Let’s Not Further Privatize Medicare

September 8, 2023

Summary: A new book by mainstream health economists and policymakers argues that we should expand and tinker with Medicare Advantage to save Medicare. But why double down on the part of Medicare that is extracting massive profits and limiting access to care?

A New Prescription For What Ails Medicare
Health Affairs Forefront
August 25, 2023
By Alain C. Enthoven

Modernizing Medicare, edited by Robert Moffit and Marie Fishpaw (Johns Hopkins Press), is a “must read” for all those concerned with public finances and health policy — though not an easy read because of the great complexity of the Medicare program.

This book, with chapters by leading authorities, explains how and why a new model, based on informed cost-conscious consumer choice among competing private health plans is the most promising — indeed the only practical — solution to the problem of soaring health care costs.

In his introduction, Robert Moffit traces the evolution of thinking by policy makers from the 1965 defined benefit fee-for-service program covering hospital and physicians’ services to the present thinking favoring the defined contribution model and consumer choice among competing health plans. The idea has gained bipartisan support. The latter model, now called Medicare Advantage, is the choice of half of all Medicare beneficiaries.

All of the chapters are worth reading, but in the interest of brevity, let me focus on three that merit particular attention.

Charles Blahous concludes persuasively that “Medicare as we know it cannot be preserved unless it is significantly changed,” while more American seniors are deciding that “Medicare Advantage meet their needs more effectively than does traditional Medicare.”

John Goodman explains some of the many ways even Medicare Advantage could be improved. Goodman notes that some practices offer “direct primary care” or 24/7 access to a primary care physician for a telemedicine consultation for a fixed monthly fee. Also, Goodman reports success with “reference pricing.”

Edmund Haislmaier proposes an idea that would be new to the health insurance market but imported from successful application elsewhere: risk transfer pools. Government would start by paying plans on the basis of the populations and counties they serve. Then all participating plans would participate in a self-governing pool in which the participants would negotiate an agreed upon equitable sharing of payments for the costs of high-cost patients.

An important read, Modernizing Medicare will become the guidebook for the inevitable changes that must be made in Medicare.

Comment (Health Affairs):  dmccanne

If there is to be competition, it seems that it should be between the health care professionals and institutions based on the services they provide.

The primary mission of the private financial administrators, that is the private insurers, is to maximize profits for their investors thereby creating more billionaires; thusly they compete for the public and private health care dollars. In contrast, the primary mission of public financial administrators, such as those managing the traditional Medicare program, is to deliver health care to those who need it, for the public good rather than for the purpose of wealth building.

Traditional Medicare does need some improvement in its benefits, but we need to abolish the private entities that are drawing billions of dollars out of our health care system through private equity and, in the meantime, assuming ownership of physician groups and other professionals.

Einav and Finkelstein in “We’ve Got You Covered,” have shown that we can have automatic coverage for everyone that is free at the point of service and that everyone can afford by funding it with a progressive income tax. Unfortunately, Moffit, Fishpaw and their conservative authors in “Modernizing Medicare,” direct their reform to “harnessing the power of market competition” by giving our health care dollars to the entrepreneurs to satisfy their own mercenary priorities. Wrong solution.

Comment by Don McCanne

This book review by professor Alain Enthoven of Stanford purports to be a prescription for what ails Medicare. Unfortunately, the book’s contributors – many widely known in health economics – are driven by their belief that remedies must be based on market competition, rather than health policy that primarily benefits patients. Market competition as practiced in the United States is designed primarily to build wealth for investors. That is hardly the prescription we want to see for our egregiously expensive health care.

There are now extensive reports about how our public and private health care dollars are being misspent on the Medicare Advantage program. Yet it has been so successfully marketed that it has become, quite inappropriately, the choice of over half of the Medicare beneficiaries. The conservative, market-oriented authors of this book are advocating the “modernization” of Medicare by further advancing the unfortunate Medicare Advantage model.

So what prescription do we need for what ails Medicare? We can improve its benefits (vision, hearing, long term care, etc.), eliminate cost sharing, expand it to cover everyone, and fund it equitably through a progressive income tax; in other words by converting it to a single payer, Medicare for All program.

It would be nice if Health Affairs would publish an article describing the moral imperative and beneficial efficiency of the single payer model.