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

Making Ryan's tax plan smarter
image The teacher evaluation confronts the future
image How to reform the US immigration system
image Inversion hysteria
AEI on Facebook
Events Calendar
  • 01
    MON
  • 02
    TUE
  • 03
    WED
  • 04
    THU
  • 05
    FRI
Wednesday, September 03, 2014 | 9:00 a.m. – 10:30 a.m.
From anarchy to Augustus: Lessons on dealing with disorder, from Rome’s first emperor

We invite you to join us for two panel discussions on how Augustus created order from chaos 2,000 years ago, and what makes for durable domestic and international political systems in the 21st century.

Wednesday, September 03, 2014 | 12:00 p.m. – 1:30 p.m.
Multiple choice: Expanding opportunity through innovation in K–12 education

Please join us for a book launch event and panel discussion about how a marketplace of education options can help today's students succeed in tomorrow's economy. Attendees will receive a complimentary copy of the featured book.

Thursday, September 04, 2014 | 12:00 p.m. – 1:30 p.m.
How conservatives can save the safety net

Please join us for a luncheon event in which our panel will discuss what conservatives can learn from how liberals talk and think about the safety net and where free-market economics, federalism, and social responsibility intersect to lift people out of poverty.

No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.