HA: Bob Reischauer and I coined it in 1995. [Reischauer, president of the Urban Institute, was director of the Congressional Budget Office from 1989 to 1995.] We published the idea in a Health Affairs article as a way to distinguish it from other proposals that were floating around, which proposed simply to replace Medicare with vouchers that were designed to grow more slowly than the cost of health care. Those plans also paid little or no attention to how the quite vulnerable Medicare population should be helped in their dealings with insurers and how to structure insurance offerings.
One of the great claims of vouchers at that time was that they would unleash the power of competition. The jury is still out on that. Our proposal called for aggressive governmental regulation, and would take the marketing of insurance policies out of the hands of insurance companies and put them in the hands of a non-governmental agency that could outlaw deceptive sales practices and techniques.
TL: How does Paul Ryan’s plan fit with what you once proposed? What about the value of the voucher under Ryan’s plans?
HA: One of Ryan’s plans would tie the value to consumer prices. Prices of most goods have risen more slowly than income and even more slowly than health costs. Under another of Mr. Ryan’s plans, the voucher would be tied to the same index that is already set as the target for Medicare in the health reform act, which Ryan proposes to repeal. That target is in the most recent proposal, of which Rep. Ryan and Sen. Wyden are co-sponsors. It contains some serious ambiguities and unfortunately, they have said they will not put the proposal into legislative language. As a result, it’s impossible to tell just what the rather vague, press release-style language really means.
TL: How will the Ryan-Wyden plan work?
HA: Starting in 2022, private insurers would be asked to bid on how much they would charge to offer benefit coverage as valuable for average people as that offered by Medicare. Everyone turning age sixty-five in that year or later who is eligible for Medicare would be given a voucher set at the second-lowest price offered in each geographic area. Recipients could use that voucher to buy private insurance or to buy into traditional Medicare coverage.
If enrollees chose a more costly plan, they would have to pay the diffierence themselves. If they chose a less costly plan, they could pocket the difference. The voucher would be reduced for upper income enrollees. People in Medicaid would continue to have protections offered by that program. Growth of the voucher would be capped at the rate of growth of income per person, plus one percentage point. Insurers would have to insure everyone regardless of age or health status.
TL: What will happen to the private market if vouchers come to pass?
HA: It will grow, but it’s not clear how much.
TL: You supported Medicare vouchers once. Have you changed your mind?
HA: I supported premium support with the protections that Bob Reischauer and I listed. But I always felt that simply dropping cash on the elderly and the disabled in an unregulated insurance market was a recipe for disaster. Given the current resistance to adequate regulation, no one is talking about the sort of premium support plan I once found attractive. But even if they were, times have changed. Now is not the time to be talking about massive and possibly disruptive changes for fifty million Medicare beneficiaries.
HA: A couple of reasons. First, the argument that premium support would lower costs seems to me much weaker than it did sixteen years ago.
TL: Can you expand on that point?
HA: There are comparative data on private plans versus traditional Medicare.
Private plans get a fourteen percent bonus to give extra benefits or lower premiums and less cost-sharing. Only a quarter of all beneficiaries have opted for these plans.
Even if one ignores these extra payments, the private plans cost more than traditional Medicare does.
TL: How much more?