More on Competitive Bidding in Medicare
August 7, 2012 6 Comments
Reihan Salam rounds up some of the thinking on competitive bidding in Medicare, spurred on by a new paper in JAMA* that finds that if you used the second-lowest bid to set the amount of government support of both traditional Fee For Service and private insurance-based Medicare, that on average the federal government’s cost would be around 9% lower than traditional Medicare, and around 14% lower for current private insurance Medicare. Reihan links to Austin Frakt’s noting that this means that premiums will either be shifted to beneficiaries, or some other dislocations will take place in terms of finding efficiencies of some sort (that will mean someone will get paid less and/or less care be delivered)…but of course the point is to shake things up a bit.
The current Medicare Advantage program (private insurance option for Medicare beneficiaries) has an administratively set benchmark that specifies how much the federal government pays insurance companies if beneficiaries choose to be enrolled in private plans; under premium support proposals such as Wyden-Ryan and others, a competitive bidding process in which market competition set this benchmark would ensue. Beneficiaries choosing more expensive plans (even if traditional FFS Medicare) would have to pay a larger premium, and those choosing lower cost plans would get a rebate.
I have changed my mind quite a bit on competitive bidding the last few years, driven in large part by my view that some sort of private insurance option in Medicare will persist, as will traditional fee for service Medicare. That leaves me wanting to do a better job of getting value for money in whatever private insurance options we do have for seniors, and competitive bidding is worthy of a try under the correct circumstances. However, my biggest question is this:
- in what geographic areas will private insurance companies submit a bid for private Medicare if the premium support amount is set by competitive bid and not an administratively set amount?
I assume insurance companies will still be allowed to pick and choose by county whether they will offer their products or not. Is this correct? Will they offer products where they now offer Medicare Advantage plans? In fewer places? In more?
*Zirui Song, David M. Cutler, Michael E. Chernew. Potential Consequences of Reforming Medicare into a Competitive Bidding System. JAMA 2012;308(5):459-460.