Sunday, September 29, 2019

Medicare Advantage for All

Here, I propose that Medicare, with all parts, A, B, C, and D, has its age of coverage fall at the rate of ten years per year and, as those workers newly covered by it cease their use of employer based health coverage, the employer portion of the Medicare tax will increase to compensate.  Because Medicare fee schedules are below those on nearly all corporate health plans, industry wide, this would cause no increase in total employee health care costs to businesses.  As well, because the corporations will be funding the added rolls of Medicare recipients, there will  be no added cost to the taxpayer.  This is not a 'government takeover of healthcare' because Part C, commonly referred to as Medicare Advantage is a set of, mostly, PPO and HMO private health insurance plans.  Of course, there are many devils in the many details, but they do not change the overall conclusion that this plan is superior to any current plans or any proposals.

It would also be an improvement over the socialized medicine that dominates most of the developed world.  This means that as it implements it will likely stimulate discussion over all of Europe and the Americas.

It is important to discriminate between this Medicare Advantage for All proposal and the many Medicare for All proposals.  They are not Medicare for all but rather standard European style nationalized healthcare systems.  They are not putting for radical new ideas but rather using a political slogan that merely rebrands a very old idea.  My proposal of  being currently floated by U.S. Presidential candidates.  Medicare Advantage for All is a blend of public and private healthcare systems, taking the best from both.  It will be close to revenue neutral and, over time, will probably result in a sustained inflation adjusted reduction of total national healthcare costs.  

It needs to gain exposure and it will likely need to do so against a not insignificant degree of political headwind.  The Republicans and Democrats have both staked out their positions and pledged fealty to the special interests that those proposals benefit.  The Republicans will like the retention of private insurance, but will dislike that the government or a quasi-government agency is inserted into the funding.  Democrats will like that the government will be involved in fee setting ad funding mechanism but will not like that the insurance companies will continue to exist.  However, if adopted, this Medicare Advantage for All not only could start the U.S. down the road toward a more sustainable and cost effective health care system, it may also prove to be better than the European style health care systems and, therefore, could positively impact a large population outside the U.S.

Medicare Advantage Basics
In order to understand what I am advocating, since it is a true Medicare for All proposal, we first need to consider how Medicare actually works and how it could be modified to cover everyone.  Retired Americans generally understand how Medicare Advantage works, though they erroneously think that Part A is retained by the government rather than being 'capitated' to the insurance company of their choice.  However, most younger Americans and nearly all people outside the U.S. do not understand it.  They believe that people over 65 in the U.S. have socialized medicine and people younger than 65 either have employer paid healthcare, are affluent enough to buy insurance 'retail' or go without.  None of these statements are actually correct.  Medicare has a centralized, governmental funding mechanism but Medicare Advantage policies are administered, in total, by private health insurance companies that, within the Medicare fee structure, negotiate with and then pay healthcare providers. 

In the U.S., at age 65, citizens are automatically enrolled in Medicare Part A.  It is a hospitalization program that covers some of hospital bills but covers neither doctor's visits nor prescription medicine.  However, unless you jump through a whole bunch of hoops, the Social Security Administration will also automatically enroll you in Part B and deduct the fee from your Social Security payment.  In that portion, you will pay 135.50USD per month (in 2019) and coverage is 80% of doctor's visits.  Prescription drugs are still not covered and is dealt with in Part D which is fully funded by the beneficiary.  However, an increasing number of Medicare beneficiaries do not keep Part A and B.  Instead, they select a Medicare Advantage program (Part C) from a private health insurance company and they will receive better benefits, sometimes substantially better, than they would with the government program.  

For example, when I was diagnosed with cancer, I went through 18 months of hormone treatment, radiation treatment and chemotherapy, and my total out-of-pocket cost was $130.  I paid $95 per month for this coverage because Humana refunded me a portion of my Part B premium.  Also, unlike the Medicare program Part B, prescription drugs are covered, usually with no copay.

