“Almost half of people on Medicare, 31 million Americans, are now enrolled in a Medicare Advantage plan, nearly double the share of 10 years ago. It is widely assumed that Medicare Advantage will cover a majority of the program’s beneficiaries within the next few years.”
…
“Medicare Advantage allows private insurers to offer their own plans that provide Medicare benefits as well as some additional perks not available in the original program. The secret to the program’s success is simplicity. Traditional Medicare is a fragmented program; Part A covers hospital care and Part B covers outpatient services. Patients must enroll in a separate Part D plan for prescription drug coverage that is administered by private insurers. Most people also purchase supplemental coverage, extra insurance that helps reduce their out-of-pocket costs.
Medicare Advantage, also known as Part C, combines those benefits into one insurance plan that also includes an annual limit on out-of-pocket costs, something that does not technically exists in regular Medicare.
But the benefits to patients seem to come at a cost to taxpayers. Though the health insurance industry disputes these findings, MedPAC, the independent committee tasked with overseeing Medicare on Congress’s behalf, found Medicare Advantage plans cost the federal government more money per patient than the original program would have if those same people had stuck with the traditional benefits.
Private companies are also making healthy margins on their Medicare business.”
…
“Medicare Advantage enrollees are more likely to report trouble affording health care than people on traditional Medicare. Some of the behavior by Medicare Advantage plans, such as using AI to decide when to stop covering services for their enrollees, may be becoming more common in the private sector but is still unheard of for public programs.
The trade-off the United States seems to be making is accepting more administrative bloat and more stringent provision of benefits in exchange for a more navigable Medicare plan. The trade-off is one other countries have made as they designed universal health care programs. (A similar trend is underway in Medicaid.)
But as concern grows about Medicare facing a potential financial cliff, and evidence mounts about the costs of Medicare Advantage, the risks of the trade-off are becoming clearer. Medicare is no longer what it used to be: Once the epitome of government-run health insurance, its benefits are on the verge of being primarily funneled through private companies. Any attempts to change the program will have to wrestle with that reality.”
…
“In traditional Medicare, for example, patients can go to any doctor or hospital that accepts Medicare; Medicare Advantage has more limited provider networks, and patients can be on the hook for higher costs if they are treated at an out-of-network doctor or hospital.
The federal government pays Medicare Advantage plans a flat rate for the expected cost of covering their particular customers and the insurers are required to adhere to certain rules about benefits and costs. But companies still have flexibility about how to run their plans and have a financial incentive to limit expenses. The less money they spend, the more they get to keep for themselves.
Still, customers will vote with their feet and, after slower-than-expected initial uptake, Medicare Advantage is now growing so quickly that it will soon be the dominant form of Medicare.”
…
“The premiums people pay for a Medicare Advantage plan can be significantly lower than the combined cost of supplemental coverage and a Part D plan — less than $50 compared to more than $200 on average, per Terry and Muhlestein — with the added benefit of having only a single insurance card. According to a 2022 Commonwealth Fund survey, the additional benefits offered by Medicare Advantage plans (such as dental or vision) and the limits on out-of-pocket costs were the most common reasons seniors gave for choosing the alternative over the original program.”
…
“Medicare Advantage patients are less likely to receive medical care at the highest-rated facilities for their particular needs, compared to people with traditional Medicare, a reflection of more restrictive provider networks.”
…
“A report from federal investigators published in April 2022 found that tens of thousands of Medicare Advantage customers were denied coverage for services they should have been entitled to. A significant number of prior authorization denials (13 percent) and payment denials (19 percent) reviewed by the investigators were for services that should have been covered by the program but were not.”
…
“According to MedPac, since 2004, Medicare has always paid more to Medicare Advantage plans for the cost of covering their customers than the program would have spent if the same beneficiaries had instead been enrolled in traditional Medicare. Some years, the private plans were receiving a nearly 20 percent markup compared to the original benefit structure.”
