“This paper aims to help inform policy discussions by examining the potential implications of a leading premium support approach on Medicare premiums, the extent to which Medicare premiums would vary by state and by county, and the key factors that could drive variations in premiums under this approach. The analysis looks at an approach to premium support that ties federal payments to the second lowest cost plan offered in an area or traditional Medicare, whichever is lower. This approach is similar to the premium support proposal included in Chairman Paul Ryans (R-WI) budget proposal for FY2013 that was embraced by Presidential nominee Mitt Romney, and previously included in the Wyden-Ryan and Domenici-Rivlin proposals. The study focuses on beneficiaries Medicare premiums, but does not take into consideration out-of-pocket spending due to the effects of changes in benefits, cost-sharing requirements and premiums for supplemental insurance. Nor does it assess potential savings to the federal government, which would be achieved to the extent that the government pays less for beneficiaries in traditional Medicare in counties in which private plan costs are lower, and less for beneficiaries in private plans in areas where traditional Medicare costs are lower.”
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