A closer read of Medicare Extra for all Part 1

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.

14 replies
  1. 1
    Baud says:

    This is a universal coverage proposal and not necessarily a single payer proposal.


  2. 2
    Another Scott says:

    I look forward to your continued examination of the CAP proposal.

    But if we’re going that route, shouldn’t we be thinking bigger?

    It seems to me that there is still going to be pressure for providers to find the most expensive codes possible to maximize their income. One of the most frustrating things about the current US health insurance system is fighting with the companies about what they will pay and that depends to a large degree on what codes are submitted by the provider. My PCP often gripes about how little Medicare pays and how the changes under Obamacare have made it much more difficult for his office…

    There have been a bunch of badly-done HMOs, but it seems like something like that has to be in our future – doctors and hospitals get paid to keep people healthy, not to treat W55.32 – gored by goat.

    (Seriously, I understand the need and value for international standards of diagnoses of diseases and injuries (to know about epidemics and so forth), but that shouldn’t be used as the only or even primary metric to decide how much the provider gets paid. The incentives are bad if one needs to control costs.)

    Is the thinking in the industry along the lines of “Watson and AI will eventually solve all the coding problems, so we don’t need to think about changing that part of the system”?

    I realize that changing the US health care system that way would be a huge change and probably doom the proposal. But, as you say, it’s important to talk about things before voting on final legislation.



  3. 3

    I detest the “single-payer only” people, because they don’t know anything about health care, but make up for their ignorance with zealotry. This plan seems like a reasonable way to actually build a single-payer health system.

  4. 4
    Sab says:

    @Thoroughly Pizzled: I seriously LIKE your comment.

  5. 5
    scottinnj says:

    The other issue I will be interested in future posts is frankly how you get providers to agree to c. 30-40% cuts if you move from commercial pay to Medicare rates. In other words while it is fair to say there is more buying power for Medicare vs commercial there is some level of cross -subsidization between Medicare and Commercial pay. For example, Kidney Dialysis is a service where commercial rates are well in excess of Medicare. Maybe (and I’m oversimplifying here) if an hour of PT (post Knee Replacement) is $70 from Medicare and $130 from commercial, we can’t cut it to $70 (PT will quit) but the right rate may be (say) $85.

    It is certainly true that there are administrative savings but to think that will entirely cover the gap seems naive. It is like conservatives saying ‘cut waste and fraud’. Yes there is waste and fraud but not enought to cut 30%.

  6. 6
  7. 7
    DHD says:

    Very interesting, especially the concerns about provider payment. Speaking selfishly as a Canadian, I really hope you guys can lose a bit of your misplaced trust in doctors and get their compensation under control, as we are really suffering from their insatiable demands for constant reimbursement (I would say salary, but unfortunately they are not paid on salary) increases and the extortionate subtext of “pay us more or we’ll move to the USA” that goes along with it.

  8. 8
    RSA says:

    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 sounds like a reasonable strategy. I mean, it’s also possible to argue about whether health care is a right or not, but as long as most people buy into that framing, it moves the discussion along.

  9. 9

    Thanks for doing these. This is going to be one of the defining intraparty fights over the next three years.

  10. 10
    Lizzy L says:

    After the election, I went to some of the meetings in my county (northern CA, west Contra Costa) of the “Health Care for All” group, which is pushing a statewide/California only single payer plan. The finances of the plan made no sense to me, nor did their insistence on modeling their plan after the Canadian system. I thought some of the European hybrid systems would actually be a better fit for us. I stopped going to the meetings. It’s interesting to me that you say this is a universal coverage proposal and not single payer, because this seems to me to be the right way to go.

  11. 11
    Feathers says:

    Is there any thought to dealing with the high costs of medical education as part of the ramp in/up to this? I remember someone’s talk about making medical education free in exchange for agreeing to Medicare/caid reimbursement rates in the future. There could be efforts to essentially reimburse current doctors in a lump sum or annual payment to pay them back for their loans.

    I’m not clear on how much the fact that US doctors bear the cost of their education plays into the higher reimbursement rates they receive. Or is it more of a high grievance factor that is in play – “I had all these loans and was poor for years, so now I’m entitled to rake it in”? I hear doctors using their loans to justify their need for higher payments.

  12. 12
    Minstrel Michael says:

    I used to date a woman who worked for an ophthalmologist in the inner city (i.e. mostly black people). Part of her job was to compare the statements that accompanied the reimbursements from payers with the original claims filed by the office. Seems it was very common for a handful of the most expensive claims in each filing to be arbitrarily denied. Most patients were on Medicare, but apparently Medicare farmed out the claims evaluations and payments to for-profit firms, and apparently they regularly did this to boost their bottom lines, but when the office rebilled for these cases (which didn’t happen too often because the office was always overworked), these payers paid up.

    I don’t know whether this sort of weaseling is common, but if it is, and if the new system would promise not to do that, that might swing a fair number of providers.

  13. 13
    yourpooruncle says:

    @Thoroughly Pizzled: If it was allowed, I’d say, no shit. They make me weary.

  14. 14
    Yutsano says:

    @Lizzy L: I’m gonna keep saying it until I’m blue in the face: the best model for the US is the Australian public/private hybrid. We could expand Medicare to everyone then let the insurance companies pick up the bits that Medicare doesn’t cover (like eyes, dental, etc) so there is always at least some kind of backstop with some help for the poor who can’t pick up the last 20%. The real problem is this needs a LOOOOOONG transition period, and not just for the doctors. It will take awhile to undo the employer based coverage system no matter what gets done.

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