Will The GOP Change Medicare?
Feb. 05--With Republicans dominating the federal government, there is some chance that Medicare may be changing.
Republicans in Congress, led by House Speaker Paul Ryan, advocate a big shift in how future retirees would be covered, and some proposals could affect people now on Medicare.
He's pushing a plan he calls "premium support." Opposing Democrats call it a "voucher program."
The way things work now, the government pays for Medicare no matter what it costs. Under premium support, the government would pay a certain set amount per recipient, and people would shop for coverage among several insurance providers.
Recipients who chose an option more expensive than the government share would have to pay the difference.
People now on Medicare and those "near retirement" could keep the current "original Medicare" option that most people choose. But they could opt into premium support if they wanted to.
However, Medigap insurance plans, which many original Medicare recipients buy, would be limited, and some now-covered costs for medical services would fall on patients.
Younger people might have to delay their retirement. Starting in 2020, the Ryan plan would gradually raise the Medicare age from 65 to 67.
Meanwhile, plans to repeal the Affordable Care Act raise questions about whether the so-called "donut hole" in Medicare drug coverage will grow back to full size. The ACA is gradually closing that gap in coverage.
Ryan has an ally in Tom Price, the House Budget chairman set to become secretary of Health and Human Services. But the GOP push could hit a road block in Price's new boss, President Donald Trump.
"I don't think President-elect Trump wants to meddle with Medicare or Social Security," Reince Priebus, Trump's chief of staff, said last month. "He made a promise in the campaign that that was something that he didn't want to do."
The Republican House leadership sketched out plans last June in a report called "A Better Way." But other plans are out there, and all are light on detail.
Today, Medicare recipients make a basic choice -- they can pick original Medicare, or one of several "Medicare Advantage" plans.
Original Medicare recipients can pick any doctor who takes Medicare, and the vast majority do. After relatively small deductibles, Medicare pays hospital bills and 80 percent of doctor charges. Many recipients pay extra for a Medicare drug plan and a private Medicare supplement policy, called Medigap, for the deductibles and copays.
A Medicare Advantage policy, offered by private insurance companies, operates like a company health plan. There are copays and deductibles, with out-of-pocket limits, and limited networks of doctors and hospitals.
Some are set up as health maintenance organizations, requiring preapproval for some procedures and specialist visits.
Still, many Advantage plans charge nothing extra, cover drugs and sometimes other services. So, Medicare Advantage tends to attract healthy people and people on tighter budgets.
Still, 7 out of 10 recipients are in original Medicare.
Under premium support, original Medicare, or something like it, would compete on price against Medicare Advantage plans, or something like them. Plans would offer bids to the government. The government would use the result to set the amount it would pay.
One proposal has the government setting its share at the second-lowest-bid. Another would set the government share at the average bid.
If you pick a plan that costs more than the government's share, you pay the difference.
"The Medicare premium support payment would be adjusted so that the sick would receive higher payments if their conditions worsened; lower-income seniors would receive additional assistance to help cover out-of-pocket costs; and wealthier seniors would assume responsibility for a greater share of their premiums," the plan says.
No one is quite sure how this would work out. The Congressional Budget Office studied the issue in 2013, using versions of premium support then floating around. It opined that recipients on average would find their costs higher if the second-lowest-bid became the bogey. Recipients on average would find costs a little lower if the average bid became the rule. However, people who stay in Original Medicare would probably pay more under either option.
But details here are really important, and unknown. The CBO had to guess at them. Lots of people wouldn't get average results, depending on where they live, what plan they pick and how sick they become.
All options would save the government money, the CBO concluded. The second-lowest-bid option would save Uncle Sam $45 billion a year, while the average-bid choice would save $15 billion.
The number and cost of Medicare Advantage plans would also vary widely around the country, depending on the local balance of bargaining power between medical providers and insurance companies.
The idea behind the Ryan plan is that competition would hold prices down and "work as a real check on widespread waste and skyrocketing health care costs." But Robert Berenson, a fellow at the Urban Institute, finds holes in that argument.
Setting original Medicare in price competition with Advantage plans could have some unexpected effects. Medical costs vary widely around the country. So, original Medicare is likely to win the competition in some areas and lose in others. It might actually disappear in some spots.
The result might reduce customer choices, not expand them, Berenson said.
Much would depend on how the rules are set. Right now, original Medicare's sheer size gives it the clout to dictate the prices it will pay providers. Employer health insurance plans pay hospital prices 75 percent higher than Medicare's.
The rules let Medicare Advantage plans pay those lower Medicare prices. That keeps them viable in some cities, where Advantage plans lack the market power to negotiate better deals.
"This is not the free market working, but rather structured competition with a necessary dose of government price regulations, which Republicans actively opposed when proposed as part of Obamacare," said Berenson.
No one knows what would happen in a completely free market with no price rules.
Ryan would also change what Medicare Advantage covers. The GOP House plan would use "value-based insurance design." That system lowers the cost to consumers of procedures considered very effective, while raising the cost of low-value services.
The Ryan plan also would change original Medicare. Right now, there is no maximum out-of-pocket limit on the 20 percent of hospital charges that fall on recipients. Ryan would add a cap, although he doesn't provide a figure.
But, starting in 2020, Medigap insurance policies could cover no more than half of Medicare copays. The most popular Medigap plans now cover those completely or nearly so.
The Ryan plan cites evidence that Medicare spending is one-third higher when people have Medigap insurance. Putting more cost on patients may make them reject some services, or shop for better prices.
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