‘Medicare Advantage For All’ Raises Questions, Concerns

"Medicare for all" was a rallying cry for advocates of a national single-payer system during the health reform debate. A twist on that slogan is now being advanced by congressional Republicans: "Medicare Advantage for all."

A plan advanced by Rep. Paul Ryan, R-Wis., would privatize Medicare by turning the largely fee-for-service entitlement into a voucher program. Instead of the approximately one-quarter of Medicare participants now covered by private carriers via Medicare Advantage, all retired beneficiaries would be buying insurance on the open market beginning in 2022. The vouchers would be capped at the gross domestic product plus 1%, with a shift for the age of the enrollee. Lower-income beneficiaries and those with greater health risks would receive increased assistance (BestWire, April 5, 2011).

Medicare, and particularly Medicare Advantage, is already in a time of transition. Under the Affordable Care Act, funds for Medicare Advantage plans will be cut by $136 billion from 2012 through 2019. Those cuts are expected to save more than $206 billion over the next 10 years (BestWire, March 16, 2011). While the Ryan budget would repeal the health reform law, it keeps that reduction intact. To the Obama administration, the cuts are a means of preserving the long-term sustainability of Medicare while underwriting other aspects of health reform. According to the U.S. Medicare Payment Advisory Board, Medicare Advantage costs approximately 10% more per beneficiary than traditional fee-for-service Medicare.

While the cost to the government is higher, the cost to insurers of providing the same level of care is just slightly more, on average, said Brian Biles, a professor in the Department of Health Policy at The George Washington University in Washington. "They don't cost more, but they certainly don't save any money," he said.

Private carriers cannot compete with traditional Medicare when it comes to holding down the cost of paying physicians and hospitals, Biles determined. Medicare pays doctors approximately 80%, and hospitals 70%, of what commercial plans pay and it keeps annual increases low, he said. Private insurers can do what Medicare does not and seek cost savings by controlling volume and intensity of care provided -- but that would mean higher deductibles or coinsurance, said Biles, a former staff director of the House Ways and Means Subcommittee on Health.

"If you squeeze them, the only thing they can do is increase out-of-pocket costs," he said.

The Ryan plan would raise the eligibility age for Medicare and increase costs for seniors, according to an early nonpartisan Congressional Budget Office analysis. By 2030, 65-year-olds would have to pay 68% of the total cost of their coverage. The present share is 25%. The voucher amount for someone turning 65 in 2022 would be $8,000.

Costs will be minimized through competition, as future seniors would gain the ability to choose the insurance they really want and need, said J.P. Wieske, executive director of the Council for Affordable Health Insurance. Current Medicare rules block flexibility for seniors and insurers, he said. With a federal paymaster, Wieske said, "I don't think anyone knows what anything costs anymore."

A privatized marketplace would lead to a private-sector scramble for the youngest and healthiest among the Medicare demographic, Biles said. This adverse selection problem could lead to older beneficiaries and those with significant health problems paying more or having greater trouble getting insurance, he said.

"This isn't reform. It's rationing," Ethan Rome, executive director of Health Care for America Now, said in a statement. "The nation's most efficient health insurance program would be turned over to the private insurance industry and seniors issued 'ration cards' instead of Medicare cards. Seniors would pay more and get less care, while health insurance companies would make more billions in profits."

America's Health Insurance Plans, a health insurers' trade group, declined to comment on specific aspects of the Ryan plan and Medicare Advantage.

Attempts to reach Ryan for comment were unsuccessful.

(By Sean P. Carr, Washington Bureau Manager: [email protected])