Comments on: AmeriCarePlans: A McCain-Obama Hybrid Proposal

By: Ron Klar

Ron Klar — Tue, 04 Nov 2008 20:20:07 +0000

Hi Brad,

The only options I mentioned (to assist coverage of high risk individuals) were those currently promoted by the candidates.

With due respect for the Dutch model, I believe there are serious disadvantages for “risk adjustment payment” compared to reinsurance. As you indicate, one is the bureaucracy required to administer it. But more important is the likely impossibility of fairly and accurately predicting the proper amounts. As we know, Medicare staffers and consultants have been trying for years, unsuccessfully, to determine risk-based amounts (AAPCC) for beneficiaries choosing Medicare+Choice and Medicare Advantage plans that accurately project the past to the future. We now have excellent data from AHRQ demonstrating (1) significant variation in expenditures among persons with the same, identifiable chronic conditions, and (2) poor predictibility, because of serious year-to-year inconsistency, of using prior expenditures to estimate future expenditures. [In fact, less than one-quarter of those who incurred expenditures in the top 1% one year also did in the next year; also, many of the persons incurring the most expenditures die in that year.] Also, it would be ironic if success in controlling a patient’s costs one year might lead to a lower subsidy the next.

Clearly, reinsurance, especially beginning at an expenditure level beyond likely discretionary levels, eliminates these issues. This would go a long way to avoid the kind of risk-selection enrollment games currently being played when there is “open enrollment”, even with risk-based subsidies or adjustments. And, very importantly, subsidizing “catastrophic” coverage provides those with perceived low risks, i.e., younger, healthy persons, to purchase ACP coverage.

Thanks for your participation.

Ron Klar

By: HarryCain

HarryCain — Tue, 04 Nov 2008 19:13:10 +0000

I like both Dr. Klar’s diagnosis and his prescription, and would add or question as follows: the Federal reinsurance idea as presented in Obama’s plan would be administratively very difficult to handle (with the conditions to be satisfied before reinsurance would kick in). Klar’s is better. But what about a more organized managed competiton framework, using for example, the revised Wyden-Bennett bill (which also combines elements of both Obama and McCain)? Why not add both reinsurance at a high level, and some risk adjusted payment scheme, if we want to make insurers really compete? (Obviously reinsurance would not be needed if risk adjustments were good enough; but we’re not there yet) Wyden-Bennett’s premium flow through the income tax system would also keep admin costs down, as would the kind of FEHBP structure that would be created in each State. The attraction of Wyden-Bennett, beyond going to an individual, managed competition environment, is the CBO estimate of major Federal savings it would provide.

By: Brad F

Brad F — Mon, 03 Nov 2008 22:55:04 +0000

Ron
You mentioned several options, but one was noticeably absent. Along the lines of the Dutch model: insurance companies accept all comers with risk adjustment payment as an alternative to reinsurance. Obviously, adds a “heavier hand” in form of regulation, which you seem to disfavor.

Folks both inside Netherlands and those outside analyzing their adjustment system indicate a reasonable work in progress. Can you comment.
Thanks
brad