In the 2020 Presidential race, the Republicans want to stay with an unworkable Employer Based healthcare plan.  The Democrats want to turn the ACA (Obamacare) into various forms of a socialized system.  If you are a U.S. citizen, this affects you directly, but if you are a citizen of anywhere else, it still affects you indirectly.  If you do not share this article, you run a very real risk of getting stuck with an expensive, unworkable healthcare system.  So, please, share this throughout your social media Universe.  Ideas, not people, change the world.

The Medicare system is, actually, relatively cost effective, because doctors get paid based on a very aggressive fee schedule.  However, with Medicare Advantage, the insurance companies also negotiate with health providers to gain even more cost advantages.  Medicare Advantage almost always is either an HMO or PPO which, while cheaper, places some additional restrictions on providers.  For example, patients may be required to get their MRI at an imaging facility, which might charge $400 instead of at a hospital that charges $3,000 or more.  It also makes wiser decisions on drugs.  For example, my insurance company required my hormone therapy drug, 'Trelstar' to come from them, because they saved money by making bulk purchases and they had negotiated a substantial reduction in the price.  It was a different drug than the more expensive and commonly prescribed drug, 'Lupron' even though research does not show any difference in efficacy.  

What really makes Medicare Advantage different than other healthcare schemes being advocated is that when a beneficiary selects Medicare Advantage, the insurance company not only receives the Part B payment from the beneficiary, it also receives a capitation fee, or the Part A budget.  This means that Medicare Advantage is funded by and promulgated by the Federal government, but is administered by the insurance provider of the beneficiary's choosing.  The government does what it does best and the private plans provide choice, service and competitive pricing.  If this seems like the best of both worlds, that is because it is.

Some Benefits
Medicare Advantage has no 'waiting lines' as there are in European systems and presumably would in the proposed Medicare for All proposals.  When I needed cancer treatment, I got it immediately.  The only delay was on deciding the precise therapy to be undertaken and during that short time, I was given Casodex a drug that temporarily slows or stops the progression of my type of cancer.  It also minimizes the negative effects of the primary hormone drug if administered for the first couple months of treatment.  So, I took Casodex for three months and it, unlike most medications which are free, did have a $10 per month copay.  The absence of lines is because, unlike, socialized medicine, Medicare Advantage is sensitive to market forces.  If a particular plan has delays in treatment, it must charge less or it will go out of business as beneficiaries change to policies that have no waiting lines.  However, consistent with free markets, one can buy a less expensive insurance policy with lower levels of benefits if that is deemed suitable.  In that case, if there are lines, it is a cost/benefit decision made by the patient.

According to one study, Canadian patients wait an average of about 19.8 weeks for a non-critical appointment.  The triage of socialized medical programs are often medically inferior to immediate treatment.  In other words, there is no downside to immediate treatment, but medical professionals can make mistakes and determining the urgency required.  I read a horrendous story about an American in Paris who collapsed due to internal bleeding.  He laid on a gurney in the hospital for 8 hours waiting for surgery because it was considered to not be 'urgent'.   It wasn't until he actually died, that he was taken into an operating theater, revived and sewed up.  According to WHO, France has the best health care system in the world.  I'm skeptical.  And I certainly doubt that this man would agree with their assessment.  The point is, even if they routinely get it right, any mistakes are more risk than immediate treatment.

The Mainstream Media has lost all semblance of objectivity.  Leonardo and The Polymath is dedicated to intellectual sophistication.  It will be intelligent, erudite, objective and disciplined.  We need your participation and your support.  Subscribe to The Polymath by entering your preferred e-mail address:

Right now, some health care providers don't accept Medicare because they get paid less than through the employer provided insurance that their working age patients receive.  This is a concern about any government program.  However, if it was 'Medicare Advantage for All', they would either accept the fee schedule or find a different line of work.  In fact, Medicare Advantage already exists and most providers accept most of the available plans despite the lower prices that they can charge.  However, they are PPOs and HMOs so there are some restrictions.  I needed to change my primary care physician when I switched to an Advantage policy with better cancer coverage.  But, that can happen, as well, for employer programs, especially if one changes jobs.

