Tag Archives: Traditional Medicare

Is Medicare for All the Answer to Sky-High Administrative Costs?

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Is Medicare for All the Answer to Sky-High Administrative Costs?

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Calls for a Medicare for All system are growing louder. Many Democrats have embraced it, while President Trump said last week that it would raise health care costs drastically.

Democrats say that giving people the option to partake in Medicare — no matter their age — will actually cut costs.

American administrative costs for health care are the highest in the world, and they argue that one advantage of Medicare for All is that it would save money because Medicare’s administrative costs are below those of private insurers.

Does that argument hold up?

Medicare’s administrative costs were $8.1 billion last year, or 1.1 percent of total spending, close to the proportion it has been in recent years.

But some have argued that the actual cost is higher because 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.

The claim that these administrative costs are overlooked is false. As annual reporting of Medicare’s finances plainly states, they are accounted for.

But there is something missing from the $8.1 billion Medicare administrative cost figure, as Kip Sullivan explains in a 2013 paper published in the Journal of Health Politics, Policy and Law. Although it accurately accounts for the federal government’s administrative costs, it does not include those borne by private plans that also offer Medicare benefits.

In addition to the traditional (public) Medicare plan, Medicare is also available from private plans through the Medicare Advantage program. Today, one-third of people using Medicare are in such plans, up from about one-fifth a decade ago. Moreover, all Medicare drug benefits are administered through private plans.

National Health Expenditure data shows both the government’s administrative costs for Medicare and those of Medicare’s private plans. Putting them together for the most recent year available (2016), they reach $47 billion, or 7 percent of total Medicare spending — well above the administrative costs borne directly by the Medicare program.

Medicare’s private drug benefit plans incur administrative costs that are about 11 percent of their spending. All of this additional, private administrative cost is paid for by taxpayers and, through their premiums, people who use Medicare.

Medicare’s direct administrative costs are not only low, but they also have been falling over the years, as a percent of total program spending. Yet the program’s total administrative costs — including those of the private plans — have been rising.

“This reflects a shift toward more enrollment in private plans,” Mr. Sullivan said. “The growth of those plans has raised, not lowered, overall Medicare administrative costs.”

Making an accurate estimate of the administrative costs of Medicare for All would depend, in part, on whether it would be more like an expansion of traditional Medicare (with its 1.1 percent administrative cost rate) or of all of Medicare, including its private plans (with a combined 7 percent administrative cost rate).

Yet both figures are well below private insurers’ administrative costs, which run about 13 percent of spending (this also includes profit), according to America’s Health Insurance Plans, an advocacy organization for the industry.

Some critics have argued that Medicare’s administrative cost rate appears artificially low because Medicare enrollees’ health spending is so high. Average Medicare spending per beneficiary is just over $12,000 per year; for an average worker in a private plan, it’s about $6,000. If you simply divide administrative costs by total spending, you will get a lower number for Medicare for this reason alone.

This is true, but the government’s administrative costs for Medicare are still below those of private plans. The government’s administrative costs are about $132 per person compared with over $700 for private plans. One reason Medicare’s are so much lower is that it reaps economies of scale. It also benefits from not needing to do much marketing, and it doesn’t earn profits.

Traditional Medicare Doesn’t Cover Dental Care. That Can Be a Big Problem.

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Traditional Medicare Doesn’t Cover Dental Care. That Can Be a Big Problem.

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Many people view Medicare as the gold standard of United States health coverage, and any attempt to cut it incurs the wrath of older Americans, a politically powerful group.

But there are substantial coverage gaps in traditional Medicare. One of them is care for your teeth.

Almost one in five adults of Medicare eligibility age (65 years old and older) have untreated cavities. The same proportion have lost all their teeth. Half of Medicare beneficiaries have some periodontal disease, or infection of structures around teeth, including the gums.

Bacteria from such infections can circulate elsewhere in the body, contributing to other health problems such as heart disease and strokes.

And yet traditional Medicare does not cover routine dental care, like checkups, cleanings, fillings, dentures and tooth extraction.

After I wrote a recent article about the lack of coverage for dental care in many state Medicaid programs, I received a lot of feedback from readers saying Medicare was no better.

I have not had dental coverage since I retired 25 years ago. Any problems and I have to go to a foreign country to get treatment that I can afford. It is incredible that there is no coverage available in America for one of the most important aspects of health and wellness care for seniors. — Tom, La Jolla

Several of my elderly relatives have just let teeth fall out without being cared for or replaced because of expense. This is no way to care for our senior citizens. — Bronxbee, Bronx

Paying for dental care out of pocket is hard for many Medicare beneficiaries. Half have annual incomes below $23,000 per year. Those who have the means, but are looking for a deal, might travel abroad for cheaper dental care. Tens of thousands of Americans go to Mexico every year for dental work at lower prices. Many others travel the globe for care.

