• Romney’s Medicare policy superposition

    Romney’s Medicare policy vision is an ambiguous combination of many possible policies. Take the following excerpt from his interview yesterday at The Washington Examiner, for example. (All emphasis mine.)

    KLEIN: Your Medicare proposal calls for transitioning to a system which Seniors would be given subsidies towards purchase of health insurance, commonly known as premium support.

    ROMNEY: By our friends premium support, by our enemies as “vouchers.” [Laughter.]

    KLEIN: Exactly. You know now, obviously a key question that’s going to determine whether this plan puts Medicare in a sustainable fiscal trajectory is the rate of growth of those support payments. Would the value — under your plan would the value of those subsidies grow at the standard measure of consumer inflation, or the rate of medical inflation?

    ROMNEY: Well it couldn’t do the latter or it would have no particular impact on reining in the excessive cost of our entitlement program. It would instead have to be limited in some way and there are a number of possible limits. One is Congressional action — deciding as Hoover, Heritage and Brooking said a few years ago, we just have a budget. And every year don’t call this an entitlement. Every year pass a budget for how much the total subsidy is going to be. And that would then set the limit of how much each person is going to receive. Obviously, I’ve mentioned that people of lower income would get a higher subsidy than people of higher income.

    I also believe that in setting that amount, you would look to see what competition is providing. You will have private health care plans that offer the care of individuals for a certain cost. That will tell you something about the level of subsidy that’s necessary. And that competition that exists in the private sector will also inform your thoughts about the subsidy that would be applied to people receiving Medicare. My inclination is that the subsidy opportunity is the same whether you are purchasing a private plan or traditional Medicare. When I say traditional Medicare, Medicare provided by government.

    I think it’s unlikely that Medicare will remain an open-ended fee-for-service-type product that it is today but I think its more likely to take on a capitated rate or more extensive managed care provisions than you’re seeing currently employed.

    So my view is your going to limit the growth — as a principle you’re going to limit the growth in the subsidy that goes to this retirement healthcare system based upon the competition that exists in the market and a determination by Congress of the budget amount that can be applied to subsidy.

    What does this mean? In fact, it could mean a wide range of things. It’s consistent with the Domenici-Rivlin plan (competitive bidding under a GDP+1% rate growth cap). With the exception of the idea of everyone receiving the same support, independent of plan choice, it’s consistent with how Medicare works today.

    Today, we have private plans — Medicare Advantage (MA). Those plans and traditional Medicare compete, in a sense. That informs, but does not by itself set, support (subsidy levels). The actual formula for setting subsidies is decided by Congress, which changes it periodically. That’s why MA payments have gone through the roof in recent years and are scheduled to come down over the next few. Still, MA plans are and will be overpaid.

    The fact is, Congress has proven to be a poor steward of taxpayer funds when it comes to MA. By suggesting Congress would be responsible for cost control under his plan, Romney is setting it up for the same kind of failure. But maybe that’s not what he means. It’s just not clear. Like a quantum system, Romney’s Medicare vision is simultaneously occupying many policy positions. Unlike one, however, despite measurement, it has refused to collapse into a unique state.

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