BEYOND THE NUMBERS
House Republican Health Plan Would Radically Restructure Medicare
The health plan from House Republican leaders would raise costs for many or most Medicare beneficiaries by converting Medicare to a premium support system, raising its eligibility age, and modifying its cost-sharing requirements.
Premium support. Under premium support, Medicare would make a fixed-dollar payment (often called a voucher) for each beneficiary to defray part of the cost of health insurance — either through a private plan or a form of traditional Medicare. The beneficiary’s premium would equal the difference between the voucher amount and the cost of the plan that he or she selected. Premium support would apply to all new beneficiaries starting in 2024 and to any other beneficiaries who chose to participate.
Unlike the current system, in which Part B premiums are generally the same for all beneficiaries, premiums under the House GOP plan would vary by region and by plan. Although the GOP plan lacks the details to assess its impact on beneficiaries, most beneficiaries enrolled in traditional Medicare would pay more than under current law, according to the Congressional Budget Office.
The plan would likely shift costs to beneficiaries over time, because the premium-support voucher probably wouldn’t keep pace with health care costs. Furthermore, if insurance companies design their offerings to attract healthier enrollees and deter sicker ones (as would be likely), the pool of beneficiaries in traditional Medicare would grow older, sicker, and costlier to cover. Since any “risk adjustment” system can’t fully account for health differences among enrollees, the increased costs would lead to higher premiums in traditional Medicare, which would depress enrollment and could ultimately make traditional Medicare unsustainable.
- Eligibility age. The House GOP plan would gradually raise Medicare’s eligibility age from 65 to 67, starting in 2020. At the same time, it would repeal or weaken health reform’s coverage expansions through Medicaid and the health insurance marketplaces. Consequently, 65- and 66-year-olds who lacked access to employer-sponsored insurance would have to get coverage in a largely unregulated individual market. Insurers could charge much higher premiums to this age group than they can under the Affordable Care Act (ACA) and even more to those with pre-existing conditions who weren’t able to maintain continuous health coverage. The proposed tax credit for health insurance would likely be much smaller than the ACA’s subsidies, and many 65- and 66-year-olds, particularly those who are poor or near-poor, would end up uninsured or underinsured.
Cost sharing. Among its few positive elements, the Republican plan would add an annual out-of-pocket spending limit to traditional Medicare, thereby filling the program’s largest coverage gap. The plan, however, would also increase cost-sharing for many beneficiaries by establishing a single unified deductible as well as uniform 20 percent coinsurance.
Each year, many beneficiaries pay the Part B deductible for physician services (now $166), but fewer have a hospital stay and, thus, must meet the separate Part A deductible ($1,288) that applies to hospital stays. If, however, they had a pay a single combined deductible of, say, $650 under the House Republican plan, many beneficiaries would pay almost $500 more each year than they currently do. Such a change could expose “more than three million low-income beneficiaries to higher out-of-pocket costs, compared to current law,” the Kaiser Family Foundation estimates. As a result, many seniors and people with disabilities could forgo needed care.