A significant illness does not bury you in paperwork.  When my father was in his early 70s, he suffered a significant stroke.  He spent three days in an ICU and then about a week in a regular hospital room.  Then he was transferred to a long term care facility where he underwent rehab.  It was an obvious strain on the family.  Also, because Medicare paid only a portion of the hospital bill and other medical expenses were only covered 80%, there were substantial expenses.  Fortunately, my parents had the financial resources to cover those costs.  But, still, my mother had a significant part-time job for over 18 months dealing with the avalanche of paperwork coming from hospitals, labs, doctors, physical therapists, etc.  It was a paper work nightmare.

On the other hand, when I was diagnosed with cancer I was on Medicare Advantage.  I saw two bills, one, for a $100 copay on my biopsy and one, for $100 on the insertion of gold balls used to guide the radiation treatment.  They were both very simple with just one line saying copay for surgery.  The only other bureaucratic problem I had was getting my 'Trelstar' shipped from Humana which my Oncology Clinic didn't seem to know how to do.  It did require three phone calls over 18 months, simply verifying that I approved of the treatment.  It was not anything like the nightmare my mother went through with my father.

Simply put, a person with a serious illness really doesn't need the added stress of dealing with mountains of paperwork and, often, contentious discussions with billing departments.  The best way to deal with that is to choose a Medicare Advantage plan where nearly everything is covered.

In Medicare advantage, there are literally dozens of plans to choose from.  That is a disadvantage, in that it takes more time to decide which plan is most appropriate.  But it is also an advantage because you can choose a plan that best fits your medical profile.  I chose a Human plan that had particularly good coverage for my kind of cancer.  I do not have any symptoms of heart disease, so I didn't care if the coverage was not as good there.   There has been much concern that a 'public option' would crowd out 'private options'.  Whether or not that is a justified concern, we have extensive experience with Medicare and, in fact, the 'private option' or Part C is actually growing rapidly. In the past decade, the percent of Medicare Beneficiaries that are enrolled in an Advantage plan has doubled.  This should be ample evidence that the system works. 

The Polymath needs to reach a large percent of the thought leaders of today in order to succeed in its mission to create more intellectually sophisticated and unbiased public discourse.  That is why it will be totally ad supported.  We will need start up capital.  At present you can contribute as little as 50USD and, when and if doing so is legal where transacted, the ad you purchase will be converted into equity.  Whether retained as an ad or converted to equity, you will have the opportunity to help in an important project and reap typical start-up capital appreciation upon success.  Learn more here.

Some Objections Discussed
Medicare Advantage plans get too much in capitation.  The argument being made is that as people get sick, they drop Medicare Advantage.  Because of this, it is argued that Medicare Advantage has healthier enrollees and are being unjustly rewarded through the capitation rate.  This seems counter intuitive since Advantage programs are almost universally better coverage than Part A & B.  If I had done so, I would have paid over $16,000 for my cancer treatment.  Instead I paid $130.  Having said that, it may not always be the case that Medicare recipients act rationally.  One of the reasons that one of my six points is to 'spin off' Medicare is because politically motivated manipulation of the capitation rates, either way, will always be a temptation.  This is not so much a criticism of the concept of Medicare Advantage as it is a criticism of its implementation.  However, in all fairness, every solution has the potential to be 'gamed'.

The Medicare Fee Schedule is not sustainable if implemented nation wide.  I read one hospital administrator who claimed that if all his patients were Medicare patients, the hospital would go out of business.  As a former Budget Director of a large natural gas distributor (a regulated monopoly) where I was attempting to squeeze efficiency out of the organization, I heard this a lot when I started.  That just wasn't what happened.  What really happened was that they sharpened their pencils and found more cost efficient ways to get the job done.  If a service really can't be delivered profitably, the regulator, in this case Medicare, needs to adjust the fee.  However, if they are unjustified in that price increase, the insurance companies will negotiate a lower price to gain a competitive advantage.  No plan can completely wring bureaucratic waste out of a system.  However, at least, with Medicare Advantage, the incentives work in the proper direction.

