The Medicare Payment Advisory Commission (MedPAC) is exploring alternative benefit models for Medicare beneficiaries as policymakers seek to rein in spending, but the models so far that the panel is considering rely primarily on various approaches to cost-sharing.
Some commission members urged at its Oct. 7 meeting that researchers develop models to incorporate benefit designs that would encourage changes in unhealthy beneficiary behavior, such as controlling weight or diabetes.
MedPAC wants to reform Medicare’s current fee-for-service benefit design because it has no limit on responsibility for sharing costs, different categories of care setting require various levels of cost-sharing, and premiums for supplemental coverage are often expensive and mask overall healthcare costs.
For the alternative benefit designs, all three would have a cap of $5,000 on out-of-pocket expenses. One model would have a $500 deductible and co-insurance package; another would have a $750 deductible with prices set for medical services; and the third would have a $500 deductible with the same medical service expenses, said Scott Harrison, a MedPAC principal policy analyst. The three would require co-payments.
Only the model with coinsurance would have higher average cost-sharing at $1,550 than what currently exists. Another model would have cost sharing that is similar to current and the other would have somewhat lower average cost-sharing of $1,150. Researchers used 2009 Medicare data to develop the models.
Glenn Hackbarth, MedPAC chairman and an independent consultant, said that supplemental coverage that beneficiaries purchase and how that interacts with their benefits is a critical element. Many seniors on a fixed income purchase Medigap insurance plans to help them cover deductibles and other expenses not covered by Medicare’s fee-for-service benefits. But the protection of the supplemental coverage also enables seniors to use more services.
“If we were able to have a potential source of savings that could offset some of the costs of the expansion of the benefit package and limit to the extent to which people supplement it, then they would not incur such cost sharing,” he said.
Scott Armstrong, MedPAC member and president and CEO of Group Health Cooperative, said the panel should consider how to create more value with Medicare benefits. For example, generic statins could require no co-pay compared with brand names.
“We can look at different models of benefit designs that do more than rejigger the out-of-pocket costs with a cap but actually invest in higher value services that change utilization patterns over time,” he said. Some employers offer such designs, and many employees in the boomer generation are familiar with them.
If the panel is unable to develop a value-based benefit design, Michael Chernew, commission member and healthcare policy professor at Harvard Medical School, said that co-pay design would be important.” It can incent beneficiaries if the most expensive treatment doesn’t add any extra value,” he said.
In November, the commission staff will add more demographic data and supplemental coverage information to its models to determine how the design changes would affect beneficiaries.