Can Competition Improve Medicare?: a Look At
Total Page:16
File Type:pdf, Size:1020Kb
QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT COST CONTROL BENEFICIARIES INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT COST CONTROL INFORMED CHOICE PRIVATE INSURANCE PLANS STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT HEALTH CARE PROVIDERS COST CONTROL INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT COST CONTROL INFORMED CHOICE GOVERNMENT QUALITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT COST CONTROL BENEFICIARIES INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT COST CONTROL INFORMED CHOICE PRIVATE INSURANCE PLANS STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT HEALTH CARE PROVIDERS COST CONTROL INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT COST CONTROL GOVERNMENT STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENTCan Competition COST CONTROL INFORMED CHOICEImprove STANDARD COMPREHENSIVE Medicare? BENEFITS QUALITY ACCOUNTABILITYA Look UNIVERSAL at Premium COVERAGE GUARANTEED Support ACCESS RISK ADJUSTMENT COST CONTROL INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT COST CONTROL INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS BENEFICIARIES QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT COST CONTROL PRIVATE INSURANCE PLANS INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT COST CONTROL INFORMED CHOICE HEALTH CARE PROVIDERS STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS GOVERNMENT RISK ADJUSTMENT COST CONTROL INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT COST CONTROL BENEFICIARIES INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT PRIVATE INSURANCE PLANS COST CONTROL INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE HEALTH CARE PROVIDERS GUARANTEED ACCESS RISK ADJUSTMENT COST CONTROL INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS QUALITY ACCOUNTABILITY GOVERNMENT QUALITY ACCOUNTABILITY UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT GOVERNMENT Can Competition Improve Medicare? A Look at Premium Support URBAN INSTITUTE COST CONTROL BENEFICIARIES INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS ACCOUNTABILITY 2 CONTENTS Preface . 3 Essay . 4 Conference Agenda . 21 Conference Participants . 22 Conference Volume Preview. 23 About the Urban Institute . 24 UNIVERSAL COVERAGE GUARANTEED ACCESS RISK ADJUSTMENT PRIVATE INSURANCE PLANS COST CONTROL 3 PREFACE On April 16, 1999, a distinguished group of health economists, policy analysts, and journalists met at the Urban Institute to explore the details of a premium support approach to Medicare reform. The daylong conference was sponsored by the Urban Institute’s Retirement Project, with generous support from the Andrew W. Mellon Foundation. An overview paper, “Reforming Medicare: A Framework for Comparing Incremental and Premium Support Approaches,” by Beth Fuchs of Health Policy Alternatives, Inc., and consultant Lisa Potetz, provided the framework for panel presentations, commen- taries, and discussion by participants. A conference volume containing this background paper and five additional papers based on the conference discussion will be published in early 2000. This booklet provides an overview and synthesis of the major issues discussed at that conference. We hope that both the shorter guide and the full volume will help frame future policy discussions and clarify reform options under consideration. Marilyn Moon, Urban Institute September 1999 INFORMED CHOICE STANDARD COMPREHENSIVE BENEFITS HEALTH CARE PROVIDERS UNIVERSAL COVERAGE 4 CAN COMPETITION IMPROVE MEDICARE? A LOOK AT PREMIUM SUPPORT Medicare’s financial future is under siege from rising health care costs The goal of premium and the impending retirement of the baby boom generation. If no changes are made, this venerable federal health insurance program— support is to replace the which today covers 39 million elderly and disabled persons at a cost current Medicare program of $220 billion—will face a crisis within the next 20 years. Its hospi- tal insurance trust fund is projected to become insolvent even sooner, with managed competition by about 2015. Not surprisingly, Medicare reform is high on the nation’s domestic policy agenda. that would rely on market The most extensive reform currently on the table is premium forces to deliver quality support, a proposal under which the government would contribute some share of the premium Medicare beneficiaries pay for basic health care in a way that maximizes services. The goal of premium support is to replace the current Medicare program with managed competition that would rely on cost-effectiveness and market forces to deliver quality care in a way that maximizes cost- beneficiaries’ choice effectiveness and beneficiaries’ choice of plans. Thus, premium support would elevate the private insurance industry to equal status of plans. with the other interested groups in the existing Medicare mix—health care providers, the federal government, and beneficiaries. The National Bipartisan Commission on the Future of Medicare recently came out in favor of one version of premium support. Presi- dent Clinton’s new Medicare reform proposal also stresses expanded competition, but with key differences. Since premium support is almost certain to be a major option in the Medicare reform debate in the 106th Congress—and since tracing the specifics needed for such a system to succeed will help clarify the wider debate about Medicare reform—premium support merits careful attention. To contribute to such an examination, the Urban Institute gathered a small group rep- resenting a broad range of expertise, experience, and points of view to spend a day formulating the questions that will need to be answered in order to assess adequately the merits and practicality of premium support. Conference discussion confirmed that designing and implement- ing premium support—particularly since it would have to alter significantly the current Medicare program—is much more compli- cated than proponents have recognized. RISK ADJUSTMENT GUARANTEED ACCESS GOVERNMENT UNIVERSAL COVERAGE ACCOUNTABILITY QUALITY 5 LEGISLATIVE CONTEXT OF MARKET-BASED REFORMS. Under current policy, Medicare is projected to become financially unsustainable sometime within the next 20 years. With this and related concerns in mind, Congress established, in the Balanced Budget Act of 1997, the National Bipartisan Commission on the Future of Medicare. Among other duties, the Commission was charged with making recommendations to Congress by March 1, 1999, on a com- prehensive approach to preserving the program. The Commission held numerous hearings and meetings from which two paths emerged. The co-chairs, Senator John Breaux (D-LA) and Representative William Thomas (R-CA), as well as the majority of the Commission members supported a comprehensive overhaul of Medicare based on a premium support structure. The Commission did not consider an alternative to the Breaux-Thomas proposal, but members opposed to the majority approach voiced support for a variety of incremental and “modernizing” Medicare reforms. These changes would involve: retaining the current financing structure while continuing to restrain spending growth in fee-for-service (FFS) Medicare, updating the cost-sharing requirements for the FFS program, instituting policies to make FFS Medicare a more prudent buyer of health care services, and making improvements to the Medicare+Choice program. Supporters of this alternative contend that, together with reform of supplemental insurance (Medigap), sufficient savings could be achieved to enable the inclusion of outpatient prescription drug coverage in the Medicare benefit package. The Breaux-Thomas premium support approach is modeled loosely after the Federal Employees Health Benefit Program (FEHBP). As Medicare+Choice, the government would pay part of the premium for an approved health plan selected by the beneficiary. The difference would be that traditional Medicare, “the government-run, fee-for-service option,” would compete for enrollment on the same basis as any approved private plan. If the beneficiary selected traditional Medicare, then the government would pay a portion of the cost of providing traditional Medicare. If the beneficiary opted instead for an approved private plan, then the government would pay a portion of that plan’s premium. Under the Breaux-Thomas proposal, a new Medicare Board would be established to administer the program in place of the Health Care Financing Administration. The Board would be given broad powers to oversee and negotiate with private plans and traditional Medicare and to approve plan service areas. The Board would have the authority to ensure quality standards, protect against adverse selection, approve benefit packages, negotiate premiums, compute payments to plans (including