The fact is that the U.S. pays about twice as much as Western Europe.  It is far from clear not clear that it is buying a better healthcare system.  The World Healthcare Organization ranks it 37th.  The explanation for the very high cost of medical care in the U.S. is not simple.  Virtually every category of medical expense, from doctor's visits, to lab costs, to hospital costs, to medicine to long term care, is far higher in the U.S. than anywhere else.  Even when considering any one line item, there are many factors contributing to the higher costs.  While Medicare Advantage for All is easy to implement, lowering the cost of healthcare in the U.S. is a complex goal.  For example, why high volume drugs, such as insulin and epi-pens, cost up to 10X as much as in other developed countries.  This will require a deep dive that may be undertaken by Congress, NIH or the insurance companies.  However, the discourse won't turn strongly toward cost control until the insurance issue is solved.

Medicare Advantage for All would not solve all U.S. health care problems, but it would be a very good start.  Once in place, because it runs primarily on PPOs, the insurance companies will still hold significant power over how medical services are delivered.  Some of that may be seen as bad, but mostly, it is good.  Competition will cause them to deliver good services and the profit motive will cause them to do it at a low cost.

There have been two trends in health care that are significant.  First, much less expensive Physician's Assistants are handling more of the routine doctor's visits.  A mid-six figure doctor with eight years of training probably is not  required to handle an ear infection in a child or diagnose that the person who presents with 'what's going around'.  Second, IBM's Watson is now being marketed as Dr. Watson, an AI program that is, according to IBM, better and more efficient at both Dx and Rx than any human.  That is being questioned by some in the industry.  However, if IBM is overstating its case at present, it will be true in the end.

These two trends are not progressing as quickly as they should partially because there is currently little incentive.  The national fee schedule portion can promulgate the use of Physician's Assistants as primary care, assisted by Dr. Watson with likely no degradation and perhaps an improvement in the quality of care.

Opponents of 'Medicare for All' throw around really frightening cost estimates, often into the tens of trillions.  These numbers are disingenuous.  We're going to do a bit of 8th grade math to clarify this issue.  Total U.S. healthcare costs i 2017 was about 3.5 trillion USD or about 18.9% of total GDP.   Average 2017 population was 325,719,000 for an expenditure per capita of 10,745 USD.  We know that there were 58.5 million medicare recipients in 2017 with an average cost per beneficiary of 12,347 USD, for a total expenditure of $722,299,500,000.  We know that of the 325,719,000 population, 9.1% or about 29,640,000 were not covered, 58,500,000 were medicare covered and 237,579,000 USD were covered by other than Medicare.  So, we know that (3,500,000,000,000-722,299,500,000)/237,579,000 = 11,700 USD per capita.  That means that, in order to cover (hence the part 'for all') the 29,640,000 currently not covered might cost about 347,788,000,000 USD per year.  While that is a large expenditure, it is less than 10% of the amount being quoted for the Medicare for All plans being considered.

It is, however, not clear that covering everyone under a Medicare Advantage for All program would actually cost that much more than is currently being spent.  The reason is because the difference between the Medicare costs of 12,347 USD and the non-Medicare costs of 11,700 USD is too small.   For example, this study states that 84% of the population under the age of 65 cost just 64% of total health care.  This suggests that that group should cost 64/84 X 12,347=9,400 USD each, implying that covering the 23,579,000 should cost an additional 221,642,600,000 USD per year.  Clearly, there are some discrepancies and a very careful scoring of Medicare Advantage for All should be done.  But estimates into the trillions are clearly wrong on their face.

The U.S healthcare system, by the studies we found costs 10,379 USD per capita in 2017.  According to the OECD, the U.S. expended 9,872 USD per capita on healthcare in 2016.  Some of the difference is because of a different year and some is due to the use of nominal, not inflation adjusted dollars.  The next most expensive country was Switzerland at 7,919 USD or 19.8% lower.  So, if the Medicare Advantage for All program could just reduce costs to the second most expensive nation in the world, it would not only eliminate any cost associated with covering the more than 23 million people currently not covered, it would lower everyone's cost by over 10%.

