The Kaiser Family Foundation released a study yesterday, entitled Transforming Medicare into a Premium Support System: Implications for Beneficiary Premiums. Democrats have jumped on the headline, “60 percent of Seniors Would Pay More for Medicare Under Romney-Ryan Voucher Plan.” Here is why that claim is false:

• This study doesn’t apply to the House Republican Budget. As the study states, “This approach is reflected in numerous proposals, such as the Domenici-Rivlin proposal, the Wyden-Ryan proposal, and Chairman Paul Ryan’s budget proposal for FY2013; however, this study should not be interpreted as an analysis of any specific proposal.” 

• The study assumes full implementation in 2010, impacting all current Medicare beneficiaries. The House Republican Budget makes no changes for 10 years, phasing in implementation starting in 2023, and makes no changes for anyone who is at least 55 years old today.  

• The study compares premium support plans with a false reality. CBO and the Medicare Trustees have already warned that the current Medicare program is going bankrupt and won’t be there for future generations without major changes to its benefit structure or huge premium increases. To compare any proposal to structurally reform the program with the current program without recognizing the future trajectory of the current program is disingenuous. 

•  This study is a purely academic exercise that examines one aspect of premium support in a vacuum— geography. It should not be used to make blanket conclusions about the entirety of the premium support model. The study analyzes the ramifications of switching from a system where all seniors pay the same Medicare premiums to a system where the value of premium support varies by geography, while ignoring numerous important variables that ultimately impact cost and coverage.

• The study claims, “The majority (59%) of Medicare beneficiaries – 25 million if fully implemented in 2010 – would be expected to pay higher Medicare premiums than they do under the current program, if they remained in the same plan.” This figure assumes current plan preferences and enrollment choices with respect to private Medicare Advantage plans versus traditional Medicare. To arrive at this number, the study assumes zero beneficiaries switch to the plan at or below benchmark, despite being dependent on the value of their premium support. The 59 percent figure quickly drops to 35 percent if only 25 percent of beneficiaries switch to the benchmark plan. In fact, the goal of switching to a premium support system is to provide financial incentives for health plans to reduce costs and for beneficiaries to choose a lower priced plan.

• As discussed on pages 9 and 18 of this study, beneficiaries’ plan choices are not purely driven by premium cost. While seniors would be guaranteed a plan that is at least the value of the traditional fee-for-service Medicare option, some beneficiaries may be willing to pay extra for more generous benefits, broader provider networks, or familiarity or satisfaction with the company offering the plan. The goal of the premium support model, however, is to encourage beneficiaries to weigh these considerations and take a more active role in managing health costs, without government mandates, to reduce costs for both beneficiaries and taxpayers. Seniors would only pay more if they wanted to.

• Perhaps most importantly, the study states that “the majority of traditional Medicare enrollees live in counties in which traditional Medicare costs are higher than the second lowest private plan bid,” validating the House Republican Budget position that private plans are more cost-efficient.

• Additionally, the study does not factor changes in out-of-pocket spending due to changes in benefit design, cost-sharing requirements and premiums for supplemental insurance. 

Staff Contact: For questions or further information contact Lisa Collins