The Commonwealth Fund (commonwealthfund.com) in May 2009 found that over the past six years the Federal government paid a greater amount for Medicare Advantage products than they would have spent in traditional fee-for-service Medicare payments. Their research notes in 2009 a “13% greater (payout) than the corresponding costs in traditional Medicare.”
The original intent of Medicare Advantage was to provide consumers a greater array of services and the benefits — perceived or real, resulting from private entrepreneurship. The Medicare Modernization Act of 2003 renamed the Medicare+Choice program Medicare Advantage thereby creating a private access to Medicare for Americans age 65 years and older. In 2009, Kaiser Family Foundation stated that of the 45 million consumers enrolled in Medicare 22 percent is within private Medicare programs – Medicare Advantage. In 2003 when the program was officially created, there were 5.3 million consumers enrolled and as of March 2009, there were 10.2 million enrollees.
The massive increase in Medicare Advantage purchasers demonstrates privatization offers (a) greater value to the consumer beyond services provided by the traditional government venues, (b) a result of strong marketing strategies with messaging that is attractive to consumers, or (c) the outcome of a confusing system. A closer look at who is purchasing Medicare Advantage identifies the typical consumer as:
§ An urban dweller, lives in the western United States or Minnesota and New York state,
§ Accesses private Medicare through a local health maintenance organization, preferred provided organization or private fee-for-service plan.
Almost from the start of the legislation’s passage, annual CMS and legislative action has tinkered with the process, payment methods, and locus of control associated with Medicare Advantage products. One of the most serious blows can a few years ago when there was, in essence, a moratorium on new plans because of serious and significant marketing incongruence associated with private firms and their strategies to increase market share. Following issuance of stringent marketing guardrails, private providers continued their stampede to grow volume, revenues, and market share.
The Centers for Medicare and Medicaid Services Call Letter for 2010 identifies a lower annual percent increase than in the past as well as a call for more restrictive cost sharing, elimination of duplicative plans and plans with limited or no enrollees, and a general tightening of the program.
Debating health care reform undoubtedly will continue center stage during the next twenty-four months and associated positioning of all players. A core question underlying this debate needs to be the division of what is needed to provide a support system of healthcare for the nation’s elderly and the value derived from this safety net. By recognizing there are distinct population segments accessing these services and plans – each with their own unique value proposition, the issue of value can be addressed.
Value drives the business model. Therefore, the government’s business model of privatizing access to Medicare should be essentially the same for public or private providers. Participating on an even playing field will then force private providers to build their own business models through the identification of their target market segment and financially creating a product offering value to their identification consumer while building revenue and market share for its owners. A one size fits all perspective is inappropriate. The challenge faced by CMS and its public and private delivery systems becomes relatively mundane while the real beneficiary will be the consumer.
The consumer as a beneficiary. Wasn’t this the original intent of creating a safety net for the elderly in the United States at the beginning?
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