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July 30, 2020

Medicare Advantage for All, Perhaps?

Author Affiliations
  • 1Brookings Institution, Washington, DC
JAMA Health Forum. 2020;1(7):e200967. doi:10.1001/jamahealthforum.2020.0967

The coronavirus disease 2019 (COVID-19) pandemic is forcing a much-needed questioning of the US health system. What is the right balance of authority between the federal government and the states? How should the profound inequities and gaps in the system be better addressed? Should emergency regulations, like those allowing more telemedicine and flexible funding, become permanent features of the system?

Hopefully, this reassessment will encompass a constructive conversation about the basic structure of the US health system and how it can be based on a more robust chassis. What should that guiding framework be? Although I view the system though a center-right lens, I believe a variant of the Medicare-for-all idea could prove to be a new chassis that can attract broad support.

In practice, unlike most high-income countries, the US has several different health systems for different segments of the population—each with distinctive rules, subsidy arrangements, and eligibility criteria. There is 1 system for poor individuals; an employment-based system for most working individuals and their families; and yet another for elderly individuals. Transitioning between these systems, as almost all US residents must do at some point, often means disruptions in coverage and care. Millions also continue to fall through gaps between these systems. Moreover, the amount of assistance available to individuals seeking coverage differs greatly depending on such circumstances as geography and work status.

Many progressives have responded to this patchwork by calling for Medicare to become the chassis for the whole system. However, the Medicare-for-all proposals advanced by such politicians as Sen Bernie Sanders (I, Vermont) and Sen Elizabeth Warren (D, Massachusetts) have encountered skepticism from many liberals, as well as heavy criticism from conservatives.

Concerns About Medicare for All

One objection is the enormous increase in federal expenditure that would be involved in such a switch, and although supporters point to the large savings in private expenditures, the net costs depend on many considerations and design features.

Another concern, applying to some versions of Medicare for all, is that although the Medicare benefit package is comprehensive, traditional Medicare has significant out-of-pocket costs for all but the lowest income beneficiaries (who qualify as “duals” for overlapping Medicaid coverage). This feature effectively requires seniors to purchase private “Medigap” coverage as a supplement.

A third concern is disruption. This is the other side of the coin associated with having multiple health systems in the US; Medicare for all would mean big changes for most individuals with existing coverage.

However, it is important to remember that even Medicare is really 2 distinct systems. The focus of Medicare-for-all proposals is traditional Medicare, which is a fee-for-service program with a detailed payment schedule administered by the government. But in parallel with this is Medicare Advantage, which operates differently from traditional Medicare with private plans receiving a single capitated payment for each beneficiary enrolled in their plan, adjusted according to the beneficiary’s general health condition.

Medicare Advantage as the Framework

Medicare Advantage for all could be a good starting point for a bipartisan discussion on creating a new framework for the US health system. Unlike the higher-profile Medicare-for-all approach, a Medicare Advantage–for-all approach would have several advantages. For instance:

  • Medicare Advantage has wide popular support as well as broad political support. Medicare Advantage enrollment has been growing rapidly, doubling in the last decade, with the proportion of Medicare beneficiaries in such plans now exceeding 34% and rising. Moreover, Republicans as well as Democrats have supported and expanded Medicare Advantage, and the idea of making Medicare Advantage plans available to younger US residents has begun to intrigue some reformers on the right.

  • The capitation system permits competing Medicare Advantage plans to offer a variety of benefits beyond a required core of basic benefits. Moreover, in contrast to traditional Medicare’s rigid and detailed payments system, it allows plans to explore different payments as a means of achieving greater efficiency and beneficiary satisfaction.

