Medicare Advantage

Changes on the Horizon for Medicare

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President Trump didn’t say much, if anything at all, about changing Medicare while he was on the campaign trail – and for good reason. Despite its status as an entitlement program, Medicare is popular among liberals and conservatives, Republicans and Democrats, and just about every American. But while he was mum on Medicare reform before he took office, Trump now appears to be falling more in line with members of the Republican Party who want to privatize the program. Chief among them is Speaker of the House Paul Ryan.
Speaker Ryan has been working for the last six years to change Medicare, moving away from the open-ended payment system currently in place to a system whereby each Medicare enrollee would receive a set amount of financial help (or voucher) from the government to apply toward the cost of health insurance. During a town hall event, Ryan made it clear that he’s discussed the matter with President Trump. They may not see eye to eye on everything, but the new president and his peers in Congress might be moving to the same page at last.
Trump and the Republicans want to “modernize” Medicare, but what would a modernized Medicare look like? Paul Ryan’s proposal (“A Better Way”), outlines two key changes for bringing the program up to date. First, he wants to change support for premium payments. Second, he wants to make Medicare Advantage, the private version of Medicare, more attractive to seniors. These two proposals will change the way seniors access and pay for their healthcare, which could be a politically risky move.

Another interesting proposal that would affect Medicare prices came directly from Trump himself. President Trump has suggested that Medicare should be allowed to negotiate drug prices directly, something the Veterans Administration already does to great effect. There are a few problems with this strategy, but on the surface, many people support the idea of Medicare negotiating prices on behalf of its members.

Premium Support

Premium support isn’t a new idea. Paul Ryan initially proposed the idea of turning Medicare into a premium support system in 2011, and most people have been opposed to it. Think of premium support as a voucher system. Instead of the federal government paying for the bulk of Medicare expenses as it does now, enrollees would be given premium support (or a voucher) that they could then apply to one of several options: a private plan, a Medicare Advantage plan or traditional Medicare. Proponents of the plan assert several benefits, including:

  • More choices for seniors who want to choose their level of coverage
  • A reduction in federal spending on Medicare payouts
  • Responsible spending on the part of providers, who would have to compete for business
  • Better care for seniors, who would be more proactive in choosing providers

How this system would work with traditional Medicare is not clear, and as Kaiser Family Foundation points out, there are a lot of questions that need to be answered before this type of system gets adopted. As it stands, very few people – Republicans and Democrats alike – support the idea of “voucherizing” Medicare. President Trump has not indicated that he supports the idea, either, but the fact that he chose Tom Price as secretary of health and human services may signal that he’s more willing to accept the far-right stance of privatizing Medicare via premium support.

Medicare Advantage

Another possible change to watch for in the Trump administration is a shift toward making Medicare Advantage plans more attractive to seniors. Also known as Medicare Part C, Medicare Advantage is the private portion of Medicare, meaning it’s sold through private insurers. This portion of the program combines Parts A and B along with other benefits, like drug coverage, to form more robust coverage. It’s becoming more popular, too. In 2016, about 31 percent of Medicare enrollees chose Advantage plans. These plans often require a copay but have a cap on out-of-pocket expenses. The tradeoff is more restrictions when it comes to treatment facilities, referrals to see specialists, and in-network coverage.

When Medicare Advantage plans first became available, they were heavily subsidized by the federal government. The value of subsidies was cut drastically by the ACA. Republicans have proposed a reimplementation of those subsidies in hopes that doing so would make Advantage plans more attractive and easier to switch to. As a result, Medicare Advantage would be able to compete more directly against traditional Medicare, which could reduce costs and give seniors better options.

Drug Company Negotiations

Drug spending has skyrocketed over the years in and outside of Medicare, but Medicare doesn’t have the negotiating power that private industry has to lower costs. Plus, Medicare is required by law to cover six protected classes of prescription medications, leaving them powerless to “walk away from the table” even if they had buying power. Trump recently sent shockwaves through the pharmaceutical industry by proposing some changes in how the U.S. handles drug spending. For Medicare, he has proposed allowing the program to negotiate costs directly, like the Veterans Administration does already.

As it stands, drug prices are handled by insurance companies that cannot buy in bulk. This keeps drug prices high, and Medicare recipients are the ones who are left to pay inflated prices. points out that in every other area of government, prices are negotiated.

What’s interesting about Trump’s position is that it goes against Republican principles of keeping the government out of business operations. But President Trump believes that pharmaceutical companies are “getting away with murder,” a belief that many Americans share regardless of political affiliation. Allowing Medicare to negotiate drug prices may bring down costs. It would not save the $300 billion that Trump has proposed, but it may cut costs enough to substantially benefit the program while making sure that seniors can still buy affordable prescriptions.