Plan competition and consumer choice in Medicare: The case for premium support

Doctor by Shutterstock.com

Article Highlights

  • Medicare program enrollment expected to increase by about 70 percent by 2035.

    Tweet This

  • Medicare needs better spending, not more spending.

    Tweet This

  • Market competition in Medicare could reduce unnecessary spending and give consumers choice.

    Tweet This

Subscribe to AEI's health emails
Articles and events on health policy. Published approximately twice a month.

First Name:
Last Name:
Email:
Zip Code:

Premium Support—Replace Medicare’s current defined-benefit system with a defined-contribution approach that provides a fixed subsidy to cover the cost of enrolling in an available health plan. Beneficiaries would receive a government contribution to purchase coverage and then be responsible for any extra premium. This reform incorporates competitive bidding and expands on it to include features such as a capped subsidy that is adjusted according to the health risk of the beneficiary.
 
The author maintains that traditional Medicare’s uncapped subsidy and reliance on fee-for-service payment promotes more spending on health services, not better spending. Legislation to reduce program cost has focused on reducing the prices paid for services. However, Congress has overridden cuts in physician fees called for by the sustainable growth-rate formula and is unlikely to enforce large payment reductions called for in the Affordable Care Act. The author argues that market competition can reduce unnecessary spending and still allow beneficiaries to select more expensive plans if they choose.

The challenge is to follow a path to reform that “does not require unsustainable political discipline” to be implemented. The author suggests a phased-in approach to premium support that would allow health care providers to adapt to the new system. He also suggests other reforms for traditional Medicare, which likely would remain competitive as a low-cost option in many markets. He concludes that plan competition and consumer choice can be effective in promoting high-quality care at an affordable price.

Other papers in this series:

The role of Medicare fee-for-service in inefficient health care delivery, by James C. Capretta
A competitive bidding approach to Medicare reform, by Roger Feldman, Bryan Dowd, and Robert Coulam

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Joseph
Antos

What's new on AEI

Retirement crisis is hyped
image Why the Foley beheading will force Obama to continue US airstrikes
image How the New York Times misguides their readers on Internet regulation
image US still has time to stake out a position of strength on Ukraine
AEI on Facebook
Events Calendar
  • 18
    MON
  • 19
    TUE
  • 20
    WED
  • 21
    THU
  • 22
    FRI
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.