I. Why should Medicare contract with private health plans?
A. Satisfy diverse consumer preferences
B. Create competition to improve quality and reduce cost
II. The current system does not meet those goals.
A. HCFA does not learn about true cost of providing services.
B. Beneficiaries do not see cost differences between plans.
C. The government, facing an inflated price of entitlement benefits,
buys too few benefits.
III. Our proposal: replace administrative pricing with competitive pricing
A. Open enrollment with guaranteed access to all health insurance
products in the market. FFS Medicare is offered everywhere.
B. All health plans, including FFS Medicare would submit prices
for the entitlement package of benefits.
C. Government sets a defined contribution -- we suggested the
price of the most efficient plan.
D. All plans can offer supplementary benefits, but Medigap plans
would have to become fully risk-bearing.
E. Any risk-adjustment system or additional aid to low-income
beneficiaries can be incorporated.
IV. The Competitive Pricing Demonstration Project
A. Demonstration version differs from our proposal
1. FFS sector and Medigap plans are excluded
2. Plans bid on a generous benefit package
B. Proposed for Baltimore and Denver -- blocked by HMOs
C. Demonstration mandated by Congress in 1997, along with the
Competitive Pricing Advisory Commission
D. HCFA has demonstrated that it can run a competitive pricing
system -- it already was doing most required tasks.
V. Summary
A. Well-informed beneficiaries, facing prices that reflect efficiency
differences among plans, should be able to join any plan they
wish.
B. In some areas, the FFS Medicare may be the low bidder.
C. Our goal is increased efficiency.
D. Our proposal is both ‘‘defined benefit’’ and ‘‘defined
contribution’’