Medicare Experiments

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Here's a post from The Incidental Economist.

"New estimates of Medicare plan competitive bidding (Ryan-Wyden premium support)

Posted: 06 Aug 2012 02:00 AM PDT

In JAMA, Zirui Song, David Cutler, and Michael Chernew estimate some of the consequences of the Ryan-Wyden premium support plan for Medicare.

Nationally, in 2009, the benchmark plan under the Ryan-Wyden framework (ie, the second-lowest plan) bid an average of 9% below traditional Medicare costs (traditional Medicare was equivalent to approximately the tenth-lowest bid). Since traditional Medicare is simply another plan option under the Ryan-Wyden plan, a beneficiary in 2009 would have paid an average of $64 per month (9% of $717) in additional premiums to stay in traditional Medicare. Across the United States, 68% of traditional Medicare beneficiaries in 2009 (approximately 24 million beneficiaries) lived in counties in which traditional Medicare spending was greater than the second–least expensive plan and would have paid more to keep their choice of coverage. [] Furthermore, more than 90% of MA [Medicare Advantage] beneficiaries (approximately 6.6 million seniors, excluding those dually eligible or in employer plans) would have also paid more for the plan they chose.

Translation: Had it been implemented in 2009, the Ryan-Wyden plan would have cut federal spending on Medicare by at least 9%. If every beneficiary had been enrolled in traditional Medicare in 2009, the estimated savings would have been exactly 9%. But almost one-quarter of beneficiaries were enrolled in a Medicare Advantage plan (pdf), which was paid 14% more than the cost of traditional Medicare at the time. So, under the Ryan-Wyden approach that brings payments to plans down to or below the cost of traditional Medicare, the savings would be higher than 9%.

Of course, holding all else equal, the full plan premiums must be paid by someone. The authors tell us what proportion of beneficiaries would have been stuck with a higher bill: 68% of traditional Medicare enrollees and 90% of MA enrollees. Don’t expect them to be happy.

On the other hand, it’s not likely all else would remain equal. Some beneficiaries would switch plans to avoid higher premiums. Perhaps plans would find ways to economize on costs, become more efficient. That’s the hope (claim) of competitive bidding/premium support advocates anyway.

What’s also true is that the future will not be exactly like 2009, at least under current law.

Affordable Care Act (ACA) reforms to traditional Medicare may change these estimates by moving traditional Medicare toward improved incentives for cost and quality through accountable care organizations, bundled payments, and strengthening primary care. The ACA also aims to slow the growth of traditional Medicare costs by reducing fee increases for some health care institutions. If traditional Medicare costs slow but do not close the 9% gap entirely, as currently projected, millions of beneficiaries will still have to pay more, although less than $64 per month, to maintain their choice of coverage—assuming the benchmark stays the same. However, if the ACA reduces traditional Medicare costs enough so that traditional Medicare becomes the benchmark, beneficiaries would no longer pay more to keep traditional Medicare; instead, MA plans would be costlier than traditional Medicare and require a premium.

That the ACA will make traditional Medicare more efficient and less costly is the hope (claim) of advocates of the law. Of course there is no way to know which advocates — those of a Ryan-Wyden type plan or those in favor of the ACA’s path — are correct about the future. Each is a bold experiment. One just happens to be law and in the process of implementation. The other is in a relatively vague stage of proposal with no certainty of becoming law.

Though I’m supportive of competitive bidding (of a type and with certain safeguards and conditions), I also think we should let the provisions of the ACA play out, to see what happens, with adjustments as warranted. Since few in power, let alone a majority of Congress, advocate running both experiments simultaneously (which is possible — they’re not incompatible), we may get only one or the other. Or we may get none. That is, in fact, precisely what would be achieved by repeal without replacement, a highly plausible political outcome."

Jun. 29, 2012 9:24 am


"None of the 36 countries which have better health care systems than the USA have followed the money to build their health care system. For the very good reason given above: money does not care.

Once care has been made the master motivation of its own house, health care, care can dictate lots of behaviors which enhance care and that the search for profit cannot dictate.

