The big three entitlement programs—Medicare, Medicaid, and Social Security—promise to increase federal spending to unprecedented and unaffordable levels in coming years. Medicare in particular represents trillions in unfunded obligations, and only bold reforms can restore long-term sustainability to the program. In his recently released budget, House Budget Committee Chairman Paul Ryan (R–WI) takes on Medicare’s future insolvency through a proposal to change the program to a premium support model.

Since its release, Ryan’s approach has received much criticism. But the fact is that nothing short of a complete transformation can ensure that Medicare will exist for future generations of seniors. In breaking research, Heritage’s Bob Moffit and Kathryn Nix lay out the facts about premium support and how it would benefit both future seniors and taxpayers.

As Moffit and Nix point out, “This general approach, though differing in details, is neither novel nor partisan.” Converting Medicare to premium support has received bipartisan backing since the 1990s. Chairman Ryan’s proposal generally follows the model provided by the successful and popular Federal Employees Health Benefits Program, while improving upon it.

In the paper, Heritage provides three key goals for reforming Medicare to a premium support model:

1)      Maximize choice. Offering seniors choices would empower consumers and unleash competition among insurers, resulting in higher patient satisfaction and controlled costs. Moffit and Nix write that “Receiving fixed financial assistance to offset the cost of health insurance would permit seniors to choose the health plan that works best for them, rather than being locked into a federally defined benefits package and forced to pay a second premium for supplemental private insurance to cover Medicare’s gaps.”

2)      Ensure consumer protection without excessive bureaucracy. Under the current Medicare system, doctors and patients are beholden to the health care decisions of the government bureaucrats who micromanage the program. Under a premium support model, government involvement would be limited to protecting consumers instead of interfering with a doctor’s ability to practice medicine.

3)      Ensure that financing is fair. According to Moffit and Nix, “seniors would have a vested interest in ensuring health dollars were spent wisely, and they would seek out the best value in health plans and medical services. Seniors and taxpayers would thus become partners—not opponents—in efforts to control Medicare costs. Financed in a predictable manner, the new system would also create stability for participating physicians and superior patient access to the care they provide.” The new system would enable the government to target additional assistance to those who need it most by increasing the contribution for older and sicker beneficiaries, as well as low-income seniors.


Obamacare has already changed Medicare “as we know it.” In order to extend the life of the program and make it better for future generations, it must be transformed. To read Moffit and Nix’s complete report, click here.