Premium Support Will Be Good for Seniors

House Budget Committee chairman Paul Ryan is working to save Medicare with his proposal to begin modernizing the program through premium support.

Joseph A. Antos of the American Enterprise Institute took the lead in developing a letter sent to congressional leaders last week endorsing this concept, and the letter was signed by 30 of our colleagues in the policy community.

The key message: “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.”

Premium support “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,” the letter explained.

It’s essential that we get on a new path to a more efficient design for Medicare that doesn’t continue to rely on an antiquated model of government officials making decisions about what benefits will or will not be available to seniors and what providers will be paid through a web of regulations and price controls.

The concept of premium assistance was endorsed in the 1990s by a majority of the members of the National Bipartisan Commission on the Future of Medicare and last year by the Bipartisan Policy Center’s Task Force on Debt Reduction.

Opponents of the proposal have charged that Ryan is planning to voucherize Medicare.  But that shows a misunderstanding of the proposal. In contrast with vouchers, premium support allows for more flexible subsidies that can be adjusted and targeted to seniors based upon financial status, age, health status, or other considerations.

Moving Medicare toward sustainability means modernizing the program. And that means giving seniors more choices in a market competing for their business, as Part D has successfully done in a program that is popular and that also is saving taxpayers money.

Premium support is a path to save Medicare over the long term without increasing taxes or further increasing deficit spending as it continues to chase an unsustainable fee-for-service model.  

We can choose rationing, higher taxes, and more deficit spending — or 21st-century reforms such as premium support that put Medicare and seniors on a better path. There will be a choice.

Published in National Review Online: Critical Condition, April 5, 2011.

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