Medicare Beneficiaries Deserve a Public Option for Comprehensive Care

Mar 8, 2012Wilson Parker

health-care-money-150As part of the 10 Ideas: Prescriptions for Health Reform series, a proposal that would give seniors access to better, cheaper care and force private insurers to compete for their

health-care-money-150As part of the 10 Ideas: Prescriptions for Health Reform series, a proposal that would give seniors access to better, cheaper care and force private insurers to compete for their business.

Suppose you are a Medicare beneficiary. You have worked all of your life, saved your money, and paid payroll taxes. Now, in addition to the basic coverage provided by Medicare, you want to receive comprehensive benefits -- the same level of coverage that most Americans enjoy. You have two options, both bad.

Your first option is to continue receiving your guaranteed basic Medicare benefits from the government while enrolling in a Medicare Supplemental Insurance plan. The Medicare Supplemental Insurance Program, or Medigap, allows private insurance companies to offer insurance plans that fill the gap between basic Medicare coverage and comprehensive coverage. Basically, this option means that you would have three insurance plans: traditional government-provided Medicare, a private Medicare Prescription Drug Benefit Plan, and a private Medicare Supplemental Insurance plan. Having three plans creates unnecessary complexity and confusion. A report published in Health Affairs by the Commonwealth Fund found that the "patching together of multiple plans creates confusion for beneficiaries; creates the potential for risk selection; and leads to higher administrative expenses, because of the multiple insurance carriers involved and the lack of integrated claims administration."

If you want to avoid the problems associated with multiple plans, your only option is to receive all of your care through a private insurance plan, known as a Medicare Advantage plan. In a Medicare Advantage plan, the government pays for roughly the amount of care that it would otherwise provide through Medicare. Beneficiaries pay for the rest of the plan through premiums. Medicare Advantage plans, however, are much less efficient than traditional Medicare. According to a report issued by the Majority Staff of the House Committee on Energy and Commerce, less than 85 percent of Medicare Advantage providers' revenue is used to pay for actual medical expenses -- in stark contrast to traditional Medicare, in which more than 98 percent of revenue is used to cover medical expenses.

Why are Medicare Advantage insurers so much less efficient? Because, as Representative Henry Waxman put it, Medicare Advantage insurers "squander billions of dollars on overhead costs -- in fact, they spend ten times the amount per beneficiary [in overhead costs] than traditional Medicare." The report's findings confirm Representative Waxman's concerns that Medicare Advantage insurers spend money wastefully. The report found a company that spent only 79 percent of its revenue paying for medical expenses but paid an executive over $35 million. The same company paid 16 other executives' salaries and bonuses worth $1 million or more. The chief Medicare administrator, in contrast, receives only $165,300, even though Medicare is larger and insures more people than the entire Medicare Advantage market.

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The report also discovered that a company that spent only 82 percent of revenue on medical expenses also spent $1.5 million on a corporate retreat in Edinburgh, Scotland and $1.8 million on a retreat in Cancun, Mexico. Wasting our seniors' hard earned money on unnecessary expenses is reprehensible. In the words of Representative Bart Stupak, "Seniors pay Medicare Advantage premiums with the expectation that the money will be used to provide critical medical care -- not pay for marketing campaigns and executive bonuses. The disparity between the percentage of premiums used to pay medical claims in traditional Medicare and Medicare Advantage is unacceptable; our seniors deserve better. This report is just the latest example of private insurance companies exploiting the Medicare Advantage system for their own gain."

Our seniors deserve better than having to choose between the confusion and inefficiency of multiple plans and the wasteful extravagance of Medicare Advantage providers. Congress can mitigate this problem by creating a public benefit option, a program in which beneficiaries would receive comprehensive care from the government. The government would pay for roughly the same amount of care that it would otherwise provide through traditional Medicare, and consumers would pay for the rest of the care through premiums. Beneficiaries would receive all of their care from one program, so there would be no difficulties arising from trying to combine multiple plans. Because that plan would be public and administered by the Centers for Medicare and Medicaid Services (the same program that administers Medicare), it would be remarkably more efficient than private insurers and would not waste money on extravagant corporate expenses. Finally, because the program would be paid for by consumer premiums, it would be completely revenue-neutral for the government.

The Commonwealth Fund projected the benefits of such a program and published their findings in Health Affairs. According to their report, a comprehensive benefit option would substantially improve the quality and value of coverage offered to consumers while saving them an average of $357 annually on premiums and $60 annually on out-of-pocket costs. The overall market reduction in spending would be approximately $5 billion.

Another advantage of a comprehensive benefit option is just that: it is an option. Even though multiple plans and consolidated private plans are less efficient than a single public plan, consumers may prefer these plans because they can provide more specialized care. If they are willing to pay the higher premiums associated with these plans, they would be able to purchase them. Indeed, private insurers that offer Medicare Advantage plans would have an incentive to become more efficient in order to remain competitive with the public option. This would require them to eliminate unnecessary expenses (like trips to Cancun). A comprehensive benefit option would also give insurers who provide Medicare Supplemental Insurance an incentive to do a better job of integrating their plans with Medicare to mitigate problems associated with combining multiple plans.

