allow them to unlock massive savings.  I worked for a carrier where there were many nerds committed to that end.  I interviewed, received and turned down an excellent offer from a carrier that is betting big on its analytics as its key asset. Providers will see a simplification in degree but not a simplification in kind as the total number of plans are reduced but the proliferation of metrics continues even if they are slightly culled.

I am only looking at 11% of his essay because this is a chunk where I have specific knowledge and experience. I am seeing major claims made that are contradicted by the best available evidence.  I am seeing massive assumptions about networks that are not realistic.  A better argument is needed for the plumbers to not cringe in horror at trying to reconcile top level claims with actual implementation.






18 replies
  1. 1
    Baud says:

    Your title reminds me, wasn’t Sanders supposed to have dropped his Medicare for All plan a week ago?

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  2. 2
    satby says:

    @Baud: oh boy, here we go.

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  3. 3
    Baud says:

    @satby: I didn’t say anything negative. I just want to know if he did and what’s in it. It was being reported that something was coming soon.

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  4. 4
    satby says:

    @Baud: no, you didn’t. And I uncharacteristically refrained, and no one else took the bait so far, so well done us?

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  5. 5
    Another Scott says:

    Hospitals that maximize profits, or even maximize revenue to fund charity care, would not raise private prices in response to lower public ones. In fact, such a hospital would already be charging the highest possible prices to all payers. And, instead of raising them to one insurer if another paid less, they’d do exactly the opposite. Prices charged to two types of customers would move together, not in opposition, for the same reason it does so in other industries….

    This is an important point that those of us who never studied Econ in school too-often have trouble wrapping our head around. But it was worked out long ago – Adam Smith in 1776:

    The rent of the land, therefore, considered as the price paid for the use of the land, is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out upon the improvement of the land, or to what he can afford to take; but to what the farmer can afford to give.

    And that’s why taxes on land have little or nothing to do with what a landlord can charge – it comes out of their pocket. (If they could charge more to cover the taxes, they would already do so.)

    We can’t continue to let the reactionary Teabaggers continue to define what is “common sense”. Common Sense is too often exactly backwards.

    Companies that maximize profit will charge what they can for their goods and services. If they could charge more, they would already be doing so – just like landlords, they won’t leave money on the table.

    Thanks.

    Cheers,
    Scott.

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  6. 6
    Baud says:

    @satby: For the record, I hope he doesn’t introduce it. I think it’ll distract from the fight against Trumpcare.

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  7. 7
    Jack the Second says:

    @Another Scott: There’s a fun parallel in price drops of consumer electronics.

    A company, eg Apple, will drop the price of their fancy electronics some time after launch. First they sell their new product for $1000, then $900, then $700, then $500.

    They almost certainly could have “afforded” to sell their product at $500 all along, but the price drops perform market segmentation: charging people differently based on what they’re willing to pay. First they sell the product at once price, and everyone willing to pay that much does so, then they drop the price, and a new batch of people who weren’t willing to pay the first price give them their money, and so on, extracting maximum profit by charging each consumer what they’re willing to pay, as opposed to leaving money on the table by charging everyone $500, the lowest the company was willing to sell it for.

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  8. 8
    Sam Dobermann says:

    Aaaaaaggggggg! Zombie Medicare for all staggers in again.

    Do people even understand what the Medicare Advantage plans even
    are? They are private insurance companies who get paid by the Fed government who collect about $120 a month (or more for higher income persons) from EACH PERSON covered. And that doesn’t touch the Hospital part which comes from the trust fund from payroll taxes. To be eligible for Medicare you have to have worked for 10 years paying into the system or there is an extra charge for the hospital part of Medicare.

    The monthly premium for Medicare (except A, the hospitalization part) is set at 25% of premium cost; the other 75% comes out of the general federal taxes. Try to figure adding in 75% premium costs for all the people under 65.

    Now about the premiums: for each person @ $120 that is $240 for a couple and $480 a month for a family of 4. And remember the Federal taxes have to come through with 3 times what ever figures that would be. But don’t forget the $$$ to cover the hospitalization costs.

    Another problem with this proposal is the idea of paying for piecework — something the ACA is trying to change. Writer says:

    the starting point for considering how much will be paid for health care services under MAPSA is the weighted average of the rates all of these various payers currently provide;

    That’s fee for service or by procedure etc. Doctors are incentivized to do more to get paid more.