In other words, the argument that 'we can't afford it', which is valid for the Socialized Healthcare masquerading as Medicare for All, is not valid for this, Medicare Advantage for All, proposal.  

One of the very big benefits of a Medicare Advantage for All program is that nothing new will need to be created.  It is simply a decision to lower the age of qualification from its current 65.  It may be done incrementally, increasing taxes and lowering qualification, say, by five or ten years every year.  This is particularly important because 'keeping my doctor' and 'keeping my plan' are very important politically.  As insurance companies lose insured through the corporate route, they will find it profitable to also offer the same plan through Medicare Advantage.  That means that for most people, it will be a seamless transition.  One year they will lose corporate coverage and find that essentially the same insurance will be offered through Medicare Advantage, they will very often find the exact same plan on the Medicare Advantage.  In fact, the insurance company will likely contact all of the enrolled who are scheduled to convert to Medicare Advantage and extend an invitation to transfer their current coverage to their Medicare program.  

By using current systems and by lowering the entitlement age each year, the problems of transition can be minimized, thereby avoiding the kind of problems that were experienced by ACA (Obamacare) during its implementation and would almost surely be experienced by an institution of socialized healthcare.  Also, this will allow the tax and capitation rates to be analyzed and tweaked as needed, involving a relatively small percent of the population.  Another advantage over ACA is that enrolling does not need to be done through a government website.  U.S. residents may have noticed that every year during the enrollment period, insurance companies set up booths near the pharmacies and provide Medicare recipients with an easy way to consider and enroll in their Medicare Advantage program.  This is critical because, despite the very clear benefits, over 60% of Medicare beneficiaries are still not enrolled in a Advantage program.  Yes, some people will want a government program for ideological reasons.  However, most people just want the best plan for the least money which portends well for the growing Advantage enrollment.

At present, Medicare collects 2.9% of payroll of which half is paid by the employee and half is paid by the employer.  The year that Medicare age falls to 55, total expenditures will increase by 55.6%, so that the Employer portion of Medicare will need to increase from 1.45% to about 3.1%.  However, about 30% of their employees will stop participating in their employer subsidized health insurance. Obviously, some employers will pay more and some will pay less depending on the age profile of their employees and the quality of their insurance subsidy.  Every year, their Medicare tax will go up and their employee health insurance subsidy will go down.  This will continue until they will no longer have any employee health insurance and the Medicare portion of their FICA tax will increase to, perhaps, 6%.  Most companies pay more than 4.5% of payrolls on health insurance subsidies, so, surprisingly, over the five years of transition, everyone (the 'for all; part) will become covered and net expense for most companies will fall.  The reason is that many small companies today pay little or nothing in employee health care coverage.  Now, they must.  I realize that many of them will object strenuously to this plan, but they do so, not from a position of equity, but rather from a position of self-interest.

Presently, a little less than 600 billion USD is being spent, by States and Federally, each year on Medicaid.  This has proven to be an extremely inefficient program, especially since ACA forced the eligibility upward for Medicaid upward in most states.  However, most of this goes away when a Medicare Advantage for All is fully implemented.  The FICA tax will cover all expenses save for the Part B.  It is reasonable to assume that the government may choose to cover Part B for individuals and families below the poverty level.  However, that will likely total less than 100 billion USD for nearly a half trillion USD savings.

As the qualification age for Medicare Advantage for All begins to fall, there will become a need for 'family coverage' that will include children.  Obviously, the capitation rate will change to recognize much lower medical costs for children and, very likely, a 'family coverage' option for Part B will likely be instituted.  This is a wrinkle, but not a stumbling block.  Much is made about poverty and children and this will represent a complete and permanent elimination of this part of the problem.

Putting it at Arm's Length
The BBC is not a government media outlet, at least in theory.  It is funded through a 'tax' on television sales, but is operated separately from the government.  While that is true by the letter of the law, Parliament still sets the amount of the license fee, which does result in some leverage that the government has over the BBC.  Still, it is a good idea.