Our seniors deserve a better choice for acquiring comprehensive health insurance coverage. Creating a comprehensive public benefit option would give them that choice. It would require no additional government revenue and would save billions by making the market more efficient.

Wilson Parker is a member of the Roosevelt Institute | Campus Network's chapter at UNC Chapel Hill, where he is studying economics. He serves as the co-director of the chapter's Economic Policy Center.

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The Next Target for Health Reformers: Opening Access to Medical Research to Spur Innovation

Mar 7, 2012Rahul Rekhi

health-care-money-150As part of the 10 Ideas: Prescriptions for Health Reform series, the recognition of a little noticed problem: our medical innovation system is hampered by huge fees to access important res

health-care-money-150As part of the 10 Ideas: Prescriptions for Health Reform series, the recognition of a little noticed problem: our medical innovation system is hampered by huge fees to access important research.

We recently saw a comprehensive overhaul of our health delivery system not seen since the likes of Lyndon B. Johnson. Indeed, the Affordable Care Act has ushered in a new era in American health care. However, the United States' health research and development (R&D) paradigm -- our health discovery system, the engine of our health technological progress -- is at its own crossroads, poised to undergo a similar transformation.

In the U.S., biomedical research is federally funded by the National Institutes of Health, which allocates more than $70 billion a year in research funding to scientists across the country. The private sector adds another $50 billion into the mix. American physicians and researchers who receive these grants go on to develop the health care innovations that we've come to take for granted.

The importance of this biomedical innovation ecosystem cannot be overstated. After all, of the arguably six most important medical innovations of the past 25 years -- MRI/CT Scans, ACE inhibitors, balloon angioplasty, statins, mammography, and bypass grafts -- four were developed in the U.S., reaping tremendous rewards for American health care. Moreover, in the last 10 years, only seven Nobel Prizes in medicine have gone to researchers outside the country, compared to 15 within our borders. These statistics, while far from comprehensive, are indicative of a competitive advantage in biomedical innovation.

Yet, for all its vaunted progress, our health R&D paradigm faces pressing and significant limitations. Getting at one of the core weaknesses of this system requires examining the basics of the R&D procedure. The process is simple: a researcher obtains funding from the NIH, among other sources, to carry out experiments and obtain results at his or her home institution. These results are then submitted to, and potentially published by, a scientific research journal, the publishers of which compile the results and include them in their publication. Subscribers of this journal can then examine the results of the study.

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It is the latter step that's the crux of the issue. These journal articles, and their results and data, are hidden behind journal subscriptions that cost as much as $25,000 a year, putting them beyond the reach of anyone who can't afford them. For example, many physicians -- most significantly those in rural areas -- do not have access to the cutting-edge medical research they need to provide the highest quality of care. Patients, too, are often simply unable to research the pathologies that plague them and their families, hindering their ability to make informed medical decisions. Most of all, students and educators are denied access to the latest scientific developments, which is a major blow to the learning process.

The effects of these barriers also extend to the research pipeline. For instance, the rate at which we translate basic biomedical discoveries into novel therapies has stagnated in recent years. In fact, despite a doubling of the federal budget for biomedical research and development, the number of new drug approvals fell from 53 in 1996 to 19 in 2009, and although 800,000 medical research papers helping to identify novel therapeutic targets were published in 2008, a paltry 21 new drugs found their way to the market. A recent study in the New England Journal of Medicine found that the primary contributor to this so-called "Valley of Death" is "the centralization of authority within large, inherently cautious bureaucracies in government, universities, foundations, and companies...[which] disregar[d]...the diversity of approaches that are necessary for innovation." In reality, this exists in part because scientists, physicians, and biotech entrepreneurs lack access to cutting-edge research developments and data -- currently monopolized by large research institutions in government, academia, and industry -- to materialize their ideas.

There's a compelling case, therefore, to enact what's called open-access research: making all research publicly available through an unrestricted online database. Indeed, a study published by an economist at Victoria University established that enacting open access policies would reap over $1 billion in benefits over the next 30 years due to the catalysis of innovation in the creation of novel drugs and medical treatments. This amounts to an eight-to-one rate of return.

A movement to enact open access research policies is currently being led by several nonprofits, most notably the Right to Research Coalition. The implications of this policy, however, have not yet hit the mainstream. To students, at least, the movement has remained under the radar. But open access research permits patients, students, physicians, entrepreneurs, and educators to reap the benefits of cutting-edge medical research. Free access to data can spur drug development, providing the life-saving treatments of the future. This system needs to change. The foundation of our healthcare innovation ecosystem depends on it.

Rahul Rekhi is a Roosevelt Institute | Campus Network member from the Rice University chapter, where he is studying bioengineering and economics.

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Millennials are Speaking Health to Power

Mar 5, 2012Rajiv Narayan

health-care-money-150Millennials don't see health policy as a side issue. They want to extend quality care to all Americans, and they have bold ideas for how to do it.

health-care-money-150Millennials don't see health policy as a side issue. They want to extend quality care to all Americans, and they have bold ideas for how to do it.

