https://www.linkedin.com/pulse/truth-5-costs-operate-medicare-lower-than-private-plans-weinberg/

Another favorite topic at the heart of the US healthcare debate is whether governments can run health insurance programs at lower operating costs than private insurance companies.

Two Sides Square Off

Private Industry Supporters: Some argue that governments regularly prove incompetent running large complex operations at a low costs. Regularly cited is the US mail system and the VA; more locally, public schools and DMV’s. And in the case of Medicare and Medicaid, something about these programs appears to set up a breeding ground for costly fraud and theft, they might argue. Finally, this group argues that competition inherently creates innovation, productivity and lower unit operating costs, something that does not naturally occur with government programs.

Government Supporters: On the other side, many argue that the sheer scale of a single program like Medicare creates consistency and low unit costs, the result of economies of scale. Further, that by extending that program to even more Americans, those scale economies will improve more. This group argues that the profit motive of private companies can only result in higher costs, not lower, enriching investors and executives.

What Do The Numbers Say?

As I researched this point, I found that cost effectiveness arguments between Medicare and Private Insurance is an old one, with each side pretty dug in. But there are some important themes associated with the underlying math.

Comparing Costs vs Percentages:

Government program supporters like to compare operating costs using percentages. The common percentage used is “operating cost as a percent of medical services”. They Argue that Medicare costs only about 2%-3% of the costs of medical services paid. They will further argue that private health plan costs are, by comparison anywhere from 10% to 25% of the costs of medical services they pay. Their conclusion is, “Medicare has far lower operating costs, and is therefore the much more efficient program.”

Private market supporters dispute this “percentage comparison”, and instead look at “operating costs $’s per capita” and compare those. They argue that when compared in this $ per capita measure, monthly Medicare operational costs are well over $100 per capita, while monthly private insurance cost of operations are well less than $100 per capita. Their conclusion is, “Private market providers have far lower operating costs, and are therefore much more efficient than Medicare”.

Why Is This Comparison Of Operating Costs of Medicare and the Private Market So Difficult?

1) As much as 50% of all US healthcare occurs in the last few months of a person’s life. This dynamic is a major driver of Medicare Coverage and its operating costs. It is far less of a driver of private healthcare coverage for younger and mostly working Americans and the related operating costs, confusing the comparisons.

2) Many diseases of aging are much more common in Medicare than in private health coverages. The most expensive is Kidney Care, and ultimately transplant or Dialysis, (which has its own category in Medicare). Beyond that, Cancers, Heart Disease, Dementia/Alzheimer’s and others are far more significant drivers of continuing costs for those covered by Medicare than those on private insurance coverages at younger ages, confusing the comparisons.

3) Workplace related coverages more often coordinate coverage with workers compensation, or even car and homeowners insurance coverages than those with Medicare Coverages. This produces different operating costs and medical coverages under the private health coverages, confusing the comparisons.

4) Private Insurance coverages are or have been subject to significant state Premium Taxes and other health care related state and federal taxes. These are often categorized as “Operating Costs” in comparisons, confusing the comparisons.

5) Some comparisons don’t capture all government expenses that support the Medicare program, perhaps to advantage this argument. Examples of services performed for Medicare by other parts of the government that aren’t accounted for: The Social Security Administration collects premiums, the Internal Revenue Service collects taxes for the program, the F.B.I. provides fraud prevention services, and at least seven other federal agencies and departments also do work that benefits Medicare, confusing the comparisons.

6) As pointed out in previous installments, a large and rapidly increasing portion of the Medicare eligible population opts out of traditional Medicare and purchases a Private Plan alternative from private companies. This is now approximately 40%. Operating costs are imbedded in the coverage price and not easily separated for purposes of comparison any longer, confusing the comparisons.

Conclusion?

