Wyden-Ryan: The Devil is in the Details
December 22, 2011
Last week Sen. Ron Wyden (D-OR) and Rep. Paul Ryan (R- WI) released a 12-page white paper outlining their plan to overhaul Medicare in an effort to reduce long-term Federal health care spending while preserving the promise of comprehensive health care benefits to our nation’s retirees. The plan would, in effect, convert Medicare from a defined benefit program to a defined contribution program. Beneficiaries would receive a fixed amount of money – “premium support” – that would be put towards the cost of their insurance plan. CMS would certify plans to be eligible for sale on a Medicare exchange, much the same way Medicare runs the Medicare Advantage and Part D programs today. Original Medicare would be offered as one of the plans on the Medicare exchange.
The release of this plan is sure to reverberate around Washington. The last time Rep. Ryan released a plan to overhaul Medicare, it was criticized to great effect by Democrats, who argued that the amount of premium support offered to beneficiaries would grow too slowly and become inadequate over time. The last time Sen. Wyden introduced a bipartisan plan to overhaul a portion of the health care system, his Republican co-sponsor, Sen. Robert Bennett (R-UT), lost his re-election primary bid to a Tea Party-backed candidate. Meanwhile, Governor Mitt Romney has recently released a plan similar to the Wyden-Ryan plan, ensuring a protracted, national debate during the 2012 election campaign season.
While plans like Wyden-Ryan are receiving bipartisan support for the time being, the devil, as they say, is in the details. And for now Wyden-Ryan is short on details. We at Extend Health have over seven years’ experience introducing defined contribution plans to Medicare-eligible retirees on behalf of over 150 employer sponsors. To the Congress that might one day debate such a plan, we offer the following advice:
Will insurers be compelled to guarantee issuance of a health insurance policy?
This may seem like an obvious point, but it’s a deal breaker for every one of Extend Health’s clients: seniors must be able to purchase any policy offered on an exchange without fear of being denied coverage. Without guaranteed issue, the most vulnerable beneficiaries will have the hardest time finding coverage. Wyden-Ryan specifically outlines this as a feature of their plan, and we would expect any final version of a plan to maintain this requirement.
What is the right level of funding?
Much of the debate will center on the amount of funding offered to beneficiaries as premium support. Will the amount be enough to purchase a private plan such that the beneficiary is no worse off – or perhaps better off – than they were under original Medicare? The answer to this question will be determined by the specifics of the policy: what determines the rate of growth of the voucher; what amount of geographic adjustment will be factored in; what amount of health risk adjustment will be factored in; can cost-containment strategies introduced by policymakers or plan administrators assist in keeping plan costs down. Policymakers will work with economists at the Congressional Budget Office who, in “scoring” a detailed plan, will officiate whether or not seniors are better off.
From our experience, providing employer sponsors with this style of actuarial analysis has been imperative to ensuring they make the right decision on a retiree health solution. Extend Health actuaries have spent the last seven years refining analyses that demonstrate how retirees choosing plans on a private Medicare exchange can collectively find greater value for their employer’s dollar than the employer can through a group plan. Without the analysis, plan sponsors are making important contribution decisions in the dark. We encourage lawmakers to use such analyses when making the case to their constituents for defined contribution.
Will plan choices be easy to understand?
Competition only produces value to the customer if the customer can easily understand the meaningful differences between products. If you’ve ever had to choose between even two health insurance options, you know how difficult this can be.
At Extend Health, we believe no retiree should decide on a plan without understanding the meaningful differences between insurance products in four areas: costs (premium vs. out-of-pocket); plan benefits; provider network; and customer service. In fact, we believe this is the whole point of operating an exchange in the first place. We have spent the last seven years building out technologies that make comparing plans along these lines as simple as possible, both for a customer looking at plans online and for a benefit advisor assisting a customer over the phone. Congress should ensure that by engaging with a Medicare exchange, beneficiaries will be able to easily comprehend the tradeoffs when choosing one plan over another. Without such a capability, the exchange won’t provide a transparent, competitive marketplace where consumers can maximize the value of their health care dollar.
- Wyden-Ryan Medicare plan merits close look (mysanantonio.com)
- A game changer on Medicare’s future? (cnn.com)
- Wyden has history of bold health care proposals – WSB Atlanta (wsbtv.com)
- Ryan and Wyden Medicare proposal overview and news roundup (brycewilliams.wordpress.com)