The initial debate over premium-support-style reform of Medicare, as most recently embodied by last week’s Ryan-Wyden proposal, remains largely driven by ideological passions, oversimplified budgetary scoring models, and policy concepts devoid of structural details. Hence, it too quickly descends into the sort of no-holds-barred fight for political dominance that Butch Cassidy faced when challenged by Harvey Logan for control of the Hole-in-the-Wall gang in the 1969 movie, “Butch Cassidy and the Sundance Kid.”
If only the president and Congress could settle Medicare reform issues as quickly and as elegantly! Perhaps we should take a little more time to re-examine past assumptions, determine priorities, and present tradeoffs more honestly. Most of all, let’s stop assuming that we can get from point A to point Z without spelling out and using many more letters of the health policy alphabet to settle on some rules of engagement. The Ryan-Wyden proposal makes an honest effort to start this process at the “high-concept” level. But even that political movie will need a more detailed script that begins to answer at least 13 more questions.
Consider what remains mostly unknown, uncertain, or unresolved—if not simply airbrushed out of the fuzzy picture—regarding a baker’s dozen of elements of a premium support plan that could be implemented, made operational, and not contradict its promises:
(1) Is the primary policy goal of premium support (or other Medicare reform alternatives) to achieve more efficient and higher-value health care? Or is it simply to lower the future rate of growth of Medicare spending? Or, more cravenly, just to keep currently happy beneficiaries reassured of little if any disruption to their existing health care arrangements? If we pretend that none of those goals are in any conflict with each other, the resulting prescription for solving several simultaneous equations remains likely to be contradictory, unaffordable, and unsustainable.
(2) Clearer answers to resolve the tradeoffs between those major policy goals and their relative order of precedence will go a long way in determining other settings for the various elements of premium support. For example, promising too many “guarantees” to beneficiaries of generous benefits, limited cost sharing, protective regulation, and standardized coverage will negate other policy objectives. They will conflict with efforts to achieve lower Medicare spending growth rates, reduce tax burdens on younger workers, shrink massive budget deficits, and increase choice and competition through better private plan alternatives.
(3) Just how “low-income” will low-income Medicare beneficiaries needing greater premium support turn out to be? Ryan-Wyden tends to start drawing special assistance income-level ceilings at dual-eligible seniors covered by Medicaid as well Medicare. Subsidies that creep further up the income ladder will hit younger taxpayers harder and reduce beneficiary incentives to make more cost-conscious care and coverage choices on the margin.
(4) Recent rhetorical boasts that a reformed Medicare program under Ryan-Wyden will provide the “toughest consumer protections” ever might send a chill down the spines of those hoping for more differentiated coverage choices and more vigorous competition among Medicare insurers and health care providers. Ensuring necessary regulation is not the same as reupholstering traditional Medicare regulation with additional layers of edicts from CMS.
(5) Competitive bidding mechanisms conceptually should determine relative levels of premium support by taxpayers in different health care market areas. But they need clear operating rules guided by key policy goals. If the foremost goal is lower costs, setting the winning bid price at the least-costly one submitted might drive down premiums over time, at the risk of failing to ensure sufficient capacity to serve all beneficiaries. At the opposite end, using competitive bidding to arrive at an “average” price of subsidized coverage based on all bids would keep more “competitors” in business, more beneficiaries happy, and the traditional Medicare program more insulated from competition. But that would come at the expense of reduced pressure for greater efficiency gains and resulting higher Medicare costs to be picked up mostly by taxpayers, and increasingly by Medicare premium payers as well. Ryan-Wyden suggests that it might favor using the lower of the second-lowest bid in a market area, or the cost of traditional Medicare fee-for-service (FFS), to set the premium support amount. The 1999 bipartisan Medicare commission’s model relied more on an enrollment-weighted average of all competitive bids. (Is anyone else out in Medicare nerd land considering a reverse second-item auction, if not a Dutch auction, but for the unfortunate imagery of reduced plan choices?)
