Extending Medicare’s Savings To The Private Sector

My CAP colleagues Judy Feder and Nicole Cafarella have an issue brief out today in which they argue that rather than privatizing Medicare and opening it up to “competition,” policy makers should work to extend “Medicare’s effectiveness in containing costs to the private sector.” The Affordable Care Act already sets an “annual target for Medicare per capita spending growth and triggers Medicare payment changes if spending projections indicate the target will be breached” and Feder and Cafarella propose extending this mechanism to the private sector:

What does make sense to achieve further per capita spending reduction is to align the private sector with the public sector’s commitment to health care payment reform…To slow the per capita growth rate systemwide, policymakers should enact legislation that modifies the target to apply beyond Medicare to private insurance spending and to trigger all-payer payment reform if the target is breached. […]

Building an effective partnership between public and private payers to slow the cost of health care across the economy — not just in Medicare — will take time. But Medicare beneficiaries can’t wait, and the Medicare trust fund is exhausted in 2024.

The bottom line is that Medicare is already doing a better job of containing health care costs than private insurers, and Feder and Cafarella suggest building on what works instead of trying something (competition of private insurers) that has never produced any actual savings or been adopted by any other industrialized nation.