Health policy is an issue that provokes strong sentiments -- and often, great controversy -- by bringing questions of body, mortality, disease, and wellness into the public arena. For a recent example we need only look to the 2010 midterm elections, when House Democrats lost their majority to a wave of Tea Party Republicans in what many attributed to blowback from the passage of the Patient Protection and Affordable Care Act (ACA).

The dispute over health care reform, like many issues in health policy, concerns the nature of paternalistic public health. Policymakers and their constituents review the (often conflicting) evidence and ask themselves to what extent they are comfortable with the level of government involvement in their personal health. Where the benefits of public intervention outweigh the intrusion of government into our individual choices, we accept policy.

At the Roosevelt Institute | Campus Network, we contend that health care is not only a choice, but a fundamental right of every American. It may surprise some to see the Millennial generation so engaged in issues of health care. After all, this is an arena that many seasoned policymakers find too byzantine to approach. In my role as the Senior Fellow for Health Policy at the Campus Network, I've learned that our approach to health policy is reflective not just of the timeliness of the issue but of the core values and principles of my generation.

Last year, we worked on a project that built a "health care toolkit" for college students. This year, we're pleased to see a rapid expansion of health coverage for young people. According to a recent revision of official estimates, 2.5 million young Americans aged 19-25 have gained health care coverage since September 2010. A little over a year ago, 64.4 percent of young Americans had health insurance; since then, that proportion has risen to 72.7 percent. Known collectively as the "invincibles," Americans aged 19-25 are accustomed to being left in the blind spot of health coverage. Those days are now largely over.

Among the many projections made by the president's Council of Economic Advisers, the ACA is estimated to "increase net economic well-being by roughly $100 billion a year" and increase real GDP by 8 percent through 2030 relative to the no-reform baseline. The Congressional Budget Office also links a "net reduction in federal deficits of $143 billion over the 2010-2019 period" to the ACA.

This year, you can find our values and belief in the power of health care policy front and center in the pages of our 10 Ideas for Health Care series. The 10 Ideas series is a flagship publication of the Campus Network. In the fall, each of the six policy centers submits a call for submissions to thousands of students. Of the hundreds of submissions we receive, only the 10 best are included in each journal. These journals provide not only valuable academic experience for students, but a springboard for our advocacy. It is not uncommon for the ideas in our journal to jump from the page to a floor debate in a state legislature, or a grant-winning project. As such, 10 Ideas for Health Care represents the very best of the Millennial paradigm and the future of health policy. This week, New Deal 2.0 will offer a sneak peek at the best of the best.

Check out “The 99 Percent Plan,” a new Roosevelt Institute/Salon essay series on the progressive vision for the economy.

Kate Lawrenz, a student from the University of Richmond, is writing about payment reform for Accountable Care Organizations. Highlighted in the ACA, Accountable Care Organizations seek to coordinate health care among Medicare recipients, calibrating services and payments with metrics to reduce redundancy and error. Kate is looking at ways to make their payment schemes even more effective.

Rahul Rekhi, a student of Rice University, is applying the lessons of emergent technologies to biomedicine. While medicine benefits tremendously from the application of new technologies and advances from research, we're slower to apply the paradigm of the Internet Generation to health care. Rahul seeks to extend the benefits of open-access computing to open-access health care.

Paul Wilson Parker, a student of the University of North Carolina at Chapel Hill, is engaging an issue of surprising interest to the Millennial generation: Medicare reform. His interest in expanding the choices available for comprehensive care and creating public competition for private insurers reflects Millennials' belief in the importance of longstanding health care programs in addition to the new and emerging trends.

But we are not stopping at writing policy. The Health Policy Center of the Campus Network is also engaged in a policy project this year. With the Farm Bill slated for reauthorization in the coming months, we believe there's a special opportunity for the Millennial generation to engage in a debate that will shape America's eating habits and access to healthy food.

Containing 10 titles ranging from funding and regulation for conservation programs to commodity futures markets, the Farm Bill was last reauthorized in 2008 at the cost of $283.9 billion. Of the $283.9 billion appropriated in 2008, $188.3 billion went to just one of the 10 titles -- nutrition. This title, which accounted then for two-thirds of the bill and is now estimated to occupy a 70 percent share, consists largely of funding for the Supplemental Nutrition Assistance Program (what is formerly known as food stamps), food and nutrition guidelines under the purview of the FDA and USDA, and school meal programs.

The Campus Network Health Policy Center will be spending the coming months building a coalition of think tanks, food organizations, and youth groups to take a stand on our nation's largest food-based legislation. Modeled after the Network's Blueprint for a Millennial America, we aim to present a Millennial Farm Bill.

Through each of these efforts, from our projects last year to our policy journal and Farm Bill Blueprint this year, it's clear that my generation is engaging the strong sentiments of health policy with strong proposals. We're informed by our values, the privileges and responsibilities that come with higher education, and the drive to detail the change we see necessary. We're here to speak health to power.

Rajiv Narayan is the Senior Fellow for Health Care Policy at the Roosevelt Institute | Campus Network and a graduating senior at the University of California, Davis.

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