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I believe there are studies of the U.S. Medicare program that show it to be more efficient than private insurers. (Maybe someone knows a weblink to info on tha

by hsitz 6y ago

I believe there are studies of the U.S. Medicare program that show it to be more efficient than private insurers. (Maybe someone knows a weblink to info on that issue offhand . . . ). Moroever, my understanding is that Medicare could be even more efficient if it were not handcuffed in various ways (e.g., legal inability to negotiate pharmaceutical prices).

bhupy 6y ago
So full disclosure: I work in claims processing. First of all, Medicare is only “more efficient” on account of price controls. “Legal inability to negotiate pharmaceutical prices” is just a euphemism for “inability to force pharmaceuticals to charge anything other than a defined amount of money”, or in other words: price controls. If a law was passed today that forced private insurers to use the Medicare fee schedules, they would be just as “efficient”. Whether price controls are an efficient way to run an industry is a separate issue entirely. Second of all, Medicare is separated into “original Medicare” (which is the government-run insurance program), and “Medicare Advantage aka Medicare Part C” (which is private insurance offered to Medicare beneficiaries). The data we have right now shows that Medicare Advantage is actually the part of Medicare that’s working the best in terms of raw efficiency and outcomes[1]. 34% of Medicare beneficiaries have elected Medicare Advantage instead of “Original Medicare”, and that number has been growing[2]. [1] https://freopp.org/medicare-advantage-a-platform-for-affordable-health-reform-fbe31bf444f3 https://freopp.org/medicare-advantage-a-platform-for-afforda... [2] https://www.kff.org/medicare/fact-sheet/medicare-advantage/ https://www.kff.org/medicare/fact-sheet/medicare-advantage/
- hsitz 6y ago
  Thanks for the clarification. Regarding the Medicare Part D provisions, which you call "price controls" . . . to many that term may imply that pharmaceutical companies have had to lower their prices for Medicare. My understanding is that a common complaint against Part D is that these prices are set at levels that are very favorable to the pharmaceutical companies (i.e., high), and that if there were free negotiation for drug prices the size and market power of Medicare would allow it to negotiate better prices. Curious if you have any comment on that.
  - bhupy 6y ago
    Yeah, by price controls, I was referring primarily to the Medicare Fee Schedules: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Paymen... Every payer (public & private) has “fee schedules”, which is just the list of prices for all treatments and/or drugs (in the case of PBMs), and Medicare’s fee schedules are often (but not always) lower than those of private payers. The “Medicare is more efficient” argument is essentially predicated on the idea that physicians would be forced to accept the lower fee schedules for everyone, which essentially amounts to “price controls”. Re: Medicare Part D, the federal government is actually not permitted to negotiate drug prices directly (unlike the VA), and that’s a really contentious issue on its own. Medicare doesn’t actually pay for Part D drugs. Ironically, with Part D, the opposite happens: Medicare doesn’t do the negotiating, and Part D providers rely on private insurer leverage.
    - hsitz 6y ago
      >The “Medicare is more efficient” argument is essentially predicated on the idea that physicians would be forced to accept the lower fee schedules for everyone, which essentially amounts to “price controls”. If doctors/hospitals were forced to accept Medicare's lower fee schedules for private insurers, too, that would mean Medicare is not more efficient. Efficiency would lie partly in the ability of Medicare to negotiate lower prices because of its size. If private insurers could free ride and get the same prices, then Medicare would not have an efficiency advantage. I think the complaints back when this was set up (i.e., when Part D was created) were that George W.Bush gave up the farm and could have negotiated much lower prices.
      - bhupy 6y ago
        Right, exactly. Which is why it’s really just a price control, not really “efficiency”. The government setting fees as a monopsony buyer is just price controls with extra steps. It’s also worth noting that Medicare Advantage carriers use their own fee schedules, not the Medicare ones. You might think that this means that Medicare Advantage plans cost more per capita than Original Medicare (the core thesis behind “Medicare is more efficient because monopsony price controls), but...the results have been complicated/unexpected: https://www.commonwealthfund.org/publications/issue-briefs/2016/jan/does-medicare-advantage-cost-less-traditional-medicare https://www.commonwealthfund.org/publications/issue-briefs/2.... It’s sometimes cheaper (depending on the geography), and that’s without the forced use of Medicare fee schedules.

