Josh Marshall, THE Josh Marshall of Talking Points Memo Blog (TPM) has an article ambiguously titled Ryan Plans to Phase Out Medicare in 2017.  I'm not even on Medicare yet and still, I got a chill when I saw the title.  But what he means is that Paul "Boy" Ryan is going to start to try to kill Medicare in 2017, kinda sorta.

Marshall leads off with a direct quotation from a Boy Ryan interview on Fox News Special Report, which I suppose is special since Ryan is lying:

PAUL RYAN: Well, you have to remember, when Obamacare became Obamacare, Obamacare rewrote medicare, rewrote medicaid. If you are going to repeal and replace Obamacare, you have to address those issues as well. What a lot of folks don't realize is this 21-person board called the ipap is about to kick in with price controls on Medicare. What people don't realize is because of Obamacare, medicare is going broke, medicare is going to have price controls because of Obamacare, medicaid is in fiscal straits. You have to deal with those issues if you are going to repeal and replace obamacare. Medicare has serious problems [because of] Obamacare. Those are part of our plan.

I have highlighted the lying part in case you missed it.

What Ryan is talking about here is the price control board.  It is actually called IPAB (Independent Payment Advisory Board), has only 15 members, and was created in 2010.  The elimination of the Board would be part of a much wider range of "reforms" of Medicare.  It appears that Ryan wants to tackle healthcare as a whole from the Federal (or as he likes to call it, the "entitlement 'end). His policy proposal is called A Better Way and it is well worth reading, especially if you think you or anyone close to you will ever be on Medicare.

Before we look at it, though, we should review some important terms that people who want to mess with Medicare think you already know, but which you probably don't.

Traditional Medicare operates on a Fee For Service (FFS) basis.  You get treatment and your provider bills Medicare. Medicare pays the provider.  With Medicare Advantage (MA), you get your "Medicare" from a private insurance company. You get treatment and your provider bills the private insurance company.  Medicare pays the insurance company.  But they don't pay the insurance company on a Fee For Service basis. They pay instead something called a capitation, which is a set monthly payment for each enrolled MA member, whether the member receives services or not.  The insurance company, in order to be able to set up as a Medicare Advantage insurer, has to make sure that it's MA members get the same types of service that FFS Medicare members get.  So how is money made by the private insurer?  The insurer pays the provider a percentage of Medicare.  Sometimes it's 100 percent of FFS Medicare, but more often it's in the range of 98 percent.  That 2 percent cut that the insurer takes is a lot of money, since Medicare claims run about five times what a commercial claim runs.  What does the provider get for giving up the 2 percent?  They get what is called "steerage".  A Medicare Advantage patient has to use the Medicare Advantage providers as set by the insurance company (and can't use any others).  So Medicare Advantage is designed to steer people to certain doctors and away from others.  This creates volume that is very predictable.

If one strips away all of the free market propaganda that Ryan uses (I call it propaganda when Ryan says that the market or competition or whatever will cause good things to happen without saying how or when or even why) what he's thinking about is rather simple.  Be warned.

Right now under FFS Medicare, Medicare pays set prices for set services.  The prices it pays are weighted by a number of things like what kind of provider it is (teaching hospitals get more than community hospitals), where the provider is (New York providers get more than Hope, Arkansas providers do), and a few other things.  The set services (my term) is important in that providers have to report on and bill for services in the same way.  In other words, there are standard definitions for almost every treatment.  Making all of the treatment definitions standard allows several good things.  First, standard definitions allow treatments to be compared for cost and quality across the country on an apples to apples basis.  Second, standard definitions allow all of the components of the treatment to be lumped together, which eliminates providers sticking extra bandaids and stuff into the treatment to jack up the prices.

Each year FFS Medicare looks at all the standard treatments and determines average prices for them.  It then reimburses providers for those treatments based on the average.  Despite Ryan's claim that this payment method eliminates competition, in fact it creates a price control mechanism.  A provider, knowing exactly what the reimbursement will be from Medicare, can cut her own costs to get a higher profit.  And as providers cut costs in the aggregate, the national average cost goes down, which then causes the average payment to go down, which puts a lot of pressure on inefficient providers to cut their costs too.

Ryan wants to eliminate FFS Medicare and transition people to Medicare Advantage; in the name of competition.  Commercial insurers don't have a good record in reducing costs via competition today.  However, although Ryan acts like he's talking about price competition (where they buyer of medical services goes to the provider of medical services and picks out a service based on entirely transparent costs and quality), he is actually talking about a different kind of cost reduction that private insurers are good at; the reduction of benefits and services.

A major limitation under current law is the “one-size-fits-all” policy under the benefit structure for Medicare Advantage (MA). Plans are required to provide the exact same benefit to all beneficiaries, regardless of comorbidity or chronic conditions and regardless of how helpful certain benefits could be to improve health care outcomes. Benefit design flexibility would allow insurers to design their plans to push providers and beneficiaries to make decisions together while participating in high-value quality services and benefits, and curtailing low-value or unnecessary services. When we give plans this flexibility to serve our most vulnerable seniors, along with strong policies that encourage the most accurate and transparent risk-adjustment for all seniors, MA will result in personalized and high-quality care.

(page 33 A Better Way) emphasis mine

A problem for Ryan is that all Medicare members get the same benefits.  He is looking to create stripped down plans.  He is couching this, here and the rest of A Better Way, in terms that make it look like the savvy consumer along with his savvy doctor is going to review various plan options to meet the consumer's needs.  But hidden behind this is that Ryan wants to reduce the capitation (converted here into a premium subsidy) so that Medicare consumers now get "price supports" rather than actual Medicare for all.  It will follow that when the savvy consumer looks at his needs, he will discover that his needs happen to almost exactly correspond to the size of the subsidy unless he has a lot of cash lying around where he can afford better insurance, at which point he will adjust his needs.

The marketing of this scheme is very interesting.  Let me quote it to you and see if you can see the joke.

Beginning in 2024, Medicare beneficiaries would be given a choice of private plans competing alongside the traditional FFS Medicare program on a newly created Medicare Exchange.

Yes.  The new Medicare would be a subsidized insurance product with different levels of coverage sold on exchanges.  Pretty much just like the Obamacare that Ryan is trying so hard to kill now.

The transition of Medicare FFS to Medicare Advantage takes Medicare and transforms it into another commercial insurance product while leaving the current system standing.  Hidden behind this transition is a cut in reimbursement so that what the member gets from the government is a (partial) subsidy for insurance.  While there is language in Ryan's proposal talking about increasing the subsidy should a person become seriously ill, this is not how commercial insurance works.  Now, you buy a plan and in a year you may buy another.  Ryan doesn't say that one would be able to change a plan for another if one got sick in the middle of the year.  And for good reason.  It creates the selection problem that the Right claims haunts Obamacare now; that people will just buy the insurance they need when they get sick.  It won't work, which is why Ryan, here and in other places, doesn't really explain how things will work.

I get it that Ryan wants to cut spending.  I don't like his implication that Medicare is paid for out of general taxes.  It's paid for by its own separate tax.  Ryan doesn't say whether this tax would go down under his program.  He also doesn't deal with the fact that since salaries in the US have been flat for years how people who would be under his new program would start saving additional retirement money to deal with the additional insurance and medical costs they would have to pay for under Ryan's plan.  It doesn't seem to be a plan that is designed by someone who would actually have to use it themselves.


unagidon is a contributing editor to Commonweal.

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