The Economics of US Health Care Policy by Phelps Charles E. Parente Stephen T

Author:Phelps, Charles E.,Parente, Stephen T.
Language: eng
Format: epub
ISBN: 9781351856348
Publisher: Taylor & Francis (CAM)

The combined effect

These proposals, taken together, will ensure that Medicare enrollees have access to a wider variety of health insurance coverage than they now see. Perhaps most importantly, by removing the fetters from HDHP plans (allowing prescription drug coverage, allowing MSAs, and providing for governmental “seeding” of MSAs for low-income enrollees), these proposals will provide enrollees with something unimaginable within the current Medicare structure (except for buying the excessive coverage in Medigap Plan F supplements)—a guarantee that limits their maximum out of pocket expenditure in any single year. We believe that when such plans emerge in the marketplace, they will prove quite popular. HDHP plans for the under-65 population are by far the fastest growing type of health insurance coverage of any offered in the United States, but participation in similar plans in Medicare is limited by the exclusion of prescription drug coverage and by prohibition of establishing and using MSA accounts to help smooth medical expenditures. We wish to again emphasize that we do not intend to make HDHP enrollment mandatory, but merely to increase the value of these coverage packages to consumers.

With this set of proposals enacted, Medicare beneficiaries will face a better future than they now have. Individually, they will have a greater set of options available to them than they now have, including fully functional HDPHs with attached MSA accounts. Their plans will provide outstanding coverage for medical interventions that have the greatest potential for reducing health burdens and (thereby) medical costs. They will maintain the option of staying in Original Medicare, but they would also be able to switch into plans that serve them better.

In aggregate, the nation will also be better off. These proposals will help to bend the cost curve by introducing higher sensitivity to costs among participants (particularly as more people shift to HDHPs and other MA plans with the changes we propose). Introducing consideration of cost into Medicare NCDs will further add in this direction. And for the first time, all Medicare and Medicaid participants will have the option of using a single source of coverage that provides true catastrophic medical expense protection now.

Our proposals also remove some important inequities in the system. Most particularly, we propose to end the large-scale cross subsidies flowing from regions with lower-cost health systems to those with profligate health care systems. Those who live in high-cost regions will find this change uncomfortable, but it will also encourage badly-needed community-wide discussions about regional costs of care.

We also would end the cross subsidy from general Medicare financing to those who acquire high-coverage Medigap plans that remove cost sharing from Original Medicare. Those who have enjoyed this hidden subsidy will object, but we see no reason to continue it. And of course, with improved HDHP plans, most of the inherent logic for people to buy full-coverage Medigap plans will evaporate, since true catastrophic protection plans would be available to all through our improved MA-HDHP offerings.

With this summary in mind, we now proceed to a more extended discussion of the logic behind our proposals.

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