With the 2020 US presidential election drawing near, debate about the options for universal coverage will ramp up. At the heart of this debate is the estimated 45% of US adults who are either uninsured or under-insured. They are at risk of experiencing financial hardship or going without needed care in a time when access to healthcare can be critical.
The COVID-19 pandemic has worsened the problem. Millions of adults have lost their jobs and their health insurance along with it. With a quick economic recovery unlikely, and as the cost of insurance continues to rise, the situation will worsen. Without action, underinsurance rates may reach levels that we have not seen in decades.
Introducing a Series on Options for Universal Coverage
In this series on options for universal coverage, we will explore elements of various reform proposals and evaluate their potential impact. Rather than examining complete proposals, we highlight specific policy elements that appear in one or more such proposals. The three we will focus on in this series are:
- Eliminating Medicare Advantage
- Expanding Medicare eligibility to all vs. some individuals
- Increasing Medicare benefits
President Trump and his administration have put forward proposals to restructure federal and state health insurance programs. Congressional leaders and the likely democratic nominee for president have their own plans. The specific elements of these proposals have important implications for American patients, taxpayers, and businesses.
Most of the Democrat-proposed policies would expand the existing Medicare and Medicaid programs, as they already cover more than a third of the US population. Their proposals include various options for expanding the Medicare program. In many cases, though, expanded Medicare would be quite different from today’s Medicare.
We begin by exploring the idea of transitioning Medicare from a mix of government and commercial plans to a benefit that is provided only through government plans.
Medicare Advantage: Private Health Plans for Medicare Enrollees
Many proposals for Medicare expansion emphasize traditional Medicare, where the federal government is the health insurer. However, commercial health insurers–through Medicare Part C, also known as Medicare Advantage (MA)–play a significant role.
Medicare enrollees can choose to enroll in either traditional Medicare or MA. They must weigh the advantages and disadvantages of each. The availability of “choice” between the public and private options has been strongly defended by the Trump Administration.
In 2018, approximately one-third of Medicare beneficiaries were covered by private MA health plans that are reimbursed by Medicare. Additionally, over 80% of those covered by traditional Medicare had some form of supplemental coverage—Medicaid or private insurance.
Implications of a Medicare without MA
The literature has much to say about the trade-offs between MA and traditional Medicare. Let’s consider two options for universal coverage:
- Medicare as it currently functions, including both traditional Medicare and MA
- A hypothetical scenario where traditional Medicare is the only option (still allowing private supplemental coverage)
We consider the potential implications of a Medicare model without MA within several areas: access to care, beneficiary choice, cost to the Medicare program, and quality of care.
- Access to Care
Compared to traditional Medicare, MA plans generally provide more coverage [PDF] — lower out-of- pocket costs and extra benefits that traditional Medicare doesn’t cover — like vision, hearing, dental, and more. The trade-off is that most restrict access to only those providers in the plan’s network.
MA enrollment remains well below 50% of eligible beneficiaries. But the increasing popularity of MA [PDF] suggests that many find this trade-off acceptable. Many Medicare beneficiaries have little to gain from MA if they have supplemental coverage provided by a prior employer or Medicaid. For others, the extra coverage in MA may be the most affordable option to get the care they need.
Depending on their health status, financial resources, and options for supplemental coverage, people may prioritize coverage vs. provider access in different ways. Under a traditional Medicare-only model, former-MA beneficiaries would gain access to a larger provider network. But they would lose access to the additional coverage afforded to MA beneficiaries, unless the restructuring adds those benefits to the traditional plan.
- Beneficiary Choice
Allowing beneficiaries a choice theoretically allows people to select the version of Medicare that is best for them. But choice has complicated implications.
First, beneficiaries can generally only change plans once per year. If a change in health status leads a beneficiary to re-evaluate their preferences, it could be months before they’re allowed to switch. For example, an MA enrollee who is diagnosed with cancer may want to seek care from a particular cancer center that is not in the MA network. The patient may have to pay more out of pocket to see that provider or wait until the open-enrollment period to switch.
Second, beneficiaries very rarely switch health plans, even when allowed. This is a broad pattern that extends beyond Medicare; beneficiaries often stay in their health plan even if another becomes more financially beneficial. Insurers may capitalize on this by charging higher premiums. The literature also suggests that initial plan choices are too complex and overwhelming and lead to less effective decisions. For example, Medicare beneficiaries are less likely to choose any MA plan if there are too many options offered.
Researchers have tried methods of improving beneficiary plan choice. Most have had limited success. Interventions that require frequent enrollment updates or that offer access to a decision support tool have not led to better choices. Restricting the number of options, however, does lead to better choices [PDF].
Under a traditional Medicare-only model, the burden of choosing a health plan would be eliminated. Research suggests that this could be an important benefit. However, without also increasing coverage to MA levels, limiting choice may not outweigh the implication of forcing people into traditional Medicare who may truly be better off in MA.
- Cost to Medicare
Taxpayers have historically paid more for beneficiaries who choose MA. These overpayments have been reduced substantially [PDF] thanks to elements of the Patient Protection and Affordable Care Act. Enrollment in MA plans has continued to increase despite the reduction in overpayments, and insurers continue to invest in and expand their MA products. This suggests that MA plans may be able to fund their additional coverage entirely through their cost savings relative to traditional Medicare.
The latest research shows that MA plans reduce medical costs substantially relative to traditional Medicare: by 25% after addressing selection bias accounted for in Medicare payment, and by 9% after addressing additional (potential) selection bias. MA plans appear to reduce costs by limiting use of expensive types of care (e.g., specialist visits) and substituting less-expensive care (e.g., surgery in outpatient settings). This is consistent with the effects of restricted provider networks.
Given that MA enrollees have lower utilization and costs, use and spending would likely increase under a traditional Medicare-only model. It is unclear whether this would affect wait times or access to care. Federal costs would probably stay steady if Medicare does not expand its benefits to include the extras that MA offers. They would decrease relative to historical overpayments to MA plans.
- Quality of Care
Do MA plans reduce medical costs at the expense of quality? The inherent selection bias between MA and traditional Medicare makes this a difficult question to answer. Studies that find evidence of poorer quality of care in MA are rare but noteworthy. One study found that MA enrollees were admitted to lower-cost hospitals, but also ones with higher risk-adjusted mortality. Another found that MA enrollees were admitted to lower-quality skilled nursing facilities [PDF]. Finally, two studies of cancer patients (here and here) found evidence of lower quality of care in MA relative to traditional Medicare.
These results do not necessarily suggest overall inferior quality in MA. On average, traditional Medicare and MA beneficiaries with similar health risk have similar health outcomes. There are also some cases where less use of expensive services by MA patients leads to better outcomes. The impact of a Medicare model without MA on quality of care would likely vary based on which services are used. Eliminating MA could reduce quality of care for some beneficiaries, maintain quality of care for most, and possibly increase quality of care for others.
Weighing the Options for Universal Coverage
Traditional Medicare reduces the burden of beneficiary insurance choices, but also eliminates an affordable option for additional coverage for some beneficiaries. Of course, proposals that eliminate MA generally propose increasing coverage within Medicare. We will examine the implications of that in our third post in this series.
In our next post we explore the implications of expanding Medicare to different groups.
Brett Lissenden
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Benjamin Silver