New Idea for Medicare Reformation: Premium Support

There are currently two federal financial plans that are gaining support from Washington insiders and policy wonks, both addressing rising Medicare costs through premium support. The Wyden-Ryan plan’s approach to premium support has gotten more media coverage than the comparable Domenici-Rivlin plan, but both fundamentally change the current fee-for-service Medicare payment model to a capped premium support model that gives seniors a set amount of money to purchase their own insurance. Due to increased discussions about health reform and the fiscal crisis, the idea of capping payments to seniors while giving them autonomy to choose their own health care plan appeals to many who see that Medicare’s status quo is unsustainable.

The current structural idea behind premium support is that the country would be divided into geographic regions that have similar populations, insurance plans and prices. Then, the government would specify a set of minimum services that all insurance providers have to cover for consistency, but allow companies to vary plan coverage and prices for anything above and beyond those mandatory services. The amount of premium support given to individuals would then be based on the regional area norms, additionally accounting for health status and age.

There are, however, some who worry that the plans encouraging premium support do not have enough language on how insurance companies and plans would be regulated. Further, these critics assert that consumers are not always as informed as we would hope about their health care needs. These concerns are relevant and valid; thankfully the criticism thus far has been directed at the specifics of a premium support plan, not the idea in itself. Therefore, as long as respected economists and academics are having positive discussions about premium support models, policymakers need to consider this as a viable alternative to the current fee-for-service payment structure that is clearly not working.