A bunch of taxpayer-money-wasting1 Harvard research people in a recent article entitled PREMIUM TRANSPARENCY IN THE MEDICARE ADVANTAGE MARKET: IMPLICATIONS FOR PREMIUMS, BENEFITS, AND EFFICIENCY has proven with great specificity and academic rigor that Original Democratic-Party Medicare is really lousy insurance. With all kinds of probably quasi-experimental methodologies and the usual academic dependence on useless years-old data, the quartet demonstrated that even when the government tries to just about give Original Democratic-Party/LBJ Medicare away for free, few of those eligible for it take up the offer. Of course, us plain old real people -- who have been forced into the terrible Democratic-Party Medicare system for 50-plus years -- could have told the Harvard guys that so the fact that they spent my tax dollars to arrive at that conclusion is a bit irritating.
The gist (or is it jist) of the Harvard research was that us stupid seniors2 don't choose so-called zero premium public Part C Medicare Advantage health plans with Part B rebates in any substantial number. Aren't we stupid? Zero-premium Part C plans are the plans most like Original Democratic-Party/LBJ Medicare in terms of its high co-pays and deductibles, lack of an annual out of pocket (OOP) spending limit, a restricted list of services covered (albeit most of the important ones except drug coverage, an annual physical and direct admittance to skilled nursing care), and other major disadvantages.3 Those zero-premium Part C plans with a Part B rebate basically reduce the cost of Original Democratic Party/LBJ Medicare to zero or near zero (in that the senior also gets back the $105 a month Part B premium typically deducted from his or her Social Security deposit). Clearly, Harvard contends, we are stupid for not signing up in droves for this crap and are being misled by blood-sucking insurance companies and medicare.gov promotional material to sign up for more expensive insurance we do not need.
Other errors in the research paper (possibly that mislead Harvard to its conclusion that we seniors are stupid) follow. But thanks for proving what we already knew: Original Democratic-Party/LBJ Medicare sucks.
- Harvard says public Part C Medicare Advantage “plans are heavily subsidized by Medicare…” I have a hard time understanding from the rest of the document what the researchers even mean by that statement but
- If the statement is based on a typical academic “it’s all the government’s money” view of the world, then Part C is no more subsidized in the grand scheme of things than Original (not traditional) Medicare.
- If – on the other hand -- the statement is referring to the so-called Part C rebate, then we Part C beneficiaries received a 3% kicker in 2013 on average over and above what Original Medicare beneficiaries received (but also received annual out of pocket spending protection, lower co-pays and deductibles, and other benefits that Original Medicare beneficiaries did not receive). I would not characterize that 3% as a “heavy subsidy” especially since public Part C Medicare Advantage is disproportionately used by the poor and minorities (another fact you did not mention; perhaps you could tie what you seem to think are bad choices by seniors to race)
- Harvard talks about“ an amount estimated to be 7% greater than what the government would have spent on care for these beneficiaries had they chosen to remain in FFS Medicare in that year.” Would it not have been less misleading to use a more recent year data relative to the financing of the program and for other information? Or if Harvard felt it useful – for some reason -- to base its research on years-old data, why not choose the years when the amounts spent on public Part C plans were 5% less on average than “what the government would have spent on care for these beneficiaries had they chosen to remain in FFS Medicare?” Does someone have an agenda I wonder?
- Harvard says “However, little is known about how higher benchmark payments are divided among lower premiums, more generous benefits, and higher plan profits…” I think that information is quite well known (the researchers included some references but probably had not seen the recent James-Cosgrove/GAO material on this subject when the paper was written). The reference to profits is a standard left-wing attack on Medicare Advantage. The fee insurance companies receive for administering a public Part C Medicare Advantage health plan is basically the same as the fee insurance companies (often the same insurance companies) receive for administering Part A, B and D Medicare programs. All of Medicare is administered by insurance companies. Original Democratic-Party/LBJ Medicare is not administered by the government as the left always claims. (In addition the Part C rebate has to go to lower premiums or more generous benefits; I am not sure what they are referring to in Footnote 8 but it must be a trivial amount.)
