A recent New England Journal of Medicinearticle by Professor of Health Care Policy, J. Michael McWilliams, MD, PhD, highlights the potentially important role of traditional Medicare program as a public alternative that can exert competitive pressure on private insurers in the Medicare Advantage program. In the article, The Future of Medicare and the Role of Traditional Medicare as Competitor, McWilliams describes how traditional Medicare cannot play this role effectively when payment policy favors Medicare Advantage and considers what reform that rebalances the two programs might look like.

The Medicare Advantage program has grown rapidly, offering enrollees substantially more generous coverage and benefits than traditional Medicare. The added coverage is made possible in part by Medicare Advantage plans’ ability to limit costs, but also by the favorable payment rates that insurers receive from the government. The higher payments pose a large net cost to the system but could nevertheless generate value if insurers passed all the dollars along to enrollees as better benefits. Because insurer competition in Medicare Advantage is generally weak, however, insurers keep much of the payments as profits. The question before Congress, argues McWilliams, is then whether the relatively limited coverage afforded by traditional Medicare should be made more generous. If stronger private competition is not materializing, then might stronger competition from a public alternative help the system generate the value promised by Medicare Advantage? 

How Congress considers this question will have major consequences for the future structure of Medicare, as the program reaches a crossroads. As McWilliams notes, “At the center of this restructuring is the fated choice between accommodating Medicare Advantage as a dominant stand-alone program and fortifying traditional Medicare along with its role in the regulation of Medicare Advantage. That deliberation may be among the most consequential for the Medicare program since its enactment.”