by hsitz 6y ago

bhupy 6y ago

So full disclosure: I work in claims processing. First of all, Medicare is only “more efficient” on account of price controls. “Legal inability to negotiate pharmaceutical prices” is just a euphemism for “inability to force pharmaceuticals to charge anything other than a defined amount of money”, or in other words: price controls. If a law was passed today that forced private insurers to use the Medicare fee schedules, they would be just as “efficient”. Whether price controls are an efficient way to run an industry is a separate issue entirely. Second of all, Medicare is separated into “original Medicare” (which is the government-run insurance program), and “Medicare Advantage aka Medicare Part C” (which is private insurance offered to Medicare beneficiaries). The data we have right now shows that Medicare Advantage is actually the part of Medicare that’s working the best in terms of raw efficiency and outcomes[1]. 34% of Medicare beneficiaries have elected Medicare Advantage instead of “Original Medicare”, and that number has been growing[2]. [1] https://freopp.org/medicare-advantage-a-platform-for-affordable-health-reform-fbe31bf444f3 https://freopp.org/medicare-advantage-a-platform-for-afforda... [2] https://www.kff.org/medicare/fact-sheet/medicare-advantage/ https://www.kff.org/medicare/fact-sheet/medicare-advantage/

hsitz 6y ago
Thanks for the clarification. Regarding the Medicare Part D provisions, which you call "price controls" . . . to many that term may imply that pharmaceutical companies have had to lower their prices for Medicare. My understanding is that a common complaint against Part D is that these prices are set at levels that are very favorable to the pharmaceutical companies (i.e., high), and that if there were free negotiation for drug prices the size and market power of Medicare would allow it to negotiate better prices. Curious if you have any comment on that.
- bhupy 6y ago
  Yeah, by price controls, I was referring primarily to the Medicare Fee Schedules: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Paymen... Every payer (public & private) has “fee schedules”, which is just the list of prices for all treatments and/or drugs (in the case of PBMs), and Medicare’s fee schedules are often (but not always) lower than those of private payers. The “Medicare is more efficient” argument is essentially predicated on the idea that physicians would be forced to accept the lower fee schedules for everyone, which essentially amounts to “price controls”. Re: Medicare Part D, the federal government is actually not permitted to negotiate drug prices directly (unlike the VA), and that’s a really contentious issue on its own. Medicare doesn’t actually pay for Part D drugs. Ironically, with Part D, the opposite happens: Medicare doesn’t do the negotiating, and Part D providers rely on private insurer leverage.
  - hsitz 6y ago
    >The “Medicare is more efficient” argument is essentially predicated on the idea that physicians would be forced to accept the lower fee schedules for everyone, which essentially amounts to “price controls”. If doctors/hospitals were forced to accept Medicare's lower fee schedules for private insurers, too, that would mean Medicare is not more efficient. Efficiency would lie partly in the ability of Medicare to negotiate lower prices because of its size. If private insurers could free ride and get the same prices, then Medicare would not have an efficiency advantage. I think the complaints back when this was set up (i.e., when Part D was created) were that George W.Bush gave up the farm and could have negotiated much lower prices.
    - bhupy 6y ago
      Right, exactly. Which is why it’s really just a price control, not really “efficiency”. The government setting fees as a monopsony buyer is just price controls with extra steps. It’s also worth noting that Medicare Advantage carriers use their own fee schedules, not the Medicare ones. You might think that this means that Medicare Advantage plans cost more per capita than Original Medicare (the core thesis behind “Medicare is more efficient because monopsony price controls), but...the results have been complicated/unexpected: https://www.commonwealthfund.org/publications/issue-briefs/2016/jan/does-medicare-advantage-cost-less-traditional-medicare https://www.commonwealthfund.org/publications/issue-briefs/2.... It’s sometimes cheaper (depending on the geography), and that’s without the forced use of Medicare fee schedules.