On Thursday, the Senate passed a bill to increase the federal budget and lift the debt ceiling for the next two years. The Trump administration provided a list of $574 billion in savings options from the president’s 2020 budget to offset some or all of the proposed deal’s domestic and defense spending increases over the next two years. And whenever big numbers in government spending are debated, Medicare is always on the table. Early reports said that a big chunk of the spending offsets were expected to come from “Medicare savings,” including by imposing an inflation cap on Medicare Part D “reinsurance” spending. The issues is complex but the politics aren’t: The deal could have led to charges that Medicare cuts were being used to pay for more government spending.
Politicians are depicting a system in meltdown, but the numbers tell a different story, not as dire and more nuanced. Government surveys show that about 90% of the population has coverage. Independent experts estimate that more than one-half of the roughly 30 million uninsured people in the country are eligible for health insurance through existing programs. The bigger issue than lack of coverage seems to be that many people with insurance are struggling to pay their deductibles and copays.
Health insurance is expensive because spending on hospital and physician services is high. Insurers are unpopular because they bear the main responsibility for controlling this spending—but in doing so, they save consumers money and focus resources toward better care. A comparison of plan options under Medicare can quantify the value added by private insurance management. Private plans reduce costs by about 10%, allowing them to provide more than $1,000 in extra health services to each Medicare enrollee every year.
Acting on the principle “Why put it off until tomorrow when you can do the wrong thing today?” the House of Representatives last week voted to repeal the Cadillac Tax, the tax of 40% on a portion of the most lavish employer-provided health care plans. The Cadillac tax was proposed not just to help fund Obamacare but also as an incentive for restraining the rapid growth of health care costs. Because the tax break—treating important compensation as untaxable—is unlimited, Alan D. Viard of the American Enterprise Institute says, it encourages employers to provide high-cost plans “that cover routine care and feature low deductibles and copayments. Those plans increase the demand for medical services and drive up costs for other patients.”
Determining whether the prices for medicines are appropriate or not is critically important, which is why studies that attempt to answer this question must stand up to scrutiny. Studies that undervalue medicines jeopardize the development of future cures, while studies that overvalue medicines justify the imposition of excessive health care costs today.
Public health insurance benefits in the U.S. are increasingly provided by private firms, despite mixed evidence on welfare effects. We investigate the impact of privatization in Medicaid by exploiting the staggered introduction of county-level mandates in Texas that required disabled beneficiaries to switch from public to private plans. Compared to the public program, which used blunt rationing to control costs, we find privatization led to improvements in healthcare—including increased consumption of high-value drug treatments and fewer avoidable hospitalizations—but also higher Medicaid spending. We conclude that private provision can be beneficial when constraints in the public setting limit efficiency.
Seniors in progressive U.S. states are choosing private Medicare Advantage plans more so than the national average even as the politicians who want to represent them talk about getting rid of the insurer’s role in health coverage.
New data from the Kaiser Family Foundation shows more than 40% of new Medicare beneficiaries in Oregon and Minnesota chose Medicare Advantage plans in 2016. And more than 36% of new Medicare beneficiaries in New York and California chose Medicare Advantage plans in 2016.
People new to Medicare can receive their Medicare benefits through either traditional Medicare or private plans, such as HMOs or PPOs, known as Medicare Advantage plans. Older adults and younger beneficiaries with disabilities have said that they make this choice based on premiums and out-of-pocket costs, access to desired providers, the reputation of the company offering the plan, ads and other marketing materials, and the advice of brokers, family members and friends.
The era of annual eye-popping Obamacare rate hikes appears to be over.
Premium increases in the law’s marketplaces are on track to be relatively modest for the second straight year, according to the first batch of 2020 rates proposed by insurers. The rate filings are an early indication that this year’s small rate hikes weren’t a fluke and that other Trump administration policies — including support for a lawsuit that could torch the Affordable Care Act — have proven less disruptive than some experts feared.
Widescale drug importation from Canada, is not a practical solution to the problem of high drug costs. It is a distraction from efforts to address the real prescription drug cost drivers. Perhaps conflating its geographic size, importation proponents seem to overlook Canada’s small population, which is less than California’s. There’s no way that our neighbors to the north could supply the U.S. market—or even a handful of states—with all of its prescription drug needs. President Trump and legislators should redirect their efforts to proposals that could actually make a difference short term and long term in lowering costs.