Letter to Congressional Leadership on Premium Support

March 31, 2011

Honorable John Boehner

Speaker of the House

U.S. House of Representatives

Washington, DC 20515


Honorable Harry Reid
Majority Leader
United States Senate
Washington, DC 20510

Honorable Nancy Pelosi

Minority Leader

U.S. House of Representatives

Washington, DC 20515


Honorable Mitch McConnell
Minority Leader
United States Senate

Washington, DC 20510

Dear Speaker Boehner, Leader Pelosi, Leader Reid, and Leader McConnell:

Medicare is in serious financial trouble. Spending is growing faster than Medicare’s revenue, and there is no end in sight. This year, Medicare is expected to spend $568 billion. In ten years, spending will reach almost $1 trillion. According to the Congressional Budget Office, the hospital insurance trust fund will run out of money by 2020. Medicare is too important to allow it to fall into bankruptcy.

The budget resolution that will soon be adopted by the House of Representatives is likely to include a call for Medicare reform. The key to that reform is premium support, which can restore fiscal health to the program by promoting more efficient and effective health care for America’s seniors.

The premium support concept has long been recognized as a prudent approach to financing health and retirement programs. It is a new way of structuring the financing of Medicare benefits that gives beneficiaries more control over their health choices and spending. Medicare beneficiaries would be granted an annual subsidy that reflects the costs associated with their health status and their financial wherewithal. This premium support arrangement would reverse the incentives now in Medicare that promote wasteful spending.

Premium support would benefit seniors and taxpayers. Medicare would remain a guaranteed benefit, but seniors would be free to choose a health plan that best meets their needs. Having more control over their health care spending would encourage consumers and patients to make better health care choices. It would stimulate more innovative and accountable competition by health care providers and give them incentives to better coordinate the care of their patients. Enhanced competition could offer seniors relief from rising Medicare premiums. Just as important, this reform could begin to ease the crushing tax burden imposed by the current program on our children and grandchildren.

The concept of premium support has been endorsed by numerous experts and commissions—including a majority of the National Bipartisan Commission on the Future of Medicare, chaired by Senator John Breaux and Representative Bill Thomas in 1999, and the Bipartisan Policy Center’s Task Force on Debt Reduction, chaired by Alice Rivlin of The Brookings Institution and former Senator Pete Domenici in 2010.

We believe that policymakers should not wait any longer to address the growing fiscal crisis in this country. Responsible reform of Medicare is a major component of any plan to place the country back on a sustainable fiscal path.


[Affiliations are listed for identification only, and do not imply endorsement by the individual’s institution.]

Joseph R. Antos, Ph.D.

Wilson H. Taylor Scholar in Health Care and Retirement Policy
American Enterprise Institute

Douglas Holtz-Eakin, Ph.D.

American Action Forum

Grace-Marie Turner

Galen Institute

Mark Pauly, Ph.D.

Professor of Health Care Systems
The Wharton School, University of Pennsylvania

Benjamin Zycher, Ph.D.

Senior Fellow
Pacific Research Institute

June O’Neill, Ph.D.

Wollman Distinguished Professor of Economics
Baruch College, City University of New York

Merrill Matthews, Ph.D.

Resident Scholar
Institute for Policy Innovation

John S. Hoff

Diana Furchtgott-Roth

Director, Center for Employment Policy
Hudson Institute

Gail R. Wilensky, Ph.D.

Senior Fellow
Project HOPE

Michael A. Morrisey, Ph.D.

University of Alabama at Birmingham

Andrew G. Biggs, Ph.D.

Resident Scholar
American Enterprise Institute

Stephen T. Parente, Ph.D.

Minnesota Insurance Industry Professor of Health Finance
Professor, Department of Finance
Carlson School of Management
University of Minnesota

Paul J. Feldstein, Ph.D.

Robert Gumbiner Professor
The Paul Merage School of Business
University of California

James C. Capretta

Fellow, Economics and Ethics Program
Ethics and Public Policy Center

Thomas Campbell Jackson

Galen Institute

Thomas R. Saving, Ph.D.

Director and Jeff Montgomery Professor of Economics
Private Enterprise Research Center

Gregory Conko

Senior Fellow
Competitive Enterprise Institute

Fred L. Smith, Jr.

Competitive Enterprise Institute

David Gratzer, M.D.

Senior Fellow
Manhattan Institute for Policy Research

Roy Ramthun

HSA Consulting Services

Scott W. Atlas, M.D.

Senior Fellow, Hoover Institution
Professor and Chief, Neuroradiology
Stanford University Medical Center
Stanford University

Robert B. Helms, Ph.D.

Resident Scholar
American Enterprise Institute

Thomas P. Miller

Resident Fellow
American Enterprise Institute

Doug Badger

Senior Fellow
Center for Medicine in the Public Interest

Kevin A. Hassett, Ph.D.

Senior Fellow and Director of Economic Policy Studies
American Enterprise Institute

Michael J. O’Grady, Ph.D.

Senior Fellow
NORC at the University of Chicago

Sally C. Pipes
President and CEO
Pacific Research Institute

Tomas J. Philipson, Ph.D.
Daniel Levin Professor of Public Policy
The University of Chicago

Bryan Dowd, Ph.D.
Professor, Division of Health Policy and Management
School of Public Health
University of Minnesota

H.E. Frech III, Ph.D.
Professor of Economics
University of California, Santa Barbara

Andrew J. Rettenmaier, Ph.D.
Executive Associate Director
Private Enterprise Research Center

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