Discussion Forum

Editor’s Note:  The following article discusses Congressional deliberations on a new Medicare competitive bidding program without recognizing the proven harms to Medicare beneficiaries and taxpayers from poorly conceived “competitive bidding” programs that are neither competitive nor a true auction.

From: Inside Health Policy

The Medicare reform plan by Sen. Ron Wyden (D-OR) and Rep. Paul Ryan (R-WI) would give seniors the choice of staying in traditional fee-for-service or choosing a plan from a newly created Medicare exchange, but the duo deflected questions about how the plan would build on the insurance exchanges created by the Affordable Care Act, indicating that the law, which Wyden supports and Ryan wants to repeal, stayed off the table during their deliberations.

Wyden and Ryan, speaking at the Bipartisan Policy Center last Thursday (Dec. 15), also stressed that while their proposal has some similarities to the plan put forward by former Sen. Pete Domenici and economist Alice Rivlin, it is fundamentally different in that it does not propose automatic cuts that would impact premiums should the program cost more than predicted.

Wyden and Ryan stressed that their plan is only a framework at this point, and noted that they do not expect consideration of it until after the elections.

The plan was released as a White Paper entitled Guaranteed Choices to Strengthen Health Security for All. Under the plan, seniors, starting in 2022, would have a choice of either staying in traditional Medicare or purchasing coverage through a newly established Medicare exchange, and Medicare would provide a payment to either offset or cover the costs of the premium. All plans, including FFS, would participate in a competitive bidding process that would determine the amount of federal contribution needed. The benchmark would be the second least expensive plan, or Medicare FFS, whichever is least expensive, and payments would be risk-adjusted and geographically rated.

The concept of including FFS in a competitive bidding system has been broached previously, most recently in an article published by the American Enterprise Institute in August. Better Prices — Through Competitive Bidding — Can Help Solve Medicare’s Fiscal Crisis, was penned by Robert Coulam, Roger Feldman, and Bryan Dowd, who say that Medicare could save $550 billion over 10 years if the bidding program were fully implemented or $460 billion over 10 years if the program were phased in gradually.

Asked about potential savings for their plan, Ryan said that the Congressional Budget Office would likely score the proposal similar to the way it scored the Domenici-Rivlin plan, because it contains a similar mechanism to slow growth.

Under the Wyden-Ryan plan, program growth after 2022 could not exceed GDP plus 1 percent. If that growth is exceeded, dual eligibles and low-income seniors would continue to be fully subsidized either through Medicaid or through separate accounts.

Congress would be required to intervene to offset any other increase, and “could implement policies that change provider reimbursements, program overhead and means-testing,” the paper says.

Wyden and Ryan say that this distinguishes their plan from others because it it the only one that allows Congress to step in and craft deliberate policies to slow growth rather than relying on automatic cuts.

The Medicare Exchange would be overseen by CMS, which would ensure all plans provide bona fide coverage” and honest information to seniors, and terminate any contracts that fail to do so, according to the White Paper.

Wyden-Ryan also proposed reforms to the current FFS program by updating cost-sharing rules such as combining the Parts A and B deductibles and creating a catastrophic cap to limit out-of-pocket spending. The “outdated physician payment formula should also be reformed” the papers says, although no specific suggestions are offered.

The plan would also build on the “free choice” vouchers that Wyden had included in the health reform law, but were later “vaporized” as Wyden put it, as part of a White House budget deal last year. Under the system, any small business with up to 100 employees would be able to offer employees the option of receiving payments which would be used to purchase their own insurance. The contributions would be tax deductible for the employer, and any worker choosing a plan equal to the contribution amount would also receive the money tax-free. If a worker chooses a plan that is less than the contribution,the plan would be tax free and the worker would be eligible for a taxable cash refund.

In addition to creating downward pressure on plan pricing, the lawmakers also say that the free choice option would help ensure a smooth transition into the Medicare program, and would also allow people to remain with an insurance product if they choose.

They said they realized the country is is campaign mode,and understood that the proposal would raise