Here’s a Primer on Major Medicare Changes Coming Your Way

Part Two

Today is part two of a three-day package about major changes taking place in Medicare, private health plans, and Social Security. These were the topics of a podcast I did with fellow Substacker Mark Miller, creator of RetirementRevised.                                                    

Mark is one of the nation’s top writers about retirement, and regularly covers developments in Medicare and Social Security. He is a frequent contributor to The New York Times, and write columns for Reuters, Morningstar.com and WealthManagement.com. His books include “Jolt: Stories of Trauma and Transformation” (Post Hill Press) and “The Hard Times Guide to Retirement Security” (Wiley).

You can listen to the full podcast at RetirementRevised. We had a long chat, which I’m presenting in three segments.

Phil Moeller (top); Mark Miller

Mark: I want to focus on my disappointment about the pieces missing from the Senate’s proposed changes to Medicare. This is kind of what's left out of the earlier set of proposals that were included in original Build Back Better proposals. They were going to include a standard dental benefit. And that has been off the table for months now. But to me, it's disappointing that that's not getting done at this point. It seems it's such a such an oversight or such a gap in Medicare that really ought to be addressed.

Phil: I would I agree with you. And I would hark back to what I said [in Part I] about insurance. Dental coverage is a tough insurance product, because everybody uses it, right? So, if everybody uses a good, how do you have an insurance product that basically compensates the people who need it the most, and have the people who need it the least pay for it? That's tough in a Medicare population because you know that almost everybody on Medicare needs some form of dental coverage. And the older you get, the more substantive it's likely to be.

So, to me if I could wave my wand and change the world, dental, vision and hearing benefits would not be insurance products, they would be straight-up subsidies paid for out of the general revenues. And everybody would get a benefit. It wouldn't be an insurance product.

Mark: Let me just ask a clarifying question. So are you saying you would just build those in as part of the standard set of benefits offered under like Part B?

Phil: If you want to do part B, that's fine. I mean, it is it is an outpatient service, right? But yeah, I think there should be a floor. But it's not a good insurance product floor. I've had private dental insurance. It's not very good. And the reason is that everybody uses it. So I keep pushing back and say, let's use insurance where it makes sense. And let's face up to the fact that there are needs that Medicare beneficiaries have, or these fundamental benefits that we know are so important for later life health. And let's just ground them into the program.

Mark: Let's broaden our conversation out a bit. To talk more generally about Medicare reform in the context of what the trends have been in the last couple of decades. Medicare has gone through an enormous, really profound privatization in the last couple of decades. That doesn't get a lot of attention or public debate. There was debate about this when Part D was created. But, you know, since then, we're seeing this very dramatic growth of the Medicare Advantage Program, which is on track to account for probably about half of enrollment, sometime pretty soon. And some people think it'll just continue to go from there. What is your view on that? Has this kind of privatization and marketplace approach to Medicare been a good thing or a bad thing for Medicare?

Phil: That's really interesting, because I would say compared with what? Compared with traditional Medicare, traditional Medicare has been very expensive and not well managed. And let me just take a step back [and note that] traditional Medicare is managed by private contractors. They are private companies that the government negotiates five year agreements with, and they're basically claims processing companies. They don't communicate with you about the care you need. They don't give you any informed guidance as to whether a procedure is good for you or necessary or not.

Traditional Medicare permits people to get care without a second opinion. Usually, if it's covered by Medicare, you're gonna get paid for the procedure. Right? I like that in theory, but in practice, it adds a lot to healthcare costs. And, and so I have probably less of a bias against private companies than a lot of people out there, in part, because these are the guys we have to dance with. I mean, it's fine to say if you're redesigning the system, it should be a public system. I agree with that. It should be a public benefit, and the government should run it.

But I also I think that the people who have the skills to understand how to manage care tend to work for private companies. And so it's like the old safe robber. Why do you rob safes? Because that's where the money is. So I think in terms of having the expertise to manage care, I think the private sector has the expertise. I think what's really lacking is the appropriate guardrails or regulatory oversight to make sure these people do their jobs properly.

I wrote a piece recently about guardrails, and believe it is all about the guardrails. And what happens is that private companies game the system. Regulators, if they're willing to step up to the plate, put in a set of proposals to deal with the abuses. And while they're doing that, the private companies move on to the next area where they can game the system. It is the nature of private companies. So the guardrail business, to me, needs to be substantially upgraded.

