premium support


Some Progress on Premium Support

Medicare premium support, the entitlement reform plan that has been part of budgets passed by the House Republicans in 2011, 2012, and 2013, was harshly criticized during the last election, with the president repeatedly, and falsely, claiming that the plan would “end Medicare as we know it.” But, as I explain in a column at National Review Online, a new report from the Congressional Budget Office shows that premium support would not undermine Medicare benefits, even though it would be effective at cutting costs.

The CBO’s new analysis concludes that, depending on the specifics of the reform, it would indeed be possible to build a program that moderates federal costs and eases premiums for beneficiaries. For instance, under a premium-support model that used the average of premium bids by region (weighted by the size of the insurer’s beneficiary enrollment) to determine the government’s contribution, federal spending would drop by 4 percent relative to current law and beneficiary premiums would fall by 6 percent.

The key change in the CBO’s assessment: They forecast that intense price competition would cause the private insurance plans to submit bids that are 4 percent below the bids they would submit under today’s Medicare Advantage program. That’s a big difference, given that Medicare’s total per capita costs are expected to approach $12,500 in 2020. This assumed reduction in costs from private insurers would mean an even wider cost gap than the one that already exists between today’s Medicare Advantage plans and the traditional fee-for-service (FFS) program. CBO’s assessment leaves no doubt that private plans, properly run, can deliver Medicare benefits at far lower cost than the existing fee-for-service plans in most regions of the country.

You can read the rest of the column here.

posted by James C. Capretta | 11:37 am
Tags: premium support, CBO
File As: Health Care

More Mediscare

My colleague Yuval Levin and I have a column in The Weekly Standard about how a recent study of Medicare reform in the Journal of American Medical Association distorts its own findings in an attempt to discredit premium support proposals like the Wyden-Ryan plan:

For starters, the Wyden-Ryan plan would apply only to entrants into the program after 2023. No current senior, and no one under 55 today, would be affected by it. So there is no way for the reform to increase the premiums of any current beneficiaries.

Moreover, even the Harvard scholars’ own analysis shows that no senior would necessarily pay any more for Medicare coverage under the proposed reform. The point of premium support is to bring more efficiency into the program. If competition introduced new ways of providing and structuring coverage and care that significantly reduced costs, presumably the fee-for-service Medicare plan (which would remain an option under Ryan’s proposal) would learn from some of these and reduce its own costs too. If it didn’t, it would lose customers, and it would deserve to.

You can read the rest of the article here.

posted by James C. Capretta | 10:57 am
Tags: Yuval Levin, premium support
File As: Health Care

The Top Five Flawed Arguments Against Premium Support

I have a new paper published at the Heritage Foundation on the flawed arguments against a premium-support reform of the health-care system. Here’s the abstract:

The introduction of the bipartisan Wyden–Ryan premium support plan for Medicare ensures that reform of the government’s largest health entitlement program will continue to be a major topic of debate in 2012. With premium support, the federal government moves away from running a health plan and instead provides fixed levels of support for insurance plans selected by the beneficiaries themselves. Opponents have made a number of flawed arguments against the concept that do not stand up to careful scrutiny. Political momentum continues to build for premium support because of its potential to control health care costs through the power of consumer choice.

You can read the whole paper here (or in PDF here).

posted by James C. Capretta | 4:24 pm
Tags: premium support
File As: Health Care

Two (Relatively) Recent Public Events

On December 16, 2011, I participated in a public forum at the Brookings Institution entitled “Controlling Medicare Costs: Is Premium Support the Answer?” The event was kicked off by a presentation from former New Mexico Senator Pete Domenici (my old boss from the years I spent on the staff of the Senate Budget Committee) and former Clinton administration Budget Director Alice Rivlin, on the specific premium support plan they have proposed as part of the deficit reduction initiative of the Bipartisan Policy Center. I participated in a panel discussion that followed their presentation, which featured the views of both opponents and proponents of premium support in the Medicare context. My remarks were based in large part on the views I expressed in a companion paper, also commissioned by Brookings (available here). A full description of the event, and a full video recording of it are available here.

