Nearly six out of ten seniors on Medicare would have paid higher out-of-pocket costs for insurance had the government adopted the premium support plan offered last year by Rep. Paul Ryan (R-Wis.) and endorsed by Republican nominee Mitt Romney, a new study shows.
The Kaiser Family Foundation used the third and most generous premium-support proposal offered by the Republican Party’s vice presidential candidate, which was co-authored by Sen. Ron Wyden (D-Ore.). Under premium support, the government gives seniors a fixed amount of cash to buy insurance policies on the private market.
“The general idea is for the federal government to make a predetermined contribution on behalf of each person on Medicare that would be applied toward the premium for a health insurance plan,” according to the study. “This approach contrasts with the current Medicare program, under which Medicare beneficiaries are entitled to a defined set of benefits, with the federal government contributing to the cost of these services, provided by either the traditional fee-for-service (FFS) program or Medicare Advantage plans.”
The analysis showed that premium support would have far different results in different parts of the country, with some areas seeing sharply higher rates for most seniors, while others would have similar or even lower rates. In 29 states and the District of Columbia, less than 15 percent of beneficiaries would pay $100 or more in additional monthly premiums. But in states like California, Florida, New Jersey and Connecticut, which have higher costs than other parts of the country, the figure was much different: More than 45 percent of beneficiaries would pay at least $100 more in Medicare monthly premiums than they do now.
Medicare beneficiaries under the Ryan-Wyden plan would have the option of remaining in traditional Medicare – but its premiums would rise, too, under the plan because payments per beneficiary would be capped, the study said. Among beneficiaries in the traditional Medicare program, 53 percent, or 18.5 million beneficiaries, would pay on average an additional $60 per month, or $720 a year in higher premiums. The rest would pay about the same.
People who are already in private insurance plans for their Medicare coverage – the so-called Medicare Advantage plans – would also see their premiums rise under premium support, the study said. Eight of every nine beneficiaries in private plans would pay on average an additional $1,044 a year in a premium support system. “This is because the vast majority of private plan enrollees are enrolled in a plan in which the plan’s bid is higher than the benchmark plan in their area,” the study said.
The study also concluded: “Proposals to transform Medicare from its current structure to one based on premium supports can be expected to directly affect costs incurred by beneficiaries, with the effects dependent on numerous factors, including policy specifications, geography, local market conditions, firm strategy and beneficiary choices in this new environment. Increases in Medicare premiums under a premium support system could be tempered by modifications in policy parameters, but the tradeoff would likely mean increases in federal costs, which could undermine the primary goal of a premium support approach.”