Should we put an end to Medicare Advantage?

Austin Frakt of the Incidental Economist argues convincingly–and I agree with him–that the answer is no.

Medicare Advantage plans have been found to be of higher quality than traditional Medicare. They also reduce wasteful use of health care by managing care, something the traditional program doesn’t do at all. Finally, they fill in gaps in coverage and cost sharing of the traditional program. They’re able to do so when the traditional program is not because changing traditional Medicare would require legislation, and it’s hard to achieve political consensus on anything in health care these days.

The bottom line is that Medicare Advantage plans offer choices that some beneficiaries value. They can deliver the Medicare benefit more efficiently and with higher quality. Yet, taxpayers do pay more to plans than they could, given plans’ own costs. Paying less might mean plans leave the market and that enrollees get less. There are always tradeoffs.

A longer piece on Medicare Advantage is published by Frakt in the New York Times.   Frakt’s article focuses mostly on the the current state of Medicare Advantage but does not fully capture the value of choice.

To consider the reason why choice is important, think about the decision to buy a car.  Let’s say that the Toyota Camry is the car that provides the best value for dollar.  Should we mandate that all people buy a Camry?  The answer is no.  Some people may prefer the less practical, but higher performance and higher cost Ferrari; others may prefer lower cost used cars.  In addition to the value of choice, having a private market for health insurance allows Medicare fee-for-service to compare its performance against private insurers.  If patients believe the quality of care they receive will decrease over time, they can shift to Medicare Advantage plans.  This choice value is difficult to quantify in a given year, but over time having options will likely lead to improved quality of care and insurance packages that better target patient demand.

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