(6) The tradeoffs between taxpayer costs, Medicare spending levels, beneficiary insulation from market–based price tags, and relative stability on the supply side of health care also will shape such policy design decisions. What percentage of total Medicare premiums will be subsidized (the 1999 bipartisan commission started at 88 percent)?
(7) Could a supplemental tier of separately-priced benefits also be offered by private insurers that first must follow bidding rules in selling an initial common core of standard Medicare benefits?
(8) How much variation (“actuarial equivalence”) will be allowed in offering basic benefits?
(9) How might levels of premium support be adjusted downward in later years (to meet budgetary targets)?
(10) What degree of means testing for access to greater taxpayer subsidies will prove both economically necessary and politically tolerable?
(11) The power of competitive pressure unleashed through a premium support reform might be shaped by design factors that could overcome the ingrained inertia of most Medicare beneficiaries to choose one plan and stick with it as long as possible. For example, initial random assignment of newly eligible Medicare enrollees into both private plans and Medicare FFS—as a default setting subject to informed consent and opt-out guarantees—might reduce the passive bias of the current program toward enrollment in the dominant incumbent option, the traditional FFS public program. On the other hand, the limits of political tolerance will be tested by premium spikes in Medicare FFS in some markets where it is less cost-competitive, or by the absence of private plan options in other areas (such as several rural states represented by members of the Senate Finance Committee?) where limited health care provider options make network contracting by private insurers less viable.
(12) Another unaddressed issue in many premium-support-style proposals involves how the administrative managers of Medicare FFS might be empowered (i.e., turned loose) to adjust their program configurations to respond to new competitive pressure from private plan alternatives. Political resistance to untying the hands of government “bureaucrats” in order to allow them to act like managers seeking to retain or expand market share (if not “profits”) is strongest among the many micromanagers of Medicare on Capitol Hill. But it also strikes a chord among risk-averse FFS beneficiaries. On balance, level-playing-field competition between the public and private faces of Medicare requires that past constraints on the former’s flexibility to adjust premiums, cost sharing, and benefits, plus selectively contract with providers, should be relaxed from congressional shackles as long as sufficient disclosure of new policies and practices is ensured and the FFS program is broken up into regional, if not smaller, units.
(13) The biggest challenge may involve the need to deliver Medicare cost savings soon enough and large enough. That would mean applying premium support to newly eligible enrollees earlier rather than later, or even to current enrollees, so that the “benefits” of competitive cost pressures make a difference before fiscal pressures overwhelm the program another ten years from now. The Ryan-Wyden plan, like most other “reform” proposals, takes a dive on this issue, even though this contradicts the purported message that choice and competitive should be good for everyone, not just new beneficiaries much further over the election year horizon.
The above policy menu is complex and relatively uncharted. It certainly merits much more discussion, initial experimentation, and careful monitoring, but those uncertainties should not dissuade policymakers from allowing it to unfold sooner rather than later. (Even health policy analysts at several Washington-based think tanks have gotten into the Medicare reform act, under the nomenclature of “defined contribution” financing for Medicare.) What is more certain is not only that the status quo is unsustainable, but that a more cautious move in the direction of premium support should and could have started over a decade ago, as proposed both by a majority of a 1999 presidential commission and in several bills offered by then-senators John Breaux and Bill First.
In any case, the public service done by Representative Ryan and Senator Wyden is not to offer the ideal, intricately-designed version of Medicare reform, but rather to help unlock the mostly stale policy discussion about how to avoid dealing with the growing mismatch between our past political promises to older Americans and our future institutional and economic capabilities to deliver them through traditional mechanisms. Medicare is destined to change substantially, by necessity. Ryan and Wyden suggest a pathway for doing this more intelligently, compassionately, and sustainably, in accord with our broader values and the rest of a hopefully more competitive and market-driven health care system. But there’s lots more heavy lifting and serious work ahead than just a quick “clean and jerk” move toward more exaggeration, wishful thinking, and blame-shifting. Denial is no longer an option.