- Harvard says (and this is key to its unintentional finding that Original Democratic-Party/LBJ Medicare sucks) “… FFS Medicare and MA plan premiums are presented to beneficiaries in such a way that plan premium reductions below the level of the premium charged by FFS Medicare, known as the Part B premium, are not salient to consumers, leading to a sharp drop-off in the premium elasticity of demand at this point.” In other words. Original FFS Medicare is lousy insurance and therefore even if you reduce its price, we seniors – who have buying insurance for 50 or more years – know it is bad insurance and won’t buy it in any great numbers. The fact that we don't buy the crap has nothing to do with how it is “presented” to us. (All the later description in the paper about the web site is equally misleading as to how information is presented to and used by seniors. In particular it is well known by seniors -- if not by these taxpayer-wasting Harvard researchers -- that the Medicare Plan Finder information on OOP costs is extremely unreliable.)
- Harvard says “The first (part of a beneficiary’s payment) is the Part B premium, which goes toward the standard benefits package that all MA plans are required to cover. All Medicare beneficiaries, whether they elect to enroll in an MA plan or traditional FFS Medicare, pay a Part B premium.5 The Part B premium under FFS Medicare was $96.40 from 2008-2010 (this did not apply to all beneficiaries but that inaccuracy is noise level compared to the many other errors in your document) and $104.90 in 2013, but MA plans can choose to charge a lower Part B premium than the one charged under FFS Medicare.6 Although MA plans are able to charge a lower premium than the FFS Medicare premium, the mechanism for doing so is somewhat convoluted. Plans may charge a premium below the FFS premium by \buying down" the Part B premium, which consists of paying CMS to reduce the Part B premium amount the enrollee is obligated to pay CMS. For reasons described below, this \buy down" may not be transparent to consumers. The other two components of the MA premium are the Part C premium, which goes toward any additional medical benefits the plan chooses to offer, and the Part D premium, which goes toward any prescription drug benefits the plan chooses to offer.” This is not an accurate description of how it works from either the beneficiaries’ or the insurers’ perspective.
- Harvard says – and this is possibly a deadly failing on its part -- “In sum, the total consumer premium for enrolling in traditional FFS Medicare is equal to the Part B premium (plus an additional Part D premium for beneficiaries that also enroll in a stand alone prescription drug plan through the Part D only" market), and the total consumer premium for enrolling in an MA plan (with drug coverage) is equal to the sum of the Parts B, C, and D premiums charged by the MA plan.” If Harvard meant to look at “total” and wanted to accurately contrast and compare what is happening in the Medicare market, which it clearly did not want to do, it cannot ignore the private insurance that almost everyone not on a public Part C Medicare Advantage health plan gets (if they are not on Medicaid or a related assistance program—see next item).
- In footnote 5 Harvard says “There are a few rare circumstances where FFS beneficiaries do not pay the Part B premium.” That is true for about 15%-20% of beneficiaries so Harvard's definition of “rare” must be a little different than Webster’s.
- Harvard says “CMS imposes two relevant constraints on the plan's choice of its premium and benefit package.” This analysis attempts to analyze consumer behavior but leaves out discussion of the biggest features – which Harvard would call constraints -- of public Part C Medicare Advantage plans. The plans must include annual out of pocket spending limits; Original FFS Medicare does not include such a feature. The plans almost always include much lower co-pays and deductibles than Original Medicare (I have never seen one that didn’t but it is theoretically possible). These benefits are not included in the Part B premium and are not paid for out of the Part C rebate as one of the researchers' earlier statements implies.
- In footnote 7 Harvard says “In our sample, over 90% of consumers are enrolled in an MA plan with drug coverage.” It appears by the way this was footnoted that the Harvard researchers did not understand why that is the case. Original Democratic-Party/LBJ Medicare does not have drug coverage.
- Harvard says the Medicare Plan Finder “does not… even note that the consumer will be required to pay a Part B premium upon enrolling in the plan.” This information is prominently displayed everywhere on medicare.gov and in the printed material; it is hard to believe anyone using Plan Finder is confused about this point
-----------------
1The research was at least partially funded by the National Institute on Aging.
2About 15% of those on Medicare are under 65
3Even with all the disadvantages of being like Original Democratic-Party/LBJ Medicare, at least zero-premium Part C plans with a Part B rebate have the OOP protection and usually lower co-pays
Comments