Medicare should also be done at an arm's length.  Medicare is primarily a non-partisan activity.  However, as long as there are multiple insurance policies that include one or more public options, the details of the capitation formula could be manipulated to benefit one or more of the policies.  Consequently, the capitation formula needs to be approved annually by the Congress and signed by the President, after a period of public commentary during which the insurance companies and other interested parties can file pro or con briefs.  I suspect that, because of the size of the matter, public Congressional hearings will likely be held. 

Additionally, the Medicare program should have a substantial trust fund that is invested for a proper, diversified low risk rate of return.  It may not be possible, practically, to have the fund fully funded in the short term.  However, the Congress should consider, if it promotes the use of QE to manipulate M2, whether the proceeds should be, at least in part, allocated to strengthen both the Medicare and Social Secuirity trust funds.

Lastly, employees should share, as they do now, in the funding of Medicare retirement benefits.  However, Medicare beneficiaries use half the 18% of GDP that is spent on healthcare.  So, the 2.9% of payroll is insufficient to cover the remaining 9% of GDP of expenses.  Consequently, and this is the case whether Medicare Advantage for All is adopted or not, both the Medicare employee and employee shares will need to go up, probably by about 3%.  Undoubtedly, opponents of Medicare Advantage for All will try to saddle the plan with this 3% payroll tax increase.  That, however, is disingenuous.  As stated, Medicare is currently 'going broke' and the adjustment will be required either way.

Medicare Advantage for All is actually relatively simple.  It just involves a few minor changes to Healthcare programs.  They are:

  1. Each year, the qualifying age for Medicare drops by 10 years.  As people qualify, if they are already covered through their employers, the insurance companies will contact them to offer continuation of coverage.
  2. This will reduce the corporate subsidy of healthcare as employees fall off of the list of the corporately insured and Medicare taxes will increase to cover the cost of the newly insured.  In this way, with cost lowering, Medicare Advantage for All will be revenue neutral.  In other words, nobody's taxes are raised to 'pay for it'.
  3. Part C, 'Advantage' will remain and since the insurance companies will offer to cover them as they qualify, the Advantage participation rate will likely increase, over five or ten years, from its current 35% to 70% or more.
  4. Part A & B will represent the 'public option' and, by law, will be limited to the same capitation formula that is applied to the Advantage insurance companies.  For those who still have a preference for a government operated healthcare program, it will be available to them.
  5. As the eligibility age falls, an increasing amount of Medicaid budget will be replaced by Medicare.  This will eliminate the differential in healthcare availability that currently exists with the State by State administration.
  6. Medicare will be sequestered as a semi-independent entity with a separate revenue stream and budget.  This is similar to how the BBC is funded and operated in the U.K. and, consequently, is not a new, untested concept.  Also, a 'Chinese Wall' will be placed between the Medicare administration and the 'public option' to assure fairness in competition.
In this short, six point, description that takes no more than a minute or two to read, we see a sane, equitable and sensible program that will assure that everyone is receiving healthcare with costs that are contained and will not financially debilitate the lower income brackets.  

Sadly, however, everyone involved is playing games with U.S. Healthcare in order to obtain political advantage.  As consumers and voters, we can only keep this from happening by becoming directly involved in the dialog.  We can do that by spreading this idea.  I'm sure that with sufficient exposure, either the Democratic candidate or Donald Trump will embrace Medicare Advantage for all in the 2020 election cycle.  I am convinced that it is the best way to provide the U.S. and, eventually, the world with quality and affordable healthcare. However, it will only happen if it becomes widely known and that is up to you, the reader, to assure that it does.  IF this obtains a few thousand reads, nothing will change and people will likely get stuck with a politically expedient, but costly and unworkable system.  If, however, it reaches millions, we will have a chance to put this issue to bed and have a system that is efficient, inexpensive and sustainable. 

Please, do share this article throughout your social media and do so quickly. The utility of this idea decreases substantially after November 2020.

The issue of National Debt comes and goes, but will definitely show its ugly head again before November 2020.  So, how do you determine what, if any, amount of deficit is acceptible?  I address this issue in my article 'What is an Acceptable National Deficit'

No comments:

Post a Comment