NCPA - National Center for Policy Analysis

Understanding Rep. Ryan's Plan for Medicare

April 6, 2011

House Budget Committee Chairman Paul Ryan (R-WI) says his overall objective is to convert Medicare into a premium support program for which the government will spend a specific amount for beneficiaries' care, a fundamental shift from the current fee-for-service program, reports Kaiser Health News.

What is premium support?

  • Currently, Medicare is an entitlement program, which means that the government must help finance every doctor visit and medical service that an individual needs.
  • Under a premium support system, the government would pay a percentage toward the insurance premium for each individual; there would likely be more help for low-income and sicker people.
  • Enrollees could kick in more money to get better coverage.

Is premium support anything like vouchers?

  • Ryan argues there are important distinctions, but others counter that premium support and vouchers are the same thing.
  • "I use the words interchangeably," says John Goodman, president of the National Center for Policy Analysis. "It just means that the government limits the amount of money that it puts up, and people have to add to it if market prices are higher."

What do insurers and industry analysts say about the idea?

  • It could be a boon for the industry, providing millions of new customers, but there are many questions about how the program would be structured.
  • Some of the unanswered questions include the dollar amount each enrollee would have to purchase insurance -- and how much that would rise in future years.
  • Would it go up only with general inflation, by the much higher medical inflation rate, or something in between?
  • Tying the annual increase to general inflation would save the government money, but cost consumers more.

Source: "Understanding Rep. Ryan's Plan for Medicare," Kaiser Health News, April 4, 2011.

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