Romney's Medicare reform and the irony of choice

Presidential candidate Mitt Romney has staked his campaign in part on substantially reforming Medicare.  Under his proposal the insurance plan would switch from providing defined benefits to a defined contribution, based on the 2nd cheapest plan available in a person's area.

There are a lot of gaps and details missing from the proposal, but the Kaiser Family Foundation took a stab at measuring the effect on seniors.  They looked at what would happen if that plan had been in effect in 2010, looking at the plans people actually enrolled in (traditional Medicare or one of the Medicare Advantage plans).  The result:  Overall 59% of all Medicare enrollees (88% of Medicare Advantage enrollees) would have to pay higher premiums to stay in their current plan.  Or to put it more directly, the defined contribution Romney's plan provides would not be adequate to pay for the plans most people are in now. 

The numbers are particularly bad for residents in the Portland area:

County	# of Medicare Enrollees not Fully Reimbursed for Current Plan	Avg Monthly Funding Gap	Total Annual Funding Gap
Multnomah	39,285	$211	$99,470,202
Washington	26,210	$216	$67,936,968
Clackamas	27,656	$229	$75,997,589
Total	93,151	$218	$243,404,759

To put that last number in perspective, $240M is about what the highly contentious income tax increases from measures 66 and 67 will cost this year. Romney's Medicare reform would impose a burden of that magnitude on the elderly just within the tri-county Portland area.

Of course, seniors could always opt for one of the two cheapest plans and avoid any funding gap. But that belies all the justifications for Romney that claim his plan increases choice or involves a free-market. The only people with choices under Romney's plan are those willing and able to pay.  Everyone else gets a pick from the bottom of the litter.

Hmm...

How Effective is Arthroscopic Knee Surgery?
Something to file away for the next time I try to convince someone doctors are no more trustworthy than plumbers.

Ratemaking vs. Negotiating in Vermont

Doctors in Vermont have apparently picked up on the concept that they will be providing most of the savings under Single Payer.  Unsurprisingly, they're forming bargaining units to "inform the process."

Here is a philosophical question:  Does it make sense to pay doctor groups differentially based on how effectively they negotiate?  Should the Vermont Medical Society get paid more then HealthFirst because of the skill of their lobbyist?

That question points out a politically incorrect truth.  The process of establishing provider payments isn't really a negotiation at all, it is an exercise in rate setting by the state.  That rates will likely be influenced by "negotiators" does not contravene this, it will just indicate a clumsy and poorly thought out ratemaking process.

Notes from Vermont

The Vermont Legislative Joint Fiscal Office released a report estimating the savings made possible by Single Payer. They estimate it will save between 0.8 and 3.5 billion between 2014 and 2019. To put those numbers in perspective, at the high end it would save more in six years on a per person basis then the much ballyhooed “super committee” is trying to cut in ten.

There’s also plenty of grist to back up my suspicions that people who advocate for Single Payer don’t really know what they’re talking about. The most common narrative advocating Single Payer runs along the line of “If we just get rid of the insurers, there will be tons of money and everyone will be happy.” Helpfully, Vermont breaks out their savings into some detail:

The low estimate shows about a third of savings coming from admin including both the payer (insurance) and provider (doctor) sides. More then half the savings come from clinical reform, which addresses how much doctors get paid, in what manner (capitation vs. fee for service), and improvements to public health and reduced utilization. The location of the "fat" is even more apparent in the high estimate:

So if Single Payer works the way people want it to, more then 75% of savings come from medical reform, not admin. And unsurprisingly, this is really hard. The paper discusses some of the issues confronted just to construct credible estimates. For example,

Each of these [payment reforms] has its own set of difficulties. For example, what is the right price to pay for a medical service? Is it the amount it costs to produce? Is it the amount at which an adequate provider supply is available? Is it the amount someone without insurance would be willing to pay for it (and who – Bill Gates or someone working at a minimum wage job)? Finally, is it the amount we as a society can afford to pay?

Implementing Single Payer involves all kinds of questions about what care should be delivered and what should be paid for it. In my view to answer those questions is to sell the program. How likely are people to buy into single payer if they don't know what they are getting? Instead advocates rely on a false narrative that reinforces a mythical conception of cost-free healthcare, one that ensures that even if the public does buy into single payer they will be unwilling to accept the compromises necessary for it to actually work.

People Against Controlling Health Care Costs

I’ve seen a lot of discussion on the need to control health care costs, but rarely do I see someone take up the other side.  It’s odd, no one ever says they are for higher health care costs, yet that has been the dominant policy of the last 20 years.

Here are some people unafraid to state this position openly: Congressional Republicans en masse.  As Austin Frankt says,

There really is no cost control solution if something like the IPAB can’t work.

You can follow the fate of it here.

Recession? Not in Health Care

I’ve heard some people intimate that health care costs declined with the recession and that health insurers would see windfall profits.  Not likely…

Health Care Cost Inflation: Copayment Cards

Here is a story demonstrating how health care costs get distorted.  Things to note:

• First, note how much patients can influence what they are prescribed, despite nominal physician control.
• Then look at the cost benefit analysis (or absence of it).  Were doctors previously prescribing the wrong treatment, or are they now wasting money?  One or the other is true.
• Third, notice how this defrays the pricing distinctions copays create.  If a 20% copay incurs the same cost as no copay, expect them to be priced the same.  That eliminates an option for cheaper insurance, making insurance more unaffordable.

The story is specifically about drugs, but I suspect the problems exist for a broad range of treatments.  More evidence that insurance reforms alone will not improve health care access, the key problem is at the provider level.