Sections

Commentary

Q&A on Mending Medicare Part D

Joseph P. Newhouse
JPN
Joseph P. Newhouse

April 2, 2007

Transcript of a video Q&A

Joseph P. Newhouse
Q&A with Joseph P. Newhouse, a Hamilton Project expert, on Mending Medicare Part D.

Watch (wmv)

As the program is set up now, it has incentive to the insurers to try to structure their benefits in a way to avoid high-cost people. This kind of incentive is present in a lot of insurance. If you and I pay a fixed premium for our insurance, the insurance company is going to lose money on us if we spend more than average. So if I can encourage you, potentially a high-cost user, to go to somebody else’s policy, I’ll be ahead. Or alternatively the rest of the people that are signed up with me will get lower premiums.
We don’t think that’s a good incentive and what we would do to try to fix that is that we would have one insurer for each region. The country is now divided up into about 34 regions. And we would tell the insurance companies – compete for a contract for this region. And then the government would pick the winning bidder.

Right now the average Medicare beneficiary faces a choice of around 50 some-odd plans that vary considerably in what the beneficiary is required to pay and also what the beneficiary pays for specific drugs. Because the benefit is set up so that typically some drugs will cost less than others, though they may treat the same kind of problem.

It’s almost inconceivable to me that the benefit would go away or that it should go away. I think the benefit should be there, I would just modify how it works.