In yesterday’s post, I evaluated Medicare for All and considered some of the implications of a single-payer system. Today’s post will assess the Medicare for America bill, which, by contrast, is a public option. This label may not appear obvious, and is even disputed by some, since the bill sunsets the Affordable Care Act (ACA) exchanges and individual private health insurance. Instead, it enrolls the majority of Americans in a public Medicare plan with benefits close to what Medicare for All would offer.
While the Medicare for America bill is arranged with great promise and enormous care, its real significance lies not in this snapshot description but in the distributional and politico-historical dynamics that its opt-out structure unleashes over time.
What makes this approach different from single-payer? What are the payer “options” apart from the public plan? First, under Medicare for America, only some services will be free at the point of care, while others will require the patient beneficiary to serve as a partial payer, so that those who earn over 200% of the poverty line will bear up to 20% of the cost of care. This is apart from the income-pegged “premium” that those same beneficiaries will pay automatically as part of their taxes. Second, any beneficiary may choose a Medicare Advantage (MA) plan instead of this new, generous Medicare, just as current beneficiaries do under existing Medicare.
Thus all Medicare-for-America enrollees have, in addition to the “public option,” an option to take their portion of financing and enroll in whatever private insurance MA products are offered in their area. Some Medicare-for-America enrollees, depending on their employers, may also have the choice of an employer-sponsored insurance plan (ESI).
These two options, ESI and MA, would be the major ways for contracting around the default public plan.
Private Insurance. In many ways, Medicare for America mirrors Medicare-for-All. It prohibits insurance (apart from MA or ESI) that would duplicate public coverage. Like Medicare for All, it allows wrap-around or supplemental insurance. These supplemental benefits can also be offered by private ESI or MA.
Direct Billing. Providers may not contract directly with enrollees at the point of service for “an item or service coverable under Medicare for America,” therefore leaving only supplemental or additional services available for enrollees to purchase directly.
Patient-Beneficiaries Outside the Public Plan. Both proposals prohibit direct billing of individuals enrolled in Medicare. That means patient-beneficiaries outside the public plan (or its MA alternatives) are free to contract directly for à la carte services from Medicare providers, or from non-participating providers, even if those services overlap in scope with Medicare benefits. This opportunity to contract around applies to a larger population than it would under Medicare for All because the beneficiaries outside the Medicare plan include those with ESI.
Providers Outside the Public Plan. Non-participating providers who direct bill face somewhat tighter restrictions on extra billing than they would under Medicare for All, with the one big ESI-related caveat. Under Medicare for America, ALL providers are barred from charging more than the Medicare for America rates, but only with respect to enrolled individuals for coverable services. ESI enrollees, however, are not in Medicare and ESI could pay higher rates to non-participating providers, even for the services that are within the scope of the public plan. This extra billing loophole does not afflict MA plans, which are restricted to Medicare-for-America rates for services within the scope of the benefits covered by the public option.
How big a problem does this pose? What does this structure, especially with the acknowledged options for exiting the public plan in favor of MA or ESI mean for the potential stratification? Will ESI offer providers more, especially since it remains subsidized by the tax exemption for employer-sponsored health benefits, and will high-end doctors and hospitals then tend to serve MA and ESI populations rather than those enrolled in the public option?
If ESI plans largely compose their networks of Medicare-participating providers, this problem fades. Participating providers cannot extra-bill for covered services, even when supplied to individuals outside the Medicare-for-America rolls.
But I remain a Medicare Advantage skeptic. Taxpayers have for too long funded these private plans at a per beneficiary rate higher than what we spend on traditional public Medicare, even as they tend to dump the most complex and expensive Medicare patients. Medicare for America includes certain safeguards against the possibility that MA plans will ultimately skim off the healthy and privileged to constitute a separate system catering to the well-off. As noted above, MA cannot pay providers more than Medicare does. Moreover, Medicare for America caps the amount it will transfer from the Medicare trust fund to the private insurer if a beneficiary opts into that plan. The capitation amount is 95% of what the public plan estimates it would otherwise have spent on that beneficiary, because, after all, the private sector and its managed care models should be more cost-efficient. But MA plans are still permitted to charging additional premiums for more attractive benefits or networks. And even in our best attempts to integrate and manage care so far, the savings have come from cherry-picking the healthiest risks (the health “haves”) rather than improving efficiency.
This is not our first rodeo. The ACA sought to discipline MA plans by paying them less. But because bonuses were available for plans that excelled in quality, cheating ensued. Roughly three-fourths of plans reported quality ratings of four stars or higher, the level needed to earn extra payment. Whistleblowers reported upcoding and fraud on the government. Will Medicare for America do better, or will we watch this show on repeat?
The economists and policy community can design and model incentives. But they cannot always predict whether our system of governance is robust enough to make the kinds of decisions that their designs intend, and with the legitimacy required. There are governance norms, historical pressures, and process questions to which the econometrically-trained policy community is not methodologically sensitive. We tried in the 80’s to legislate 95% payment for private Medicare managed care plans. But then we tinkered with the formula in the Balanced Budget Act of 1997 (BBA) that helped usher in the surpluses of the late 1990’s.
The economists at the time projected MA budget neutrality, calculating that the new formula would not expand MA spending. Their models could not predict that the next round of legislating would be for BBA “givebacks”—a feeding trough for special interests that descended on Congress for a bill to reverse BBA cuts. After insurance company lobbying, the 1999 givebacks bill contained an additional $4 billion for Medicare managed care, while the 2000 givebacks gave them another $11 billion over five years. This history does not augur well for our ability to hold the line on Medicare for America’s 95% payment rate, just as it raises doubts about whether a regional official can withstand special consideration when negotiating a major hospital system’s global budget under Medicare for All.
Economists could not project these political conditions, nor could they predict that the Supreme Court would strike the Medicaid conditionality passed in the ACA in a bid to save its own legitimacy. They could not predict the Trump Administration, nor the thousand small corruptions that riddle the ACA and accumulate every day in the ordinary administration and governance of this apparatus, just as it did with the configuration that came before.
Large as the effect of these corruptions is on the ACA, they are perhaps even more damaging in their second-order effects. These reversals and special favors undermine the trust that people have in government’s capacity to achieve significant collective feats.
What does this policy blindspot mean for the debate we are having now between Medicare for All and Medicare for America? I have only a partial answer and it is little more than guesswork. Partly, we should kick the tires on these proposals not just for the appeal of the visions advanced, but also for the spots at risk of capture and distortion from their original purposes. But we must also ask to what extent we design health reform for the governance system we have, or for the governance system that we wish we had. My guess is that robust collective will is like a muscle—we must practice being whom we aspire to be, and the work of building that fitness is a process, not an end result. It should not surprise us then that each of these proposals represents a way station, not a final end-state, in our ongoing quest for a just, collective response to human suffering and vulnerability.
Christina S. Ho is the Associate Dean for Faculty Research, Development and New Programs and a Professor of Law at Rutgers Law School.