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Public Statements

Issue Position: Medicare

Issue Position

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Overview

President Obama has had three years in office, during which time he has attacked every serious proposal to preserve and strengthen America's entitlement programs while enacting cuts to Medicare and putting in place a bureaucratic board that one day may ration the care available through the program. Mitt Romney has laid out the approach he would take to modernizing America's entitlement programs, guaranteeing their continued vitality for future generations. Mitt's proposals would not affect today's seniors or those nearing retirement, and they would not raise taxes. But he proposes that tomorrow's Medicare should give beneficiaries a generous defined contribution, or "premium support," and allow them to choose between private plans and traditional Medicare.

Mitt's plan honors commitments to current seniors while giving the next generation an improved program that offers the freedom to choose what their coverage under Medicare should look like. Instead of paying providers directly for medical services, the government's role will be to help future seniors pay for an insurance option that provides coverage at least as good as today's Medicare, and to offer traditional Medicare as one of the insurance options that seniors can choose. With insurers competing against each other to provide the best value to customers, efficiency and quality will improve and costs will decline. Seniors will be allowed to keep the savings from less expensive options or choose to pay more for costlier plans.

Key Elements of Mitt's Plan

* * Nothing changes for current seniors or those nearing retirement
* * Medicare is reformed as a premium support system, meaning that existing spending is repackaged as a fixed-amount benefit to each senior that he or she can use to purchase an insurance plan
* * All insurance plans must offer coverage at least comparable to what Medicare provides today
* * If seniors choose more expensive plans, they will have to pay the difference between the support amount and the premium price; if they choose less expensive plans, they can use any leftover support to pay other medical expenses like co-pays and deductibles
* * "Traditional" fee-for-service Medicare will be offered by the government as an insurance plan, meaning that seniors can purchase that form of coverage if they prefer it; however, if it costs the government more to provide that service than it costs private plans to offer their versions, then the premiums charged by the government will have to be higher and seniors will have to pay the difference to enroll in the traditional Medicare option
* * Lower income seniors will receive more generous support to ensure that they can afford coverage; wealthier seniors will receive less support
* * Competition among plans to provide high quality service while charging low premiums will hold costs down while also improving the quality of coverage enjoyed by seniors

Frequently Asked Questions About Mitt's Plan

What are the immediate effects of this plan?
This plan has no effect on current seniors or those nearing retirement. It will go into effect for younger Americans when they reach retirement in the future.

How is this different from the Ryan Plan?
Shortly after Mitt presented the proposal described here, Congressman Paul Ryan and Senator Ron Wyden introduced a bipartisan proposal that almost precisely mirrors Mitt's ideas. Unsurprisingly, the Obama administration immediately rejected the proposal. Mitt has applauded the Ryan-Wyden effort and looks forward to working as president with leaders from both sides of the aisle to implement meaningful reforms that will preserve Medicare for future generations.

How high will the premium support be? How quickly will it grow?
Mitt continues to work on refining the details of his plan, and he is exploring different options for ensuring that future seniors receive the premium support they need while also ensuring that competitive pressures encourage providers to improve quality and control cost. His goal is for Medicare to offer every senior affordable options that provide coverage and service at least as good as what today's seniors receive. Lower income seniors in the future will receive the most generous benefits to ensure that they are able to get care every bit as good as that provided in the current Medicare program.

How will the plan impact total Medicare spending?
The total impact on spending will depend on a number of factors, including the rate of premium support increase and the effect of competitive pressure on providers. By replacing the inefficiency of the current system with a competitive, market-oriented system in which every provider -- including the government -- wants to find the most efficient way to provide high quality care, the plan puts the future of Medicare on a sound footing to meet the needs of future generations.

How will traditional Medicare remain an option?
Traditional Medicare will compete against private plans. It will be operated by the government and funded by premiums, co-insurance, and deductibles that are set at the level necessary to cover its costs. The attractiveness of this option to future seniors will depend on how its efficiency and quality compares to that offered by other providers in the marketplace. Future seniors will benefit from the innovation and competition among options.

How will seniors be affected by the costs of different options?
Future seniors will be able to enjoy the savings from selecting less expensive plans, or choose to pay more for costlier options. When the insurance premium costs less than the support provided, the balance will be available in an HSA-like account to pay for other out-of-pocket health expenses.


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