…
“The growth of Medicare Advantage is contributing to the financial crunch. Those plans receive funding based on the type of service provided to their customer, which means money for hospital care comes from Part A. Annual Part A payments to Medicare Advantage plans are expected to increase from about $176 billion in 2022 to $336 billion by 2030.
With revived concerns over Medicare’s solvency and evidence of excess spending in Medicare Advantage, policymakers are starting to look at making changes to the program. But that won’t be easy.”
…
“States have outsourced much of the administration of Medicaid to managed care plans. Countries like the Netherlands have set up health systems that use private insurers, operating under strict government oversight, to provide insurance benefits to their citizens. Giving people more choice and a more streamlined experience can have its benefits, as evidenced by the popularity of Medicare Advantage in the US.
But asking private actors, with profit motivations, to administer government benefits to which people are supposed to be entitled brings risks. People are more likely to have trouble affording health care and their claims are more likely to be denied; that is true in places like the Netherlands, compared to other countries with more direct government administration, and that is true of Medicare Advantage when compared to the traditional Medicare program.”
“It is true that, as of right now, Medicare is projected to be unable to pay all of its bills as early as 2028. Without congressional action, a stronger economy, or more likely, both, the government could end up without enough money to cover everything it promises enrollees within five years.
That would be unprecedented and would likely provoke a political crisis. But it is not quite the same thing as Medicare going bankrupt and ceasing to exist entirely. Alarm bells have sounded about Medicare’s trust fund for decades, with the exact date of when it would run out of money moving forward and back. But, eventually, Congress will need to act.
To understand the program’s financial situation, start with how Medicare is structured. Medicare is broken down into several different parts. Part A covers hospital care, stays at skilled-nursing facilities, and home health care. Part B pays for outpatient physician care. Part D is the prescription drug benefit, which is administered by private insurance plans. Most Medicare beneficiaries — anyone over age 65 — get their insurance directly through the government. But almost half are now insured through Medicare Advantage (also known as Part C) in which patients sign up for a private plan, paid for largely by the federal government, which provides a comprehensive suite of benefits. (Those plans are also more expensive to the government and their growing enrollment is contributing to the solvency problem”
…
“Different parts of Medicare are funded in different ways, but when we’re talking about a Medicare funding crisis, we’re talking about the benefits paid by Part A: hospital services. Hospital bills for Medicare enrollees are funded almost entirely through the program’s dedicated payroll taxes. If those benefits cost more than the government receives in Medicare payroll taxes in a given year, as can happen in an economic downturn, the difference comes out of a trust fund earmarked specifically for Part A. The Medicare trustees, who issue annual reports on the program’s finances, project that Medicare spending will begin outpacing revenue again in 2024, requiring the program to dip into the trust fund. The trust fund is projected to be fully depleted by 2028 without further policy changes.”
…
“Part B and Part D, however, are not facing the same financial crunch. They are funded primarily by general tax revenue, instead of an earmarked payroll tax, and premiums paid by beneficiaries. Their trust funds are projected to be sufficient for the foreseeable future.”
…
“Medicare Advantage plans receive funding based on the type of service provided to their customer, which means money for hospital care comes from Part A. Annual Part A payments to Medicare Advantage plans is expected to increase from about $176 billion in 2022 to $336 billion by 2030.
Separate from the new budget proposal, the White House is attempting to rein in the payments to Medicare Advantage plans (from an 8 percent increase last year to a proposed 1 percent increase in the coming year). Republicans and the health insurance industry have slammed that proposal as a cut to Medicare, an example of how it can be politically difficult to get Medicare spending under control.
Biden’s budget will likely jumpstart a new debate about Medicare solvency. But it’s only a beginning.
Congress has passed provisions to reduce Medicare spending in recent years, such as the Inflation Reduction Act’s plan for the program to negotiate some prescription drug prices. But lawmakers have also acted to avert any cuts to how much the program pays doctors, hospitals, and other medical providers.
