A new working paper from the Congressional Budget Office (CBO) shows that a government price ceiling on out-of-network care allows Medicare Advantage plans (commercial health plans that offer Medicare benefits) to contain in-network provider rates and keep premiums down. Would government price caps on out-of-network care for commercial health plans that provide coverage to working people lead to lower health care costs for in-network care as well?
In brief, the CBO finds that Medicare Advantage plans pay providers close to the same amount as traditional Medicare, for which the government negotiates provider rates. Medicare Advantage plans are able to secure favorable doctor rates principally because doctors know that the traditional Medicare rate is the most Medicare Advantage plans are responsible for paying them for out-of-network services under the law. Moreover, doctors know that the traditional Medicare rate is the best rate they can get for treating people with Medicare not enrolled in a Medicare Advantage plan.
In stark contrast, commercial health plans offering coverage to working people, pay on average as much as two times traditional Medicare rates for the same services. Doctors in many communities appear to have a lot of negotiating leverage with commercial health insurers. As a result, unlike traditional Medicare and Medicare Advantage plans, commercial health plans covering working people pay very different doctor rates both within geographic areas and among geographic areas.
It is due time that Congress stepped in to rein in provider rates for everyone. As it is, one in four working people with health insurance skip care because of its cost, And, taxpayers are supporting these excessive provider rates. Taxpayer dollars subsidize the cost of commercial insurance both for people with workplace coverage and for people in the state health insurance exchanges. People with workplace coverage get preferential tax treatment for that coverage. And, many people in the state health insurance exchanges get taxpayer subsidies for their premiums and cost-sharing.
With Medicare for all, as Bernie Sanders and 15 other Senators have proposed, Congress could ensure fair provider rates and lower premiums for everyone. Simply placing a cap on the amount commercial insurers pay for out-of-network care, as some have proposed, would not likely give commercial insurers the needed leverage to bring down provider rates. Providers would likely still have the leverage to raise their rates further for in-network care to compensate for the loss in revenue from out-of-network services. Similarly, extending Medicare to people without workplace coverage and allowing commercial insurance to continue for people with workplace coverage likely would not give the commercial insurers the needed leverage to rein in provider rates. Only about 10 percent of services are out-of-network.
Providers have extra leverage over commercial insurers in the non-Medicare market because commercial insurers can pass on costs to businesses buying the health care coverage. It is hard to see providers conceding voluntarily to lower rates for people who have always paid more for their care than people with Medicare. We need Congress to extend Medicare to everyone in order for everyone to benefit from Medicare’s rates.
If you agree that it’s time for Congress to allow Medicare drug price negotiation, please sign this petition.
Here’s more from Just Care:
- Sanders and 15 other Senators introduce Medicare for all bill
- Commercial health insurance unreliable, costly
- Medicare is more efficient than commercial health insurance
- Four things to think about when choosing between traditional Medicare and a Medicare Advantage plan
- Six things to know about your 2018 Social Security benefits