Sunday, May 8, 2011
Professor Marshall B. Kapp of Florida State University has posted an interesting abstract on SSRN suggesting that transforming Medicare from a defined benefit program into a defined contribution opportunity for senior citizens would embody a “more positive vision of older individuals and their capabilities.” His premise is that Medicare’s defined benefit structure is paternalistic and presumes that older persons must be protected from the risks of wrong decisions, rather than allowing them to make their own decisions about the delivery and financing of their health care services. Prof. Kapp advocates for the recent proposal of Congressman Ryan to transform Medicare into a premium support system, in which the federal government would pay a subsidy to seniors to purchase private insurance plans that they select. As evidence of how such a premium support program can be successful, Prof. Kapp cites Medicare Part D, the prescription drug benefit added to Medicare in 2003. Prof. Kapp points out:
One might question why the same older individuals who (with informational and social support) are able to navigate the complicated waters of prescription drug plans are—across the board—too hopelessly feeble-minded to pick intelligently among comprehensive health plan alternatives.
Although it is likely that most people would agree that the expansion of Medicare to include a prescription drug benefit was a good thing for Medicare beneficiaries, as compared to having no prescription drug benefit, it is less clear whether most people would agree that the current structure of Medicare Part D is better than a defined prescription drug benefit for Medicare beneficiaries would have been. Prof. Kapp’s citation of the success of Medicare Part D to bolster his argument reminds me of the studies that pharmaceutical companies present to the Food and Drug Administration to support approval of new drugs—studies that show that the new drug is better than no treatment at all, but do not compare the new drug to available, and presumably cheaper, drugs already on the market to treat the condition. Certainly, having coverage for prescription drugs is better than having none, but that doesn’t mean that the type of coverage available is the better than another option that might be available.
Because prescription drug plans (PDPs) do not have to provide a standard drug formulary, each PDP can offer a different set of drugs (although they must all have at least one drug in each therapeutic category and class of covered Part D drugs). When a Medicare beneficiary chooses a PDP, she is basically guessing what drugs she will need in the upcoming plan year. She might guess correctly, in which case the plan will suit her needs well, and she will feel “empowered.” But if her health condition changes (and senior citizens’ health conditions can change suddenly and precipitously, regardless of how mentally acute they are at present), she might guess wrong, in which case she is stuck with her wrong decision, and her family or society in general will pay the consequences along with her. I doubt that Medicare beneficiaries who guessed wrong, and wind up with no coverage for a particular drug they need, feel particularly “empowered” by their “wrong decisions.” The same thing would happen on a larger scale if all Medicare beneficiary health care needs were subject to this game of roulette. All of the information in the world does not turn a game of chance into a sure thing—knowing the odds of winning doesn’t somehow make a gamble any less of a game of chance. You can protect yourself against the risk of gambling by choosing not to play. Seniors cannot protect themselves against the risk of making a wrong decision when choosing a health care plan by choosing not to get sick or older.
Prof. Kapp acknowledges that there must be safeguards built into a defined contribution system of Medicare for older persons who lack the capacity to make autonomous choices, but it is unclear how we would determine capacity issues to trigger these safeguards. Much has been written about the difficulty of determining when it is time to take away the car keys from older people, and the agonizing family and doctor-patient discussions that can ensue from the need to make such decisions. How much more difficult would it be to tell your older loved one that you don’t believe she can choose her health care plan? Or would we subject older Americans to government-mandated capacity testing to determine when they can no longer make a health care plan decision for themselves? Neither choice is very attractive. Trying to institute a capacity testing policy would make the contentious inter-generational debates about requiring older adults to submit to periodic re-testing for driver’s licensing pale by comparison. Certainly subjecting older adults to mandatory capacity testing to determine their capability to make decisions is at least as paternalistic as providing them with a defined health care benefit.
It is hard to define a “wrong decision” in the context of health insurance. It is irrelevant whether you are an older person or a young person when it comes to making such decisions. For example, many of my law students make a choice to forego health insurance, or to buy a very cheap, basic policy with many exclusions or low benefit caps (which will become unavailable as PPACA is implemented). When I ask these students why they decided to forego health insurance, many times they will make the rational economic argument that as young, healthy people, they are unlikely to need extensive medical care, and can fund whatever minimal care they need out-of-pocket more cheaply than buying health insurance. A few years ago, a young, healthy 29-year old student of mine made this economically rational decision to forego health insurance, choosing to get her routine medical care from low-cost clinics. She started to feel ill, and was ultimately diagnosed with advanced ovarian cancer. Her lack of health insurance inhibited her ability to get timely care throughout her ordeal, and caused her and her family inordinate amounts of stress at a time when their energies and attentions would have been better spent elsewhere. She died about 6 months after the diagnosis. Did she make a “wrong decision?” Or was she a victim of a capricious illness that didn’t care what choices she made?
Perhaps a two-tiered Medicare system, where basic health care is provided to older adults through a defined benefit plan, along with a defined contribution that they can use to pay for some combination of health care goods and services beyond the basic package, would be a way to acknowledge that a majority of older adults are vibrant, robust individuals fully capable of making their own decisions, while still protecting them from the vagaries of illness and the increasing likelihood as they age that they will experience a sudden deterioration in their mental or physician condition. According to T.R. Reid’s exploration of health care finance in industrialized countries around the world, The Healing of America, Switzerland, a bastion of powerful insurance companies, uses a system like this for all Swiss citizens. We should be able to acknowledge the autonomy of older Americans without subjecting them to the unfettered vagaries of the marketplace.