“A clear choice on election day”
Harold Pollack talks Medicare and premium support with Austin Frakt
October 3, 2012
EDITOR’S NOTE: Welcome to our first Healthinsurance.org Curbside Consult – a periodic informal dialogue with medical and health policy experts about pressing issues of the day.
Tonight, President Obama and Governor Romney will face off in their first debate. Medicare and Medicaid will be central topics of the conversation there. Healthinsurance.org’s Harold Pollack caught up with the Incidental Economist’s Austin Frakt to get a run-down on what’s at stake.
(This Sept. 28 e-mail conversation was edited for clarity and length.)
Harold: Good morning, Austin Frakt. You are my friend and colleague at the Incidental Economist. Welcome to our first ever Healthinsurance.org Curbside Consult. Why don’t you introduce yourself?
Austin: Thanks Harold. I am a Boston University health economist and researcher. I am also an avid TIE (The Incidental Economist) blogger and prolific tweeter (@afrakt). I am a lover of evidence and sensitive to political constraints. I also play the trumpet.
Medicare and premium support
Harold: I thought we would start with Medicare and premium support. (My Twitter feed is @haroldpollack, by the way.)
Austin: There is no bad time to discuss premium support. It’s a rich topic. Fire away.
Harold: Mitt Romney and Paul Ryan would transform Medicare over time towards a premium support model (crudely put, a voucher model). Can you briefly explain what they propose?
Austin: We can break their Medicare proposal into three pieces. First, they would undo the Affordable Care Act’s Medicare reforms, the ones that will shave $716 billion over 10 years from the program’s spending. Second, they would raise the Medicare retirement age over time from 65 to 67. Third, they would implement a premium support system beginning in a decade that would require private plans and traditional (a.k.a. fee for service or FFS) Medicare to compete head-to-head in a way they have never done before.
Harold: I take it you believe there is both good and bad in moving Medicare to a more competitive structure in which individuals receive vouchers to purchase either traditional Medicare or a competing private plan. What are the potential benefits?
Austin: The chief benefit would be the purchase and provision of the standard Medicare benefit (or something financially equivalent) at the lowest possible cost. I would liken it to you purchasing a service for your home or family. One way to do that is to accept bids and to acquire the service at the lowest-cost bid, provided it met the quality you desired. In fact, the government does this for many goods and services. It’s standard procurement procedure. That’s not the way Medicare works. Instead, right now, the program pays private plans according to administrative rules that are disconnected – deliberately so – from the actual cost of providing care. That’s why Medicare Advantage plans are so lavishly paid. By the way, traditional fee-for-service Medicare overpays for services too. Both systems can be strengthened by a competitive bidding process. For more on competitive bidding, see my Frequently Asked Questions.
Harold: From a 50,000-foot perspective, I see the potential advantages of such a competitive bidding process. Yet you wrote in the New England Journal of Medicinethat premium support is not quite ready for primetime in Medicare. Why?
Austin: Premium support has potential risks for beneficiaries, too. One risk is that plans will cherry pick the healthiest, lowest-cost individuals, leaving traditional Medicare to care for the sickest and most expensive. That would drive fee-for-service costs up, requiring it to charge a higher premium. It is, in effect, a tax on the sick. That’s arguably unfair. It’s also problematic to the extent the sick can’t keep up with the premiums.
Another is that plans will not be accountable for quality, that they’ll do whatever it takes to earn a profit. They might not necessarily provide the care beneficiaries need.
Those are two valid concerns. They can be addressed, however. My real concern is that I don’t see premium support proponents taking these concerns seriously. I don’t see them trying to incorporate safeguards and fall-backs in case these risks are real. (For more on these risks, and what to do about them, see here.)
Raising the Medicare eligibility age
Harold: It’s also striking how much more benign these proposals would look if health reform were in place as a backup to the whole thing. For example, raising the Medicare retirement age [as the GOP platform proposes] would be much safer if people age 65-67 could get coverage through an exchange. Is there any decent argument for raising this age?
Austin: I don’t think so. For every federal dollar saved, two more would need to be spent by other payers (Medicaid, employers, individuals) to provide coverage. Moreover, the Medicare savings would be minuscule, less than 1% of program costs. Given health care inflation, they’d be swamped in months. Then what? Keep raising the age? It’s just not an approach that addresses the fundamental issues. (For more on raising the Medicare age, see here.)
Devil’s in the details … or lack thereof
Harold: A second thing strikes me. I’ve noted before that Romney and Ryan have not provided the essential details one would need to evaluate their Medicare proposals. They have provided this detail on Medicaid. And the details are much more harmful and immediate than anything they propose for Medicare. Yet these proposals get less attention.
Austin: I slightly disagree, though I know where you’re coming from. In my view, Romney and Ryan have, over time, proposed many differing details on Medicare. If you wish to take their most recent statements as their “final answer,” then we know a great deal. If you, instead, take the also-reasonable view that they are likely to keep changing their answer, then you are indeed left rudderless.
And, yes, their Medicaid plan is quite clear and not receiving as much attention. The relative attention of Medicare vs. Medicaid likely reflects the degree to which beneficiaries of the two programs vote. That’s sad, but true.
