One solution to the SGR debacle, then, is to expand MA by converting Medicare into premium support, requiring that FFS compete with MA plans. Payments would be determined through competitive bidding, ensuring that enrollees choose the most cost-effective plans. Because MA plans tend to bid lower than what FFS costs, MA plans would likely capture the majority of enrollment. As an ever-larger share of people enrolled in MA (because it is less expensive and because outcomes are significantly better for MA beneficiaries), the SGR would become less relevant. While some beneficiaries would remain in FFS, the SGR could become unnecessary if FFS rates were based on MA rates.
The question is how to get it done.
An SGR repeal bill should be separate from budget negotiations. There is bipartisan agreement that the SGR is a relic, which means less horse trading to get a permanent fix passed.
Premium support, on the other hand, will have to be a bargaining chip in the budget. Democrats will be wary of such a proposal, so Republicans must package it well. While naysayers might argue that premium support is dead in the water after the 2012 elections, high satisfaction rates and better outcomes in MA make it an easy political sell. And if private sector competition is good enough for Obamacare (and for Medicare Part D), why not for all of Medicare?
The advantage of premium support is that it kills several birds with one stone. The uncertainty of physician payment cuts becomes irrelevant, a larger share of the Medicare population is transitioned into higher-quality insurance coverage, and we spend less money on the Medicare program — as much as $275 billion less. What’s not to like?
Yevgeniy Feyman is a fellow at the Manhattan Institute’s Center for Medical Progress.