By Joanne Kenen
“Premium support” is one of those quintessential Washington phrases. What on earth does it mean?
It’s in the news now because House Budget chairman Paul Ryan wants to turn Medicare into a “premium support” program. It’s not a totally new idea – House Republicans, including former Speaker Newt Gingrich and former House Ways and Means chairman Bill Thomas, had somewhat similar ideas that began circulating in the mid-1990s. But the Ryan idea is starker – or bolder, depending on your perspective.
Basically premium support is like a coupon or voucher. Instead of having a federal Medicare program pay your doctors and hospitals, etc. – drawing on tax revenue and the premiums beneficiaries pay – people on Medicare would get a voucher. Ryan shuns the word “voucher” because Medicare would make the payment directly to the health plan chosen by the individual, it wouldn’t be handed over to the individual. He prefers the word subsidy.
The voucher, or subsidy, would go up in value each year – but not as fast as health care costs rise. Critics say this means that the federal government will save money but the elderly and the disabled will pay more and more each year. Ryan says it will mean cost savings; his critics say it means cost-shifting to a relatively poor slice of the population that can’t bear the cost.
To use ridiculously simple math (and the growth rates here aren’t going to be exactly right, we’re being very simple) .Say your health policy at work cost $10. Your employer pays $3, you pay $7. The next year, let’s say it costs $11. Your employer pays $3.30. You pay 7.70. Each year, the gap widens.
Medicare would start at age 67, not 65. That idea has been debated and not just by the far right; life expectancy is much higher than when Medicare began in 1965 and the program has severe fiscal challenges. But remember that people in their late 50s and early 60s – the pre-Medicare population – already have a lot of trouble getting health coverage and have high health costs. One idea that has circulated (though I don’t think it has all that much traction at this time) is to raise the Medicare age gradually, once the state-based insurance exchanges and related subsidies are up and running. People might have to wait two more years for Medicare, but they would have another way of getting health insurance during those years, with subsidies if they qualify.
But Ryan’s budget would repeal most of health care – repeal the state exchanges, repeal the subsidies, repeal the mandates. A good number of those aged 65-67 would not be insured, or would be paying exorbitant amounts for insurance that may not be very good.
Plans accepting those vouchers and covering Medicare-age people would have to meet some requirements and government regulations under Ryan’s plan.
Here are some resources to learn more:
Ryan’s ” Path to Prosperity Plan. Health policy is scattered through the document, but the main Medicare section is pages 44-47. Don’t expect to find all the details you may be looking for – they aren’t there.
The Democratic Senate’s budgeteers responded skeptically.. Keep in mind that the Democratic committee chair Sen. Kent Conrad of North Dakota is quite the deficit hawk. But he disagrees strongly with Ryan’s approach, in multiple ways.
The Congressional Budget Office was critical. This link will take you to a summary, and from there you can access the full report, a more accessible director’s blog post and a Q&A.
Kaiser Health News did a useful overview, Understanding Rep. Ryan’s Plan For Medicare
If you want to skim some history on earlier versions of premium support, here’s a booklet that came out of an Urban Institute conference in 1999.
And of course, for the 180 view, here’s the Heritage Foundation’s website.
Joanne Kenen is AHCJ’s Health Policy topic leader. She is writing blog posts, tip sheets, articles and gathering resources to help our members cover the complex implementation of Health Policy. If you have questions or suggestions for future resources on the topic, please send them to joanne@healthjournalism.org.
