GOP can­di­dates back new pre­mium plan for Medi­care, but de­tails and im­pact a lit­tle fuzzy

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Providers de­bate win­ners and losers if Medi­care gives ben­e­fi­cia­ries a fixed pay­ment to buy in­sur­ance

The three lead­ing con­tenders for the GOP pres­i­den­tial nom­i­na­tion af­ter last week’s Su­per Tues­day pri­maries say Medi­care should give ben­e­fi­cia­ries a fixed amount to use to­ward a pri­vate health plan. Op­po­nents ar­gue the “pre­mium sup­port” model would spell the end of the decades-old fed­eral health­care pro­gram, while providers worry it would un­der­mine re­im­burse­ment in the pur­suit of con­trol­ling spend­ing. And a grow­ing num­ber of econ­o­mists, pol­icy an­a­lysts and politi­cians agree now is the time for a se­ri­ous dis­cus­sion about whether the ap­proach would save Medi­care or kill it.

That con­ver­sa­tion be­gan nearly a year ago, when House Bud­get Com­mit­tee Chair­man Paul Ryan (R-wis.) un­veiled a bud­get pro­posal with sweep­ing re­forms to the na­tion’s en­ti­tle­ment pro­grams, in­clud­ing a pre­mium-sup­port model in which new Medi­care ben­e­fi­cia­ries in 2022 would choose from a list of health plans and Medi­care would sub­si­dize the plan (April 11, 2011, p. 6). Fast-for­ward seven months to De­cem­ber 2011, and Ryan made news for team- ing with a mem­ber of the op­pos­ing party—sen. Ron Wy­den of Ore­gon—to pro­pose a plan that would place a pre­mium-sup­port model along­side tra­di­tional Medi­care fee-for-ser­vice in an ef­fort to give ben­e­fi­cia­ries more choices.

To­day, the top Re­pub­li­can pres­i­den­tial hope­fuls—for­mer House Speaker Newt Gin­grich, for­mer Mas­sachusetts Gov. Mitt Rom­ney, and for­mer Penn­syl­va­nia Sen. Rick San­to­rum—have in­di­cated their pref­er­ence for the pre­mium-sup­port con­cept in some fash­ion, but their com­ments are very gen­eral, much like the pre­mi­um­sup­port pro­pos­als that have emerged (See chart).

“We don’t know what the pre­mium-sup­port plans that have been put for­ward would re­ally look like if trans­lated into leg­is­la­tion,” said Henry Aaron, a se­nior fel­low in eco­nomic stud­ies at the Brook­ings In­sti­tu­tion who de­vel­oped the pre­mium-sup­port con­cept with for­mer Con­gres­sional Bud­get Of­fice Di­rec­tor Robert Reis­chauer in 1995. “The dis­cus­sion has not got­ten se­ri­ous. It’s all from 40,000 feet and look­ing down be­low.”

Con­sider, for in­stance, what the three politi­cians have posted to their web­sites about the pre­mium-sup­port con­cept: “Cre­ate more choices in Medi­care by giv­ing se­niors the op­tion to choose, on a vol­un­tary ba­sis, a more per­sonal sys­tem in the pri­vate sec­tor with greater op­tions for bet­ter care” (Gin­grich); “Medi­care is reformed as a pre­mium-sup­port sys­tem, mean­ing that ex­ist­ing spend­ing is repack­aged as a fixed-amount ben­e­fit to each se­nior that he or she can use to pur­chase an in­sur­ance plan” (Rom­ney); and “Im­ple­ment Medi­care re­forms and in­no­va­tion pro­posed by Con­gress­man Paul Ryan and speed up their im­ple­men­ta­tion to con­trol health­care costs and im­prove qual­ity” (San­to­rum).

The un­likely pair­ing of Ryan and Wy­den of­fers a “po­lit­i­cal pedi­gree” that makes for an out­stand­ing pro­posal, ac­cord­ing to Robert Mof­fit, se­nior fel­low at the Her­itage Foun­da­tion, a con­ser­va­tive think tank on Capi­tol Hill. Mean­while, the Obama ad­min­is­tra­tion will have to spend a lot of time de­fend­ing its al­ter­na­tive, Mof­fit said, which is mak­ing Medi­care pay­ment cuts to hos­pi­tals and doc­tors—ei­ther through the cuts in the Pa­tient Pro­tec­tion and Af­ford­able Care Act, the In­de­pen­dent Pay­ment Ad­vi­sory Board that the ACA cre­ated, or the flawed physi­cian pay­ment sys­tem.

“You can’t sim­ply deal with Medi­care by cut­ting doc­tor pay­ments for­ever,” Mof­fit said. “It will be like Soviet free speech: It’s there, but it doesn’t mean any­thing.”

At the Fed­er­a­tion of Amer­i­can Hos­pi­tals an­nual meet­ing in Washington last week, Wy­den said this year is the time to tackle the


The lead­ing GOP pres­i­den­tial can­di­dates have of­fered vague plans for con­vert­ing Medi­care to a pre­mium-sup­port model, but in­dus­try ex­perts say they would need to see con­crete, de­tailed pro­pos­als be­fore de­cid­ing what to sup­port.

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