• It’s the little differences that matter

    While Austin has been parsing the word “ration”, I’ve been interested in the ways in which people are mangling “premium support”. To me, it has always meant offering a percentage of the premium for insurance. Vouchers, on the other hand, usually represented a certain monetary value independent of the cost of the insurance. Recently, a number of politicians have been conflating the two.

    This is important, because premium support is what’s going on in Medicare right now. For most people, the government always covers about 75% of part B premiums. Even if costs go up, people are only responsible for 25% of the cost of insurance. With vouchers, in the future, they could be stuck with a much, much higher amount.

    Rep. Ryan, when he designed a plan with Alice Rivlin, talked about premium support. Then – on his own – he released a plan that included what to me looked like vouchers. He still talked like the plans were the same, though. Are they? Here’s Alice Rivlin:

    The Bipartisan Policy Center’s Debt Reduction Task Force, which I co-chaired with former Senator Pete Domenici (R-NM), proposed transitioning Medicare to premium support starting in 2018. In our version, all Medicare beneficiaries would have a choice: Either stay in traditional fee-for-service Medicare or choose a comprehensive health plan on a newly created Medicare Exchange. The growth of the total subsidy — both for traditional Medicare and for the Exchange — would be capped at the growth of the economy (GDP) plus one percent. If the cost of traditional Medicare grows faster than that, then its beneficiaries would either have to pay an additional premium or move to the exchange. To protect lower income beneficiaries, the premium could be related to income, although we did not actually spell this out in our plan.

    In contrast, the version of premium support in Ryan’s budget plan does not preserve the traditional Medicare option. Newly eligible beneficiaries beginning in 2021 would have only the exchange option. Moreover, the Ryan plan has a lower growth rate for the subsidy (only the rate of inflation). In a negotiation with Democrats, these two features, among others, would have to be on the table.

    Why would premium support produce better care for Medicare beneficiaries at more sustainable rates of growth? First, with competition among the plans on the Exchange and improving information about plan outcomes, seniors can be expected to migrate to lower cost and higher quality plans. Second, capping the subsidy’s growth at a sustainable rate would make the government’s contribution predictable and incentivize movement to more efficient health care delivery. Of course, if Congress thinks the cap is too low, it can always raise it.

    I’m not even sure that I agree that what Ms. Rivlin is proposing is “premium support” as I used to define it.  I’m as confused as the rest of you sometimes.

    But, look. We can debate whether it’s a “voucher” or “premium support” or “whatever”, but can we all just admit that there’s a difference between these plans? Can we further admit that the difference is not small, but as Austin said – “the whole ballgame“?

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    • There is a fair amount of overlap. In both cases, the government subsidizes the cost of insurance (including Medicare). In both cases, you get an amount of money that Congress can fiddle with if it’s viewed as too stingy or too expensive. The key is where the subsidies are set, and how they relate to the cost of insurance.

      I’m not sure if I’m agreeing or disagreeing with you.

    • I am puzzled as to how and why Ryan changed things so much. My guess is that he really believes that private insurance will somehow bring costs down, but I dont know. I wish that we, the public, had the right and the ability to ask these kinds of questions of our elected officials. Our journalists certainly do not.

      Steve

    • The devil is always in the detail!

    • The difference is small. The difference is that under the Rivlin proposal seniors could keep traditional Medicare but that premiums would increase, albeit at a slower rate than the Ryan plan. Under either plan there is a shift of cost of health care from government to seniors.

      If private insurance companies provided the same basic program as Medicare, and they probably would, then what would happen is that everyone would stay in Medicare and pay more, as opposed to everyone being in a private plan and paying more.

      The idea that competition with private insurance can reduce costs is simply not realistic. Look at the last 30 years. If private insurance could reduce costs, it would have.

      I think the only reasonable conclusion is that Rivlin has found herself on the wrong side of an argument, and she is trying to rehabilitate herself. Won’t work, see Gingrich, Newt and Romney, Mitt.

    • Is it to be assumed that plans offered on the exchanges would be required to take on all applicants such as 80 year olds with cardiomyopathy and diabetes? Wouldn’t any company taking on such risks demand a universal mandate to sweeten up the risk pool? Then we would have everyone on an ACA like plan instead of just those under 65. I don’t see how the insurance companies can take on the risks that Medicare does even under a universal mandate scenario without very high rates unless we give them taxpayer subsidies on the order of what Medicare gets. How would that be cheaper unless the subsidies are seriously slashed. Sounds like a great way to impoverish seniors through the back door.

      Dick