Although low-income Medicare beneficiaries can also qualify for Medicaid, that’s of little help for those living in states with gaps in Medicaid dental coverage.

According to a study published in Health Affairs, in a given year, three-quarters of low-income Medicare beneficiaries do not receive any dental care at all. Among higher-income beneficiaries, the figure is about one-quarter.

“The separation of coverage for dental care from the rest of our health care has had dramatic effects on both,” said Amber Willink, the lead author of the study and a researcher at Johns Hopkins Bloomberg School of Public Health. “As a consequence of avoidable dental problems, the Medicare program bears the cost of expensive emergency department visits and avoidable hospitalizations. It’s lose-lose.”

Traditional Medicare will cover dental procedures that are integral to other covered services. So if your Medicare-covered hospital procedure involved dental structures in some way, important related dental care would be covered. But paying for any other care is up to the patient.

Lack of dental coverage by Medicare is among the top concerns of beneficiaries. The program also lacks coverage for hearing, vision or long-term care services. However, many Medicare Advantage plans — private alternatives to the traditional program — cover these services.

For example, 58 percent of Medicare Advantage enrollees have coverage for dental exams. In receiving these benefits through private plans, enrollees are also subject to plans’ efforts to limit use by, for example, requiring prior authorization or offering narrow networks of providers. These restrictions can be problematic for some beneficiaries, and about two-thirds of Medicare beneficiaries opt for the traditional program, not a private plan.

Adding a dental benefit to Medicare is popular. A Families USA survey of likely voters found that the vast majority (86 percent) of likely voters support doing so. The survey also found that when people do not see a dentist, the top reason is cost.

Ms. Willink’s study estimated that a Medicare dental benefit that covered three-quarters of the cost of care would increase Medicare premiums by $7 per month, or about 5 percent. The rest would need to be financed by taxes.

The cost of such a benefit might be offset — or partly offset — by reductions in other health care spending, reflecting the fact that poor oral health contributes to other health problems.

Making a case for this in the political arena would not be easy, though. The initial cost would be an inviting target for politicians who express concern about fiscal prudence, regardless of any potential long-term gain. But expanding Medicare has been done before.

In 2006, a prescription drug benefit was added to the program. The law for that program was enacted in 2003, and in that same year, the surgeon general released a report calling for dental care to be treated and covered like other health care. Whether by Medicaid or Medicare, that wish is still unfulfilled.

 

More Than One-Third of People with Traditional Medicare Spent at Least 20 Percent of Their Total Income on Health Care in 2013

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http://connect.kff.org/many-people-with-traditional-medicare-spent-at-least-20-percent-of-their-income-on-health-care-in-2013?ecid=ACsprvsiFmfyaQUfADFrf32n4wh0OUu4gIROk6tAc4VZ2GmtOCvvgdhIWsEh3xLkkK2toktoTqJN&utm_campaign=KFF-2018-January-Medicare-Out-Of-Pocket-Spending&utm_source=hs_email&utm_medium=email&utm_content=60277390&_hsenc=p2ANqtz-8TexIgilMHyZy_2ZHSiNhSiGZ7_j6xP8h5pBC_LYjbUou03aHoJahmhFiI7UBZrjo7aWH-BfGSNqiNYCUmP5Ho5m9bNA&_hsmi=60277390

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Health Costs Are Projected to Consume Half of Average Per Social Security Income by 2030

Health care costs are a substantial and growing burden for many people on Medicare and are projected to consume a larger share of total income over time, according to a new analysis from the Kaiser Family Foundation.

The study, Medicare Beneficiaries’ Out-of-Pocket Health Care Spending as a Share of Income Now and Projections for the Future, finds that more one-third of people with traditional Medicare spent at least 20 percent of their total income on out-of-pocket health care costs in 2013. That included premiums, deductibles and cost sharing for Medicare-covered services, as well as spending on services not covered by Medicare, such as dental and long-term care. The analysis of spending as a share of total income does not include enrollees in Medicare Advantage plans, who account for 19 million of the 59 million people with Medicare. Income is measured on a per person basis, which for married couples is income for the couple divided in half.

