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MedPAC Sidles into Debate over Premium Support

By John Reichard, CQ HealthBeat Editor

September 7, 2012 -- The key group that Congress relies on for advice on Medicare policy has begun moving cautiously into the politically charged debate over "premium support," the GOP-backed overhaul strategy that Democrats are doing their best to derail by calling it "vouchercare."

The Medicare Payment Advisory Commission (MedPAC) can hardly ignore the issue. After all, President Obama is facing a troubled economy and may not be re-elected. And his presidential rival, Republican nominee Mitt Romney, is all in when it comes to premium support, which would give seniors a limited amount of money each year with which to shop for health insurance from a menu of options.

If lawmakers decide to convert Medicare to such a system, they'll be relying heavily on MedPAC for technical policy advice. And MedPAC hasn't really addressed premium support before.

That changed late last week—only the commission isn't using the term "premium support." Instead, it's referring to "competitively determined plan contributions." MedPAC Chairman Glenn Hackbarth explained that he's avoiding the term because he wants to start "with a blank sheet of paper so that we can structure the conversation in a way that we think makes sense to us."

Existing premium-support proposals "are already ideas that have content attached to them," he said. "What I want to do is free us from those already existing ideas."

Hackbarth observed that MedPAC has long endorsed the idea of giving seniors a private plan alternative to the traditional fee-for-service Medicare program.

The private plan alternatives that exist now in Medicare, called Medicare Advantage plans, are paid based on "administered pricing," he noted.

Payments to those plans are based on average per capita costs in traditional Medicare, which decides on its own what rates it will pay providers for health care services rather than relying on market forces to determine what it wants to pay.

But another way to decide how much the government contributes financially to plans is to have them bid competitively on how much they'll charge to provide Medicare benefits, hence the term "competitively determined plan contributions," or CPCs. Hackbarth said he's under no illusions that the term will spread beyond MedPAC. "I'm not trying to cast a new label that the world is going to latch on to," he said.

MedPAC staffer Julie Lee presented commission members with various design issues to consider in developing their take on what the outside world calls premium support or vouchers. For example, should seniors be offered a standard benefits package, or should plans be allowed to vary benefits? Should the federal contribution vary locally or be the same nationally?

Should the federal contribution be based only on an average of what the private plans bid, or should the costs of the traditional Medicare fee-for-service program be included in determining the average bid used to set the government's financial contribution? Doing so would lead to a lower average bid in geographic areas where Medicare beneficiaries make relatively little use of medical services, Lee noted. But the average would be higher in parts of the country where beneficiaries use more health care.

How such design questions are answered will determine how much of the premium the government will pay on behalf of beneficiaries and the willingness of plans to compete in different parts of the country, so MedPAC has much to ponder. MedPAC staff is expected to do research to help commissioners weigh the merits of the different design options. Hackbarth didn't mention a specific timetable for developing panel recommendations, if any. But the commission clearly wants to start getting ready if it's called on to provide more detailed advice.

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