Kaiser’s Faux ‘Study’ of Premium Support

Published October 15, 2012

National Review Online

It’s a pattern of course. At critical moments in the campaign, a reliably liberal research organization releases a faux “study” that is quickly picked up by the Obama campaign and turned into negative attack ads. In the last two months we have seen “studies” of this type from the Brookings-Urban Institute Tax Policy Center, the Commonwealth Fund, and researchers at Harvard. All magically found their way into Obama campaign talking points, ads, and other material. And all accused the Romney campaign of harboring secret plans to pile thousands of dollars in new costs onto America’s struggling middle class.

Today’s in-kind donation to the Obama campaign came from the supposedly nonpartisan, but reliably liberal, Kaiser Foundation. The Kaiser study claims that a Medicare “premium support” plan–that the authors claim resembles the plan offered by Representative Paul Ryan and Democratic senator Ron Wyden–would drive up costs on seniors by hundreds of dollars per month. Conveniently, the Kaiser release provides helpful state-by-state numbers so reporters can pull out premium-hike estimates in critical swing states.

There are three problems with the study. First, it doesn’t analyze anything close to the Ryan-Wyden plan. Second, its methodology is biased against the benefits of competition and consumer choice. And, third, if there were any conclusion to be drawn from the data used to produce the study, it’s that Representative Ryan has been right all along in saying that private plans have the capacity to dramatically reduce costs for Medicare–without shifting costs onto any seniors.

Like a previous study published in the Journal of the American Medical Association, the Kaiser report uses existing data from the current Medicare Advantage program to simulate what would happen if a premium-support program–with competitive bids submitted by private plans as well as the traditional fee-for-service (FFS) option–were in operation right now, for current seniors. The authors’ conclusion is that seniors enrolled in Medicare FFS today would have to pay more to stay where they are.

The problem is, under Ryan-Wyden, no current seniors would be placed into a premium-support program. They would all be exempt, as would everyone age 55 and older but not yet on Medicare. So this hypothetical premium jump for current Medicare beneficiaries has no connection to reality.

Moreover, under Ryan-Wyden, future enrollees into the program–those who have not yet enrolled in any Medicare option–would be guaranteed at least two options that would cost no more than what current Medicare would require. So, under Ryan-Wyden, no senior–present or in the future–would ever have to pay more than they do today for Medicare. Period.

In addition, the method Kaiser used to determine the premiums charged by the private plans and Medicare FFS is flawed. According to Kaiser, competition and consumer choice would have only a minimal impact on costs. This defies commonsense and experience. In the Medicare prescription-drug benefit, which is a prototype of premium support, competition has held costs more than 40 percent below original projections. And the plans competing with each other work aggressively to cut costs and keep their premiums low. In 2013, the average beneficiary premium will be just $30 per month, the same as it was in 2012 and in 2011. And the drug-benefit marketplace is plenty dynamic, with some portion of the beneficiary population switching every year to lower cost coverage.

Ironically, if there were any message to be taken away from the existing private plan data in Medicare, it’s not that Ryan-Wyden would increase costs for seniors but that it would decrease costs for everyone, including the government. According to the data used by Kaiser, private plans can in fact deliver the guaranteed Medicare benefit package at lower cost than Medicare FFS in large portions of the country. This directly contradicts one of the Obama campaign’s central themes, which is that private plans are more expensive than Medicare FFS. And premium support would encourage even more aggressive cost cutting because plans that found ways to offer high-quality coverage at the lowest price would be highly attractive to the beneficiaries.

It would not be surprising to see President Obama trot out this “study” during tomorrow night’s debate in a shameless attempt to scare seniors three weeks before an election. If he does, Governor Romney should respond as he did in the first debate by noting for those watching that there is only one candidate in the presidential election who has cut benefits for current seniors, and that’s the president. Obamacare cuts $716 billion out of Medicare over a decade, pushes 4 million seniors out of their Medicare Advantage plans, and will cause 15 percent of hospitals and nursing homes to stop admitting Medicare patients. These cuts will force current seniors to pay thousands of dollars more for their health care. No wonder the president wants to change the subject.

James C. Capretta is a fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.

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