    ACA is trying to change that: there are many experiments going on to pay for keeping people well, paying more based on quality, rewarding hospitals for reducing costs, etc. And so forth.

    This proposal is not a true single payer though it would suck from the federal taxes. Each plan would have its own paper work for providers and insurers would have no interest in keeping costs low.

    But what ever, remember this is America, with its own “personality problems.” There is no way we would have a single payer system. A whole lot of people including many doctors would simply opt out; they don’t want to mix with the hoi poloi. Too many so called libertarians would avoid anything “federal.” We would quickly have two systems, one for the 1% and one for the rest of us.

    I have to get to sleep so I can’t write more now. Just wanted to get my 2¢ in.

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  9. 9
    rikyrah says:

    Rival Senate healthcare group seeks to make waves
    BY NATHANIEL WEIXEL – 05/14/17 05:15 PM EDT

    A rival group of Republican senators is seeking leverage to influence the direction of the Senate’s ObamaCare replacement bill.

    The group, led by Sens. Susan Collins (R-Maine) and Bill Cassidy (R-La.), has been meeting “a couple times a week,” according to Sen. Shelly Moore Capitol (R-W.Va.).

    Cassidy is a physician and Collins is a former state insurance commissioner. Both have been outspoken opponents of the House-passed American Healthcare Act, and have co-sponsored their own version of an ObamaCare repeal bill called the Patient Freedom Act.

    Cassidy told The Hill he and Collins have been meeting with Senate leaders to talk about their legislation. However, he noted the politics of the Senate mean that every member’s voice matters.

    “When you only have 52 senators, everybody has significant leverage. That tight vote margin means everyone is essential,” Cassidy said.

    The main GOP working group on healthcare includes 13 men backed by Senate leadership who are seeking to bridge the divide between conservatives and centrists.

    What ever legislation emerges from that group is likely to be the bill that comes to the Senate floor.

    But if all of the Senate’s Democrats oppose the measure, Senate Majority Leader Mitch McConnell (R-Ky.) will only be able to afford two defections.

    That gives the other group leverage.

    “Let’s look at it practically,” Capito told The Hill. “You can only lose two votes on any one issue … so I think a bloc of four or five can be very effective.”

    Health lobbyists have noted many members of the leadership-led group have been fairly measured in their criticisms of the House bill approved earlier this month.

    Collins and Cassidy, in contrast, both seem keen on turning sharply from the House bill.

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  10. 10

    […] Via blog post, David Anderson drew my attention to a Health Affairs post by Billy Wynne, the Managing Partner of TRP Health Policy, in which Mr. Wynne wrote, “[C]ommercial rates are hiked, often stratospherically, to compensate for typically insufficient Medicaid reimbursement.” […]

  11. 11

    @rikyrah: Do not trust Collins.

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  12. 12
    Daddio7 says:

    @Another Scott: What hospitals do would be illegal for any other type of business. They sell their services for different prices to different customers. Insurance companies dictate what they will pay. Different carriers pay different prices. Out of pocket patients pay whatever the billing department thinks they can get away with. Rates are continuously renegotiated. If a hospital determines it needs more money to cover Medicaid losses it will have to negotiate higher prices.

    By paying less than the cost of services provided Medicaid is a stealth tax on people who utilize hospitals with Medicaid patients. If society is providing care for these people society as a whole should pay the cost, not just those unlucky enough to seek treatment alongside Medicaid recipients. In a perverse way hospitals in affluent neighborhoods can provide cheaper care because most their patients have money or insurance while hospitals in poorer neighborhoods must charge more to those with coverage because so many of their patients are treated for free or only have low paying Medicaid or Medicare coverage.

    Idealy the goverment should pay for and provide medical care just as it provides national security. How many millionaire generals are there? Well yes there are some, but only after they resign and go to work for defense contractors and that shouldn’t happen either. My wife needs a medication that with a little effort I could make in my garage. It requires a specialist proscribe it. This man, an Egyptian immigrant by the way, sees eight or nine patients an hour and charges $300 each. I learned he is also opening an office to proscribe medical marijuana, another gold mine. This for a plant that people can grow on their patio. Government involvement in health care is criminally dysfunctional.

