Quote-of-the-day mailing list
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Subject: qotd: Premium support would affect much more than the premiums
Date: Tue, 16 Oct 2012 13:48:47 -0700
From: Don McCanne <email@example.com>
To: Quote-of-the-Day <firstname.lastname@example.org>
Kaiser Family Foundation
Transforming Medicare into a Premium Support System: Implications for
By Gretchen Jacobson, Tricia Neuman and Anthony Damico
Over the past several decades, the idea of transforming Medicare from
its current structure to one known as "premium support" has been raised
intermittently as an approach for reforming the Medicare program, often
in the context of efforts to reduce the federal debt and deficit. The
primary goals of a premium support system are to reduce the growth in
Medicare spending, and rely more on a competitive marketplace. While
the parameters of various premium support proposals differ, the general
idea is for the federal government to make a predetermined contribution
on behalf of each person on Medicare that would be applied toward the
premium for a health insurance plan.
This paper aims to help inform policy discussions by examining the
potential implications of a leading premium support approach on Medicare
premiums, the extent to which Medicare premiums would vary by state and
by county, and the key factors that could drive variations in premiums
under this approach. The analysis looks at an approach to premium
support that ties federal payments to the second lowest cost plan
offered in an area or traditional Medicare, whichever is lower. This
approach is similar to the premium support proposal included in Chairman
Paul Ryan's (R-WI) budget proposal for FY2013 that was embraced by
Presidential nominee Mitt Romney, and previously included in the
Wyden-Ryan and Domenici-Rivlin proposals. The study focuses on
beneficiaries' Medicare premiums, but does not take into consideration
out-of-pocket spending due to the effects of changes in benefits,
cost-sharing requirements and premiums for supplemental insurance.
From the Discussion
These findings underscore the potential for highly disparate effects of
a premium support system for beneficiaries across the country. The
results show how individual decision making (plan choices), coupled with
geographical variations in the cost of traditional Medicare and the
private health plans, would play a major role in determining how well
beneficiaries fare with respect to premiums under this approach.
The study estimates that the majority (59%) of Medicare beneficiaries
would be expected to face additional premiums, based on current plan
preferences, under the modeled premium support system. Clearly, a
smaller share of beneficiaries would pay higher premiums if they instead
enrolled in a low-cost plan offered in their area. In high-cost areas,
such as Miami and Los Angeles, most beneficiaries in the traditional
Medicare program would see a significant increase in Medicare premiums,
unless they opted to enroll in a lower-cost private plan. Conversely,
in low-cost areas, such as Honolulu County in Hawaii and Multnomah
County in Oregon (which includes Portland), the majority of
beneficiaries would not pay additional premiums if they remained in
their plan (based on current enrollment in that county), but a sizeable
minority (17% and 43%, respectively) would pay at least $100 more in
monthly premiums for their Medicare coverage in a private plan.
Further, this analysis shows that premiums for traditional Medicare
would likely vary across states, and within states, by county. If this
system had been fully implemented in 2010, some would have paid the same
Medicare premium, while others would have paid an additional $200 more
per month in Medicare premiums, not considering other additional costs
beneficiaries could potentially face, such as cost-sharing requirements
for benefits covered by the plan, the cost of benefits not covered by
the plan, and premiums for supplemental insurance.
Beyond premiums, other factors could be considered in choosing a plan,
which may or may not be consistent with the choice of a low-cost plan.
First, enrolling in a low-cost plan, if it requires changing from
another plan, may require beneficiaries to change their doctors and
other health care providers, posing potential problems for beneficiaries
with long-standing relationships with their doctors, especially those
with chronic conditions. Second, some beneficiaries may value the
option to enroll in a highly-rated plan, but quality is not a factor in
determining which plan is the benchmark plan. Third, low-cost plans in
a given area may or may not have the capacity to accommodate all
beneficiaries who wish to enroll in the plan. Fourth, the low-cost plans
offered in an area could change each year or so, as has occurred in the
Medicare Part D program, potentially creating instability for
beneficiaries with modest incomes who would have a strong financial
incentive to remain in a low-cost plan each year.
Given a lack of specificity about some of the key policy elements and
questions about the likely response of the insurance industry and
beneficiaries, there remains great uncertainty about the expected
effects of this approach for elderly and disabled Americans in the future.
* This study focuses narrowly on the expected effects of a premium
support system on beneficiaries' Medicare premiums – an approach that
excludes the effects of changes in benefits, cost-sharing requirements
and premiums for supplemental insurance.
* This study models the effects of a premium support system in a given
year, but not the expected costs for beneficiaries over the longer term,
including the effects of adverse selection for beneficiaries in
traditional Medicare or the potential for Medicare spending caps to
increase premiums for beneficiaries over time.
* This study does not examine the effects of a premium support system
for beneficiaries with low-incomes, including dual-eligible
beneficiaries who could also be affected by changes made to Medicaid,
such as a Medicaid block grant.
* This study considers potential changes in plan behavior (changes in
bids), but does not analyze the potential for insurers' responses to
vary, based on local market conditions.
* This study does not capture the nuances of beneficiaries' plan
switching behavior and only allows for beneficiaries to switch into a
benchmark plan, rather than a plan that is less expensive than their
current plan, but is not a benchmark plan.
* This study does not consider whether benchmark plans (if not
traditional Medicare) would have sufficient capacity to serve all
* Finally, this analysis does not consider the effect of a premium
support system for other payers, including the federal government, state
governments (Medicaid), or employers.
Comment: When reforms for health care are proposed, the first response
by many is, what will it cost me? In the case of the premium support
model (voucher, or defined contribution), most people want to know what
the premium will be. This meticulous 48-page study by Kaiser Family
Foundation shows that for the majority of individuals, premiums would
increase. But there is much more to premium support than merely the
premium to be paid.
Reading the full report might be of interest to individuals who would
want to see the complexities involved in simply determining the impact
on premiums. In the excerpts above, some of the factors that were not
considered are emphasized, especially in the list of limitations of the
study. Because the proposal depends heavily on private insurance plans,
there are a slew of potential negative impacts which can increase costs
and impair access for the Medicare beneficiary - impacts that are far
beyond those suggested by the list of limitations.
If you aren't convinced by now that premium support is a terrible idea,
go to our website at www.pnhp.org <http://www.pnhp.org> and type in
"premium support" in the search window and spend a an hour or so reading
what we have to say. Then go back and read what Romney and Ryan have to
say, and you'll see what they deliberately left out. It is a scheme to
slowly unwind the social contract of health care justice, when what we
need to do is to improve that contract and expand it to cover everyone.