Converting Medicare into a voucher program modelled on the plan Mitt Romney and Paul Ryan have proposed would increase premiums for the majority of seniors, even ones who choose to remain in traditional Medicare, according to a comprehensive nonpartisan study (PDF) released Monday.
The Kaiser Family Foundation delved into the likely impact of transforming Medicare into a “premium support” system. Under that approach, the federal government would provide seniors a subsidy to shop for insurance plans from a menu of competing private plans and traditional Medicare. That subsidy would be capped at the value of the second least costly premium in the marketplace.
Using 2010 data as a model, Kaiser’s study found that among seniors who chose to remain in traditional Medicare, more than half would have paid higher premiums. Just under half would have paid the same. That would’ve yielded an average premium hike of $720 annually for seniors who chose to remain in traditional Medicare.
Among seniors with private Medicare Advantage plans, 88 per cent would have paid higher premiums unless they switched to a cheaper plan with less generous benefits. On average, seniors already in private plans would have paid $1,044 more annually, according to the study.
Taken together, 59 per cent of Medicare beneficiaries would have ended up paying higher premiums than they do in the current system if they remained in their current plan.
The caveats: the report makes clear that it’s not a perfect analysis of the Romney-Ryan plan. That’s in part because the Romney-Ryan would take effect in 2023, whereas Kaiser’s report studies the impact of such a plan taking effect in 2010. It’s also because Romney and Ryan haven’t provided enough details to conduct a truly thoroughgoing analysis.
The Romney campaign quickly moved to dismiss the significance of the study.
“As the authors stress, this is not a study of the Romney-Ryan plan,” Romney spokeswoman Andrea Saul told TPM. “Our plan would always provide future beneficiaries guaranteed coverage options with no increase in out-of-pocket costs from today’s Medicare.”
The study nevertheless concludes that, taking a broadly similar approach, the majority of seniors would have paid higher premiums in 2010 than they did under Medicare in its existing form.
Kaiser used Medicare Advantage bids for the year 2010 as proxies for private plan bids under a premium support system.
The study found that if one in four seniors responded to the programmatic changes by switching into cheaper plans the share that face higher premiums would fall from 59 per cent to 35 per cent.
Costs would vary considerably across regions, as would the share of seniors subjected to higher premiums — populous states would be most affected, with seniors in Florida taking the greatest hit, the Kaiser study found.
Two final key caveats: First, the Kaiser study does not project the longer-term implications for traditional Medicare. Many analysts warn that over time, sicker and older patients would choose traditional Medicare over private plans as private insurers tailored their plans to younger, healthier beneficiaries. Without strict rules and adequate risk adjustment, this would put traditional Medicare premiums on a “death spiral” and the public plan would collapse.
Second, the Kaiser study looks at a single year, and does not model the impact of a Medicare spending cap. That’s not necessarily the case under the Ryan plan, which limits premium growth at GDP plus 0.5 per cent a year. In other words, if the second-cheapest bid in any region exceeds that in a given year, the voucher would be limited to GDP + 0.5, likely leaving seniors to pay the difference on their own.
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