With the legislative effort to repeal and replace the Affordable Care Act (ACA) stalled for now and the Trump administration moving to dismantle the law by all available regulatory means, the constructive among us are compelled to explore paths forward for our health care system that may be viable in the long run. Not coincidentally, before the quixotic rise and fall of the Graham-Cassidy bill, we saw a boomlet in the debate over a Medicare-for-all approach to universal coverage. So I would like to continue our inquiry into what the concept really means and try to answer the question: Is a bipartisan solution possible?
In my previous post, I introduced the concept of Medicare Advantage Premium Support for All (MAPSA). In brief, I posited that a national system that drives bona fide competition among private insurers (Medicare Advantage) and traditional Medicare by empowering consumers with advanceable tax credit subsidies could not only succeed in delivering universal, portable coverage, but that there is enough spending in our current system to finance it.
I was deeply encouraged by the robust positive and, equally helpful, critical feedback I received on this modest proposal. As I confessed at the outset, the thesis raises innumerable questions, with much more investigation and documentation necessary to prove the concept. With your help, I aim to explore these questions in future posts.
This post will take a closer look at the type of plan options we would have if we move to a Medicare-for-all system. In other words, it will explain the program’s current benefit design, how it varies in the Medicare Advantage program or with the purchase of supplemental coverage (Medigap), apparent gaps that may need to be addressed, and the strengths of the otherwise terminated coverage programs that should likely be maintained to optimize the MAPSA regime.
So let us continue this journey together, intrepid travelers, and define the system our country deserves.
Traditional Medicare And Part D
When Medicare began, it was comprised by two key components: an inpatient benefit (Part A) and an outpatient benefit (Part B), which loosely mirrors the Blue Cross Blue Shield model that evolved about a generation prior.
Generally, Medicare Part A has no premium; workers pay into the Medicare Trust Fund via a payroll tax and become eligible when they turn 65 or other criteria are met. In 2017, Part A had a $1,316 deductible for hospital stays, with additional costs kicking in after 60 and 91 days. Additional inpatient and related services are covered under this benefit, such as skilled nursing care and home health, each with their own coinsurance regime that I will not delve into here. Importantly, Medicare Part A has no limit on out-of-pocket costs—in other words, no catastrophic cap.
Medicare Part B covers clinician visits, clinical lab tests, outpatient hospital services, durable medical equipment, and more. In 2017, the deductible is $183 with 20 percent coinsurance for most services. Preventive screenings are covered for no additional cost. Like Part A, Part B currently has no limit on out-of-pocket costs. We’ll come back to that.
In 2003, Congress established a prescription drug benefit in Medicare, referred to as Part D. More akin to its neighbor, Part C (Medicare Advantage), Part D relies on private insurance carriers and pharmacy benefit managers to deliver a drug benefit within certain parameters. In 2017, the base benefit featured a $400 deductible, 25 percent coinsurance up to $3,700, a (now diminishing) coverage gap until the enrollee has spent $4,950 total out of pocket, and then 5 percent coinsurance after that. Plans may deviate from this model, but their approach must be actuarially equivalent to it.
With these three components taken together, Medicare covers almost all of the essential health benefits (EHBs) mandated under the ACA with an actuarial value of 84 percent (see Issue 9), which is approximately halfway between the gold and platinum tiers of coverage established by the ACA. There are some gaps between Medicare and EHBs that I will address later in this post.
Low-income individuals enrolled in Medicare get support from Medicaid, including via the so-called Medicare Savings Programs (MSPs). Those who are fully eligible for Medicaid (so-called duals) have access essentially to any benefit their state plan covers that isn’t included in Medicare. This includes reducing their premium and cost-sharing responsibilities to what they would pay under Medicaid.
Beneficiaries who are not fully eligible for Medicaid but have income below 130 percent of the federal poverty level can also get assistance with their Part B premiums and, in some cases, cost sharing. Complexly, if endearingly, referred to as the QMB (quimby, [Qualified Medicare Beneficiary]), SLMB (slimby, [Specified Low-Income Medicare Beneficiary]), and QI (Qualifying Individual) programs, the MSPs provide some degree of built-in means testing to the Medicare benefit that enhances the value for low-income enrollees.
Participation rates in these programs are remarkably low, however, with less than a third of eligible people enrolling in them. Furthermore, coordination between these state-based Medicaid programs and federal Medicare is challenging at best. In a MAPSA world, the Medicare subsidies embedded in Medicaid and the MSPs could be automatically included in the benefit delivered to those eligible, perhaps with a maintenance of effort provision applied to states to make it affordable. For more on that, you’ll have to wait for my financing post. It’s going to be a hoot.
For the prescription drug program, there is a low-income subsidy for individuals with incomes below 150 percent of the poverty level. Thirty percent of all Part D enrollees received the low-income subsidy in 2014; many are auto-enrolled. Most of these beneficiaries pay no premium and have no deductible, although those above 135 percent of poverty level may be required to make some out-of-pocket contribution. This chart helpfully puts eligibility requirements and benefits under the low-income subsidy program in one place.
