Changing Medicare into a “Premium Support” Program Would Reduce—Not Increase—Choices for Individuals

The budget blueprint recently passed by the House proposes to redesign Medicare—the program that nearly all Americans ages 65 and older and millions of younger people with disabilities rely on for health coverage. The proposal would transform Medicare into what’s termed a “premium support” or “voucher” program. This change would have a huge impact on people with Medicare today and in the future.

Premium support would be a dramatic change from the current Medicare design. Today, if you want to enroll in traditional Medicare, you would pay the same premium for Part B (which covers doctors’ visits), and typically have no premium for Part A (which covers hospital services) regardless of where you live.  In addition, you could choose traditional Medicare or enroll in one of the private health plans (called Medicare Advantage plans) available in your location.

With premium support, however, you would instead get a specified dollar amount (or voucher) to use toward buying health coverage. You would have to choose between competing plans—which would include private health plans and traditional Medicare coverage—each with its own price. The amount you pay will be the difference between the price of the plan and the voucher, so if you choose a higher-priced plan, you would pay more than if you choose a lower-priced plan.

In addition, you would likely have fewer choices under a premium support program—and the available options would differ dramatically depending on where you live. While proponents argue that premium support would enhance opportunities for people with Medicare to choose a coverage option that matches their preferences, a new AARP-funded research report by the Urban Institute challenges this claim. As shown in the report (and AARP Public Policy Institute summary), premium support would reduce—not increase—options for individuals, compared with what they have now:

 

• Many people who prefer traditional coverage—the option that most people with Medicare choose today—would see steep increases in their premiums. As a result, many would have to either pay much more for their preferred option or choose something else.

• In some locations, the premiums for traditional Medicare would be so expensive that it would be unaffordable for most people and thus not a real option for them.

• In other places, private plans—which are now available in nearly all locations and chosen by about one-third of people with Medicare—would be more expensive than traditional Medicare. In some markets, private plans would not be able to attract enough enrollees to be successful, so individuals living in those places would no longer have this option.

 

The current combination of Medicare Advantage and traditional Medicare promotes private plan competition and offers individuals a choice of options. In contrast, premium support would place a large burden on the vulnerable Medicare population and force many people into a plan based on affordability. Under premium support, traditional Medicare’s current wide choice of physicians, hospitals, and other providers would likely only be available to higher-income people in some locations, while private plans would cease to exist in others.