As some of this discussion indicates, it is nearly impossible to formulate a clear comparison between Medicare operating costs and “the private market”. However, it also appears unlikely that the original Medicare Program administration, when properly compared, is more efficient than the highly competitive private market. That market now provides many low price, high value alternatives for rapidly growing number of Medicare eligibles. It is those same private market players who provide specialized solutions for younger and more often working American families at lower per capita costs than the Medicare Program, the measure that this writer is moved to support.

https://www.linkedin.com/pulse/truth-4-medicare-for-all-elected-officials-government-denny-weinberg/

To our elected officials and government workers re: Medicare-For-All. “If it’s so great, why aren’t YOU part of the Medicare program today?”

Lets take a quick look at who these government workers are and to what extent they have been the leaders in single payer programs so far.

Federal Government Workers

There are roughly 2 million federal workers in the US today. They and their families participate in a health benefits program created in 1960 just for them (the FEHBP). Interestingly, the FEHBP is not a government run single payer system, but arguably, the opposite. It’s a mostly open marketplace to over 200 private market HMO, PPO and other options from nearly every Blue Cross/Blue Shield plan and many other local and major managed care companies such as Aetna, Humana and United HealthCare.

When federal workers reach age 65, most choose continuing their FEHBP alternative, because it offers great local and national private options that are just a better deal than the single payer Medicare option. Once they actually do retire, workers can continue to choose to apply their Medicare subsidies to alternatives to Medicare that I have talked about in previous posts from the same private insurance company vendors they currently have, with little disruption.

State and Local Government Workers

There are roughly 4.5 Mil workers of each of the states, with coverage structures as varied as the number of states. Beyond that, another 14 Mil workers are associated with local governments, cities and counties and their health coverages even more varied.

Virtually all have unique programs providing multiple PPO and HMO and other coverages from a variety of private health insurance vendors. Those workers over ages 65, typically remain with those private health plans just as they did when they were younger. For retirees, today often older than age 65, the options are too varied for this article. But suffice it to say, they too have many private market alternatives or wraparound options to the Traditional Medicare program, and many opt for those.

Medicare-For-All; Will Federal, State and Local Government Workers Lead The Way?

So government workers and retirees participate in private insurance programs in much the same way way as the rest of us. As such, it would appear that if Medicare were “switched on” as the sole solution for health care coverage, all these government workers would be as impacted as everyone else, and might have similar responses, both positive and negative.

It seems that time and political realities will indicate whether government workers themselves would support a single source for their health care options, defined by the government, without the benefit of private market wrap-arounds or alternatives.

https://www.linkedin.com/pulse/truth-3-medicare-free-denny-weinberg/

Someone Is Paying For The Whole Thing, You Know

The “Free-ness” of Medicare, like many other commodities, comes down to two important metrics discussed here; Cost, and Price.

Cost:

• Costs for Medicare include all payments to hospitals, doctors, pharmacies, labs, imaging centers, etc.
• Costs for Medicare also include amounts paid to 12 private companies contracted regionally to manage and administer the Medicare Program. (i.e. claims, payments, providers, appeals, inquiries, education, medical records, etc). These critical administrative functions have been outsourced to the insurance industry and its affiliates for many years.
• Finally, Medicare costs include payments to dozens of private insurance companies who provide private alternatives to Medicare, such as Medicare Advantage PPO’s and HMO’s.

Price:

• Current projections are that Medicare costs will increase about 5% per year and prices will have to increase much more than that to keep the program from insolvency in the next few years.
• Most adult Americans (including many that are also beneficiaries) pay varying portions of this price through special taxes, depending upon their type and amount of income.
• If a Medicare beneficiary has also chosen to take Social Security income (most do), varying portions of that price are mandatorily deducted from that Social Security income as well, automatically.

So What Does It Really Cost and How Much Is The Real Price?

In 2017, the Medicare program made over $700 Billion in Payments to private insurance administrators and care providers for Traditional Medicare or for alternatives (Medicare Advantage). That year, about 58 Mil beneficiaries were enrolled in the program. The result is a cost for each Beneficiary of just over $1,000 per month. In 2019 that cost and related price will both be higher due to inflation.

But the beneficiary share of that price also varies widely based upon several factors. Those include income, the number of qualifying years of employment and whether Part B or Part D (coverage for Doctors and Prescriptions) is chosen or waived. (This will be further offset by the amount [if any] of Social Security income deducted first).

