Why Now Is Not the Time for Premium Support

Brookings Institution, Washington, DC, USA.
New England Journal of Medicine (Impact Factor: 55.87). 03/2012; 366(10):877-9. DOI: 10.1056/NEJMp1200448
Source: PubMed


The idea of a premium-support system for Medicare dates from 1995, but current proposals do not contain appropriate safeguards, and the circumstances of the U.S. health care system have changed in ways that would make the approach unwise today.

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  • JAMA The Journal of the American Medical Association 08/2012; 308(5):459-60. DOI:10.1001/jama.2012.7909 · 35.29 Impact Factor
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    ABSTRACT: A key issue in the decades-long struggle over US health care spending is how to distribute liability for expenses across all market participants, from insurers to providers. The rise and abandonment in the 1990s of capitation payments-lump-sum, per person payments to health care providers to provide all care for a specified individual or group-offers a stark example of how difficult it is for providers to assume meaningful financial responsibility for patient care. This article chronicles the expansion and decline of the capitation model in the 1990s. We offer lessons learned and assess the extent to which these lessons have been applied in the development of contemporary forms of provider cost sharing, particularly accountable care organizations, which in effect constitute a search for the "sweet spot," or appropriate place on a spectrum, between providers and payers with respect to the degree of risk they absorb.
    Health Affairs 09/2012; 31(9):1951-8. DOI:10.1377/hlthaff.2012.0344 · 4.97 Impact Factor
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    ABSTRACT: Objectives: To conduct the first empirical study of competitive bidding in Medicare. Study design and methods: We analyzed 2006-2010 Medicare Advantage data from the Centers for Medicare and Medicaid Services using longitudinal models adjusted for market and plan characteristics. Results: A $1 increase in Medicare's payment to health maintenance organization (HMO) plans led to a $0.49 (P <.001) increase in plan bids, with $0.34 (P <.001) going to beneficiaries in the form of extra benefits or lower cost sharing. With preferred provider organization and private fee-for-service plans included, higher Medicare payments increased bids less ($0.33 per dollar), suggesting more competition among these latter plans. Conclusions: As a market-based alternative to cost control through administrative pricing, competitive bidding relies on private insurance plans proposing prices they are willing to accept for insuring a beneficiary. However, competition is imperfect in the Medicare bidding market. As much as half of every dollar in increased plan payment went to higher bids rather than to beneficiaries. While having more insurers in a market lowered bids, the design of any bidding system for Medicare should recognize this shortcoming of competition.
    The American journal of managed care 09/2012; 18(9):546-52. · 2.26 Impact Factor
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