February 2, 2012
By Robert E. Moffit, Ph.D. and Rea S. Hederman, Jr.
The recent proposal by Representative Paul Ryan (R–WI) and Senator Ron Wyden (D–OR) showcases the growing, and bipartisan, agreement that premium support is the path forward for saving Medicare. Premium support is a financing arrangement where the government makes a defined contribution to the health plan of an enrollee’s choice. The government does this today for the vast majority of seniors enrolled in Medicare’s drug program. Adopting premium support would guarantee beneficiaries access to a wide range of health plans and providers, while reducing costly bureaucracy and red tape and controlling costs. The Heritage Foundation has also outlined such an approach in Saving The American Dream and has already spelled out the details crucial to make such a reform work.
Medicare premium support sharply contrasts with President Obama’s approach, which relies almost exclusively on huge Medicare payment reductions to finance other entitlement expansions, creates a powerful Independent Payment Advisory Board (IPAB) to make further detailed and specific payment cuts, and imposes new layers of red tape on doctors and other medical professionals. Indeed, the Administration’s Medicare payment reductions will drive Medicare payment levels down below Medicaid levels, thus guaranteeing seniors problems in accessing care.
Key Features of Reform
Virtually all major Medicare premium support proposals include certain key features. To make such a reform work, Congress would have to take certain practical steps, such as:
Premium Support Is the Best Option
As a direct result of the “Affordable Care Act,” Medicare “as we know it” has already ended. Medicare patients face reduced access to care, which will be increasingly rationed through relentless payment cuts. Key decisions will be made by an unelected board—the Independent Payment Advisory Board—which will determine specific payments Medicare providers receive and under what circumstances. The Center for Medicare and Medicaid Innovation is tasked with shifting traditional Medicare from fee-for-service into new payment and delivery models that are to be imposed in top-down fashion. Meanwhile, the bureaucracy will metastasize, and doctors and hospitals will face more reams of costly rules and red tape.
Medicare premium support, long a bipartisan proposal, is the best alternative to this unhappy scenario. Premium support would guarantee better choices and broader access to quality care, faster innovation in care delivery, less waste and fraud in medical transactions, and superior cost control. For the next generation of taxpayers and retirees, there is no better option than premium support.
Robert E. Moffit, Ph.D.
, is Senior Fellow in the Center for Policy Innovation and Rea S. Hederman, Jr., is Assistant Director of and Research Fellow in the Center for Data Analysis at The Heritage Foundation.
Show references in this report
Senator Ron Wyden (D–OR) and Representative Paul Ryan (R–WI), “Guaranteed Choices to Strengthen Medicare and Health Security for All: Bipartisan Options for the Future,” at http://budget.house.gov/UploadedFiles/WydenRyan.pdf (February 1, 2012). Ryan had an earlier premium support provision that was enacted in the House of Representatives as part of the budget. See House Budget Committee Fiscal Year 2012 Budget Resolution, “The Path to Prosperity: Restoring America’s Promise,” April 5, 2011, at http://budget.house.gov/uploadedfiles/PathtoProsperityFY2012.pdf (February 1, 2012).
See Stuart M. Butler, Alison Acosta Fraser, and William W. Beach (eds), Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity, The Heritage Foundation, 2011, at http://savingthedream.org/. For the details of the Heritage premium support proposal, see Robert E. Moffit, “The Second Stage of Medicare Reform: Moving to a Premium Support Program,” Heritage Foundation Backgrounder No. 2626, November 28, 2011, at http://www.heritage.org/research/reports/2011/11/the-second-stage-of-medicare-reform-moving-to-a-premium-support-program.
Moffit, “The Second Stage of Medicare Reform: Moving to a Premium Support Program,” p. 5.
James C. Capretta, “The Case for Competition in Medicare,” Heritage Foundation Backgrounder No. 2605, September 12, 2011, at http://www.heritage.org/research/reports/2011/09/the-case-for-competition-in-medicare.
Alison Acosta Fraser, “How to Fix the Federal Budget,” Heritage Foundation WebMemo No. 3174, March 1, 2011, at http://www.heritage.org/research/reports/2011/03/how-to-fix-the-federal-budget.
Robert E. Moffit, Ph.D.
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Rea S. Hederman, Jr.
Director, Center for Data Analysis and Lazof Family Fellow
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