“Premium support” refers to a plan to gradually move beneficiaries to a program run by private insurers with financial support from the the federal government. Instead of the government directly reimbursing providers as in the current fee-for-service (FFS) system that applies to most Medicare beneficiaries, seniors would be given a fixed amount of money — or a “defined contribution” — to be applied toward the purchase price of the health insurance premium charged by a private insurer in a federally regulated Medicare exchange market. Beneficiaries who enroll in plans with higher premiums than the government’s contribution would be responsible for paying the difference between the two, while beneficiaries who enroll in plans with premiums lower than the government’s contribution could receive premium rebates or additional benefits. In this way, the premium support contribution is essentially a government subsidy to private health care companies on behalf of Medicare beneficiaries. It is intended to stimulate marketplace competition among health insurance plans.
The Congressional Budget Office (CBO) summarizes the change this way: “Current law prescribes the health care benefits to which people are entitled, and the federal government pays whatever is needed to honor those entitlements. The proposal changes that entitlement to a fixed federal contribution: for Medicare, that contribution would be in the form of per capita payments.” Premium support subsidies are thus fixed according to the number of beneficiaries in the system, a significant difference from the current structure of Medicare in which the government reimburses providers for their services, causing the government’s costs to vary according to the quantity of medical services used.
RELATED FAQs
How Would a Premium Support Payment System be Designed?
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How Would Premium Support Contain Rising Health Care Costs?
