Under such an arrangement, the government would give beneficiaries a fixed amount of money each year to buy health insurance in the private market—similar to the way some uninsured people may get subsidies under the Affordable Care Act. If vouchers, sometimes called “premium supports,” are insufficient to buy what the seniors want, they will have to pay the difference out-of-pocket. Over time, Medicare experts believe, the voucher may not keep pace with medical inflation, shrinking in value. In analyzing Ryan’s plan last year, the Congressional Budget Office found that “most elderly people who would be entitled to premium support payments would pay more for their healthcare than they would pay under current the Medicare system.”
To understand exactly how a voucher plan would work and how much seniors will pay on their own, you need details, which are lacking at the moment. Ryan says people currently on Medicare can stay in the traditional program, but the fear is that the healthiest and wealthiest might opt out. If only sick people remain, Medicare could find itself in a what insurers call a “death spiral,” with the people remaining in the program paying ever heavier premiums. But Ryan is a big champion of voucher plans for Medicare, and if the GOP ticket wins, this could move to the top of the agenda. The president is not a fan of vouchers, so this change is unlikely if Obama wins.
MAKING PEOPLE PAY MORE FOR THE BENEFITS THEY HAVE
What’s already happened? A change already in place—called for by the prescription drug law passed in 2003 (under George Bush) and by the ACA, and thus supported by both Democrats and Republicans—requires people with higher incomes to pay more for their Medicare Part B benefits (doctor visits, lab tests, and outpatient hospital services), as well as for their Part D benefits (prescription drugs). The higher premiums now affect those with incomes of $85,000 and up and couples with incomes of $170,000.
What’s in the wind? There’s Beltway talk of requiring people whose incomes are not considered high by today’s standards to pay more. Some proposals call for changing the way the income thresholds for the higher premiums are determined. That would mean people who do not have high incomes now would be considered having high incomes for the purposes of paying more. As I recently explained, about 5 percent of seniors now pay an income-related premium for Part B; by the end of the decade 10 percent will. For drug, or Part D benefits, the proportion of seniors paying higher premiums would grow from 3 percent today to 8 percent by 2019 if these changes are enacted. Look for some politicians from both parties to support this one.
GIVING BENEFITS TO FEWER PEOPLE
What’s in the wind? If Republicans take the White House and both houses of Congress, seniors on Medicare who have higher incomes may find themselves subject to means testing, a step that would also radically change Medicare. Medicare is social insurance: People are obligated to pay into the system while they are working and, in turn, they have a right to benefits later when they turn 65. It doesn’t matter how high their income is, they are entitled to Medicare benefits. This universality—the idea that everyone is in the pool—has contributed to Medicare’s popularity. It’s not a welfare program like its cousin, Medicaid. To qualify for Medicaid benefits, recipients’ income and assets cannot exceed certain guidelines.
The budget discussion is sure to include the notion of means testing Medicare too. Supporters argue that rich people like Warren Buffett don’t need Social Security or Medicare, and the federal government could save billions by giving benefits only to those who truly need them. The counterargument: With means testing, these programs will turn into welfare programs, like Medicaid, and lose popular support.
Ryan’s “Path to Prosperity” budget plan also proposes changing the financing arrangement for Medicaid. It calls for converting the matching payments the federal government makes to the states into block grants of fixed dollar amounts. A state could use that money as it saw fit. Republicans and some Democrats support using block grants for Medicaid. But there’s a problem: fewer people would be covered. The CBO found the “large projected reduction in payments would probably reduce eligibility for Medicaid.”