Romney's plan would change Medicare fundamentally

Kaiser Health NewsNovember 9, 2011 

WASHINGTON — Mitt Romney's plan to overhaul Medicare follows a familiar Republican prescription: Use the power of the marketplace to bring down costs and improve care. Yet such a move would change the nature of the popular program fundamentally, and it treads close to a House of Representatives Republican proposal that sparked controversy earlier this year.

The GOP presidential candidate's "premium support" plan would provide a set amount of money to beneficiaries, allowing them to shop around for health coverage.

Romney has promised that beneficiaries who like the current fee-for-service plan could opt for that instead of purchasing private insurance. He also says that all plans must offer coverage at least comparable to what Medicare provides today. But by giving beneficiaries a fixed amount of money to buy that coverage, Romney's plan clearly would change Medicare's traditional program from one that pays a share of all medical bills a senior incurs.

Keeping a traditional-Medicare option helps differentiate Romney's proposal from the plan by Rep. Paul Ryan, R-Wis., that the House approved earlier this year. In that way, Romney counters critics who charged that Ryan's plan would destroy a popular program that's protected millions of seniors from ever-growing health care costs.

"When the president says, 'You're trying to get rid of Medicare,' he's (Romney's) going to say, 'No, I'm not,' " said Robert Blendon, a professor at the Harvard School of Public Health.

Polls have found that the public is split about a "premium support" model, and seniors, an important voting bloc, strongly oppose it.

Romney has given few specifics about his plan, which he announced last Friday, but analysts said that wasn't surprising. "Every time we've seen a Romney plan, it's an appetizer that hedges the details," said Tom Miller, a resident fellow at the American Enterprise Institute, a center-right research center.

Romney, a former Massachusetts governor, has said that plans would compete on a combination of premium prices and benefits, and seniors could choose either private health insurance policies or the government-run traditional Medicare plan. Enrollees could use their own money to obtain more generous benefits than the level the government's premium contribution supports. Romney's plan would give lower-income and sicker seniors more money to purchase coverage, while wealthier seniors would receive less.

The idea of limiting government spending on Medicare and offering private plans isn't new. Seniors already can choose to obtain health coverage through private Medicare Advantage plans, most of which are managed-care plans and which cover some benefits that traditional Medicare does not, including eyeglasses and hearing aids.

Enrollment in Medicare Advantage plans has grown in recent years, thanks in large part to their more generous benefit packages, but they still serve only about a quarter of Medicare's 48 million beneficiaries.

The lack of details in Romney's plan leaves an array of possible scenarios for what it might mean to seniors. It doesn't specify how much money the federal government would contribute to cover their premium costs and whether that support would rise enough each year to keep up with health care costs.

"He is exploring different options for ensuring that future seniors receive the premium support they need while also ensuring that competitive pressures encourage providers to improve quality and control cost," according to an outline of Romney's proposal.

To make traditional Medicare and private plans compete on equal footing, Medicare fee-for-service plans would have to change from standard premiums for Part B coverage for doctor bills and other outpatient services to premiums that vary from one region of the country to another, as private insurance premiums do, said James Capretta, a fellow at the Ethics and Public Policy Center, a conservative research center. "You've got to break it a little bit more into more of a region-by-region competition," he said.

Miller agreed that fee-for-service can be competitive with private plans only if it's broken into smaller, regional units. "Lump together some of the smaller states and allow them to have some operating authority," he said. If they can't operate within their budget, he said, allow them to adjust cost-sharing and establish more restrictive networks of doctors, hospitals and other medical providers.

Ron Pollack, the executive director of Families USA, a liberal consumer group, predicted that Medicare's oldest and sickest beneficiaries would be worse off under Romney's plan. With limits on the government's contributions for premiums, seniors could end up with fewer benefits for the same or higher costs, he said.

While younger, healthier seniors would move to private plans — some of which would have lower premiums than traditional Medicare plans — older and sicker people would remain with fee-for-service because it's what they're used to and they want the guarantee of comprehensive benefits even if they have to pay more for it, Pollack said.

"A defined contribution system provides little guarantee about what benefits are covered," he said. "You can't reduce spending in Medicare unless the benefits are somewhat less or the contribution provided by the government, as a percent of total costs, diminishes over time." If the government's share goes down, the beneficiary's will go up.

Joe Baker, the president of the Medicare Rights Center, a New York-based consumer advocacy group, discounts Romney's claims that having more seniors in private plans will save Medicare money. The Medicare Advantage program, he said, "has not brought down costs, so to think that there's a new version that willy-nilly by itself will bring down costs is a fantasy. . . . It's really cover for the real goal, and that is to end Medicare as we know it and by doing that, have more money come out of the pockets of consumers and save the federal government money."

A Congressional Budget Office analysis projected that under Ryan's Medicare plan, by 2030 a typical 65-year-old would be required to pay 68 percent of his or her Medicare-covered services. That compares with the 25 percent they'd pay under current law.

How much beneficiaries would have to pay under the Romney plan will depend on its details.

(Kaiser Health News is an editorially independent news service of the Kaiser Family Foundation, a nonpartisan health care policy organization that isn't affiliated with Kaiser Permanente.)

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