The collapse of Florida's International Medical Centers -- and its dream of better, cheaper care for the elderly -- doesn't change a thing about this country's health care needs. Medicare costs still must be contained, and elderly patients still need to be given choices in their care. What remains is to figure out how best to accomplish those goals. We need to press on, test and improve -- not abandon -- the government's private health plan option (PHPO).
Under this program, eligible Medicare beneficiaries would use a voucher from the government to join any of a variety of health plans -- from private insurance to a health maintenance organization. Some would provide more coverage than others, but the choice would be up to the individual. They would be able to enroll in the plan that best fits their particular circumstances and preferences.
Proponents of the private health plan option believe that private insurers can do a better job than the government of underwriting total health care delivery at a pre-determined price, without a loss of quality. The proponents also see PHPO as protection against two classes of medicine, because voucher programs would allow the elderly to hold private insurance policies, as most employed people do.
Thus far -- and IMC's failure aside -- some in Congress and the health care industry have expressed skepticism about the plan. Some members of Congress see in the concept's cost-savings feature the threat of reduced future spending for health care. They fear that quality could be sacrificed by entrepreneurs without a proven track record of quality care. Hospitals and doctors are skittish about the level of government premiums. And some of the elderly seem confused when shown a variety of coverage options. But the private health plan option can work, if government modifies its approach, imposes stricter controls on quality and offers realistic premium payments.
First, the Health Care Financing Administration should use its broad demonstration authority to "sell" the concept to Congress and the elderly, instead of marketing the idea primarily to employers and health insurers as it has the past. The government should also develop national experiments instead of limited demonstration projects to test markets or selected contractors. Here are some suggested approaches: All Medicare enrollees could be given the choice of joining health plans now available to federal workers under the Federal Employees Health Benefits Program (FEHBP). Each of these plans has already met detailed federal standards. So Medicare enrollees would be guaranteed a plan that works. In a less ambitious experiment, Medicare could offer the FEHBP option only to new Medicare-eligible persons. This 65-year-old age group is most likely to select a private option and most knowledgeable about insurance options, since many currently are covered through their jobs. In addition to FEHBP plans, new beneficiaries might also be given a choice to continue any private plan that they had previously joined through their employer. Ultimately, the government premium for these plans would become established on a national rate scale. Meanwhile, an interim blended approach could split the financial risk between health care providers and the government, rather than placing it entirely on one. This national pilot should explore, on a voluntary basis, whether Medicare beneficiaries are willing to contribute toward a private plan that may exceed the amount the government is willing to provide through Medicare. This is particularly important since many high-quality HMOs and other plans have already shown a lack of interest in contracting with the government because of low premiums or the fear that future premiums will be too low.
To enhance cooperation from health insurers, premiums should be set up on a multi-year basis. To do this, HCFA must improve its method of predicting costs to minimize the incentive for health insurers to try to lure only healthy patients. This so-called "adverse selection" problem can be lessened, if not eliminated, if the government pursues research such as that preformed by the Health Data Institute. These studies demonstrated improvements in setting premiums by analyzing prior medical experiences of individual Medicare beneficiaries to foretell future medical experience. Such a system for adjusting premiums could encourage plans to enroll more, not fewer, sick persons.
Finally, the government should make clear that the option to join a private health insurance plan belongs to individual Medicare beneficiaries. Current law provides a very limited private option -- a few select HMOs. What logic is there in letting an elderly Medicare beneficiary join an HMO, yet prohibiting that person from keeping the same Blue Cross/Blue Shield or other commercial plan that insured him or her for years in the work force?
The elderly deserve the same range of private insurance choices available to those under 65 -- including some that may require them to make additional financial contributions. This is important because under current rules, the government pays a private plan 95 percent, not 100 percent, of an average Medicare patient's estimated medical costs. While we cannot expect the government to pick up the entire tab for health services, we also cannot perpetuate the myth that better care can be delivered year after year for fewer dollars.
Michael Bromberg is executive director of the Federation of American Health Systems, a trade group representing for-profit hospitals and other health care institutions.