Given all that, Medicare Prices for 2019 range as follows:

So Is Medicare Free?

When you consider a program that on average costs over $1,000 per beneficiary per month …

… Then knowing that a substantial part of the needed price is covered by the tax on virtually all workers and other income earners …

… and since many beneficiaries may not rationalize the substantial dollars being stripped away from the (unrelated) Social Security payments to help pay their share of the price…

… and considering that a material number of beneficiaries have incomes over $85,000 per year (many still work) …

… and finally, comparing all the components of coverage Americans have received when younger and working (Hospital, Physician and Prescriptions) …

… These numbers, taken together, for many people are certainly not free.

https://www.linkedin.com/pulse/truth-2-medicare-coverage-may-good-you-expected-denny-weinberg/

Background

In the mid 1960’s, Medicare was first created as a “Social Insurance Program”, designed to be consistently applied to all older Americans. Comprehensive, inexpensive, and relevant to the standards-of-care at the time, this was considered “Good” Coverage.

But the passing of years unveiled a multitude of unanticipated dynamics.

• For example, the very definition of “health care” has both broadened and deepened materially since 1965. The first MRI or the first Angioplasty would not occur until a decade later.
• Meanwhile, the age-65 life expectancy has expanded by nearly 50% since then, exposing the medical system to care demands and opportunities never contemplated, late in life.
• While care technology, science and processes have responded to this expanding demand, they brought with them dramatically accelerating costs, year after year.
• Finally, political pressures to respond to special populations, including dialysis patients, or emerging care settings like home health or hospice, or even outpatient prescription drugs… all resulted in substantial Medicare Program scope creep.

So it should not be surprising that since inception, Medicare COVERAGE itself has required regular, often dramatic modifications to keep its “social insurance purpose” in balance with these and other continually changing demands. Some of that pressure has even challenged the highly protected “social Insurance” model itself:

• By the early 2000’s, these pressures yielded to means-based-pricing for seniors of varying income levels
• A 2013 survey of Americans over age 65 revealed “raising the age of eligibility to 67” as the second most popular to reduce costs and improve long term viability.

Americans Are Not Very Informed About Medicare

Most Americans (even beneficiaries) are not really aware of the full effect of these sequential program changes, because they have been spread out over many years. After all, the Medicare program has been around for 50 years, but most beneficiaries participate for less than a dozen years. So, many assume this program has been stable and managable year after year, with surprising simplicity and effectiveness. But Medicare Coverage is not at all what it was 50 years ago.

Consider a small number of coverage dynamics between the late 1960’s and today:

Other coverage details and provisions have had to change along the way too, few offsetting the additional copayments, co-insurance, annual and lifetime limits or out-of-pocket cost exposure for beneficiaries.

Could Today’s Medicare Even Work Without The Private Market?

These exposures explain why most Medicare beneficiaries are compelled to purchase a supplemental private insurance plan to cover those costs not covered by today’s Medicare. Such private plans are called Medicare Supplement Plans, and they have been increasingly necessary as the exposures under the Traditional Medicare program have grown over the years. But they too have become expensive due to the the increasing uncovered portions of Medicare. Over the years, the average Medicare Supplement has increased in price from less than $20 per month in the 1980’s to a few Hundred dollars per month today.

Alternatively, Medicare beneficiaries today can choose to leave Traditional Medicare altogether, and apply their “benefit equivalent eligibility” to the purchase of an alternative from a private Insurance company. These programs, called Medicare Advantage Plans, attract nearly 1/3 of all Medicare Beneficiaries who simply can’t make Traditional Medicare pencil out.

So What Does This Mean?

Most of the Medicare-For-All proposals don’t advertise the high coverage gaps in the current model, and the dependency on either a private market supplement (Medicare Supplement Plans), or private market alternative (Medicare Advantage Plans). Without these, Medicare-For-All will be woefully inadequate to meet the coverage expectations of Americans. Alternatively, Medicare-For-All proposals could completely re-invent what Medicare is , increasing its coverage and raising its price substantially.

Either way, it is going to cost a lot of money.