WASHINGTON -- A body of healthcare experts charged with advising Congress on Medicare payment issues explored a framework for premium support, but stopped short of recommending the idea.
Many conservatives in Congress have long championed the idea of shifting Medicare financing to a premium support model. They argue such a payment structure will provide a more predictable and potentially cost-efficient way of financing the program.
Under some versions of premium support, beneficiaries would receive a set dollar amount or a "voucher" -- although the term is now political poison -- with which seniors can pay for either a traditional fee-for-service or Medicare Advantage plan.
Such a path represents a dramatic departure from the current system in which individuals who turn 65 are given the option to enroll in either Medicare or a privately insured Medicare Advantage plan.
Medicare Payment Advisory Commission (MedPAC) chairman , of Los Altos, Calif., emphasized that the goal of the group's discussion was not to support or oppose premium support, but rather to provide "appropriate considerations and modeling aspects" that might be useful if Congress chooses to advance such a system in the future.
Commissioner of the Brookings Institution, a liberal think tank, said he doesn't anticipate a shift to premium support "happening soon," however, simply considering all aspects of such an approach might allow the group to focus on ways to make Medicare Advantage plans more efficient, even without premium support.
At the meeting on Friday, MedPAC also discussed the pros and cons of standardization across plans -- i.e., defining a basic plan, which could be used as a comparator -- which is a likely first step to overhauling Medicare's payment structure. Members agreed that such an approach, if thoughtfully implemented, could help beneficiaries choose plans, however, many worried about unintended consequences such as hindering innovation.
The commission plans to include a chapter on premium support in its June report.
Baby Steps
In kicking off its discussion, the Medicare Payment Advisory Commission first addressed potential advantages and disadvantages of standardization.
Analysts for MedPAC suggested that instead of complete standardization of health insurance plans, where both Medicare Advantage and fee-for-service Medicare offered the same exact plan, insurers could standardize components of a basic plan such as benefits, cost-sharing, and plan offerings.
Cost-sharing would not have to be the same for individual services across plans; instead, plans could be actuarially equivalent (i.e., participants could have the same average cost-sharing per month across an array of services.) Currently, the Centers for Medicare and Medicaid Services uses "service-by-service limits," the analysts noted.
Benefits of standardizing plans include simplifying the "shopping" process for consumers and reducing incentives for gaming, but it could also limit flexibility of plans and restrict choices for beneficiaries.
Commissioner of Healthfirst in New York City, said having a standard plan across insurers would help beneficiaries to make apple-to-apple comparisons.However, if standardization meant certain previously covered services would now have to be purchased by beneficiaries, the commission should make that clear in its report, she said.
Wang was particularly worried about the impact of standardization on low-income beneficiaries including dual eligibles -- those who qualify for both Medicare and Medicaid.
Unintended Consequences
Commissioner while also noting the benefits for those shopping plans, also worried about suppressing innovation.
"[I]f we started to very significantly restrict the various options that get created, I think we go backwards," he said.
Other knots in the standardization approach include the difficulty of accounting for value-based payment design.
Two commissioners, , and , also addressed an overarching issue embedded in the premium support debate: whether Medicare should be a defined benefit or a defined contribution program.
"Most people, when they talk about premium support in Medicare, talk about a defined benefit," said Buto, who argued that, as medical costs rise, beneficiaries would see decreasing levels of services over time under a defined contribution program.
Buto supported the defined benefit structure, with basic package of benefits and basing premiums around those services.
Nerenz, though, argued that such a strategy would limit innovation in benefit design.
"If you build around standard benefits, to a certain extent, you lock in standard benefits," he said.
Effects on Beneficiary Behavior
In addition to addressing these broad considerations, MedPAC's analysts modeled one sample framework for premium support, in which competitive bidding would set benchmarks for individual geographic regions.
The bidding process would line up Medicare fee-for-service as a direct competitor to Medicare Advantage plans. The benchmark in each region would fall to whichever rate is lower: a fee-for-service plan or the median Medicare Advantage bid.
(Such a framework differs from other premium support models that define a set amount for a voucher, based on factors outside of the health plan and then increase at a specific rate to account for price increases.)
In this model, analysts calculated the potential for "switching" from traditional Medicare to Medicare Advantage, following the implementation of a premium support model, based on historical data that identified patterns for Medicare Advantage plans -- both within Medicare Advantage and into traditional fee-for-service Medicare -- and for Medicare Part D plans. Premium increases of $20 or more often contributed to switching behavior, noted analysts.
The analysts estimated that roughly 15 million fee-for-service enrollees might potentially move to Medicare Advantage in the premium support framework they modeled, while only about 2 million Medicare Advantage enrollees might switch to fee-for-service.
Since there are more geographic areas where fee-for-service plans -- under the competitive bidding model described -- would cost significantly more than Medicare Advantage, under the bidding design the analysts outlined, a greater portion of enrollees would likely switch to private plans than the vice versa.
The analysts humbly noted, however, their calculations have "very little predictive value," and that they would need more precise details for any premium support design in order to draw more definitive conclusions. They also noted the inherent challenges in predicting both enrollee behavior and the ways plans might evolve.
As Commissioner of Milton Hospital and Southshore Hospital in Weymouth, Mass., also pointed out, there are non-monetary reasons beneficiaries may stick with or change plans, including keeping their doctor, who may be out-of-network under a cheaper plan option.
If the goal of premium support is to steer beneficiaries towards the most cost-effective plans, non-monetary considerations may be "the wrench in the whole process," Coombs said.