(The opinions expressed here are those of the author, a columnist for Reuters.)
By Mark Miller
CHICAGO (Reuters) - Imagine a Medicare reform plan that boosts your premiums 50 percent. If you like your doctor, you won't be able to keep her. The wealthy will subsidize healthcare for poor seniors.
An Obamacare takeover of Medicare? Nope. It's the latest iteration of "premium support," the plan for Medicare unveiled this week by U.S. Representative Paul Ryan (R-Wisconsin).
Ryan, who chairs the House Budget Committee, unveiled a deficit-reducing budget plan for fiscal 2015 that would give seniors vouchers to buy private insurance coverage in lieu of traditional Medicare. The plan also includes sharp cuts to Medicaid and food stamps, and repeal of the Affordable Care Act. With Democrats in control of the Senate and the White House, it has no chance of becoming law this year.
But Ryan has proposed several Medicare premium support plans since 2010, so there can be no doubt this is where Republicans will take us if they gain control of Congress and the White House. And Ryan's decision to double down (again) on this will make Medicare a midterm election issue this year. So let's do a refresher on what this brand of Medicare reform would mean for seniors.
Under Ryan's latest plan, starting in 2024, everyone turning 65 would choose between private insurance plans and traditional Medicare. Once there, they would receive a voucher from the federal government to purchase medical coverage from a private insurer in a public exchange, or to pay for traditional fee-for-service Medicare.
The exchange resembles the existing market for Medicare Advantage, the program's all-in-one managed care option, but there's a key difference: The costs of Medicare Advantage plans must track those of traditional Medicare. Under premium support, seniors would be given a fixed amount to buy insurance, and would cover any difference between the subsidy and actual cost.
Much rides on how the voucher's initial value would be set. Details on premium support circa 2014 are scant, but some earlier versions have set the initial value to equal the cost of the second-lowest-cost private plan offered in a region, or the value of the traditional Medicare plan, whichever is less. In a region where Medicare costs run high, the cost for traditional Medicare would be much higher than the private plan benchmark; anyone choosing the traditional plan would pay the difference.
Another key question is how the voucher's value would be adjusted over time. In the past, Ryan has proposed limiting the rate of growth to the rate of growth of gross domestic product per capita plus one percentage point. That number is likely to be considerably smaller than the growth of healthcare costs.
Here are my takeaways on what premium support would mean:
- Premiums jump. Traditional Medicare premiums would be 50 percent higher in 2020 than under current projections, according to the Congressional Budget Office (CBO). One reason is that younger, healthier beneficiaries would be recruited to sign up in private plans, as has been the case in Medicare Advantage. That would leave older, sicker patients in the fee-for-service program, driving up costs.
- Restricted physician choice. Private plans will restrict health provider choices; that's just a fact of life in managed care. Some seniors using Medicare Advantage learned that the hard way last fall when one of the biggest plan providers, UnitedHealthCare, dropped thousands of providers on short notice from its networks in 10 states. The move prompted an outcry from patients and doctors, and Medicare is preparing rules requiring greater advance warning. But Advantage plans always can drop providers when they can't strike deals with them on reimbursement rates, and that would be the case under premium support.
Would you be able to keep your doctor under premium support? It depends on whether she's in the network you select initially, but there's no guarantee she'll always be there.
- Rich people pay more. Ryan's plan states that "wealthy seniors would assume responsibility for a greater share of their premiums, while "lower-income seniors would receive additional assistance to help cover out-of-pocket costs." Wealthy seniors already pay plenty more for the same services everyone else receives; high-income premium surcharges kick in if you have income of $85,000 (individual filers) or $170,000 (joint filers). High-income seniors can afford to pay more, but they get nothing additional in return. That undermines Medicare's structure as a social insurance system that treats all participants equally.
It's true that Medicare expenditures will soar in the years ahead. Medicare's trustees project total annual spending will jump 78 percent by 2022, to $1.09 trillion, although much of that increase will be fueled by higher enrollment as the baby boom generation ages. The increase looks more manageable as a share of GDP: It will rise from 2.9 percent in fiscal 2014 to 4.5 percent in 2034, according to the CBO.
Medicare spending will need to be slowed further, but that is best achieved within the existing system.
Allowing Medicare to negotiate prescription drug prices directly with pharmaceutical companies would be a great start; another would be greater coordination of care provided to "dual eligibles" - the 9 million patients eligible for both Medicare and Medicaid. Typically, these are low-income patients who have multiple chronic conditions, and many go to multiple healthcare providers with little coordination of care. Many Medicare experts also think the program needs to squeeze payments to hospitals.
The alternative is a massive privatization experiment conducted on elderly Americans. Let's not go there.
For more from Mark Miller, see link.reuters.com/qyk97s
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Editing by Douglas Royalty)