You know, part of the proposals that we're talking about [I this bill] include substantially beefing up the IRS to collect the taxes. I think we need to beef up the regulatory oversight system to really acknowledge the reality that to get the benefits of private enterprise, you’ve got to keep these guys in line. Private enterprise leads to its own abuses. That's what capitalism does. It's just the nature of the beast. So I tend to be a supporter of private company. But we haven't provided the oversight that they need. And of course, the private companies work like the dickens to avoid the oversight.

One of the issues here, I believe, is that there isn't enough transparency on the data. I mean, whenever you talk to people who study the system closely -- the folks of the Kaiser Family Foundation would be a good example -- and you ask questions about comparing traditional Medicare and Medicare Advantage, one of the things they'll say is that they just don't have nearly the depth of data on Medicare Advantage that they do on traditional Medicare. So I would think that part of what you're talking about is that we need more transparency and visibility into what's actually going on in the system.

And as you know, the annual negotiations between Medicare and Medicare Advantage companies are not public datasets, they are conducted in private and that information is not released. Well, I believe regulators should have access to the information. You could say it shouldn't be made public. I would quibble over that. But as long as the people who are supposed to build, the guardrails have access to the data they need to make important decisions, I can sleep well at night.

I'd like the consumers to have all the data eventually if they can understand it. Because I believe that an informed consumer is good for the system. But on a transactional basis. Yeah, I think the regulators should have access to this data and those annual negotiations, where it's sort of like seeing sausage be made. I mean, they're pretty messy. But I think it would be really valuable if at least the regulators, under whatever kind of privacy terms insurers and regulators could reach, were able to have access to that data.

Mark: Big picture, I certainly agree with you. Transparency; good. Secrecy; not good. You know, we're big sunlight people. And so, you know, let the sun shine in and there's usually better results. And to your point a minute ago about the cost of traditional Medicare being high. I guess you're saying there is your argument there that there's an incentives in the system for healthcare providers to just bill a lot of services [and] that they're unchecked, is that the reason you're saying that the cost of traditional Medicare is unacceptable?

Phil: There certainly are incentives for health care providers to order the next test. It certainly protects them from a malpractice standpoint, but it also enhances their revenue streams. The second element of that is that consumers have a tendency to over demand care, because the additional increment of care is perceived as being costless to a consumer and Medicare.  I paid my Medicare premium, so the procedure is covered.

And once I've done my annual Part B deductible, why shouldn't I have this outpatient procedure done? My part A is a pretty good coverage for hospital expenses. So again, surveys pretty persuasively indicate that upwards of 25 to 35 percent of health care isn't needed. It's so-called low value care. It doesn't make you better. And in many cases, it makes you worse, because you go into these false positive readings of a lot of predictive tests. And they lead down their own rabbit holes and cause problems for people.

So that's why, and I know we want to talk in a bit about accountable care organizations. Yeah, that to me is one of the reasons I support ACOs in concept.

Mark: So let's go ahead and talk about those. I've written some about this project, the ACO Reach project. I know you have. But probably not everybody listening to us today necessarily knows what this is all about. You want to give sort of a high level overview of what we're talking about and why it's such a big deal going forward?

Phil: Do you have another podcast we can do for the high level? I mean, this stuff is really complicated.

Mark: Yeah, okay. Well, do your best.

Phil: Accountable care organizations are a long running Medicare quote -- experiment end quote. It's no longer really an experiment, but it started as that to recruit groups of healthcare practitioners. It started with physician practices, so that a group of physicians can provide coordinated care for Mark Miller. And if Mark Miller’s health is improved by this care, the organization gets a financial reward. If Mark Miller's health is not improved by this care, at least in theory, they were supposed to pay a penalty. But what happens really is nobody likes to pay a penalty, so they just don't get a reward.

But the point is, if these organizations are doing their job properly, improving Mark Miller's health is not a function of giving Mark Miller more health care. It's a function of giving Mark Miller better health care, health care that is results oriented. We have a growing body of research where we sort of know what works and what doesn't work in health care. And these accountable care organizations are incented to provide what I call results based health care. So that in theory, this would result in better care for you and lower costs the system.

That's been very slow to materialize. However, I think that this Reach program you alluded to, is Medicare's effort to say we're going to go all in on this stuff. We really think the future of Medicare is accountable care organizations overseen by private companies.

