In a speech today at Stanford’s Hoover Institution, House Budget Committee Chairman Paul Ryan repeated his call for converting Medicare to a “premium support” system. Premium support proposals, such as those in the House-passed fiscal year 2012 budget resolution (which Chairman Ryan developed) and the deficit-reduction plan from the Bipartisan Policy Center’s Rivlin-Domenici commission, would replace Medicare’s guarantee of health coverage with a flat payment — often termed a voucher — that beneficiaries could use to help pay for private insurance. (Some proposals would retain traditional Medicare as an option.)
As I explain in a new report, converting Medicare to premium support would likely create a two-tier health care system. Affluent people would receive the most up-to-date medical care, since they could buy comprehensive coverage by supplementing the voucher with their own funds. But people of modest means who could only afford the coverage that their voucher buys would increasingly find medical advances out of reach.
Premium support raises important issues that may seem manageable in theory but would be extremely hard to resolve satisfactorily in practice. My report discusses four such issues: