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Argument: Medicare/Medicaid are not successes and models for public insurance

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Supporting quotations

Walton J. Francis. "Why a new public plan will not improve American health care". Heritage Foundation. May 5, 2009: "Government as Umpire. Of course, there are success stories among competitive systems in which government does not operate a plan, but operates a system in which private plans compete. The FEHBP has long outperformed Medicare in every way— control of costs, improving benefits, and enrollee satisfaction.[33] It is not uncommon for advocates of a new public plan to cite data for some time period purporting to show that Medicare controls costs better than the FEHBP.[34] But these comparisons are flawed unless they control for benefit improvements over time. Adjusting for benefit improvement for the one-third of a century from 1975 through 2008, the average annual adjusted increase in Medicare costs per enrollee was 7.9 percent, compared to 7.0 percent for the FEHBP.[35]

Both Medicare Advantage and Medicare prescrip tion drug plans have proven successful in the last several years on a variety of metrics. Although Medi care Advantage plans have had unnecessarily high premium support levels (most recently estimated by MedPAC at about 14 percent higher than Original Medicare, but about to be reduced substantially by HHS or Congress or both), they have succeeded amazingly well at reducing costs to enrollees and improving benefits. Their average benefit design is as good, or better, than that proposed by Dr. Davis of the Commonwealth Fund for "Medicare Extra." In particular, the vast majority of PPO and fee-for-ser vice plans have an explicit limit on out-of-pocket costs that is less than $5,000 (HMOs, of course, usu ally have a de facto limit). On average, Medicare Advantage plans save most enrollees about $2,000 a year that those enrollees would otherwise have spent on Medigap premiums to fill the wide-open holes in Original Medicare's benefits. And because those enrollees do not have zero percent coinsurance by virtue of Medigap wraparound, Original Medicare saves substantially in reduced overuse, probably about as much as, and perhaps more than, the 14 percent premium subsidy differential.[36]

These programs achieve their impressive success without the bother and encumbrance of having an "800-pound gorilla" public plan among the com­petitive offerings. In fact, were it not for the incred ible "stickiness" of health plan enrollment choices, particularly among the elderly, it is likely that Orig inal Medicare would not have retained anywhere near its current 78 percent market share.

The Medicaid Comparison. There are govern ment-run health plans that lack Medicare's over whelming political and market power. They do not perform all the functions of private plans, but perform more of them than does Medicare and more of them than do most states' employee ben efit plans. Medicaid plans pay allegedly competi tive rates to providers, many of whom can and do elect not to accept those rates and do not partici pate in the program (only about one-half of phy sicians participate).[37]

Medicaid administrative costs run on the order of 10 percent or more of total costs (there is vast state-to-state variation). Fraud is rampant. Overall costs grow at even faster rates than that of Medicare. Rent-seeking is endemic. Many, if not most, provid ers whom the states manage to entice into partici pating are bimodal: dedicated and able ones performing a public service at considerable finan cial sacrifice on the one hand, and the least compe tent bottom of the barrel on the other hand. Medicaid is so unattractive to potential enrollees that some estimates place the number of uninsured who are Medicaid eligible but decline to enroll at as high as 10 million.[38]

To be sure, Medicaid serves many of the poorest and least healthy Americans (not to mention elderly residents of nursing homes). No other program comes close to this focus. But most other public programs and private insurers also serve many poor and ill persons, if not as high a proportion. And the uninsured, on average, are far less disadvantaged than Medicaid enrollees.

Any Member of Congress or other advocate who argues for a public plan should be asked to provide a detailed comparison to the closest non-compul sory model we have in America today, government-run Medicaid, with respect to quality and costs. Based on that comparison, they should then be politely asked why any sensible person should even consider inflicting such an option on the uninsured when private plans are already proven to be ready and able to expand coverage by millions of people virtually overnight, as evidenced by successful launches of the Medicare Advantage and prescrip tion drug plans in Medicare Part D.

The Stealth Reversal of the Medicare Modern ization Act (MMA). In 2003, Congress enacted far-reaching reforms in Medicare. Two were of great importance: the creation of a new Medicare Pre scription Drug Program, and the reform and expan sion of what is now called Medicare Advantage. Both these reforms overcame decades of inertia, and both are arguably wildly successful. The Part D pro gram, for instance, has achieved something almost unheard of in government—it was created on schedule and below estimated cost. Indeed, Part D has kept its costs almost one-third below the origi nal careful and prudent cost estimates of the CMS actuaries and the skilled staff at the Congressional Budget Office through private-plan innovations, such as encouraging a massive shift to lower-cost generic medicines.

Why, then, should these MMA programs be obliterated in the name of health care reform in a 180-degree reversal of the policy decisions made a half-dozen years ago? If Medicare Extra and Medi care Plus are to be provided to seniors at a taxpayer cost certain to measure in the tens of billions of dol lars annually, who will pay and who will benefit? Will Medigap policies be banned, or will they con tinue to provide wrap-around coverage at vast expense through inducing wasteful overuse of health care? If Medigap policies continue to cover more than 90 percent of enrollees in Original Medicare, will the principal effect of Medicare Extra or Medi care Plus simply be to reduce seniors' Medigap pre mium costs without consequentially affecting their actual coverage? Why is this new spending on Medi care beneficiaries a top priority when tens of millions of Americans have no health insurance at all?"

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