For those who can afford it, there are supplemental insurance plans that traditional Medicare enrollees can buy to cut down their out-of-pocket spending. These Medigap plans are tightly regulated and are labeled A through L based on the degree of protections they offer. This chart provides a helpful overview of the plan offerings in 2012. Some Medigap plans include a catastrophic cap, although Congress recently moved to prohibit enrollment in the two most comprehensive plan options, under the theory that first-dollar coverage of health care services can increase overall program costs
Around 20 percent of Medicare beneficiaries buy Medigap plans. This is due in part to the fact that they are fairly expensive, averaging more than $2,000 per year in 2010 on top of the standard Medicare premium. While Medigap plans are subject to guaranteed issue requirements, they mimic commercial plans in being rated by age, sex, and smoking status in states that do not require community rating. They are also not available to individuals younger than age 65 in some states. With the ascent of Medicare Advantage, Medigap plans have been declining in popularity. Under MAPSA, Medigap could be the starting point for higher-income households to purchase enhanced coverage or for employers to provide these extra benefits to workers.
Medicare Advantage, initially established as Medicare+Choice in 1997, is the commercial coverage component of Medicare in which private insurers offer competing benefit packages that meet federally mandated guidelines. One-third of Medicare beneficiaries enrolled in a Medicare Advantage plan in 2017, and they had, on average, 19 plans to choose from including health maintenance organizations, preferred provider organizations, and private fee-for-service options.
The “base benefit” for Medicare Advantage must include Part A and B benefits, and 88 percent of plans include the Part D drug benefit as well (so-called MA-PDs). Medicare Advantage enrollees pay the Part B premium, and there may be additional premiums if Part D or other optional benefits are included, although 81 percent of Medicare Advantage enrollees were offered “zero premium” MA-PD plans in 2017. Thirty-one percent had access to plans for less than the “base” Part B premium.
In 2017, on average, Medicare Advantage plans were paid on par with Medicare spending. Plan payment varies by region, although, in part due to statutorily set regional benchmarks. If the premiums they bid are below those benchmarks, plans can allocate some of the difference, a portion of which is otherwise rebated to them by the Centers for Medicare and Medicaid Services (CMS), toward additional benefits for their enrollees beyond what traditional Medicare covers.
For example, while, unlike traditional Medicare, Medicare Advantage plans are required to cap out-of-pocket spending for medical benefits at $6,700, in 2017, the average out-of-pocket cap was a bit below that at $5,332. For beneficiaries enrolled in these plans that have no additional premium, they are basically getting this core benefit of Medigap for free.
Furthermore, the majority of Medicare Advantage plans include preventive dental care, eye care, and hearing assistance. In 2016, almost 40 percent of plans included nurse hotlines, 34 percent included gym memberships, and 25 percent included non-emergency transportation. A substantial majority of those plans were offered with zero additional premium. This recent Health Affairs blog post has a very helpful chart summarizing the array of extra benefits enrollees have access to.
The last thing to note about Medicare Advantage is that it features three special plan options targeted to the unique needs of certain populations. These Special Needs Plans cater to beneficiaries residing in institutional settings, those with chronic illnesses, and those dually eligible for Medicare and Medicaid. Initially authorized on a temporary basis, Congress has recently advanced legislation to extend them permanently.
Gaps To Address: Catastrophic Coverage, Long-Term Services And Supports, And Kids
First of all, I want to avoid pretending we are going to resolve all of the Medicare program’s flaws in the same fell swoop that we expand it to cover everyone. I have no appetite to count the number of times, in its 50-plus years, Congress has amended the underlying law, and I truly shudder to fathom how many regulations CMS has issued implementing it. Suffice it to say, that work is going to continue, as it should, as new technologies evolve, innovative payment and delivery reforms are adopted, flaws come to light, and so forth.
The truth is, the Medicare program enjoys enviable popularity among its beneficiaries, greater than any other coverage program we have. So let’s not let the perfect be the enemy of the (very) good. At the same time, if we’re going to universalize it, it would be irresponsible not to acknowledge the program’s flaws with open eyes and adopt an intention to remedy them to the degree feasible.
This brief letter from leaders at the Center for Medicare Advocacy cuts right to the chase: The lack of vision, hearing, and dental coverage is an obvious gap in Medicare’s benefit design, as is the lack of a catastrophic cap in traditional Medicare or Part D.
Some of these challenges are remedied by the MSPs and low-income subsidy for lower-income beneficiaries and Medigap for those with more resources. Also, as noted, Medicare Advantage plans offer a cap on out-of-pocket spending and often cover some of these missing benefits. So you could argue that the broader Medicare “market” will solve these challenges for the vast majority of participants.