And this week, I had the pleasure of moderating a public forum, sponsored by e21, on Capitol Hill featuring introductory remarks from Wyoming Senator John Barrasso and a presentation from University of Minnesota Law Professor Daniel Schwarcz on why employers are likely to dump their unhealthy workers into the Patient Protection and Affordable Care Act’s state exchanges. Professor Schwarcz’s presentation drew on his findings from a law journal article he recently co-authored (available here). The full details regarding the event, as well as a full video recording of it, are available here.

posted by James C. Capretta | 11:48 am
Tags: premium support
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More on Premium Support

I have a new column up at National Review Online on premium support and controlling health care costs:

There are many reasons to be grateful for the introduction of the Medicare “premium support” plan by Democratic senator Ron Wyden and Republican House Budget Committee chairman Paul Ryan.

In some respects, it represents an improvement over the design of previous versions of premium support. Whereas the original Ryan plan offered seniors a subsidy based on a predetermined formula, the Wyden-Ryan plan relies on competitive bidding for setting the government’s contribution rate. Competitive bidding has the potential to cut costs even more than a predetermined index, because an index tends to lock in today’s wasteful spending. Of course, Wyden-Ryan also very usefully shook up the political debate over premium support, making it much more difficult for Democrats to demonize the concept.

But perhaps the most useful byproduct of the Wyden-Ryan plan has been the clarifying effect it has had on the debate over how to slow the rise of health-care costs.

The full article is available here.

posted by James C. Capretta | 12:45 pm
Tags: Medicare reform, premium support
File As: Health Care

Premium Support in the new Medicare proposal

I have an article up at National Review Online on the new Medicare proposal:

The release of the Medicare-reform proposal cosponsored by Democratic senator Ron Wyden and GOP House Budget Committee Chairman Paul Ryan is a milestone event in the long-running struggle for sensible entitlement reform....

The Wyden-Ryan proposal has ... brought to the surface an important issue of how “premium support” is designed. The version that Ryan released in April 2011, and which passed the House as part of the GOP’s budget plan, would have given seniors a subsidy each year based on a predetermined government formula. The new version would instead set the government contribution based on bids from the competing plans, including the “public option” of traditional “fee for service” Medicare. Setting aside the public option for a moment, moving toward competitive bidding is actually an improvement over the previous version. Most analysts agree that the potential for cost-cutting in Medicare is immense. With a government-set formula for payments, there is a danger that excessive costs get locked into the payment stream. With competitive bidding, there is much greater potential for deep cost-cutting, as plans that find new ways to deliver more for less can attract enrollment with low premiums.

You can read the whole piece here.

posted by James C. Capretta | 4:26 pm
Tags: Medicare reform, premium support
File As: Health Care

The Case for Reforming Medicare with Premium Support

Over at economics21, I have a new paper on how Medicare can be reformed with a concept known as “premium support”:

To see the value of premium support as a reform concept, it is necessary to understand how Medicare works today, and especially the role that Medicare plays in today’s inefficient arrangements for delivering health care services.... The primary problem is that health care in this country is highly fragmented and uncoordinated. In the main, physicians, hospitals, clinics, labs, and pharmacies are autonomous, financially independent units. They bill separately for the services they render to patients, with very little need to coordinate with anyone else in the system. The result is an incredible level of duplication and waste, overemphasis on procedure-based medicine, as well as burdensome paperwork, excessive bureaucracy, and a lack of accountability for the all-too-frequent cases of low quality care....

Premium support provides a ... vision for how to bring about “delivery system reform.” Instead of relying on the government’s capacity to re-engineer how doctors and hospitals are organized and provide care, premium support relies on a decentralized process of consumer choice and vigorous price and quality competition among the plans providing coverage as well as among those providing services directly to patients. The idea is to give the program’s participants strong financial incentives to gravitate toward arrangements that can deliver high quality care at the lowest possible premium.

You can read the full paper here.

posted by James C. Capretta | 11:11 am
Tags: Medicare, premium support
File As: Health Care