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Premium Support Proposals: Key Elements and a Comparison

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Unread 04.16.12, 05:56 PM
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Premium Support Proposals: Key Elements and a Comparison

On 04.16.12 12:30 PM posted by Alyene Senger

A new poll by Reason-Rupe shows that Americans support the structural reform of a premium support model for Medicare.

The current Medicare program has made $38 trillion of unfunded promises to seniors over the next 75 years, and the Part A trust fund is predicted to be bankrupt as soon as 2024. The gravity of Medicare’s fiscal mess makes reform inevitable.

With premium support, the government provides a contribution toward the cost of a health plan of the beneficiary’s choosing. Reason states, “For people not yet in the program and under the age of 55 right now, 65 percent of Americans favor changing Medicare into a program that would give recipients a credit that could be used to purchase private health insurance.”

Premium support proposals have been gaining popularity, even across party lines. There are now five major plans that include premium support for Medicare: (1) The Heritage Foundation’s Saving the American Dream, (2) the fiscal year 2013 House budget resolution (i.e., the Ryan proposal), (3) the Burr–Coburn plan, (4) the Wyden–Ryan plan, and (5) the Domenici–Rivlin proposal.

In a new paper, Heritage expert Bob Moffit explains that the five major premium support plans may differ in detail, but they all include certain elements that increase consumer choice and competition:
  • Seniors could still enroll in traditional Medicare. The Medicare fee-for-service plan would be transformed into a health care program that would compete with other private plans in the premium support model.
  • The government’s contribution would be market-based. All plans have similar financing: “[T]he government’s contribution to a Medicare enrollee’s coverage would be based on an annual process of (regional and national) competitive bidding among health plans to provide at least the traditional Medicare benefits.”
  • The government’s contribution would target enrollees based on need. Subsidies would be reduced for upper-income enrollees and completely phased out for the wealthiest seniors.
  • The government would ensure consumer protections and oversee competition. As Moffit explains, “A federal agency should enforce uniform rules for health insurance and rules for consumer protection, such as marketing rules and fiscal solvency requirements, and administer a risk-adjustment program.”
  • Improve or create risk-adjustment mechanisms. Moffit says, “With patient choice among a wide array of competing plans, the affordability and continuity of coverage can be disrupted by adverse selection (the concentration of older and sicker beneficiaries in certain plans) thus pushing up costs and driving out plans.” The market should be stabilized by improving or creating risk-adjustment mechanisms.
Moffit then provides a thorough comparison of each premium support plan, highlighting their commonalities and explaining their differences.

To read Moffit’s Saving the American Dream: Comparing Medicare Reform Plans, click here.

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