IT'S W'S AMERICA:

The recent slowdown in the growth of health-care spending has been most noticeable in Medicare costs and premiums for employer-based plans -- not coincidentally, the two parts of the system least altered by the ACA. Nor is it any coincidence that the growth of costs began its decline in 2003, when MMA overhauled Medicare and revolutionized the structure of employer-provided plans.

President Bush was vilified by conservatives for the immediate expense of the Part D drug benefit included in the MMA, but this ended up costing 50 percent less than the CBO initially estimated it would. In fact, a recent analysis found that, by providing incentives for beneficiaries to switch to cheaper generic drugs where appropriate, Part D has accounted for 60 percent of the total slowdown in Medicare costs since 2011. And Part D aside, the MMA has been remarkably successful in achieving its primary aim: a broader structural transformation of Medicare. [...]

[T]he availability of privately managed Medicare Advantage plans offers a genuine alternative to politically micromanaged care delivery, and such plans have begun to revolutionize the Medicare program. Medicare Advantage delivers the same package of benefits with a higher quality of care for an average of $1,200 less per beneficiary than the government could directly. Plans can then use these savings to attract enrollees by filling in cost-sharing gaps and providing supplemental dental, vision, or hearing coverage that is not part of the standard benefit.

Options for Medicare beneficiaries to choose privately managed HMO coverage were established in the early 1980s and expanded to PPOs and fee-for-service plans by the 1997 Balanced Budget Act. Unfortunately, the BBA drove payments below the costs of delivering the standard Medicare benefit package in many areas, and so enrollment declined by 23 percent in the years following its enactment. By solving that problem, the MMA caused enrollment to soar from 5.3 million in 2003 to 17.6 million in 2016 -- a trend that continued despite payments' being trimmed back by the ACA.

Almost a third of Medicare beneficiaries -- and a majority of those without Medicaid or employer-funded supplemental coverage -- now choose to receive comprehensive coverage from private plans. By mitigating the dysfunctions that Medicare imposes on the health-care-delivery system, MA's growth has even been shown to reduce hospital costs for commercially insured younger populations that aren't covered by Medicare.

The MMA also initiated a revolution in employer-based coverage, by extending the tax deductibility of health insurance to out-of-pocket spending from the Health Savings Accounts of those enrolled in high-deductible plans. This provision helped correct a long-standing bias in the tax code, which had caused third-party (i.e. insurer) management of health-care spending to displace direct consumer control. It was projected to cost only $6 billion in lost federal revenue from 2004 to 2013, but it has had a huge impact.

The proportion of employees enrolled in plans with deductibles above $1,000 increased from 10 percent in 2006 to 51 percent in 2016, while the share receiving payments into private accounts to help cover out-of-pocket expenses increased from 4 percent to 29 percent over the same period. A recent NBER analysis credited the diffusion of high-deductible plans as the primary factor in slowing the growth of health-care spending.

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