By creating more competitive markets for health insurance
exchanges, Medicare Part C and other health services, the nation can save big,
says Ezekiel J. Emanuel, chair of the Department of Medical Ethics and Health
Policy at the University of Pennsylvania. After decades of false starts and
frustration, free market champions should be cheering— competitive marketplaces
work in health care. And no matter what your opinion of Obamacare, you have got
to admit, that’s a good thing.
It’s now been about a decade since President George W. Bush
enacted Medicare Part D — a competitive market for drug benefit plans with
government set ground rules. Competing plans have to comply with benchmark
regulations—for instance, they have to cover two or more drugs in each drug
category—but otherwise, they are free to set their formularies, premiums,
tiering arrangements and co-pays.
Today, there are over 1,000 plans offered in Part D, and
beneficiaries all over the county have a wide variety of choices. Even seniors
in rural states such as Alaska can choose from over 24 plans. Medicare Part D
has cost below all government projections since its inception. In 2013, it was
50% below what the Congressional Budget Office originally estimated.
Cumulatively, over its nine years, Medicare Part D has cost $197 billion less
than projected. Plans have figured out how to stay profitable with lower bids
by, for instance, promoting the use of generic drugs among their beneficiaries.
It is no wonder, then, with low costs and high choice, the vast majority of
Medicare beneficiaries are satisfied with their drug plan.
Almost the same thing has happened in the purchase of
durable medical equipment. The same law that gave us Medicare Part D also gave
us an experiment with competitive bidding for hospital beds, wheelchairs,
oxygen equipment, prostethesis, and many other items used by seniors and paid
for by Medicare. In the past, Medicare would set prices according to a fee
schedule. With competitive bidding, manufacturers are pitted against one
another. The Affordable Care Act will expand this program nationwide by 2016
unless Congress votes to prevent it.
The result has been what free-market competition would
predict — huge savings. There is more we can do to stimulate more competition
and lower prices in health care. First, Medicare could use some help to improve
the competitive bidding process so gaming is reduced, the bids are binding, and
quality is guaranteed. I have long proposed having a board of experts from
business and academia to advise Medicare on doing competitive bidding right.
Second, Medicare Part C—the privately-run Medicare Advantage
plans—should also be shifted to a better competitive bidding process. About 30%
of Medicare beneficiaries are now enrolled in Part C—and it is expanding fast.
The current bidding process is extraordinarily complicated. And, Medicare
overpays. On average, before the Affordable Care Act, Medicare paid Part C
plans 114% of what the services would cost if provided in traditional Medicare.
Today, because of the ACA, it is down to 106% — still overpaying. Instead of
linking payments to a government-set benchmark, payments should be linked to
what insurers actually bid to provide the established basket of services to
seniors with bonuses for those plans that rank higher in terms of quality. Such
competition gets the government out of price setting and incentivizes low
cost-high quality care.
Third, we can encourage more competition in the exchanges.
To do this, we need to boost enrollment in order to make it more enticing for
insurers to enter the market. Merging the exchange for small businesses into
the exchanges for individuals could accomplish this.
Finally, we need more price and quality transparency. This
will facilitate consumers being able to shop around for the best-value care and
create competition among providers.
We have significant evidence that market competition works
to control health care costs—just like in other industries. While some
market-oriented proposals would leave patients with stingier coverage or higher
costs, the reforms detailed here would improve patient choice and lower costs.
With the American people standing to benefit both as health care consumers and
as taxpayers, the government should push where it can to expand competition and
save us all more money.
Click
here to access the full article on Fortune.com