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Medicare Needs the Life Support of Premium Support

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Unread 02.24.12, 10:08 AM
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Medicare Needs the Life Support of Premium Support

On 02.24.12 08:30 AM posted by Alyene Senger

Medicare reform is coming soon; it has to if the program is going to survive. As budget expert J. D. Foster writes, “Medicare reform is inevitable because its demands on the federal budget are unsustainable.”

The Congressional Budget Office projects that by 2022, Medicare spending will exceed $1 trillion—almost 90 percent more than expected in 2012. In addition, the Medicare Part A trust fund is predicted to reach insolvency as soon as 2024.

The Heritage Foundation has put forth a model for premium support that would avert disaster and preserve Medicare for future generations. Moving to premium support would replace Medicare’s current defined-benefit system with one where seniors use a defined contribution to enroll in private plans of their choice. Writing for Heritage, expert James Capretta point outs, “Political momentum continues to build for premium support because of its potential to control health care costs through the power of consumer choice.”

Still, opposition remains. As Capretta shows, “Opponents have made a number of flawed arguments against the concept that do not stand up to careful scrutiny.” For example, the left often asserts that premium support just shifts costs to seniors. But according to Capretta, this relies on the “implausible assumption…that competition in Medicare will not affect the efficiency or cost of the options offered to Medicare participants. The whole point of premium support is to build a functioning marketplace in which plans must compete for the business of cost-conscious consumers.”

In a recent lecture, Heritage’s Stuart Butler further makes the case for premium support by highlighting its long bipartisan history. The idea, which is anything but new, was first introduced as formal legislation in the late 1990s by the National Bipartisan Commission on the Future of Medicare. The premium-support model has evolved over time, with the most recent versions introduced by Senator Ron Wyden (D–OR) and Representative Paul Ryan (R–WI), and Senators Richard Burr (R–NC) and Tom Coburn (R–OK). As Butler states, “Each of these proposals moves us forward towards achieving an affordable, acceptable, system of health care for seniors—and one that is also affordable for our children and grandchildren.”

Despite some technical differences, most versions of premium support include certain crucial elements. Heritage experts Bob Moffit and Rea Hederman outline key aspects and themes:
  • Creation of a market-based defined contribution,
  • Making traditional Medicare compete,
  • Enforcing a level playing field,
  • Targeting assistance to those with the most need, and
  • Setting a budget backstop.
Premium support is the best and least radical way to save Medicare while increasing patient choice and reducing costs. To read Heritage’s full proposal for reform, Saving the American Dream, click here.

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