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  • Premium Support in Medicare: What It Is and What It Isn't

    Yesterday, House Budget Committee Chairman Paul Ryan (R–WI) unveiled his budget proposal for fiscal year 2012. The transformative proposal would reverse the current trajectory of out-of-control federal spending largely due to the inclusion of a bold proposal to reform the currently unsustainable Medicare program.

    Ryan’s approach would change the way the federal government provides for the medical needs of seniors by moving the program to a “premium support” system. Rather than paying directly for medical services, premium support would enable the government to make contributions to the cost of a health plan chosen by the individual themselves from a selection of plans.

    Already, mudslinging from the left is in overdrive. Senator Debbie Stabenow (D–MI) said Ryan’s proposal was “pulling the rug out from under seniors,” while House Minority Leader Nancy Pelosi (D–CA) called it “a path to poverty for American’s seniors and children.”

    But support for the status quo is a recipe for failure, especially for future generations of seniors. Currently, most beneficiaries must obtain supplemental policies to receive comprehensive coverage under Medicare. Moreover, uncertainties regarding provider reimbursement rates make it difficult to ensure that seniors will have continued access to physicians. And as the population ages and health care costs continue their rapid climb, spending on the program is projected to more than double by 2040. Clearly, change is inevitable.

    A recent article from Kaiser Health News (KHN) lays out the details of the Ryan plan, which creates for seniors a system akin to the popular Federal Employee Health Benefits Program (FEHBP), through which Members of Congress and all federal employees receive coverage. KHN explains that under such a system, “Employees and retirees have a variety of options, from catastrophic coverage plans with high deductibles to health maintenance organizations to high-end plans with many choices of doctors. Everyone has a choice of at least 10 fee-for-service plans, but the exact number varies by where an enrollee lives.”

    Premium support puts individuals, not government, in charge. Market competition would drive costs down, as insurers would face pressure from the consumer to offer higher value plans that best meet their needs. Moreover, premium support is not a partisan proposal, nor is it a new concept. It has received substantial bipartisan support over the last few decades. Legislation co-sponsored by former Senators John Breaux (D–LA) and Bill Frist (R–TN) in 2001 and based on the work of the 1999 National Bipartisan Commission would have established a premium-support system modeled after the FEHBP. Advocates for this general direction for reform also include leaders at the left-leaning Urban Institute and the Brookings Institution.

    Critics of the FEHBP and a premium-support model claim that traditional Medicare has lower administrative costs. However, research by Heritage health economist Robert Book shows that this isn’t the case. Rather, he explains that “on a per-person basis Medicare’s administrative costs are actually higher than those of private insurance—this despite the fact that private insurance companies do incur several categories of costs that do not apply to Medicare.” Moreover, health care economist Walton Francis writes that “the FEHBP has outperformed original Medicare in every dimension of its performance. It has better benefits, better service, catastrophic limits on what enrollees must pay, and far better premium cost control.”

    The Heritage Foundation has long advocated using market-based solutions to improve seniors’ health care choices and put Medicare on sound fiscal footing. In their description of how to move forward with a premium-support system, experts Robert Moffit and James Capretta write:

    A better Medicare program … will give Medicare patients control over the flow of dollars and freedom to make decisions about how they access medical services. This will stimulate intense market competition among plans and providers, control costs, and promote rapid innovation and higher productivity through the efficient delivery of quality care, thus guaranteeing value in return for retiree premiums and taxpayer dollars.

    Posted in Obamacare [slideshow_deploy]

    14 Responses to Premium Support in Medicare: What It Is and What It Isn't

    1. Kevin H, college par says:

      This is nothing more than a voucher. To call it anything else means you spent some money for fosus groups to come up with a name Americans like more.

      it's simply a voucher that will not be able to keep up with costs and force substantial out of pocket costs for seniors.

      As i said in previous comments, this proposal from Ryan is a gift to Democrats.

    2. Bobbie says:

      Debbie Stabenow and Nancy Pelosi better stop fear mongering my loved ones!

      The democrats ONLY DEFENSE!? FEAR MONGERING THE ELDERLY! Wonder if Nancy and Deb are neglecting the care of their own elderly loved ones. Letting time waste pointing fingers at the Republicans, "Grandma, I'm sorry. The Republicans are suggesting family be accountable to care for you? They want you to choose for yourself and family if you're unable!? They want to reduce costs wherever they can and make medicare and social security plans understandable? They won't ignore the fraud and corruption democrats are best at! They're preventing trouble, Grandma! They insist on accountability of what is not within your control!!?? AND expect us to be fair!? They want to make sure you are truly entitled with all you and grandpa put into this country since your's and grandpa's servicing and laboring days! AND THEY want YOU to have the social security grandpa left you with! But grandma, as democrats with a purpose, we were taught that those that didn't pay in deserve it more than you and gramps! We as democrats believe the irresponsibilities of others should logically be put on the responsible. You! And we were taught never to expect accountability from the irresponsible just make someone else pay for it. You! Grandma they think you deserve the same type of health care I get???? Grandma, I'd feel much better if you were taken care of by unqualified people (because democrats don't discriminate) that get paid by tax payers, that way we can use it as an excuse to raise taxes and i can keep my job and title as a proud democrat who doesn't look at a single person who doesn't need government's assistance! Job security, grandma!" STOP FEAR MONGERING MY LOVED ONES!!!

      Evil has no conscience and that seems to be what we're dealing with, here.