Both tax increases and any spending reductions can be a tough sell in Congress. So can increasing the eligibility age, an oft-floated idea that still amounts to cutting benefits for seniors.
Biden is going with tax hikes in his budget plan. But it’s not yet clear if lawmakers are really willing to act on his or any proposal to improve Medicare’s finances.
They still have five years before the Part A trust fund will run out, according to the latest available projections. The Medicare trustees urged Congress to act soon to avert the crisis, in order to minimize the risks for patients and providers. But unfortunately, lawmakers have a habit of waiting until the last minute to act.”
“Florida Republican Sen. Rick Scott’s plan to “rescue America””
…
“Scott’s proposal would radically overhaul how the federal government operates, forcing Congress to re-pass every federal law or else let them lapse — a move that, in Democrats’ telling, would endanger much of what the government does, including beloved federal programs like Medicare and Social Security.
It’s a short proposal, with little detail to flesh it out. But on its face, its meaning is plain: Every five years, every federal law would need to be passed anew in order to stay on the books.”
…
““Instead of making the wealthy pay their fair share, some Republicans want Medicare and Social Security to sunset,” Biden said in his State of the Union address. “It is being proposed by individuals. I’m politely not naming them, but it’s being proposed by some of you.”
It was a new twist on a familiar trope: Republican proposes cutting government benefits, Democrat attacks him for it. And it seems to have left a mark: After more than a week of uproar since the State of the Union, Scott formally revised his 12-point “rescue America” plan to specify that its provision requiring every federal law to be re-passed every five years would not, in fact, apply to Social Security and Medicare. And so, at least officially, the senator has papered over the main political weakness of his plan.”
“Democrats have a multi-pronged strategy for addressing drug prices in the Build Back Better Act. First, they would allow Medicare to negotiate with pharmaceutical manufacturers on the prices of a certain number of prescription drugs, something they have been promising to do for years. But Democrats also want to limit drug companies’ ability to hike the prices of their medications for everyone — regardless of what kind of health insurance they have — in the future.
To do that, Congress has proposed requiring drugmakers to pay rebates for any price increases, in either the Medicare health program or the commercial health plans that cover 180 million Americans.
But, as Politico reported this week, the plan to apply the inflation-indexed rebates to the commercial market could be in trouble.
Senate Republicans — at the urging of the drug industry — plan to challenge whether the rebates for commercial health plans are permissible in a bill passed through the budget reconciliation process.”
…
“the Byrd Rule requires that all the provisions in a budget reconciliation bill directly change federal spending or revenue.
Republicans will argue that the purpose of the provision is to control drug prices for the private plans, full stop, and that does not have anything to do with federal spending or revenue — at least not directly.
The Democratic counterargument would be that applying these rebates to commercial plans would have a serious, more than incidental, effect on the federal budget. The federal government subsidizes almost all private insurance plans in one way or another, and so lower or higher costs for those plans could have major implications and lower costs for private health plans could also mean higher wages for workers, who would then pay more in taxes.
Who wins is likely ultimately a decision for the Senate parliamentarian.”
…
“what would happen if the parliamentarian determines rebates covering commercial plans cannot be allowed under the Byrd Rule?
The big fear, voiced by advocates of the Democrats’ plan, is that drug companies would extract higher prices from the commercial market in order to make up for the revenue they would lose from Medicare once that program’s new price controls take effect.
According to several experts, that appears unlikely. Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, covered why in a lengthy analysis published in September.
“Fundamentally, for this to occur, it would have to be the case that drug companies are benevolently choosing not to profit-maximize at present,” Adler told me this week, “which I find rather difficult to believe.””
…
“Under the current plan, drugmakers would pay a rebate based on their sales volume in both the Medicare and commercial markets. In that scenario, there would be little reason to raise list prices faster than inflation, because you are paying the penalty based on the entire market.
But if those rebates can’t include the commercial market, the penalty will be based on the Medicare market only — making it a smaller price to pay if a company does decide to hike the list price of a drug at a rate higher than inflation.”
