No cap

Apparently, Mitt Romney has taken a Medicare growth cap off the table. That’s according to his own campaign document, which says, “Governor Romney has proposed no cap on premium support in his own plan.” And Michael Cooper in the New York Times reported yesterday that,

The Romney campaign now says that their plan would work differently from Mr. Ryan’s original proposal, and would have the flexibility to raise the proposed cap on spending if it does not keep up with costs.

If Romney’s new Medicare plan has no rate growth cap (like the GDP+1% in current law or the GDP+0.5% one President Obama and Rep. Ryan have proposed previously), then the implications are that

  1. It’s uncertain that the cost curve would bend, though still likely it would shift due to competitive pricing of premium support levels.
  2. If the cost curve would bend, nobody has showed how to predict the rate. That requires dynamic scoring, which neither CBO nor anybody else knows how to do.
  3. Nevertheless, with the support level permitted to grow with the cost of health care, this is a step in the right direction. See point 2 of my list of elements for a complete premium support plan.
  4. Still, there are many other elements to a complete plan, some that would make curve bending more likely.
  5. Politically, no cap or other plausible curve bending elements is good for beneficiaries and good for providers, but not good for taxpayers.
  6. This is what I would expect of a more realistic premium support plan, however. Even one with a claimed cap would probably blow through it. Politically, Medicare and commercial market rates and generosity cannot diverge too far from one another.



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