Nothing for something? Estimating cost and value for beneficiaries from recent medicare spending increases on HMO paymen
- PDF / 282,299 Bytes
- 23 Pages / 439.37 x 666.142 pts Page_size
- 97 Downloads / 203 Views
Nothing for something? Estimating cost and value for beneficiaries from recent medicare spending increases on HMO payments and drug benefits Steven D. Pizer · Austin B. Frakt · Roger Feldman
Received: 15 October 2007 / Accepted: 10 September 2008 / Published online: 27 September 2008 © Springer Science+Business Media, LLC 2008
Abstract The Medicare Modernization Act of 2003 added a new outpatient prescription drug benefit to Medicare and increased payments to HMOs. We estimate a nested logit model of plan choice to quantify the welfare benefits from these two expansion paths. We find that the addition of stand-alone prescription drug plans was welfare improving and produced nine times as much value per government dollar as the increase in payments to HMOs. In light of these results, we suggest that HMO bidding procedures should be modified to reduce payments to HMOs by about $67 billion over the next 10 years. Keywords
Medicare · HMO payment · Choice models · Welfare
JEL Classifications I 11 · I 18
Introduction The recent addition of outpatient drug benefits to Medicare through a wide variety of private plans and the ongoing debate about setting payment rates for those plans raises questions about their costs and benefits. Private HMOs have operated in Medicare since 1982, enrolling as many as 16% of beneficiaries at their peak in 1998 (Berenson 2004). Supporters of these plans argue that they improve Medicare by introducing choices for consumers and by financing additional benefits through cost controls and inter-plan competition (Jindal 2002). The most important of these additional benefits are reduced cost-sharing for outpatient medical S. D. Pizer (B) · A. B. Frakt Department of Veterans’ Affairs, Health Care Financing & Economics, VA Boston Health Care System, 150 South Huntington Ave. (152H), Boston, MA 02130, USA e-mail: [email protected] S. D. Pizer Boston University, Boston, MA, USA R. Feldman University of Minnesota, Minneapolis, MN, USA
123
60
S. D. Pizer et al.
care and coverage for outpatient prescription drugs. These benefits also have been available from Medicare supplement insurance policies (also known as Medigap), but when purchased without the assistance of a former employer these policies are substantially more expensive than coverage through Medicare HMOs (Atherly 2002). Detractors argue that Medicare HMOs attract disproportionately healthy enrollees and therefore are overpaid, increasing costs to the government compared with providing the same coverage through traditional Medicare (Mello et al. 2003; Medicare Payment Advisory Commission (MedPAC) 2007). We approach this debate in a new way by asking if beneficiaries would prefer to allocate scarce government resources to subsidize prescription drug coverage alone or to increase choices and benefits more flexibly by increasing payments to HMOs. The Medicare Modernization Act of 2003 (MMA) expanded the program in both ways by (1) creating a new subsidized minimum outpatient prescription drug benefit and (2) increasing payments to HMOs (Kaiser
Data Loading...