  • In contrast with the design of traditional Medicare, Medicare Advantage plans are generally consistent with the growing managed care pattern in nonelderly coverage, including within the employer-based system. Today, about 90% of Medicaid beneficiaries are enrolled in some form of managed care. Meanwhile, about two-thirds of workers with employment-based plans are enrolled in health maintenance organizations or other network coverage that is similar to most Medicare Advantage plans. Medicare’s income-adjusted premiums are also broadly compatible with the structure of income-based subsidies available for plans in state health insurance exchanges, and many insurers offer Medicare Advantage and health insurance exchange plans that have similar designs. Thus, for a large proportion of households, transitioning from their existing coverage to coverage more like Medicare Advantage plans would not involve a big adjustment.

  • Recent changes in laws and regulations allow Medicare Advantage plans to include more nonclinical services that can influence health, such as nonurgent transportation, nutritional services, and even some simple home modifications to reduce the risk of injuries. This reflects the growing interest in addressing so-called social determinants of health.

Gradual, Not Radical

Choosing Medicare Advantage as the organizing theme for reforming the whole US system does not necessarily imply there must be radical legislation that literally replaces all existing coverage with the current Medicare Advantage program. That would be unnecessarily disruptive and regimented. Rather, it should mean gradually adapting existing forms of coverage so that over time they become very similar to Medicare Advantage, and there would essentially be no change in coverage as individuals change jobs, lose their jobs, or retire.

One step toward that outcome would be to merge state exchange plans with Medicare Advantage plans in the state. Another would be to slowly reconcile the subsidy system available for exchange plans with the tax benefits for employer-sponsored insurance, such that a similar structure of income-related subsidies would apply to everyone enrolling in insurance. Seniors would continue to receive assistance toward the cost of coverage that is reflective of the payroll taxes they paid and the national commitment to their health care, at least until there was agreement on a more comprehensive revenue and financing system, and the state-federal share of support would continue for lower-income households. A third step would be to move further toward the place of work being just a convenient location to facilitate plan selection, with employers handling the mechanics of government subsidies and payments by workers, and to move away from employers as plan sponsors.

None of these steps are small details, of course. They are major issues and would involve contentious debate. But to reach eventual agreement on big changes in society, it is necessary to have a framework in mind that is likely to command broad support and that the current system could evolve toward with minimum disruption. Medicare Advantage for all is such a framework. Medicare for all is not.

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Article Information

Open Access: This is an open access article distributed under the terms of the CC-BY License.

Corresponding Author: Stuart M. Butler, PhD, Brookings Institution, 1775 Massachusetts Ave NW, Washington, DC 20036 (smbutler@brookings.edu).

Conflict of Interest Disclosures: None reported.

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    5 Comments for this article
    EXPAND ALL
    Took the Words Out of My Mouth!
    Vincent Mor, Ph.D. | Brown University School of Public Health
    Congratulations to Dr. Stuart. When Bernie Sanders first suggested Medicare for all I countered with Medicare Advantage (MA) for all both as a more gradual transition that allows for ongoing private insurance and for the regional diversity that exists. MA plans can delegate to integrated delivery systems of all stripes which can also assume risk. MA plans have the advantage of using Medicare pricing, avoiding egregious pricing practices (which still needs to be applied to drugs). Best of all, capitation allows control of all medical care cost increases. This is the right track.
    CONFLICT OF INTEREST: None Reported
    A Good Discussion
    Michael Mundorff, MBA, MHSA | integrated healthcare system (retired)
    I am encouraged that Dr. Butler advocates “to move away from employers as plan sponsors,” but I would go further. Even having “employers handling the mechanics of government subsidies and payments by workers” is only feasible if an employer is of sufficient size and expertise — and willingness — to mediate those bureaucratic tasks. The pandemic has dramatically exposed the hazards of tying employment to health insurance in any manner, as millions are unemployed and lose health care coverage as a result.

    It is also heartening that he is willing to “reconcile the subsidy system available for
    exchange plans with the tax benefits for employer-sponsored insurance”. The tax preference for employer-sponsored insurance is an economic and policy dinosaur that has somehow managed to avoid death by asteroid.