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  13. 13
    rikyrah says:

    @schrodingers_cat:

    @rikyrah: Do not trust Collins.

    you bet your behind that we shouldn’t trust Collins.
    not.one.solitary.milimeter.

    ReplyReply
  14. 14
    Another Scott says:

    @Daddio7: I agree with some of what you’re saying, but disagree with others. E.g.

    What hospitals do would be illegal for any other type of business. They sell their services for different prices to different customers.

    That’s clearly not true.

    An organization that can buy 100M widgets is going to get a much better price than I will if I want to buy one.

    Airlines charge vastly different prices for seats right next to each other. They charge people on their Super Ultimate Neptunium Frequent Flyer program different prices than Joe walking up to the counter the same hour he wants to fly.

    Yes, hospitals charge vastly different rates to different people, and have “customary” price lists that have no relation to reality. But it’s not unique.

    But government being involved with health care is not “criminally dysfunctional” – it’s the only thing that protects us from quackery and the evils of the so-called “healthcare marketplace” which clearly isn’t a market. Of course it’s not perfect.

    The question, as always, is how do we get to a more rational and fairer system given the real-world politics. Incremental progress is the only proven way forward.

    FWIW.

    Cheers,
    Scott.

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  15. 15
    mai naem mobile says:

    Jeezus christ. I am so sick and tired of this healthcare debate. Why the fuck can’t we have universal care? I don’t care if you want to call it single payer or medicare for all. I know the difference and i don’t care.jeezus, When 9/11 happened we got DHS done pretty damn quick. I am not talking about the political obstacles,just that it can be done logistically, It’s the business interests that don’t want it done. I am not even sure there would be that much job displacement even in the insurance industry. Billing will have to be done. Rates will have to be negotiated. It would be upper management jobs that would be lost and I have zero sympathy for those people. Healthcare workers in this country in general are overpaid, except for the lower end. It’s the specialist docs for sure but thats not all. I know physios and pharmacists who make $150K. Also, the biggie is the hospitals. One time we went to an ortho doc with my mom. The guys office must have cost big $$$ to decorate. They had a grand piano that played electronically in the lobby. Why? I’ve been to a specialist doc with a massive wall aquarium. This is the kind of shit medicare dollars are going to indirectly. When I walk into a hospital nowadays all I see are dollar signs in what they’ve spent on decorating and the materials used in building or remodelimg the building.

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  16. 16
    Dennis Byron says:

    @Sam Dobermann:

    The commenter writes “Zombie Medicare for all staggers in again. Do people even understand what the Medicare Advantage plans even are? They are private insurance companies who get paid by the Fed government who collect about $120 a month (or more for higher income persons) from EACH PERSON covered.”

    Commenter seems to be mixing up Parts B and C of Medicare. First, all insurance companies involved with Medicare (and all insurance companies of all types in the US as far as I know) are “private” in the context the commenter seems to be using. About six such insurance companies manage Medicare Part B (and A) across the U.S. but they do not collect any money in the way the commenter thinks; the treasury — mostly through Social Security — collects the monthly premium, which is $134 a month this year if you are just signing up for the first time (it’s zero if you’re poor, around $110 on average if you’ve been on it for a while, and up to $300 and something if you’re wealthy). Almost everyone on Medicare is on Part B.

    Part B covers 80% of a specific list of medical services at a fee for service fixed by the government. The six insurance companies have bid on and received a contract from the government to administer Part B and specify which doctors, hospitals, etc. get what (according to the pre-ordained list of fees) from the A and B Trust Funds in their regions.

    Separately those six insurance companies and about 100 other “sponsors” (who are mostly insurance companies but do not have to be) manage Part C of Medicare county by county (Medicare Advantage is the most popular type of Part C plan). The sponsors receive a capitated fee from the A and B Medicare Trust funds, which I think averages about $900 a month this year (the “premium support” so often mentioned), and from which the sponsor has to pay all a beneficiary’s doctor, hospital, etc. fees — not just for the medical services covered under Part B. Many people pay nothing extra for Part C; some pay as much as $200 more a month on top of Part B (Part A for hospital services is almost always “free” if you don’t count 50 years of payroll taxes).

