WHAT'S BEING SAVED
GOP candidates back new premium plan for Medicare, but details and impact a little fuzzy
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.