Harold: I hope Romney’s political difficulties increase the perceived incentives to actually provide the critical details. He’s played rope-a-dope on both health policy and taxes. This has left a huge hole for Democrats to fill in the blanks. Yet I think there is a reason Romney has been vague. If he actually specified what he proposes to do, people would either disagree with him or discover that his numbers don’t add up.
Austin: It’d be gratifying and helpful to see a nice, fleshed-out white paper by Romney and Ryan on Medicare, and on health care, in general. We won’t see that. In any case, if you believe the polls, his approach hasn’t worked. But I don’t want to become a political analyst here … And I suppose, to be fair, we might point out that Obama can be a bit cagey on Medicare too.
Harold: There is also the emphatically conservative language of the GOP platform, written by core Republican constituencies and legislators who might be in a position to write the fine print about what a Romney health plan would actually be. It seems naive to take their most recent statements at complete face value when both Romney and Ryan have repeatedly embraced quite conservative proposals a few months ago.
Austin: Yes, there’s a trust issue. In part, this is what underlies my concerns about premium support. Unless I see clear and consistent attention to its limitations and risks, I don’t see why I should trust that a good plan will make it through the sausage mill. (What I think a complete premium support plan should include is here.)
All is fair in campaigns?
Harold: Indeed. Of course my last comment gets into the politics – and the inherent difficulty of discussing complicated proposals against the backdrop of a presidential campaign. I am having a hard time understanding what’s fair to say about the vaguely specified Romney Medicare plans.
Austin: It seems in a campaign, anything is fair. What you do might depend on whom you want to irritate and whom you want to please, what fights you wish to take on.
Harold: One challenge we all have in this election. There are big partisan and ideological differences. But then there are technical and policy judgments about how particular policies would actually work. These are not entirely ideological or partisan questions. It’s hard to have both kinds of conversation in one political campaign.
Austin: It’s always a danger to expect too much from the political process. Everything will be more compromised coming out than it is flawed going in. It’s hard to predict exactly how. Given that, it’s also reasonable to judge ideas by gestalt. Is this plan in the general direction you prefer? Is that one more consistent with your values and understanding of the world (evidence, facts, etc.)? Maybe the tiny details aren’t as relevant as we wonks sometimes take them to be. On the other hand, sometimes a tiny detail isn’t all that tiny. What happens when Medicare spending hits the proposed rate growth cap is a HUGE question, even though it’s somewhat esoteric.
Capping Medicare growth
Harold: You say “What happens when Medicare spending hits the proposed rate growth cap is a HUGE question, even though it’s somewhat esoteric.” Explain for our readers what you are talking about.
Austin: Ah, well, Romney and Ryan once proposed to cap Medicare growth to half a percentage point above the growth rate of the overall economy (GDP). But they would not reveal what would happen if Medicare costs grow faster than that. That’s a crucial question. Would beneficiaries have to pay more? They wouldn’t say. Since then, Romney has said there would be no cap, but that begs the question of how much Medicare savings (or cost growth) we can count on. Either way, it’s incomplete and in a fundamentally important way.
The Affordable Care Act basically caps Medicare growth to GDP + 1% (Obama has also proposed lowering that to GDP + 0.5%). But the President is clear what happens if the cap binds. The Independent Payment Advisory Board (IPAB) would propose ways of reducing spending, with fast track legislative authority. Crucially, they would not be permitted to shift costs to beneficiaries. They would have to change how providers are paid. Maybe that’s not as specific as some would like, but it is far more specific than Romney has been.
Medicaid cut proposals
Harold: I must say that I’m becoming so angry that it’s hard to keep listening and learning. Romney and Ryan propose to cut federal support for Medicaid by about 1/3 in ten years. Particularly as someone who cares for a Medicaid recipient, I am so infuriated by that. It’s hard then to dispassionately discuss the details of a premium support model or to trust that Republicans would protect the most vulnerable people filling in the blanks.
Austin: It is hard to fathom that such severe Medicaid cuts could really stick. It’s preposterous, really. The suffering would be enormous, and not just for individuals. Hospitals and other providers would really feel the pain. It just doesn’t seem politically feasible to me.
Harold:I agree with that. I think the political consequences of such Medicaid proposals have proved more costly than the Romney campaign anticipated. President Clinton’s speech at the Democratic convention hit these points hard. Clinton also noted the simple fact that 2/3 of Medicaid dollars go to the elderly and the disabled. I still find it ironic that the lowest-unit-cost segment of our health care system – Medicaid – is slated for the deepest cuts.
Austin: I think that’s the case politically for the same reasons Medicaid is the lowest-unit-cost segment. Its constituency is very weak. The fragmentation of our system bites us in so many ways. I’d be remiss in not encouraging readers to look at Aaron Carroll’s series on Medicaid. Also, pertaining to the ACA’s Medicaid expansion (the totally opposite direction of Romney), here are all the reasons I could think of to do it and not do it.
Harold: Any closing thoughts?
Austin: I’d end with this: This election offers the starkest choice on health care we’ve ever had. The choice is more clear than it was in 2008, because ACA is now law. Therefore, we know almost exactly what will happen if Obama wins. In 2008, we had only his plan to go on. The law is far more detailed. Similarly, since Romney has pledged repeal, we know very well what he’d do. He’s been less than clear on some other reforms, but we can see the thrust quite well, and it is the opposite direction – in terms of coverage expansion – than Obama.
So, we have a clear choice on election day, don’t we?