A growing proportion of Medicare beneficiaries are opting out of the government-run insurance program. They are instead choosing a private plan alternative, one of the Medicare Advantage plans. The strength of this trend defies predictions from the Congressional Budget Office, and nobody can fully explain it.
Here’s another mystery. Traditional Medicare spending growth has slowed, bucking historical trends and expectations. Though there are theories, we don’t fully know what’s causing that either.
Pinning down explanations for these two mysteries is important. Doing so could help us understand the structure and cost of Medicare in the future.
The mysteries may be connected by something that appears, at first, to be unrelated: Doctors and hospitals tend to treat insured patients the same way, regardless of what kind of coverage they have. A traditional Medicare patient admitted to the hospital with, say, pneumonia will receive the same standard of care as a similar but privately insured pneumonia patient.
From this, an idea emerges that links the two mysteries. As enrollment in Medicare Advantage plans grows, so too do the plans’ influence over how doctors and hospitals provide care. Unlike the traditional program, Medicare Advantage plans establish networks, covering care provided only by certain doctors and specific hospitals. Often those are the ones with lower cost growth. As doctors and hospitals reduce their cost growth to gain access to Medicare Advantage networks and the increasing number of patients enrolled in the plans, they do so for traditional Medicare patients as well.
So, as Medicare Advantage enrollment swells, the growth in the cost of care for traditional Medicare falls — a spillover effect. That’s the theory, anyway. Does it hold water?
HENRY KOTULA 