In the Republican presidential debate Monday, Mitt Romney came out in favor of a “premium support program, which allows people to buy either current standard Medicare or a private plan.” He said he supported the proposal made by Wisconsin congressman Paul Ryan, which, he believed, “is absolutely right on.”
“Give people choice,” Romney said. “Let competition exist in our Medicare program by virtue of the two things that I’ve described: higher benefits for lower-income people, lower benefits for higher-income people.” What is premium support anyway? So far, the mainstream media has done little to explain the concepts and terms being tossed around by politicians on all sides. Campaign Desk sat down with Henry Aaron, a senior fellow at the Brookings Institution, to sort all this out.
Trudy Lieberman: What is a voucher or a premium support?
Henry Aaron: It is a check from the government to a recipient for a single purpose, in this case paying for health insurance. In the case of Medicare, the check would have to be used in one of two ways. It could be signed over to an insurance company to buy private insurance. Or, if the plan allows it, the voucher can be returned to the government to pay for traditional Medicare. The voucher would cap Medicare’s growth in spending.
TL: How would this cap work?
HA: Suppose that Medicare costs $100 when the new program begins, and that Congress sets the value of the voucher at $100 and ties the future value to a formula that grows five percent a year. Thus, the value of the voucher will be $105 in the next year, whatever happens to the price of health care. The initial voucher allows Medicare enrollees to stay in traditional Medicare at no added cost. Or they can buy private insurance at the same price. If enrollees choose a more costly private plan, they have to pay all of the added cost themselves. If they choose a cheaper plan, they can pocket the savings.
TL: But what happens in the future?
HA: A critical question is whether enrollees will be able in the future to afford coverage as good as Medicare provides. If the cost of health care rises less than five percent, enrollees will continue to enjoy coverage with no loss of benefits. But if the cost of health care rises more than five percent, they will face a dilemma: suffer a progressively deeper loss of health insurance coverage or pay continually larger amounts for coverage that does not change.
TL: So how serious is the risk that coverage will erode or out-of-pocket costs will go up?
HA: That depends on the plan. If the voucher is tied to overall health costs, there is little or no risk. But under most so-called ‘premium support’ plans, the voucher is tied to an index that has in the past grown much more slowly than the cost of health care. That gap adds up fast, and can quickly erode coverage.
TL: What guarantees will there be that the voucher will keep up with health care cost inflation?
HA: Well, as I say, most plans are designed not to keep up with health care costs. But whatever formula Congress adopts at the outset, there can’t be a guarantee. Under pressure to hold down spending, Congress could restrict the voucher even more. Under pressure from beneficiaries, Congress might raise the voucher.
TL: But is there still a concern about what the adjustment formula is?
HA: You bet! When you set a rule, that becomes the status quo, and the status quo is hard to change.
TL: The term “voucher” is sometimes used interchangeably with “premium support,” a more benign phrase. Where did the term “premium support” come from?
Am 71 with little or no assets,am on Cigna medicare advantage..would I be better with obama or romney now that ryan is the vp choice...have read everthing i can find and understand and as an independent,still confused...Would appreciate your input....Looking at my states long term care which would be under Medicaid....S.Lee Sun CIty West,Az.
#1 Posted by sheila lee, CJR on Sat 11 Aug 2012 at 03:48 PM
Under the voucher system, what is to prevent private insurance companies from raising premiums, deductibles, co-insurance, co-pays? Currently, eligible bneficiaries receive Medicare Part A, which covers hospital, surgery center, rehab and skilled nursing facility charges, at no cost. What will happen to that coverage? Beneficiaries can opt for Medicare Part B at an annual premium and most do. What is to prevent this cost from exceeding the voucher? Private insurance companies already charge exhorbitant premiums for supplemental insurance in addition to out of pocket expenses depending on the plan selected. Any costs exceeding the voucher for those opting to continue their Medicare coverage would not be affordable for most elderly consumers. This voucher plan giving people the option to choose private health insurance or Medicare is a ruse to put private health insurance companies in total control enabling them to raise rates and out of pocket expenses at will.
#2 Posted by B Schemer, CJR on Thu 16 Aug 2012 at 11:14 PM
The question of keeping medical costs on pace with the rise of the voucher value lies in solutions applied to other problems affecting the industry. Tort reform should make liability coverage cheaper for health care professionals. This gives them room to cut costs and compete. We would need to move to create a more shopper freindly cost assessment for consumers. Also opening up interstate health insurance competition has been suggested as a way to create competition. Also, we need to solve the immigration problem. Free indigent care is eating hospitals alive in border states. If you really want to get serious about getting control of health care costs...ban tobacco.
#3 Posted by Mark, CJR on Mon 3 Sep 2012 at 11:18 AM