High-Deductible Health Plans Reduce Health Care Cost And Utilization, Including Use Of Needed Preventive Services Rajender Agarwal et al. 10 2017. HealthAffairs. https://www.healthaffairs.org/doi/10.1377/hlthaff.2017.0610 Does High Cost-Sharing Slow the Long-term Growth Rate of Health Spending? Evidence from the States Molly Frean and Mark
“Medicare is one of America’s flagship government programs, immensely popular with the public, a critical safety net for people over 65 — and it is full of holes.
The program’s benefits are not as comprehensive as most other kinds of health insurance Americans carry. Unlike with commercial health insurance or with Medicaid, which covers people in or near poverty, there may not be a limit on what a person on Medicare may have to pay out of pocket for their medical care.
Medicare also doesn’t cover dental or vision services, which are essential to the health of the over-65 population that it serves. The benefits for long-term care are meager, placing an enormous financial burden on patients and their families.
Two things can be true at once: Medicare has been a tremendous success in eliminating poverty from medical expenses among the elderly, compared to the pre-1965 status quo, and it is, as currently constructed, woefully inadequate to the realities of modern health care.
Democrats in Congress appear to recognize this problem. They plan to include some expansion of Medicare — by adding new benefits and perhaps making more people eligible — in the major budget reconciliation bill they hope to pass in the coming months.
For now, they appear to be focused on adding new dental, vision, and hearing benefits. They are working with finite resources; money spent on new benefits is money that can’t be spent on adding more people to the rolls or lowering patients’ out-of-pocket costs for other medical services.”
“Medicare’s board of trustees produced their annual report on the program’s fiscal health. That report contained some expected yet nonetheless alarming news: Medicare’s hospital insurance (HI) trust fund, itself a kind of accounting fiction, will be insolvent in just five years. Starting in 2026, the HI fund, which covers inpatient hospital services, will be depleted.
The program will have to rely on the HI fund’s incoming revenues, essentially operating on a cash flow basis—and there won’t be enough cash. In 2026, the HI fund will only cover about 91 percent of its bills. In the years that follow, that gap will only grow larger. So without changes to the program’s financing, doctors, hospitals, and other medical providers will face rapidly reduced payments from the program, with ensuing ripple effects on both the wider economy, roughly a sixth of which revolves around health care services, and on the provision and availability of health care.
If anything, the program’s fiscal problems may be even worse than that: The new report assumes that an array of cost-reduction measures, including a series of technical tweaks the physician payments and bonuses, will persist. But they also note that Medicare’s “long-range costs could be substantially higher than shown throughout much of the report if the cost-reduction measures prove problematic and new legislation scales them back.
As anyone who has even a passing familiarity with attempts to control the cost of federal health care programs through doctor payment tweaks knows, those sorts of measures often prove problematic—which is to say, doctors don’t like them, and thus, for political reasons, Congress overrides those payment changes.”
“Medicare’s inability to determine the price it pays for aducanumab is a uniquely American problem compared to health systems in the rest of the developed world. Countries like Australia and the United Kingdom have independent boards that evaluate a new drug’s effectiveness and set a price based on that estimated value. The US pharma industry says the US system is important for encouraging innovation, and companies have made amazing breakthroughs, such as the hepatitis-C drugs that effectively cure that disease.
But, as the standards for approving have sometimes seemed to slip in recent years, the chances of the FDA approving very expensive drugs with only marginal benefits have risen.
“We don’t require prices to reflect the value of treatment, period,” Dusetzina said. “Companies can price their drugs as high as they want. Companies can also get drugs approved with little evidence.”
So Biogen is planning to charge $56,000 annually for aducanumab. ICER, which evaluates the estimated value of new drugs, estimates, based on the clinical evidence, that it’s worth more like $8,000; perhaps as little as $2,500 or as much as $23,100. Regardless, the price announced after Biogen secured FDA approval “far exceeds even this optimistic scenario,” ICER concluded.”