Privatizing Medicare Could Create Instability, Advisory Panel Warns

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By Mike Stankiewicz

Shifting Medicare to a privatized premium support system could cause chaos in the health-care market and harm patients, members of a Medicare advisory committee cautioned March 3.

At their March meeting, Medicare Payment Advisory Commission members warned of the potential for market volatility under the proposed new system and the difficulty for beneficiaries to adapt to the changes.

“There are a number of concerns that will have an impact on premium support going forward smoothly,” Commissioner Jack Hoadley, a health policy analyst at Georgetown University’s Health Policy Institute, said.

Some Republican lawmakers have attempted to shift Medicare away from an open-ended government system to pay for seniors’ medical services to a private market system for years, but GOP leadership won’t push these changes in 2017 because repealing the Affordable Care Act will dominate this year’s health-care agenda, Rep. Kevin Brady (R-Texas) previously told Bloomberg BNA.

Harm to Beneficiaries

MedPAC staff members presented findings from a recent Medicare Advantage study that analyzed how private coverage affected the market and beneficiaries. Medicare Advantage, also known as Part C, is offered by private insurance companies which Medicare pays to cover Medicare benefits.

The study found that when Medicare Advantage enrollees switched their plans voluntarily, they saved an average of $210 per year, but it noted that not all beneficiaries know the comparison tools and assistance they can get to help them make a decision regarding their coverage and that many have trouble choosing or switching plans.

“Due to the complexity of making health-care choices, and information deficits, a premium support plan might lead to beneficiaries not making the best choices financially or otherwise,” Hoadley said.

Commissioner Alice Coombs, an anesthesiology specialist at South Shore Anesthesia Associates Inc. in Weymouth, Mass., noted transportation was another issue facing many seniors. She recalled an instance where an insurance company was enrolling seniors in a Medicare Advantage program, but the company itself wasn’t accessible by public transportation and would require seniors to walk up several dozen stairs to access. “That was not conducive for people to switch, even if that plan was better for them.”

Market Volatility

Under a premium support system, beneficiaries’ premiums and out-of-pocket costs could rise or fall depending on a number of factors, including market fluctuations. This is in contrast to Medicare Part A, which has no premium if the beneficiary or their spouse paid Medicare taxes while working, and Medicare Part B, whose premiums are determined by income levels.

“If we see a fair amount of plan entry and exit, such as what we’ve seen in the Affordable Care Act where we’ve seen people are forced to move around, we could see a lot of premium volatility changing from year to year,” Hoadley said.

Under a premium support plan, beneficiaries would have complete responsibility for their health-care choices. If beneficiaries don’t monitor premium changes closely, they might be surprised by yearly fluctuations.

The staff presentation noted there were very few details about a possible premium support system, which makes it impossible to support or oppose such a plan at this time.

“There are simply too many other elements of premium support that would still need to be specified,” Eric Rollins, MedPAC principal policy analyst, said near the close of his presentation, “and those details could have a significant impact on the behavioral responses by beneficiaries and providers.”

The committee’s next meeting is scheduled for April.

To contact the reporter on this story: Mike Stankiewicz in Washington at mstankiewicz@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

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