Shifting to a “defined contribution” approach to funding Medicare could be especially expensive for residents of Florida, New Jersey and Nevada.
If the shift had taken place in 2010, and Medicare enrollees had tried to stay in the same plans, the percentage of enrollees who would have had to pay $100 or more in additional premiums per month could have been 50 percent in Nevada, 57 percent in New Jersey and 77 percent in Florida.
Gretchen Jacobson and other analysts at the Henry J. Kaiser Family Foundation have published data supporting those predictions in a defined contribution Medicare plan report released by the foundation.
Today, the analysts said, the Medicare program pays monthly amounts ranging from $500 to $900 to provide traditional Medicare coverage in different parts of the country.
Medicare uses a combination of a bidding process and county-by-county or region-by-region formulas to set the amounts it pays private Medicare Advantage plans for each enrollee served.
Defined contribution Medicare funding proposals — often called “voucher” proposals, or “premium support” proposals — would have Medicare managers replace the current funding mechanisms with a simpler formula.
The government would base payments either on the cost of traditional Medicare in an area or on the cost of the second-cheapest private plan in the area, whichever was lower.
Enrollees who signed up for “benchmark plan” coverage could pay what they pay today, or less. An enrollee who wanted to use a more expensive plan would have to pay the difference between the benchmark plan premium and the premium for the plan actually selected.
Rep. Paul Ryan, R-Wis., the Republican nominee for vice president, has been a supporter of defined contribution Medicare funding proposals, the analysts said.
The analysts noted that they had to make many decisions to simplify their work. They looked only at enrollees’ premium payments and not at the enrollees’ other out-of-pocket costs, for example. The analysts also made assumptions about technical matters such as what definition of “service area” Medicare managers would use and what the minimum level of benefits provided would have to be.