In an interview with ThinkProgress, Sen. Ron Wyden (D-OR) addressed criticism of the Medicare premium support plan he introduced yesterday with Rep. Paul Ryan (R-WI). Before tackling the policy specifics, Wyden addressed the political reaction to the plan and played down Republican support for his proposal. “I want folks all across the political spectrum…to be supportive of these kinds of principles,” he said, in response to a question about Newt Gingrich’s and Mitt Romney’s endorsements of Wyden/Ryan. “I don’t put too much stock into someone saying on the campaign trail that they’re for this, or they’re for that.” “I’m looking for people who will talk in specific terms about the fundamental issues — will they be for traditional Medicare being there for all time?,” he offered.
Under the Wyden/Ryan proposal, beginning in 2022, seniors will receive a pre-determined premium support voucher to purchase benefits through an exchange of private plans or the existing fee-for-service program. The government subsidy would be determined by the “second-least expensive approved plan or fee-for-service Medicare, whichever is least expensive” and “rise or fall along with the actual cost of the policies — creating more protection for seniors” than past premium support plans.
Some health analysts, including this blog, have raised concerns that shifting beneficiaries from Medicare into private health insurance plans would undermine Medicare’s “guaranteed equitable access to affordable health care” and, in some geographic areas, offer premium support subsidies that don’t fully cover the cost of traditional Medicare. The program would also place seniors in the untested — and at times untrustworthy — hands of private insurers, who would have an incentive to design policies that attract only the healthiest applicants. Wyden/Ryan does offer tools to help prevent cherry-picking, but the plan is somewhat vague and relies on existing risk adjustment mechanisms that may not eliminate adverse selection against traditional Medicare.
What follows is an abridged and edited version of Wyden’s response to this criticism:
MOVING AWAY FROM THE ADVANTAGES OF MEDICARE
VOLSKY: Some health analysts have asked, why would you take Medicare that’s a bulk purchaser, that can drive innovation that, with the Affordable Care Act is going to do delivery reforms that are hopefully going to be taken systemwide, why would you take take that, move more people out of it, make it smaller over time and rely on this new competitive structure that for the most part is an untested system?
WYDEN: I’m for using Medicare marketplace leverage at every possible opportunity. For example, I’ve been one of the strongest proponents of lifting restrictions so that Medicare can bargain to hold down the costs of medicine. Of course you ought to use the marketing power of Medicare. What we’re simply saying is that anyone who wants to be in traditional Medicare today, can do it, can be in traditional Medicare. I simply think it makes sense to give senior citizens the choice to do something else, particularly if you have the consumer protections I envision.
VOLSKY: But if the program becomes smaller over time, as it inevitably will, when people go into the private Medicare exchange…
WYDEN: I don’t believe that you can foreordain the decisions. I think people are going to look…
VOLSKY: Do you envision that most people are going to remain in traditional Medicare?
WYDEN: I think traditional Medicare certainly has a story to tell right now. I think traditional Medicare with [low] per-patient growth, right now, going to talk about that, that’s as it should be.
REGULATING PRIVATE INSURERS
VOLSKY: On some level, this plan requires you to trust insurers to do the right thing, are you comfortable with that, given their track record?
WYDEN: The first law passed law for watchdog insurance rip offs was something that I was the principle author of with Sen. Tom Daschle, I was in the House. So as far as I’m concerned, consumer protection here is going to have to be the strongest set of consumer protections in government….The history is, we have always attracted some rip off artists. My position is, you have to come down on those folks with hot nail boots right at the outset, that’s number one. Second, the history is that seniors don’t change [plans] as readily as some folks. What we say is making sure that the federal government, real time watch dogs the companies doing this marketing, roots them out if they engage in these kinds of practices. And this is essentially what I’ve put a priority on in my three decades of working with senior citizens.
VOLSKY: So you’re confident that you’re going to be able to put in place the kind of enforcement that’s going to make all of this work in terms of keeping insurers honest?
WYDEN: Yes, CMS and OPM are really the heart of the federal structure. CMS governs the marketplace. They decide whether what plans are offering is acceptable, whether the agents are gaming the system. We have the authority for risk adjustment and this has been a special priority for me during my time in public service. Consumer protections are going to be significantly stronger than anything else that’s been offered. And by the way the FEHBP has significantly cleaned up some of these consumer abuses.
VOLSKY: Under your plan, private insurers are required to “cover at least the actuarial equivalent of the benefit package provided by fee-for-service Medicare,” meaning that insurers don’t have to offer standardized benefits and would be able to design their packages to attract healthier applicants.
WYDEN: The reason why we put this out as an outline is to basically get in exactly what you’re talking about, the knots and bolts of it. But the reason why we looked to CMS in terms of riding herd on these policies, you know, real time, is to make sure we don’t have the kind of marketing abuses that you’re talking about and you should know, those are my roots….Risk adjustment is absolutely key, we of course have guaranteed issue, no cherry picking, that sort of thing.
VOLSKY: In terms of opening up the senior market to this kind of competition and giving them choice, as you know some segments of the senior population have disabilities, may have a harder time in making informed choices. I know your’e going to standardize information and make everything clear…
WYDEN: People would be available to assist them. We’re going to be working through all of the details. I ran the legal aide program for the elderly for a number of years before I came to Congress. I’m very familiar with the network of aging health services. We’re going to make sure there are going to be people in the network of aging services to answer questions. Individual information.
COST SHIFT TO SENIORS
VOLSKY: Under the plan, the premium support subsidies are based on the “second-least expensive approved plan or fee-for-service Medicare, whichever is least expensive.” If a beneficiary chooses a more expensive plan, she or he would pay the difference. Conversely, if they choose the cheaper policy, they would receive a rebate. But in areas of the country where fee-for-service is more expensive than a private program, wouldn’t seniors (who are not lower-income) experience a cost shift if they want to stay in traditional Medicare?
WYDEN: That’s a lot of IFs, I don’t think I’m going to speculate. Look, as we got into this, a lot folks on the progressive side were confident that Medicare would outcompete private plans during that health reform debate, not sure how the opposite could be argued now. If anything, the private plans are going to be tested some more.