    The beneficiary decides which way he or she wants to be handled. About two thirds have selected the fee for service method. These people almost all have private individually bought gap insurance or a private group insurance typically from a former employer. But increasingly the capitated fee approach — which is now about 20 years old formally — is overtaking the fee for service approach. About half the people fully signing up for Medicare today for the first time are choosing Part C. In another generation, assuming Medicae is not reformed, over half of the people on Medicare will be on capitated fee (as is already true for people under Medicare age)

    (As an aside, “Family of four” is not an issue for people on Medicare but is not possible anyways. There is no family plan in Medicare.)

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  17. 17
    ` says:

    @Dennis Byron: I can’t comment more now but one thing Sorry for my grammar but

    About six such insurance companies manage Medicare Part B (and A) across the U.S. but they do not collect any money in the way the commenter thinks; the treasury — mostly through Social Security — collects the monthly premium, which is $134 a month this year if you are just signing up for the first time (it’s zero if you’re poor, around $110 on average if you’ve been on it for a while, and up to $300 and something if you’re wealthy). Almost everyone on Medicare is on Part B.

    I meant they are paid by the government which said government collects about $120 … I didn’t look up the precise amounts.

    However some advantage plans — most of which do not have premiums but some do have copays are paid by government but have their own rules of what they cover (but they have minimum services, thanks Obama) and their own panels of providers!

    All advantage plans are part C. Many Cs include part D which is prescriptions. Other folks have part B (and A automatically) and gap plans which now include part D.

    Only about 1/3 elders have advantage plans. Lucky ones like me have a secondary retirement plan with Medicare the primary. Where some low income people have no premiums or copays they are on Medicare AND Medicaid. Further, nursing home care is Medicaid (or private pay). How you will square this complex is unknown.

    Only 95 % of the elderly are on Medicare at all. Now 90% have insurance thanks to the ACA.
    More later.

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  18. 18
    Dennis Byron says:

    @`:

    Someone (maybe his or her handle is an apostrophe?) directed the following comment to me (and oddly began the comment by saying he or she did not have time to comment now?):

    “I meant they are paid by the government which said government collects about $120 … I didn’t look up the precise amounts. However some advantage plans — most of which do not have premiums but some do have copays are paid by government but have their own rules of what they cover (but they have minimum services, thanks Obama) and their own panels of providers! All advantage plans are part C. Many Cs include part D which is prescriptions. Other folks have part B (and A automatically) and gap plans which now include part D. Only about 1/3 elders have advantage plans. Lucky ones like me have a secondary retirement plan with Medicare the primary. Where some low income people have no premiums or copays they are on Medicare AND Medicaid. Further, nursing home care is Medicaid (or private pay). How you will square this complex is unknown. Only 95 % of the elderly are on Medicare at all. Now 90% have insurance thanks to the ACA. More later.”

    The commenter also apologized for bad grammar but should apologize for giving people incorrect information about Medicare. In order of appearance but not importance, the errors are as follows:

    1. I don’t quite understand the first sentence (who is they?) but as I said in my original comment the current premium is $134 for most people now signing up for Medicare; it is not “about $120.” I did look it up. It is absurd to claim someone is wrong in the same sentence in which you claim not to have had time to look up the correct data.
    2. No, it is not true that some advantage plans have co-pays paid by the government (that is true for drug coverage under both Parts C and D however for people who qualify for Social Security Extra Help)
    3. The fact that almost all Part C plans cover services not covered by traditional Medicare but have to cover at least everything covered in traditional Medicare (in this case the commenter seems to be repeating what I said in my comment but then expressing the facts incorrectly) has nothing to do with Obama. That fact has been the case since 1997 as a matter of law and as part of Medicare demonstration projects since 1972
    4. Everyone on Part C also has to have Part B (and A) and pay the Part B premium as well as a Part C premium if there is one
    5. The last three sentences are incomprehensible to me.

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  1. […] Via blog post, David Anderson drew my attention to a Health Affairs post by Billy Wynne, the Managing Partner of TRP Health Policy, in which Mr. Wynne wrote, “[C]ommercial rates are hiked, often stratospherically, to compensate for typically insufficient Medicaid reimbursement.” […]

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