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Friday, October 19, 2012

No Support for Premium Support

Marc Steinberg

Deputy Director of Health Policy

Supporters of the Romney-Ryan plan for Medicare like to say that the major changes that are part of their proposal don’t take effect for 10 years and therefore people who currently have Medicare won’t be affected. Well, there are at least five reasons why the changes that take effect right away matter a lot to people with Medicare right now. But it’s also pretty obvious why proponents of this supposedly great plan for Medicare want to push it off for a decade: It’s because the plan will send out-of-pocket health care costs through the roof.

The core of the plan—call it premium support, Romney-Ryan, the Ryan plan, the House Republican plan, vouchercare, or couponcare—is pretty clear. Under the plan, in 10 years, everyone born after 1958 will no longer be guaranteed a set of Medicare benefits. Instead, they will receive a limited subsidy to purchase coverage from either a private insurance company or traditional Medicare. If the subsidy is inadequate to cover the cost of premiums, people will have to pay the difference out of their pockets. And over time, as the voucher covers a decreasing share of premiums, beneficiaries’ costs rise further.

Of course we can’t know for sure what health care will cost in 10 years, so it’s hard to predict exactly how much the plan will affect seniors. An important new study from the non-partisan Kaiser Family Foundation takes a different approach: It illustrates what the impact of the Republican Medicare proposal would have been if it had been in place in 2010. It found that 59 percent of people with Medicare would have paid higher premiums under the Republican plan if they wanted to keep the same insurance. And the average increase in premiums would be $109 per month, every month.

Why do premiums go up so much and for so many people? It’s because the subsidy would be inadequate to cover the cost of insurance that beneficiaries have today. The impact is also unevenly distributed: Florida would be hardest hit, with 77 percent of beneficiaries seeing premium increases of $100 per month or more. California, Connecticut, Nevada, and New Jersey are also at the top of the list.

Supporters of the Romney-Ryan voucher plan can’t really dispute the study. The whole idea of the plan is to drive people out of the coverage they have now and into private insurance plans—it’s the same idea that Newt Gingrich was pushing in 1995 when he said he wanted Medicare to “wither on the vine.” And it’s great for insurance companies’ bottom lines.

But is it good for those of us who rely on Medicare now or for the rest of us who hope to get there someday? Not so much. There’s no evidence that, on average, private insurance plans are more efficient than traditional Medicare. In fact, in most parts of the country, private plans cost more to provide the same care. And to the extent that private plans do appear to be cheaper, it’s often because they’re good at gaming the system. Private plans can lure in healthier members and avoid the sicker ones. They can limit their networks to keep out the advanced medical centers that treat the sickest people. Their benefit packages can offer perks like gym memberships that appeal to healthier people and offset those costs by charging more for services sick people need, like chemotherapy. The result may be a pretty good deal for people who are healthy, but ever-higher premiums and cost-sharing for older, sicker people who have more health care needs. And the problem gets worse under the voucher plan as the value of the voucher shrinks over time compared to health care costs, and health care bills eat up more and more of seniors’ savings.

Insurance, Medicare in particular, is supposed to be about helping people when they need it most. President Johnson understood this when he signed Medicare into law and said of older Americans: “No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime so that they might enjoy dignity in their later years. No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations to their parents, and to their uncles, and their aunts.” It’s a simple concept—but apparently one that supporters of the Romney-Ryan Medicare plan just don’t get.