      Harry Reid and all involved, it's YOUR INTENTIONAL IGNORANCE OR INCOMPETENT NATURE AMERICA DOESN'T DESERVE THAT CAUSED ALL PROBLEMS you dumped in the laps of the good of the government TRYING TO SOLVE!

      What are the RIGHT things, Mr. President? Specifics please! You've had since last October.

    3. Mary says:

      The Ryan plan would be a large improvement for seniors. It converts the system into something like the Federal Employees system which uses competition and choice to give people good medical insurance at reasonable cost. This is much, much better than the Democrat plan under Obamacare which just reduces and reduces physician reimbursement rates until physicians drop out of the system and seniors can't get the health care they need. The Obama plan is really just rationing for seniors. It will take the form of more and more doctors saying "we can't take anymore medicare patients". Or Medicare directly saying "we won't cover that procedure."

    4. Jeff Miwaukee says:

      As a former insurance worker, who is going to issue a medical policy to an eighty or so old sickly person at any reasonable price. How does this address the out of control raising of premiums. This seems very suspicious and doesnt make a whole lot of sense

    5. Lydia B, Lompoc, CA says:

      If a voucher plan is good enough for Congress…it's good enough for me!

    6. Mike, Wichita Falls says:

      I didn't think "voucher" was a bad word like "liberal".

      Ryan's plan may not be perfect, but it's a whole lot better than the current system where providers bill a distant, faceless, unaccountable bureaucracy. His plan appears to force providers and insurers to deal directly with patients' dollars. Both entities know they can't overcharge people who cannot borrow money as can our federal government and especially seniors on a fixed income. That is a significant limiting factor.

      Yes, there may be significant out of pocket costs initially as this market adjusts, but the status quo will result, and has already resulted, in significant out-of-pocket costs for taxpayers, even those yet unborn. We like to talk about "fairness"; well is that fair?

    7. Kevin H, college par says:

      CBO analysis shows 65 and 66 year old would be left out in cold – Ryan's plan is so cowardly, in his 70 page proposal, he conveniently leaves out the fact that he's raising age for Medicare recipients from 65 to 67. His plan also repeals health reform law, so that means 65 and 66 year olds would be left on their own and CBO estimates 65 year olds woudl now have to pay 20,500 instead of 14,200 and out of pocket costs would more than double.

      It's amazing all the pieces of Ryan's plan that he chose to leave out of his 70 page proposal. Now that facts are seeping out, Americans can see what a horrible proposal this is.

      This proposal woudl only reduce defcits 1.6 trillion over 10 years. That is horrible.

      What's worse, all the conservatives yelling about raising the debt limit – HOWEVER, under the ryan plan, the debt limit in 2021 would be 8.8 trillion more.

      What an sham. I expected a lot more from Ryan, but guess the tea party took over and he doesn't have the backbone to stand up to them.

    8. Leon Lundquist, Dura says:

      For the first time I can see daylight in my Issue: Junk Science in Medicine. Under Premium Support the Medical Consumer can save up their Health Care Dollars by making wise choices. In many cases the treatment costs a hundred times less than the tests. If cost doesn't matter the Patient hasn't the incentive to discuss savings, let alone choose against the more expensive junk. It is irresponsible to say "It is just like a Voucher!" That's like saying there is no difference between Democrats and Republicans (I'll bet Keven H. thinks so!)

      I don't want a Cadillac Insurance program designed to 'Fit All' because I can't get pregnant! I don't need, can't use and shouldn't pay for Junk! My risks are unique and individual! What I need is a little Common Sense and a lot less Defensive Medicine! Don't make me pay for a million Administrators getting in the way of my Treatment! Get out! Get out of my pants! Please!

    9. Tom Sullivan in FL says:

      Health insurance is a complex product, like other major purchases. There are many features, cost differences, and many choices to be made. Some people would rather Uncle Sam make all their choices for them. We could call it the "Comrades Health Plan". Everyone who wants to run their own life could use their premium support to choose the type of policy they want. And it sounds like they could even bank some of the money if they maintain good health. Incentives for good health! What a concept!

    10. Bobbie says:

      You know what amazes me, Kevin? Your satisfaction in the dereliction of anyone! But democrats that have control over you!?? Simply amazing! You know what else amazes me? How contrast your levels of standards are in regard to job performance between republicans and democrats. You refuse accountability put on the actions of democrats past and present, you spin their faults on republicans yet you expect perfection from republicans. Simply amazing. Keep this in mind Kev. Where government is outside their constitutional duties, freedom isn't. You send a message, Kevin. You want socialism over freedom. hmm…

    11. Glenn Bergen, Denver says:

      I am recently retired from a major aerospace firm which has operations around the world. At one point (1983), I had business travel in England where I had the opportunity to apply for a vacancy. When it came to healthcare, my firm provided a private medical plan that could be honored by the English medical community. The options with the National Health Service was voiluntary; you could opt out (for a 1 time fee).Later, in my career, I had a second opportunity to move to England. This time (1997), participation in NHS was mandatory. For that reason, I turned down the offer. My health had changed, and too many of my colleaques had to leave England or spend money for an airline ticket for American healthcare. I welcome the voucher sytem being proposed; it not much different than the current healthcare system that I'm covered with.

    12. Julia, Indiana says:

      I am a "senior" currently on Medicare. I want the premium support implemented as soon as possible and I want it to be available to those currently on Medicare, not just to future recipients. PLEASE get the government out of my healthcare!

    13. Pingback: The Absurd Report » Premium Support in Medicare: What It Is and What It Isn’t

    14. Pingback: Will Obama's Medicare Plan Lead to Health Care Rationing? | The Foundry: Conservative Policy News.

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