Study: Privatized Medicare would raise premiums
WASHINGTON (AP) – Nearly six in 10 Medicare recipients would pay higher premiums under a hypothetical privatized system, with wide regional differences leading to big hikes in some states and counties, a study released Monday finds.
The report by the nonpartisan Kaiser Family Foundation immediately became fodder for the presidential campaign. Republican Mitt Romney and his running mate, Wisconsin congressman Paul Ryan, have proposed changing Medicare from an open-ended benefit program to a system dominated by private plans that are paid a fixed amount by the government. President Barack Obama says that would shift costs to seniors.
The Medicare change would mirror the difference between traditional workplace pensions and modern-day 401(k) plans, in which the employer contribution is limited. While financing Medicare would become less of a challenge for taxpayers under Romney’s “premium support” approach, the risk is that retirees could end up paying more if medical costs rise unchecked.
In the senior-rich political swing state of Florida, the hypothetical plan modeled by Kaiser would boost premiums for traditional Medicare by more than $200 a month on average. In Nevada, another competitive state, 50 percent of seniors would face additional monthly premiums of $100 or more. That’s part of a new pattern of regional disparities that would emerge from overhauling Medicare’s payment system, the report said.
The study carried a prominent disclaimer that it should not be taken as an analysis of the Romney-Ryan proposal, partly because their plan lacks specifics. However, Kaiser says the approach it modeled is similar to what Romney and Ryan propose.
Like the Romney-Ryan plan, government health insurance payments for individual seniors would be tied to the cost of the second-lowest private insurance plan in their geographical area, or traditional Medicare, whichever is less expensive. Seniors could pick a private plan or a new public program modeled on traditional Medicare. But if their pick costs more than the government payment, they would have to pay the difference themselves.
One of the biggest differences, however, is that the report assumes the privatization plan is already implemented. Under Romney-Ryan, current beneficiaries and those 10 years from retirement could stay in the traditional system. But the Kaiser study assumed the change has already taken place, and all Medicare recipients are already in the new system.
The study also did not model the effects of additional financial help that Romney has promised for low-income seniors and those in frail health, because details have not been filled in.
The Obama campaign pounced on the findings, while the Romney camp pointed to the disclaimer, saying the report does not reflect the candidate’s own plan.
“As the authors stress, this is not a study of the Romney-Ryan plan,” said Romney spokeswoman Andrea Saul. “Our plan would always provide future beneficiaries guaranteed coverage options with no increase in out-of-pocket costs from today’s Medicare.”
The Obama campaign posted a link to the study on its website. “Under Romney’s plan, millions of people -especially those with complicated health needs who see a lot of different doctors- would have to give up their doctors or pay extra to maintain access to their choices,” said Obama spokesman Adam Fetcher.
Kaiser’s top Medicare expert, Tricia Neuman, said the organization has been working on the report since the early part of the year, well before Romney picked Ryan as his running mate and cemented his support for the Medicare plan the congressman developed as chairman of the House budget committee.
Kaiser serves as an information clearinghouse about the health care system. Neuman, a vice president of the group, said the goal of the study is to help inform next year’s budget debates, regardless of who is elected president.
The study’s main finding is that changing Medicare from an open-ended program that covers the same benefits across the country will have profound local implications. Because the government’s contribution would be limited under the new system, seniors in areas with high medical costs would see an increase in their premiums unless they switch to a low-cost plan.
Overall, the study found that 59 percent of Medicare recipients would face higher premiums if they remained in their current plan, including about half of those in the traditional program.
Since Medicare spending per person varies dramatically around the country, the report found that privatizing the program would create big regional disparities. In high-cost areas, the difference between the second-least expensive private insurance plan and traditional Medicare can be substantial, said Neuman.
In five states – California, Connecticut, Florida, New Jersey and Nevada – large numbers of seniors would pay an additional $100 a month or more in Medicare premiums. Premiums could also vary within states. In San Francisco and Sacramento counties in the northern part of California, premiums for traditional Medicare would remain unchanged. But to the south, in Los Angeles and Orange counties, premiums would go up more than $200 a month.
“These findings underscore the potential for highly disparate effects of a premium support system for beneficiaries across the country,” the report said.