Health Affairs

Premium Support In Medicare

Bethesda, MD -- A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation examines an approach for restructuring Medicare known as premium support. The concept means that the federal government would make a predetermined annual payment on behalf of each Medicare enrollee to the health plan of his or her choice--thus, "support" toward the annual "premium."

As the brief explains, the general idea is to stabilize government spending on Medicare, in contrast to the open-ended spending on the traditional Medicare program. An additional goal is to foster competition among private health plans to cover Medicare beneficiaries and innovate in the quality of care provided and in lowering costs.

Premium support is a key part of several deficit budget plans, including those offered by House Budget Committee Chair Paul Ryan (R-WI) and Sen. Ron Wyden (D-OR) as well as by former White House budget director Alice Rivlin and former Senate Budget Committee Chair Pete Domenici (R-NM), among others. Proponents believe restructuring Medicare this way would be an important move toward fiscal responsibility. Critics of premium support proposals fear that over time, more and more of the costs of health care would be shifted onto Medicare beneficiaries.

The health policy brief provides additional information and perspective, as follows:

• Aspects of the various plans being considered. Current premium support proposals differ in several ways, including how they preserve (or phase out) the traditional Medicare program; how the government sets the amount of its contributions; and the role, if any, that traditional Medicare would play in a system of premium support.
  
  
• The impact on federal spending. Various estimates are that premium support plans could reduce federal spending on Medicare by up to 11 percent by 2030.
  
  
• The impact on beneficiaries. The brief details the views of premium support proponents that Medicare enrollees would have more options for coverage through a variety of health plans. At the same time, it also explores the views of critics of premium support, who fear cost shifts to beneficiaries as described above.
  
  
• Next steps. As the brief explains, Medicare is likely to remain a focal point in efforts to address the federal budget deficit. With Congress and the administration in the midst of an election season, serious plans to reform Medicare may have to wait until the next Congress. The election results may also affect whatever Medicare reforms are enacted in the next few years.

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically and health policy briefs published twice monthly at www.healthaffairs.org. Read daily perspectives on Health Affairs Blog. Download weekly Narrative Matters podcasts on iTunes.