Over the next couple of days, I’ll be going through the Center for American Progress’s recent proposal for a significant Medicare reconfiguration and expansion that they call Medicare Extra for All.
There is no chance that this will be enacted policy before 1/21/21 That is irrelevant. Excluding post office renamings, there are few major bills, with notably rare exceptions, that involve multiple trillions of dollars over several decades that have an immaculate conception and a complication free birth. Instead, bills that go through Congress and signed into law are often the subject of multiple iterations of white papers, counter-white papers, critiques, revisions, consensus committees and then another round of revisions. I see this proposal as part of that process. And thus, figuring out what they are trying to do, how they are trying to do it and seeing where there are potential rough edges is a valuable exercise.
Today, we’ll go through the introduction, international comparisons and the Legislative specifications sections.
Right off the bat, the first five words are “Health care is a right….” This is a framing attempt to get the discussion onto the means of universal coverage instead of a long and not particularly productive discussion on ends and means. This is a universal coverage proposal and not necessarily a single payer proposal.
The proposal has a short term focus of improving and stabilizing the ACA exchanges but it seeks to do more. It identifies one of the big problems with the ACA in that even for people with insurance, a lot of people are underinsured. They use the Commonwealth Foundation definition of underinsurance as having an out of pocket maximum of more than 10% of income. A single individual buying a Bronze plan can earn up to $70,000 and be under-insured with this definition.
Paragraphs 7 and 8 are the key philosophical paragraphs. Paragraph 7 opens up the Medicare Extra program to all employers as a massive buy-in option. This is a nice way to get around the “If you like it, you can keep it” problem. It will not be the government moving people with employer sponsored insurance to a new program, it will be the HR department.
The way that the HR department will choose the Medicare Extra policy is that it will have a significant price advantage over most commercial policies because its provider payment rates will be tied to Medicare rates. This is a significant pricing advantage for most regions and most services.
This is also not an unexpected proposal as I noted in the summer of 2016:
Most liberal health policy goals have a very simple summary: get more people on insurance that pays providers rates that are closer to Medicare rates than commercial large group rates. Large group rates pay providers between 40% and 100% more than Medicare for physical health service. Moving the entire employer sponsored coverage universe to paying Medicare like rates would knock 30% off of the current bill….
All of these efforts are just different ways to achieve an underlying goal of reducing provider compensation by lowering the average payment per service by having more people move from high payment to provider coverage to Medicare based pricing.
And this leads to a significant challenge. Providers sank the public-option in 2009. Doctors and nurses are highly trusted. Congress and insurance company bureaucrats are slightly more popular than syphilis in a good week. It is easy to handwave a 30% or 40% net reduction in hospital and doctor payments to create a massive pricing advantage over Aetna or UHC or UPMC or the Blues, but actually doing so creates a very large, very well trusted, and very wealthy set of opponents. This is tough.
CAP also says that they can gain some administrative efficiencies. And over the long run, I believe them, but the transitional period of a ten year CBO score will see very few administrative gains as most provider offices will still be billing to a dozen or more payers on a typical Tuesday until the very end of the run-out period. Furthermore, there is a trade-off between low cost to process claims and aggressive care management and fraud detection. A low administrative cost can be achieved if every claim is automatically adjudicated but a lot of claims will be optimized to beat the automatic edits and rejection filters so a lot of extra money will go out the door because the claim system is too cheap.
Paragraph 10 is a decent review of all the different ways other industrialized countries organize near universal coverage. It is an argument that single payer should be a means and not an end in and of itself. It also notes that there is significant patient/consumer out of pocket spending in most systems. It is an existence claim that mixed private-public systems do achieve the goal of near universal coverage at far lower total costs than the US kludge.
Paragraph 11 and 12 is where CAP identifies Medicare as the skeleton that is best used in the US to build a universal coverage system.
Now let’s see what is actually being proposed.
Eligibility: Everyone who is lawfully present in the United States is eligible. Auto-enrollment occurs for newborns and at age 65. All current insurance excluding Medicaid is grandfathered in although there is an anticipation that a lot will wind down over time. People who are not covered by other insurance systems will be preemptively enrolled in Medicare Extra when they show up at the hospital or a doctor’s office with a problem. This works because most of Medicare Extra is not financed through the premium model but through the general taxation model.
Paragraph 18 looks at the covered benefits. The essential health benefits are more expansive than the ACA benefits. Dental, vision and hearing services are added. More importantly, it seems like CAP wants to go towards a Value Based Insurance Design paradigm with expanded no-cost sharing services for preventative care, treatment of chronic diseases and no cost sharing generic drugs. I think the last is intended to push providers to prescribe more generics when there is clinical equivalence.
Benefit changes would occur through the current Medicare National Coverage Determination process that assesses how Medicare will pay for new technology.
So far, this is a big deal but a straightforward deal. I will look at the financing and cost-sharing components in the next edition.