Conservatives, including The Heritage Foundation, support reforming Medicare to provide seniors with a defined contribution to apply to the health care plan of their choice. This approach would address the program’s insolvency, and it is superior to other options—including the President’s plan to allow an unelected board of officials to ratchet down spending—because it would allow consumer choice to catalyze patient-centered innovations and better value in the health care system.
Among the straw man arguments liberals have made against this “premium-support” model is the claim that it would be too confusing for seniors to act as cost-conscious, savvy consumers in a controlled marketplace. But choice is nothing new in Medicare.
Under the current system, seniors already make several complex health care decisions, and in many cases, those decisions are unnecessarily confusing compared to the proposed transformations. In the parts of Medicare that already use defined contribution—Medicare Advantage and Part D—seniors are able to leverage the power of their choices to improve value. Changing the system to a defined-contribution model would streamline the decision-making process and make it more transparent.
As it works now, here are some of the choices seniors already navigate:
Traditional Fee-For-Service or Medicare Advantage? The first choice seniors make regarding Medicare is whether to stick with the traditional program or to opt for Medicare Advantage, which enables individuals to receive the same benefits through one of its many private options. Medicare Advantage’s popularity has increased rapidly in recent years, with enrollment more than doubling since 2005. The program now covers 24 percent of Medicare beneficiaries. One major benefit of choosing an Advantage plan is that seniors receive comprehensive coverage from one source as opposed to the fragmented coverage provided by Medicare Parts A, B, D, and most often, supplemental policies. This perk would be enjoyed by all seniors under a premium-support model.
Which Medicare Advantage Plan? Those who enter Medicare Advantage choose from different types of health plans that provide traditional Medicare benefits. In 2011, enrollees will have, on average, 24 options. Plans can offer additional benefits unavailable under traditional Medicare, along with various options for cost-sharing and coinsurance. In 2010, 79 percent of Medicare Advantage plans included the prescription drug benefit, and 49 percent provided benefits bridging the notorious coverage gap that is part of the Part D standard plan. Rather than experiencing more confusion, Medicare Advantage beneficiaries are actually able to achieve comprehensive coverage through one-stop shopping.
Supplemental Policy? Due to the gaps in coverage provided by traditional, fee-for-service Medicare, most beneficiaries also hold supplemental coverage. In fact, 90 percent of Medicare enrollees use a supplemental policy to assist with cost-sharing and services that are not covered under traditional Medicare. Most receive additional coverage through an employer-sponsored plan, Medicare Advantage, or Medicaid, but 17 percent of Medicare beneficiaries choose from several private Medigap policies.
Which drug plan? Finally, enrollees in traditional Medicare must decide whether to secure prescription drug coverage offered under the voluntary Part D program. Under this part of Medicare, private plans submit bids to offer a standard benefit package, and the federal government makes a defined contribution. Seniors chose from a minimum of 28 options in 2011. The Part D program is hugely popular and successful; surveys show that in 2010, 84 percent of enrollees were satisfied with their coverage, and a whopping 94 percent said they understood their plan and it worked well.
Beyond these coverage decisions, seniors also choose their doctors and decide which services and treatments best suit their health needs, lifestyle, and other unique personal concerns. The fact is, decisions are endless when it comes to health care, and patients can and do make them. Any claim that too many options would confuse seniors ignores the fact that beneficiaries already make a number of complex choices under the current Medicare system.
