In a recent paper, Heritage expert Bob Moffit responds to the critics of the premium-support model for Medicare. This type of reform would give seniors a defined government contribution toward the cost of a Medicare plan of their choice. All plans would compete against each other to deliver market-based prices and higher quality care for seniors.
Here’s a summary of the most common arguments against premium support and why they don’t hold up against facts:
- “Premium support would destroy traditional Medicare.” Under all of the major premium-support proposals, traditional Medicare is still an option for seniors. Seniors would be given a choice between the fee-for-service Medicare of today or private plans. Medicare would be forced to compete with private plans that have the potential to offer greater benefits at a lower cost.
- “Premium support would ‘privatize’ Medicare.” Medicare is highly privatized already. Moffit points out that almost all of Medicare is comprised of private agents or institutions that are financed by the public and have to follow public rules. In addition, Medicare Advantage (MA), which currently enrolls 27 percent of all Medicare beneficiaries, is comprised of private health plans that compete against each other, and the Medicare prescription drug benefit is provided through private plans as well.
- “Premium support would leave Medicare patients at the mercy of rapacious insurance companies.” Moffit writes that “every major premium-support proposal would retain or reinforce insurance rules that prevent ‘cherry picking’ or coverage denials based on health status.”
- “Premium support would increase beneficiary premiums.” Moffit explains, “A transition from a defined benefit to a defined contribution would not necessarily increase premiums over current projections.” The government contribution toward premiums would be based on competitive bidding among health plans in the market, tying it to real health spending trends.
- “Traditional Medicare does a better job of controlling costs than MA.” MA plans generally offer much more generous benefit packages than traditional Medicare, but when an MA HMO plan offers only the benefits of traditional Medicare, the plan’s costs come in at or below those of traditional Medicare.
- “Premium support would end Medicare’s guaranteed benefits.” Moffit explains that “all major versions of premium support guarantee beneficiaries at least the Medicare benefits or the level of benefits they get today with access to new plans with even higher levels of coverage at competitive prices tomorrow.”
- “Lower-income seniors would be vulnerable to higher out-of-pocket costs.” The Heritage plan, like all other major premium-support plans, would cap out-of-pocket spending for low-income Medicare beneficiaries. For example, as Moffit points out, the premium-support plan in the most recent (fiscal year 2013) House budget resolution would still allow Medicaid to step in and pay the extra out-of-pocket costs for eligible seniors and would provide a fully funded account to help offset increased costs for other low-income beneficiaries who are not eligible for Medicaid.
- “Seniors would be confused and unable to choose health insurance policies.” To the contrary, millions of seniors pick the doctors who treat them, 90 percent of Medicare beneficiaries are enrolled in supplemental insurance plans of their choice, 27 percent of beneficiaries choose to participate in MA and also pick private plans within MA, and about 60 percent of beneficiaries are enrolled in private prescription drug plans.
- “Premium support will not work because risk-adjustment mechanisms are imperfect.” They may be imperfect now, but they are clearly improving. Former CBO director Alice Rivlin, coauthor of another major bipartisan premium-support proposal, reports that “risk adjustment techniques improved substantially as relevant data and experience accumulated in MA and other programs, and can be expected to improve more.”
Premium support is the only reform option that will ensure that Medicare is still around for future generations. It also has the added advantage of a long history of bipartisan support. To read Moffit’s entire paper, click here.