Reponse to John Goodman and Thomas saving on Medicare's efficiency

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Article Highlights

  • Three assertions on saving #Medicare's efficiency

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  • The authors' defense of "overpayments" to MA plans is curiously incomplete

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  • Here's what fuller disclosure of the #CBO table for different periods of time actually looks like #healthcare

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There are lots of interesting and valuable points made in this post. However, several assertions raise some secondary questions about the true nature of the statistical comparisons.

First, the link to a description of the unpublished Milliman study (a recent WSJ op ed) actually compared Medicare beneficiaries over age 65 to individuals under 65 with the same health-care needs (not to seniors who are still on private insurance). Perhaps the risk adjustment was so remarkably sophisticated that it made "everything equal" by accounting for all the differences in spending patterns for those two different types of patients, or perhaps that's why the ongoing study is still unpublished.

"I was not aware that "we" or "they" are insisting that everyone have this extra insurance." -- Thomas P. Miller

Second, CBO's most recent analysis of per capita spending in excess of GDP Growth does not rely on the 1975 to 2008 figure displayed. It concludes, "In CBO's judgment, the average rate of excess cost growth since 1985 best reflects features of the health care and health insurance systems that are likely to endure." Hence, its newest long-term projections rely on the average rate of cost growth observed between 1985 and 2008. CBO explains:

"Excess cost growth was lower, on average, during that period than during the longer 1975-2008 period. That slowing probably stems, at least in part, from two important shifts: Private health insurance moved away from indemnity policies--which generally reimburse enrollees for their incurred medical costs, and which predominated before the 1990s--and toward greater management of care; and Medicare shifted from cost-based payment methods to fee schedules that seem less conducive to spending growth because price increases are constrained. Excess cost growth was even lower, on average, during the shorter 1990-2008 period, but that average gives a good deal of weight to the years in the 1990s when managed care was spreading most rapidly--some of which probably represented a one-time downward shift in health care costs rather than a change in the underlying growth rate. In CBO's judgment, the average rate of excess cost growth since 1985 best reflects features of the health care and health insurance systems that are likely to endure."

Here's what fuller disclosure of the CBO table for different periods of time actually looks like:

Miller-table

 

 

Of course, any of these comparisons "are far from perfect." But there's no need to stack the statistical deck further by only using the wider spread between Medicare and all other for the 1975-2008 period.

Third, the authors' defense of "overpayments" to MA plans is curiously incomplete. We don't see any estimates of how much the average Medicare FFS enrollee (not just the minority currently purchasing individual Medigap plans) actually pays in additional unsubsidized private plan premiums-- compared to the marginally higher MA plan reimbursements above comparable Medicare FFS costs. And we don't know whether the authors would suggest that such supplemental coverage should be subsidized for all Medicare beneficiaries, or just low-income ones (apart from the way in which Medigap coverage leverages basic Medicare FFS subsidies to reduce cost sharing and drive overall Medicare spending higher). I was not aware that "we" or "they" are insisting that everyone have this extra insurance.

Thomas P. Miller is a resident fellow at AEI.

 

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About the Author

 

Thomas P.
Miller
  • Thomas Miller is a former senior health economist for the Joint Economic Committee (JEC). He studies health care policy and regulation. A former trial attorney, journalist, and sports broadcaster, Mr. Miller is the co-author of Why ObamaCare Is Wrong For America (HarperCollins 2011) and heads AEI's "Beyond Repeal & Replace" health reform project. He has testified before Congress on issues including the uninsured, health care costs, Medicare prescription drug benefits, health insurance tax credits, genetic information, Social Security, and federal reinsurance of catastrophic events. While at the JEC, he organized a number of hearings that focused on reforms in private health care markets, such as information transparency and consumer-driven health care.
  • Phone: 202-862-5886
    Email: tmiller@aei.org
  • Assistant Info

    Name: Neil McCray
    Phone: 202-862-5826
    Email: Neil.McCray@aei.org

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