Is It Realistic to Grow Medicare Premium Support at CPI?

by Reihan Salam

A number of readers have asked me if I think it made sense for Chairman Ryan to propose growing premium support levels in keeping with the CPI rather than the blended growth rate he’s backed in earlier versions of his reform proposal, in which he’d split the difference between CPI-U (consumer prices for urban consumers) and CPI-M (consumer prices for medical care). I think that GDP +1% was the much better way to go.

I see Chairman Ryan’s proposal as a rough outline, which means that the process of filling in the blanks will be where the action is. We’re at roughly the stage when candidate Barack Obama proposed a health system reform that explicitly excluded an individual mandate and that included a public option. Chances are that a final reform proposal based on Chairman Ryan’s broad goals will look very different from the proposal we’re batting around right now. As we devise that proposal, I’d recommend GDP +1% as a better medium-term guide, though I’d be comfortable with a blended approach that would slope the growth rate downward over time.