    Disclosure: I am currently covered by a Medicare Advantage plan.
    CONFLICT OF INTEREST: None Reported
    READ MORE
    Medicare Advantage is a Shell Game
    Stephen Kemble, M.D. | Physicians for a National Health Program
    A fundamental problem with competing private plans in health care is that too much of the per-beneficiary financial risk is predictable due to pre-existing conditions and social determinants of health, so that the primary driver of competition is to avoid risk. This means “cherry picking” the healthy and “lemon dropping” sicker and costlier patients from Medicare Advantage (MA) plans. Risk adjustment is far too crude to prevent this, and efforts to make it more accurate encounter prohibitive complexity and administrative cost. There is pervasive evidence that MA plans do selectively enroll healthier-than-average Medicare beneficiaries, and sicker, more complex patients selectively disenroll from MA plans. There is also extensive evidence of increased coding intensity in MA plans to beat risk adjustment formulas, and MA plans carry much higher administrative cost than traditional Medicare. The outcome is that the MA program has never saved money for the Medicare program as a whole, and MA claims of more cost-effective care are much better explained by the favorable risk pool the MA plans have been able to secure.
    CONFLICT OF INTEREST: None Reported
    READ MORE
    Medicare Advantage Prioritizes Profits above Values of Universal, Equitable, Affordable Health Care
    Robert Vinetz, M.D. | Pediatrician, Retired
    There are many well-documented, evidence-based reasons why Medicare Advantage is the wrong way to go. If our values and priorities are for health care that is universal, affordable, sustainable, not wasteful, equitable, high quality and comprehensive, then Medicare Advantage is a disadvantage: It simply won’t work!

    One fundamental reason it won't work: Medicare Advantage is a for-profit system, so named to be a look-alike for its not-for-profit cousin, traditional Medicare. For-profit companies must have as their top priority the maximization of profit. Everything else is secondary…or tertiary…or not even considered (? pandemic prevention and control).

    We must ask
    ourselves: Do we really want profit-making for investors to be the top priority of our health care system?
    CONFLICT OF INTEREST: None Reported
    READ MORE
    Medicare Advantage is a Great Foundation
    Walton Francis, M.A., M.P.A, M.P.P. |
    Stewart Butler has put his finger on what is arguably the single best model for expanding insurance coverage compatibly with current American systems and expectations. Medicare Advantage (MA) is the best large insurance system in America. It facilitates consumer-driven plan choices. It painlessly provides catastrophic cost protection missing from Medicare. Moreover, it prevents huge amounts of wasted utilization created by Medigap and other expensive wrap-around arrangements that make health care "free" to about 90% of the Medicare enrollees who are not in MA plans and who use Medigap plans or former employer subsidies to supplement original Medicare. Published estimates are that such wrap-around schemes cost Medicare about $2,000 a year per person. What is most striking to me is that not only is the MA system a close cousin to many existing employer offerings (and to marketplace exchanges), but also that the current tax-favored subsidy for employer-paid insurance could with reasonable ease be reworked into a premium subsidy system still administered by employers yet similar to that used in MA. Benefit-rich union plans could be left as is or converted to especially generous MA premium subsidies, based on bargaining agreements. Similar arrangements could be made for most Medicaid enrollees. Both employers and enrollees could be kept whole compared to present arrangements. With subsidies also designed to allow "zero premium" plans like those in MA, actual enrollment could be legally voluntary but in practice strongly encouraged by employers. Yes, many details would need to be sorted out (e.g., use of age-based premiums, reinsurance and other mechanisms to avoid adverse selection), but with voluntary participation by states, employers, and enrollees, transition over time could be relatively painless and never forced through "one size fits all" mandates. Of overall importance, most insurance companies are major players in both the Medicare and employer markets, and as a result the great majority of enrollees would retain the ability to choose similar if not identical plans while getting a broader array of choices, and to select plans with networks including their physicians.
    CONFLICT OF INTEREST: Creator of plan comparison tools for health insurance
    READ MORE
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