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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