And just one last thing before we sort of do a riff, like everything else in private health care, private companies abused the system. So accountable care organizations have become an attractive investment vehicle for health care VC [venture capital], who see in these organizations an opportunity to make a buck. So the traditional ACO, you know, is a physician controlled healthcare practice, but that less and less is descriptive of American healthcare corporations.

You know, UnitedHealthcare now has something like 90,000 doctors, and their Optum subsidiary is becoming the 800 pound gorilla of private health care. Accountable care organizations are in the wheelhouse for Optum, right? They can have these organizations, they can ration care, they're smart enough to know how to make a lot of money off of rationed care, the bottom line is going to be are the savings to the system and the improved health results worth giving these companies even more money?

Mark: Right. And just, that's a great overview. And I think one more point to just add here, I think is that what we're talking about is a transformation of the traditional Medicare program. So I already have, let's say Medicare Advantage sitting there, which is roughly getting close to half of the enrolled population. Now we're talking about the other half. So for folks who are enrolled in traditional Medicare, Medicare officials are saying that by the end of this decade, they think everybody's gonna be enrolled in an ACO.

And one of the things that's kind of eyebrow raising about it for me is that as it rolls out, you can be enrolled in one of these things without asking for it. Because what they're doing is sort of date Medicare's doing data matching, and saying, “Oh, Mark, you use physician So and So, and physician So and So is now a part of an ACO, therefore, so are you. Now, right, you can disenroll yourself, but that would require you to go out and hunt down a new physician who's not part of an ACO. And guess what? The physician will probably will be part of that ACO shortly anyway. So it's really a profound change for people who like traditional Medicare.

As somebody who's enrolled in it myself, I love it. For the reasons you said, you know. It's like you've gone to health insurance heaven after years and years of employer managed care, with prior authorizations and running through the hoops there. Now, you get your monthly statement from Medicare and it says this was covered and that was covered.

Phil: And it's really good because they don't do these things until six months after you've had the care. So you basically get a free ride until the paper pushers catch up to the reality of your life.

Mark: But just to put an underscore on this. If you're listening to this show, and you're in traditional Medicare, this is coming around the corner at you sometime in the next couple of years, like it or now.

Phil: So, I go back to my monitoring. It's going to be all about the guardrails. I talked to one of my good sources who was such a good source that I'm not allowed to say who it is. I asked them a question. I said, “Well, if you're in an accountable care organization, and you've been a traditional Medicare user, does that mean you've given up the right to choose whatever healthcare provider you want?”

Mark: This has been a major appeal of traditional Medicare, that you can choose any participating physician in the country, which means you have your choice of really almost any physician in the contract, since most do participate in Medicare. So that's a pretty unique thing to have at this point.

Phil: And the response I got was, “Well, under the current rules, anybody in an ACO can go out of network with no penalty.” So it's not like a Medicare Advantage plan, right? You can still pick any provider you want. They can't charge you more; they still have to charge you the Medicare rates. So if you want to put a rose-colored spin on it, it's like the best of both worlds You get managed care, but you can get care from whoever you want. So if you don't like the package that the ACO provides, you can go find somebody else. And you're not worse off for it financially.

I think one of the keys there is going to be, does Medicare keep that guardrail in place? And can we educate traditional Medicare users effectively about their rights under the new accountable care organization changes?

Mark: You know, I'm not really optimistic that we can do the education piece because it's tough sledding. Well, we know what happens in Medicare Advantage plans. It's an onslaught of marketing materials every year, promoting plans, and those voices are a lot louder in many cases, then, you know, let's say the nonprofit advisory or even the journalists like us. People's mailboxes are filling up.

Phil: Absolutely. So that's a concern. But I think what's going to happen is a lot of the aggressive negotiations are going to be private, they're going to be between the insurance companies and the health care providers. So, you want to drive a deal with physician practice A, because you can get it to lower its rates enough so that you can make good money charging Medicare approved prices. And the providers, maybe they don't love this change, but they need the revenue stream. And you know what the old mantra is in retail -- make it up on volume? So they get a lot of business that they might not otherwise get? And I think you're going to see, you know, a lot of twisted arms in healthcare, as these ACOs expand.

Yesterday: A Better Deal from Medicare’s Part D Drug Plans?

Tomorrow: Finally, a COLA with Lots of Fizz for Consumers!

Philip Moeller is the principal author of the Get What’s Yours series of books about Social Security, Medicare, and health care. @PhilMoeller