By Jane Norman, CQ HealthBeat Associate Editor
October 15, 2012 -- A market-based, privatized Medicare system is at the heart of the presidential candidates' battle over the system's future, and a recent Kaiser Family Foundation study bolstered Democrats' contention that shifting to premium support would mean higher costs for many seniors.
But Republicans pushed back hard, saying that the nonpartisan study by one of the nation's most respected health research organizations was little more than an academic exercise injected into the ongoing debate. Republicans also said that the analysis didn't make any attempt to quantify how much budget savings there would be and how Medicare's projected insolvency would be forestalled if a premium support system were adopted.
The Obama campaign in turn highlighted the study in a blog post on its campaign website, saying that "it's long been clear that Mitt Romney's plan to turn Medicare into a voucher program would have devastating consequences."
The Kaiser study, by Gretchen Jacobson, Tricia Neuman and Anthony Damico, found that six out of 10 Medicare enrollees would pay higher premiums on average for the same Medicare benefits they now have. That would include more than half of those signed up for traditional fee-for-service Medicare and nearly 90 percent of those in a Medicare Advantage private plan.
In addition, Medicare premiums would vary widely depending on where seniors live, assuming they kept the same plans they now have. In five states—California, Michigan, New Jersey, Nevada and New York—enrollees would pay $100 to $199 a month more for traditional Medicare because Medicare spending per enrollee is higher in those states. While beneficiaries in traditional Medicare all pay the same premium, what the system spends on them varies. In Florida, Medicare beneficiaries would pay an additional $200 per month than they pay now if their wanted to stay with their current plans, the study found.
A separate poll indicated that higher Medicare premiums or cost sharing are not popular. A new survey by the Pew Research Center said that 57 percent of Americans disapprove of making people on Medicare contribute more for their health care costs, though that was down from the 64 percent disapproval found for the same option in a 2010 survey.
Foundation analysts stressed that they were not trying to model any specific proposal in looking at how much premiums would rise if seniors received a set payment for their care to use for a private plan or traditional Medicare. That would require more detail than the Republican presidential candidate has disclosed so far in his advocacy of a premium support plan as well as assumptions about future demographics, spending and enrollment, the Kaiser authors said.
Another big difference is that the Kaiser study used data on current seniors, while Romney specifically says his plan would not affect anyone now 55 or older and wouldn't launch until 2023. Any new plan also likely would be phased in rather than implemented all at once.
But the study did say that the plan would be "similar" to the fiscal year 2013 proposal advocated by House Budget Committee Chairman Paul D. Ryan of Wisconsin, the GOP nominee for vice president.
"This analysis, therefore, should be viewed as a device for illustrating the potential effects of a fully implemented premium support system for Medicare beneficiaries, based on an approach to premium support put forward by several policy makers," the authors said.
Government Payments Tied to Benchmarks
Under the analysis, built on plan choices made by beneficiaries in 2010, federal payments to seniors would be tied to the second-lowest-cost Medicare Advantage plan offered in a geographic area or tied to traditional Medicare, whichever cost less. That plan would be considered the benchmark for payments. If a senior wanted a plan that cost more than the benchmark, he or she would have to pay more.
In addition, the analysis used 2010 Medicare expenditures by county and the 2010 costs of proving Medicare through private Medicare Advantage plans. Medicare Advantage receives a capitated amount of money from the Centers for Medicare and Medicaid Services to provide all Part A and Part B benefits, while government payments in traditional Medicare are simply tied to provided services.
And the analysis also assumed that in order to better compete, private plans would lower their bids by 5 percent across the board.
In 2010, about 25 percent of beneficiaries, or 11 million men and women, were enrolled in Medicare Advantage, though the share of people by county varied widely. In some places as few as 10 percent of enrollees opted for the private plan while in other areas it was as much as 50 percent.
The analysis found that 59 percent of Medicare beneficiaries, or 25 million people based on 2010 figures, would pay more than they do now for the same plan. That's because their set government payment would be tied to the benchmark and the benchmark would not be as generous as their current benefits, whether through a private plan or traditional Medicare.
The remainder of beneficiaries would pay the same amount or less, the study said.
Among those in traditional Medicare who opted to stay in traditional Medicare, they'd pay, on average, $60 a month more in additional premiums. And among those in private plans who wanted to stay in the same plan, they'd pay $87 a month more.
However, Chris Jacobs, senior policy analyst on the Senate Republican staff for the Joint Economic Committee, said in a critique of the Kaiser study that many changes have taken place in Medicare Advantage since 2010, including the first phases of cost reductions mandated by the health care law (PL 111-148, PL 111-152).
In addition, Jacobs said, the study doesn't explain the real problems with geographic disparities in Medicare in the current system and instead seems to attribute those problems to the premium support idea. Seniors in low-cost states like Wisconsin now pay the same Part B premiums as seniors in high-cost states like Florida, thus subsidizing higher spending in the Sunshine State, he said. That's really an argument against the status quo in traditional Medicare in which high-cost areas for too long have enjoyed a subsidy from lower-cost states, Jacobs said.
Democrats, however, said that the study showed that unless a senior in Miami paid thousands in additional costs, that senior would be forced into a new private plan that limited choice among doctors, unlike traditional Medicare. That means that the Romney plan could mean people with complex, chronic health needs lose access to their current doctors. Plus, the study just looked at the impact of premium support in a single year and didn't figure in the effect of a cap on the growth of the payments allocated to seniors, Democrats said.