Medicare Premium Support Explained in New Kaiser Family Foundation FAQ

A recent issue brief from the Kaiser Family Foundation (KFF) answers important questions about a controversial Medicare savings proposal called premium support. KFF defines premium support as “a general term used to describe an approach to reform Medicare that aims to reduce the growth in Medicare spending by increasing competition among health plans and providing a stronger incentive for beneficiaries to be cost-conscious in their plan selection.”

Under a premium support model, the federal government would provide a voucher for people with Medicare to use toward purchasing a health insurance plan–either a private plan or Original Medicare. Compared to the current system, the major difference with this model is that payment by the federal government for services accessed by people with Original Medicare would be capped at a certain amount for each beneficiary instead of being tied to the specific services accessed.

As explained in the issue brief, a premium support model could have a profound impact on people with Medicare. For example, both Original Medicare and private Medicare Advantage plans must currently offer the same set of standard benefits. Under a premium support system it is unclear if that would still be the case. Some proposals only require plans to provide benefits that are “actuarially equivalent” to Original Medicare benefits, potentially giving  plans  the freedom to significantly alter benefits and cost sharing.

Consequently, plans could design offerings that only benefit younger, healthier enrollees whose care would be less costly. This could leave older and sicker beneficiaries with less choice, and it could make selecting among plans a more difficult prospect for all people with Medicare. It could also lead to a higher proportion of more expensive beneficiaries in the Original Medicare program, affecting the long-term sustainability of Original Medicare.

The KFF brief offers many other insights into the potential effects of a premium support model for Medicare. For a detailed explanation of premium support and its potential impact, visit the KFF website.