Voucher Plan

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Voucher Program Could Raise Medicare Premiums Across Country

If the program had existed in 2010, Californians would have paid in excess of $100 more per month, study finds

By Jordan Rau, Kaiser Health News

The type of proposal championed by Republicans to overhaul Medicare by giving beneficiaries a fixed amount of money to purchase insurance could lead to significant increases in premium costs in some parts of the country, according to a new study.

If the plan had been in place in 2010, six in 10 Medicare beneficiaries—about 25 million people both in traditional Medicare and in private Medicare Advantage plans —would have faced higher premiums if they didn’t switch to a cheaper plan, according to researchers at the Kaiser Family Foundation. (The foundation is not affiliated with Kaiser Permanente).

The study modeled the impact of a generic version of premium support, under which beneficiaries would receive a defined subsidy, or voucher, to buy health insurance in a competitive market instead of getting a guaranteed set of benefits as Medicare has traditionally provided. That payment would be tied to the second lowest cost plan offered in an area or traditional Medicare, whichever is lower. This kind of a change is a central part of the House Republican budget written by Rep. Paul Ryan of Wisconsin, now the GOP’s vice-presidential candidate, and it has also been embraced by GOP presidential nominee Mitt Romney. Even a few Democrats have flirted with such a plan as a way to leverage market efficiency to rein in the spiraling cost of Medicare.

The new study estimated how the plan would have worked in 2010 by looking at the cost of traditional Medicare and private Medicare Advantage plans around the country. The study’s authors emphasized that their model was not an exact replica of any existing proposal for a variety of reasons, including that most plans, among them Ryan’s, wouldn’t phase in for a decade and even then would affect only new Medicare beneficiaries.

The study found that 59 percent of Medicare beneficiaries would have paid higher premiums in 2010 unless they shifted into a cheaper plan. In California, Michigan, New Jersey, Nevada and New York, average extra premiums would exceed $100 a month, and in Florida they would exceed $200 a month, the study calculated. Continue reading