For example most forms of advertizing by private health care companies is unlawful in Europe (and European authorities are suggesting to crack down on more subtle forms of lobbying). In the USA, lobbying and advertizing has become more costly than research and development, explaining, at least partly, why the development of new drugs and cures has stagnated in recent years."


The prolem is the profit motive. Healthcare and banking should be free of the profit motive.

pshakkottai's picture
Jul. 11, 2011 10:27 am

Love America where everything is pitched to you in an advertisement and the cost of marketing makes it more expensive. Love that drug advertising-medical diagnosis by commercial to increase profits.

Jun. 29, 2012 9:24 am

A little research in medical sites and dental sites can educate you too on the latest ripoff being pitched to you not because you need it but because it increases their bottom line. And they have already assured coverage by the insurance industry.

Dental's latest is sleep guards to keep you from grating your teeth. Do you grate your teeth? Well forensics say so from the chipped enanel. Has your spouse or partner noticed this grating? not asked

Did you used to grate your teeth in your sleep? Probably, younger patients have more stress.

Nightline did a spot on a doctor pitching a cd or download to other medicare doctors on how they could increase their bottom line through billing codes. Walk your patient down the hall and back is physical therapy. Counciling and survey on the effects of tobacco counted as smoking cessation program. Yes you too can get free money from the government, Mathew Lesko will tell you how for 3 easy payments...Lesko was not in the Nightline segment.

douglaslee's picture
Jul. 31, 2007 3:01 pm

With the advent of better toothpaste and brushes, dentists have become like chiropractors pushing profitable treatments like cosmetic dentistry.

Jun. 29, 2012 9:24 am

Diabetes is a goldmine for Medicare-sucking privateers also. Get on one mailing list for diabetes, and the locusts come out - seniors are bombarded by sales solicitations from companies hawking diabetes test kits, aids, guides, etc. etc.....and they all say .."We bill Medicare directly!".......and when the senior is not quite there 100% mentally, they order...and order...and order ....and order stuff, maybe sometimes with a small copay. And the companies they try to enroll the senior into an automatic shipment/charging routine, so the stuff piles up if usage rate goes down, or the senior stops using it.....of if the senior goes into a home or dies.

When my Dad went into a home, a bunch of this diabetes stuff piled up, added to the piles of stuff he already wasn't using, and it took me several months to figure out what was going on and get these shysters to stop sending stuff. In the end I had to throw it all away...the home wouldn't accept it, but Medicare picked up most of the bill!

And at the assisted living home, the home contracted a service, provided by a private company, that sent out a nurse to give my Dad 2x per day insulin shots that the assisted living home. The cost? The Medicare statement said this company cost $12,000 per quarter!!!

I support Medicare, but it needs to be reformed to protect it from the private profit jackals that are robbing it blind. Some type of means testing of recipients is also needed. Maybe even means testing of the Medicare recipients KIDS are also needed. It makes no sense to be on Medicare when one or more of your kids is prospering. That would force more shopping for services, woudn't it. Otherwise it makes no sense for well to do seniors or families to get Medicare.

Maybe we need to be reacquainted with the idea that middle class families on up need to eat more of the cost of taking care of their parents. (Including me)

al3's picture
Jul. 31, 2007 3:01 pm

Well, Medicare is an insurance for those who private insurers refused to insure...the elderly and the disabled. The co-pays still make using it impossible for many seniors and it doesn't cover dental....something aging teeth have to do without.

Medicaid isn't the same thing. It does have a means test. Each state has its own input into that. I think in Texas it's something like a household income of under $5,000 a year. Either Texas or Indiana has that as the income cap.

My niece recently entered a lottery for Medicaid. She's now totally disabled (medically verified), has gone through her savings, and is going through the long process of applying for/receiving disability benefits. Currently, she has no health care or access to it. Her health deteriorates monthly.

Retired Monk - "Ideology is a disease"

Jul. 31, 2007 3:01 pm

Where is Donald Trump's Worldview Leading Us?

I want to step back a little from the constant strum of the latest Trump scandal to the most recent outrage, the Trump constantly popping into the news literally every day. I don't remember this during the Obama administration or any other presidency frankly of my lifetime.

Every day they look for some way to get in the news even if it's negative.

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