Discussion Forum

Researchers, an analyst and an industry expert said that while Medicare Part D has consistently fallen below Congressional Budget Office cost estimates, the program’s financial success does not directly correlate to financial models for larger Medicare reform using a premium support model. But others said during a recent panel discussion that Part D provides some good guidelines.

James Capretta, a fellow at the Ethics and Policy Center, said Part D could serve as a model for how to handle the political economy of the entire Medicare program as Part D roughly has achieved the right balance between the government and other stakeholders. The government is not in the role of the price regulator, but it does oversee the marketplace and provide rules. In the rest of Medicare, Capretta contends, the government is micromanaging prices.

But Marilyn Moon, another panelist from the American Institute for Research, said that Part D has a lot more controls and protections than current premium support plan proposals, including upside risk protection and oversight of how competitions among plans occurs.

The discussion comes as legislators are increasingly discussing Medicare reforms, with premium support in the spotlight. Sen. Paul Ryan’s (R-WI) premium support framework, originally developed with Sen. Ron Wyden (D-OR), would transform Medicare into a program that relies upon competitive bidding to establish rates and keep traditional fee-for-service Medicare as an option.

Capretta maintained that Part D provides an entitlement controlled by beneficiaries. Beneficiaries are entitled to Part D coverage, and if they want a more expensive plan than the entitlement calls for, they pay the extra themselves, Capretta said. That payment model is similar to what Ryan has proposed for premium support across Medicare, he added.

But Juliet Cubanski, associate director for the Kaiser Family Foundation’s Medicare policy program, said that many low income subsidized Part D recipients, who do not have to pay premiums for Part D if on a designated benchmark plan, still do and it’s unclear if that occurs because beneficiaries do not receive all the information about how to switch plans if their current one loses benchmark status or if it is because they would like to keep their plan. There is limited information as to whether low income beneficiaries are choosing to pay more for their Part D plan, Cubanski said, adding that any premium support plan would need to take that into account and include adequate protections for low income beneficiaries on Medicare.

Capretta also said Part D provides a guide on how relationships inside a premium support model should be structured, as there is a huge incentive for providers to try to save money, corrections or changes to the program are relatively easy to make, and innovations in the program can evolve and change over time as nothing is locked in. But Capretta also acknowledged that a premium support plan incorporating all aspects of Medicare would contain a much higher degree of complexity than Part D.

That complexity could lead people to pick a Medicare plan based on reputation, Jack Hoadley of the Health Policy Institute said at the panel discussion held earlier this month. Trying to pick a plan including all Medicare services would be extremely difficult, Hoadley said, and there would be too many factors to successfully use a plan finder to logically find which plan would be the most beneficial. As the decision gets more complicated, people also have more incentive to stay with one plan and never move, Hoadley said, even if another plan would be cheaper or more favorable.

Beneficiaries in Part D plans switch only 6 percent of the time when a switch could lead to a cheaper drug plan, according to the panel.

But Karen Ignagni, president and CEO of American’s Health Insurance Plans, pointed out that people who plan to use the new insurance health exchanges under the Affordable Care Act are expected to use plan finders and, in fact, the exchanges run off the very idea Hoadley said would be too complicated for people to handle.

For insurance plans to reach the triple aim of quality, competitive prices and good access to providers, the plans would need much more complicated incentives for providers than those used in the Part D system, she said. In a fee-for-service system, this would be difficult to do, Ignagni added. Accountable Care Organizations, bundling programs, integrated care and capitation all begin to blend risk, shift risk, and create transparency for beneficiaries, and Ignagni said she was excited to “look under the hood” at these structures which can contribute, ultimately, to any design of Medicare reform. — Michelle M. Stein