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.