Over the years of its existence, the Medicare health program has had to compete with private health plans. In the recent years, there have been proposals for its privatization to enable it to compete more effectively with the private health schemes. In 2003, the Medicare Modernization Act created Medicare Advantage (MA), a scheme that allows beneficiaries of Medicare to enroll into private plans (Biles, Pozen, & Guterman, 2009). Consequently, the Affordable Care Act establishes a new reimbursement system for private health plans to the beneficiaries of MA. This new system will be phased in by 2017 and aims to cut the extra payments received by private insurance schemes relative to per capita spending on Medicare, and reward schemes that earn top performance ratings (Families USA, 2005).
This paper seeks to discuss the impacts of health assessment (HIA) in the privatization of Medicare program. This HIA process will involve screening, scoping, assessment, giving recommendations and implementation, reporting and monitoring. In doing it, it will review published journals on the subject matter.
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Families USA (2005) gives a practical example of how the Medicare works. They give an example of five Medicare beneficiaries with total medical expenses of $26,000. It gives an average premium of $5,200 per person, i.e. the benchmark. They go on to argue that private insurance scheme, on the other hand, would opt for healthy individuals with annual medical expenses of about $1,000. This private scheme would then charge a lower premium fee of $5,000 per person, making $4,000 profit in the process. Therefore, private schemes would outcompete the traditional Medicare pay-for-service scheme.
Moreover, with the Affordable Care Act (ACA) that seeks to reward those in cheaper plans, one of five people (in the earlier example), with a relatively good health and lesser medical expense opts out of Medicare and joins a private plan. It leaves the other four with the total medical expense of $25,000 whereas the one who left joins a private plan that still charges premiums of $5,000. On the other hand, Medicare now pays about $6,250 per person covered, and extra $250 on the new benchmark of $6,000. Thus, the person who left Medicare will be rewarded with $1,000, the difference between the benchmark and the premium he/she pays.
Based on it, Families USA argues that it is a fact that Medicares premiums will continue soaring upward in subsequent years. Therefore, Medicare will eventually be medical cover for the terminally ill, very weak, and elderly people. It will become a scheme for those people who need lots of services and care. Since private insurance plans are run with a profit motive, such people will be left out. Because of such, Medicares fee-for-service scheme will be destroyed due to the escalating medical fees and people who need special care and attention will hence be driven into the private plans (Families USA, 2005).
Based on such facts, it is clear that HIA for privatization of Medicare is viable. It is evident that MA process, the scheme that rewards people who opt to leave the Medicare plan for private plans, eventually leads to more people leaving Medicare in subsequent years.
In order to ensure that people join private plans under the MA process, Medicare established a payment plan that is based on four factors (Biles, Pozen, & Guterman, 2009). The four factors are:
i. Setting the benchmark rates at the county level based on the rules set by the Medicare and MA and any future legislation.
ii. Inclusion of a fee-for-service payment adjustment for medical education costs in benchmark rates.
iii. A budget neutral risk adjustment (BNRA) policy for offsetting the impact of risk adjustment of MA payments.
iv. Submission of bids by private plans of the amount each plan would charge for traditional Medicare services, for those who would enroll with them.
Furthermore, a new method for calculating the MA benchmark rates for each county was devised in 2009. According to the method, 3,140 counties in the country are ranked depending on their estimated per capita spending in Medicare and in place in one of four groups of 785 counties. The counties in four cohorts then allocated benchmark rates based on:
i. The top 785 counties with the highest per capita expenditure are assigned benchmark rates equal to 95% of their countys projected per capita expenditure in Medicare. This group includes mainly counties of the states largest cities.
ii. Next 785 counties are assigned benchmark rates equal to 100% of their countys estimated per capita expenditure in Medicare. 81% live in urban areas and 19% live in rural areas.
iii. Next 785 counties are assigned benchmark rates equal to 107.5 percent of their countys estimated per capita expenditure in traditional Medicare. 70% live in urban areas and 30% in rural areas.
iv. The lowest 785 counties are assigned benchmark rates equal to 115% of their estimated per capita expenditure in Medicare. 59% live in urban areas and 41% live in rural areas.
Deloitte (2011) says that the Affordable Care Act (ACA) would bring a direct benefit by 2014 to approximately 32 million people who were previously uninsured. Starting January 1, 2014, majority of uninsured individuals will be required to have at least some kind of health insurance, otherwise called coverage through the government-sponsored plan, employer-sponsored insurance (ESI), or a plan offered by private insurers in the individual market (Deloitte, 2011). Of these, ESI is the most common kind of health insurance cover. In 2009, 59% of those below 65 years of age were insured through their employers.
Prior to ACA, most of the people purchasing plans in the private insurance market were mainly self-employed, unemployed, retirees, those between jobs, those employed, but not covered in ESI and students (Berenson & Burton, 2011). Here, there are covers for individual persons and for family units. With privatization of Medicare, the interests of these groups of people will also be catered for.
ACA introduces incentives and penalties as of 2014, meant to motivate people to maintain a required least level of health insurance cover. The penalties should be imposed on persons and employers who fail to obtain and provide the required minimum health cover. On top of that, ACA should introduce new commercial standards in order to better access and protection of patients rights. These standards include, among other things, abolishing of medical underwriting, eradication of lifetime parameters, banning of existing conditional exclusions as well as elimination of cost sharing for preventive services. Health plans thus must offer cover on a guaranteed and renewal bases.
Despite these numerous proposals on health insurance, future of Medicare is unclear (Berenson & Burton, 2011). We expect that enrollment rates, demographics arrangements and plan types to experience tremendous changes. Furthermore, stakeholders are concerned about the evolving aspect of ESI and working population rather than on ACA only. Moreover, they cite economic, socio-political, and behavioral aspects as probable drivers to shape the changing health insurance landscape. For instance, states and federal governments will be tasked with the development of essential legislative, monitoring, and commercial policy arrangements conform to federal law.
Monitoring and Evaluation
With privatization of Medicare, more individuals are expected to obtain health insurance. Consequently, the demand for health care will rise. Hence, health care providers should make considerations on how to deal with the excess demand using the existing resources (Berenson, 2004). With this demand, providers must deal with new modes of payment, such as bundled payments, medical homes, Accountable Care Organizations, etc. Health institutions should consider ways for addressing organizational issues, revenue, and types of care arising from such initiatives.
Further, institutions might experience increased cases of claims received for settlement, exhausted benefits, uncovered benefits, and denial of any claims (Wyden & Ryan, 2011). Hospitals will also be accountable for collecting co-insurance and deductions from previously self-pay patients. Moreover, they must be ready for the possibilities of bad debt when deductions and co-insurance are not dispatched.