While adding these benefits to the standard Medicare package would clearly be preferable, if we are serious about this we have to be excruciatingly careful about cost. Just taking dental coverage, for example, in which a typical plan costs around $750 per year, adding that to Medicare just for its current enrollees would cost around $40 billion per year.
With regard to including catastrophic coverage in traditional Medicare, I refer you to this postmortem of the enactment and rapidly ensuing repeal of the Medicare Catastrophic Coverage Act in the late 1980s, published by Health Affairs in 1990. Including a catastrophic cap is still actively debated, although often in conjunction with making the convoluted cost-sharing structure of Medicare Part A more uniform and aligned with that of Part B.
There are at least two gaps in Medicare coverage that are especially important to consider in the context of a MAPSA regime where we purport to phase out other major coverage options currently offered, especially Medicaid and commercial insurance. They are long-term services and supports (LTSS) and early and periodic screening, diagnostic, and treatment (EPSDT) services. For more on how Medicaid and Medicare benefits differ, I refer you to this helpful side by side.
(Side note: because the Department of Veterans Affairs, Tricare, and Indian Health Service together only cover approximately 5 percent of the population, I intend to set aside disposition of them for purposes of this inquiry. Suffice it to say that it’s this guy’s opinion that, wherever our health system goes, the care and coverage value delivered to these populations should be maintained or enhanced.)
With limited coverage under Medicare and very few, if any, viable commercial options, Medicaid has become the de facto source of long-term care for our country, especially for those with lower income. This includes not just institutional (primarily nursing home) care but home and community-based services as well. LTSS provide assistance to individuals who have trouble completing routine tasks due to age, chronic illness, or disability.
LTSS are expensive, with nursing home care costing on average $91,250 per year, although home and community-based options are considerably less expensive. Total national spending on these services was $310 billion in 2013. Excluding certain administrative costs, and so forth, Medicaid spent $123 billion on LTSS that year, which accounted for about 28 percent of total program spending.
Under MAPSA, these costs could continue to be borne by an ongoing partnership between states and the federal government, a vestige of the otherwise repealed Medicaid program. Alternatively, a new benefit could be added to Medicare to cover these costs, which may be preferable although, again, the price tag could prove prohibitive.
Last, but certainly not least, we have to take care of our kids. Medicare has been honed around the needs of senior citizens and the disabled. The vast majority of the benefits translate perfectly well to the pediatric population, although. While there are some other nuances to consider, I suggest that EPSDT, vision and dental, and neonatal care are the benefits currently covered by Medicaid or under the ACA that must be added to Medicare to ensure no child is worse off under the new system.
In Medicaid, EPSDT provides a wide range of preventive, diagnostic, and treatment services in a more robust way than the program affords adults. It ensures any treatment or service deemed necessary is paid for so long as it falls under one of the very broad categories of Medicaid coverage. Caps on the benefit are not allowed. Despite its comprehensiveness, the cost of EPSDT is relatively low.
Furthermore, the ACA mandates coverage of vision and dental health services for kids, as well as neonatal care. Pediatric dental plans may be sold separately in the exchanges, and that could be a model adopted under MAPSA, although a pediatric vision benefit is mandated for all plans. Medicaid also requires coverage of vision and dental care for kids. Again, in a pediatric context, covering these services and neonatal care is not likely to tip the scale meaningfully when it comes to spending.
On a related note, Medicare also does not cover contraceptive services, which are a mandatory benefit under the ACA and Medicaid. The Trump administration’s recent move to expand exceptions to this requirement for employers is only the most recent demonstration of the political volatility of the topic. It’s not an overstatement to say that it, not to mention disposition of existing Hyde Amendment restrictions on federal funding of abortion, could undermine an otherwise bipartisan agreement on broad-based reform. For now, I will simply point out that evidence strongly supports the conclusion that access to contraception reduces unwanted pregnancies and health care spending. The rest we’ll put off to another day.
Conclusion And Next Steps
I would suggest that the key takeaway here is that the Medicare benefit is pretty darn robust, an excellent place to start for a universal coverage regime. With some minor exceptions, it covers everything we would need, has built-in assistance for low-income people, and provides pathways for employers or higher-income households to buy additional benefits. With Medicare Advantage, it would provide additional choices for families to pick a plan that’s best for them, while fostering competition among private carriers on premium, quality, and other factors consumers care about.
As noted, there are some clear flaws that would need to be confronted, especially the lack of a catastrophic cap in the traditional program and exclusion of LTSS or EPSDT coverage. With this in mind, in a subsequent post, I will try to sort out what the existing spending in our system (federal, state, employer, and household) could afford if repurposed toward an advanceable tax credit for the purchase of a Medicare plan.
Additional must-do’s on the list include considering the impact on providers, transitional issues for families, employers, and states as we consolidate our multisiloed regime, and (perhaps most importantly) political viability.
What am I missing? Please keep your feedback and new ideas coming and stick with me. This is going to take a while, but, let’s be honest, we’ve got plenty of time.