(Illustration not to scale; "Original Medicare Only" actually represents less than 5% of universe)
The gist of the gated article referenced by the Post is that Part A/B/C insurers are cherry picking healthy seniors and leaving the expensive seniors to FFS Medicare.
The trouble with drawing that conclusion, at least from the limited and confusing data provided by the Washington Post, is that academics and wonkbloggers consistently ignore all private Medicare supplemental plans in their market analysis (see illustration above; FFS Medicare is called Original Medicare in the illustration), claiming that the Medicare world is binary, divided between those seniors on a Part A/B/C Medicare health plan and those who are not. The Medicare market does not work that way (see Aaron/Reischauer research on the "real Medicare market" at Health Affairs).
It is the Medicare system itself and us seniors that would drive this data trends illustrated by the Post... if the data is even actionable. It is not any current Part A/B/C Medicare health plan marketing techniques. And any proposed Medicare reform I've seen would eliminate this behavior, if true, not make it worse.
The tradeoffs and tricks us seniors can play vary state by state but in Massachusetts we have continuous open enrollment of Medigap.
- One of the Massachusetts Medigap plans has an average $240 a month premium (including Part D) but covers all deductibles (but with a lifetime limit)
- The other Massachusetts Medigap plan is about $1200 a year cheaper but has deductibles (and also has lifetime limits)
- Part A/B/C Medicare health plans in Massachusetts average about $50 a month, include deductibles (but have no lifetime limits, which is in fact their major advantage).
So it is possible to game the system for a year if you have elective surgery coming up by dropping a Part A/B/C health plan as of January of a given year, pay $240 a month to a Medigap (and Part D) insurer for the period around the surgery and $140 a month to the insurers for the rest of the year and have no co-pays for all the care related to the surgery. As a result:
- On a Part A/B/C Medicare health plan1 in the year with surgery, the senior might pay $600 plus a $1000 hospital deductible, a $1000 SNF deductible and lets say $500 in various doctor/specialist/drug co-pays for a total of $3100
- By switching to Medigap for the year in which the known surgery takes place, the senior could pay under $2000 for the year instead.
This would be just one gaming strategy. There are other possibilities flipping from zero-premium Part C plans to Medigap or vice versa. The possibilities vary widely state by state.
I don't believe cherry picking or senior gaming is happening to any measurable degree (at least now that 30% of beneficiaries are on Part A/B/C Medicare). I think the data in the gated article somehow shown on the Wonkblog chart is "malarkey." Three Harvard professors just studied all the 2009 Part A/B/C Medicare health plan data and found no sign of cherry picking (see September Journal of Managed Care). Harvard Professor David Cutler said recently that he thought there was cherry picking but he couldn't prove it with his data and couldn't even theorize how it was done.
So Cutler and other academmics can't prove it or even figure out how it is done. But those dastardly George Bush supporters (like James Roosevelt) must be doing it.
-- Dennis Byron
1In all cases, whether on a Part A/B/C Medicare health plan or traditional Medicare A/B FFS with Medigap and a drug plan, the senior is also paying a monthly Part B premium as well.