While some people with Medicare face relatively low out-of-pocket costs, the financial burden can be especially large for beneficiaries with modest incomes and significant medical needs. For instance, among beneficiaries in traditional Medicare, just over half with incomes below $20,000 and those ages 85 and over spent at least 20 percent of their total income on health expenditures in 2013, along with more than 4 in 10 beneficiaries in fair or poor health status.

Among all Medicare beneficiaries, out-of-pocket costs consumed 41 percent of beneficiaries’ per person Social Security income in 2013, on average. Older women and beneficiaries ages 85 and older tended to have higher average out-of-pocket spending as a share of average Social Security income than others, according to the analysis.

The analysis projects that the health care spending burden among Medicare beneficiaries will rise over time. By 2030, the study projects that under current policies 42 percent of people with traditional Medicare will spend 20 percent of their total income or more on health care costs.  Among all people with Medicare, out-of-pocket costs are projected to consume half of the average per person Social Security benefit by 2030.

With rising health care costs representing a growing challenge to the financial security of older adults, these findings have implications for policies that could shift costs on to beneficiaries as part of a broader effort to reduce federal spending on Medicare, Medicaid or Social Security.

Post-acute care: Medicare Advantage vs. Traditional Medicare

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Post-acute care: Medicare Advantage vs. traditional Medicare

From a public spending point of view, post-acute care is particularly problematic. Most of Medicare’s geographic spending variation is due to this type of care. Part of the story is that Medicare pays for post-acute care in several different ways, with different implications for efficiency.

For example, traditional Medicare (TM) — which spends ten percent of its total on post-acute care — pays skilled nursing facilities per diem rates but inpatient rehabilitation facilities a single payment per discharge. Post-acute care is also available through Medicare Advantage (MA), which operates under a global, per-enrollee, payment. Unlike TM, MA plans establish networks, may require prior authorization for post-acute care, and can charge more in cost-sharing for post-acute care than TM does.

These different payment models offer different incentives that may affect who receives care, in what setting, and for how long. In Health Affairs, Peter Huckfeldt, José Escarce, Brendan Rabideau, Pinar Karaca-Mandic, and Neeraj Sood assessed some of the consequences of those incentives. Focusing on hospital discharges for lower extremity joint replacement, stroke, and heart failure patients between January 2011 and June 2013, they examined subsequent admissions to skilled nursing and inpatient rehabilitation facilities, comparing admission rates, lengths of stays, hospital readmission rates, time spent in the community, and mortality for MA and TM enrollees. To do so, they used CMS data on post-acute patient assessments for patients with discharges from hospitals that received disproportionate share or medical education payments from Medicare.

Medicare Advantage risk selection

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http://www.academyhealth.org/blog/2017-04/medicare-advantage-risk-selection

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One of the concerns about Medicare Advantage (MA) is that it doesn’t serve sick beneficiaries well, motivating some of them to switch to traditional Medicare (TM). If true, it’s an argument for maintaining affordable access to TM.

There’s considerable evidence that it is true. The most recent (if you can call last summer recent) is found in a paper by Elizabeth Goldberg and colleagues. They examined Medicare beneficiaries 65 years or older between 2000 and 2012, a period during which enrollment in MA grew from 19% of beneficiaries to 28%. For each year, they classified a beneficiary as “MA” if enrolled in an MA plan in January of that year, and “TM” otherwise. Note, however, that it wasn’t until 2006 that beneficiaries had to stick with their plan choice for most of the year (lock-in). Nowadays, they can adjust their plan choice only until mid-February. Prior to 2006, they could switch plans every month.

TM has no Part A (hospital insurance) premium and it’s standard Part B (physician services insurance) premium is 25 percent of program costs, or $134 per month in 2017. The premium is higher for individuals and couples with higher income. Both parts include considerable cost sharing and both have an open network and impose no managed care-type restrictions on utilization. Though MA plans tend to fill in much of Medicare’s cost sharing, as well as offer supplemental benefits at little to no additional premium, they usually have limited networks and attempt to manage care. It’s these latter features that can make TM more attractive than MA to sicker beneficiaries.

Older studies also found that sicker people tended to prefer traditional Medicare and were more likely to leave Medicare H.M.O.s. And other, more recent studies found that lower-income, less educated and sicker people reported worse experiences in Medicare Advantage than in traditional Medicare.

My takeaway from all this is that MA may promote efficiency and higher quality care, but it doesn’t serve some types of sicker beneficiaries as well as TM. They vote with their feet and leave MA when TM appears relatively more attractive. Though not without cost, this degree of choice — that spans both private and public options — is a strength of Medicare and a large benefit to its beneficiaries, while remaining the focus of intense political attention.