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NYT: Medicare Premium Support Is Gaining Traction

2:37 PM, Nov 28, 2011 • By JEFFREY H. ANDERSON
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Remember those ads with a Paul Ryan-lookalike rolling granny’s wheelchair off a cliff? Well, just a few short months later, the New York Times writes

Obama doctors

“Though it reached no agreement, the special Congressional committee on deficit reduction built a case for major structural changes in Medicare that would limit the government’s open-ended financial commitment to the program, lawmakers and health policy experts say.

“Members of both parties told the panel that Medicare should offer a fixed amount of money to each beneficiary to buy coverage from competing private plans, whose costs and benefits would be tightly regulated by the government.

“The idea is sometimes known as premium support, because Medicare would subsidize premiums charged by private insurers that care for beneficiaries under contract with the government….

“Alice M. Rivlin, who was budget director for President Bill Clinton, had urged the deficit panel to establish an insurance exchange for Medicare beneficiaries. Private plans would compete with the traditional Medicare program and would have to provide at least the same benefits. The federal contribution in each region would be based on the cost of the second-cheapest option, whether that was a private plan or traditional Medicare.”

The Times adds, “Competition among private insurers has already driven down costs for prescription drug coverage under Medicare. Medicare’s drug benefit is delivered entirely by private insurers. In addition, one-fourth of the 48 million Medicare beneficiaries are in private Medicare Advantage plans….”

Meanwhile, President Obama is moving in the opposite direction.  The Times notes that Obamacare “is cutting payments to Medicare Advantage plans.” And rather than reforming Medicare and making it a premium support system, which would give seniors a choice of plans and bring down costs through increased competition, the Times notes that Obama “is counting on a new agency, the Independent Payment Advisory Board, to ensure a sharp reduction in the growth of Medicare spending per beneficiary.” 

Obligatorily, the Times does try to defend Obamacare, saying that it too would implement a premium support model. But Yuval Levin (read his excellent Medicare premium support proposal here), shreds this:

“[R]ather than acknowledge that the fact that such reforms are needed is proof that no one seriously expects the supposed Medicare reforms in Obamacare (like the IPAB and its price controls) to work, the Times parrots the line tried out by various defenders of Obamacare in the past year, that Obamacare would actually move the under-65 market to something like a premium-support system, so its logic is the same as a premium-support reform of Medicare. This ignores the fact that Ryan’s Medicare reform would transform Medicare — which is currently a purely government-run single-payer fee-for-service insurer — into at least something of a competitive market among private insurers while Obamacare would transform our existing private market (in which competition is already severely constrained and distorted by a variety of federally imposed flaws and inefficiencies) into an even more heavily regulated and less competitive market, while leaving in place Medicare’s fee-for-service system, which is responsible for so much of the inefficiency in our entire health sector. In other words, Ryan would move the entire sector in the direction of more private competition than exists today while Obamacare would move the entire sector in the direction of less private competition than exists today. The fact that both might use something called premium-support, but in very different parts of the system and for very different purposes, can hardly mask this utterly fundamental difference.”

It’s good to see that, even if President Obama won’t get serious about Medicare reform or deficit spending writ large, at least a few member of his party are starting to do so.  Levin adds, “[T]his is, among other things, evidence of the extraordinary influence that the Ryan proposal has had on our politics in just a few short months. It is evidence, in other words, that in these times of trouble, political courage in the cause of serious reforms to get us beyond the liberal welfare state can pay off.”

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