Reshuffling Medicare costs, does it add up?
The debate in Washington over how to find savings in the mammoth Medicare program has been going on for years. In its latest incarnation, the agency that assists Medicare in making policy recommendations – the Medicare Payment Advisory Commission or MedPAC – is focusing on out-of-pocket expenses.
MedPAC commissioners have universally approved a plan for Congress now to consider:
--A limit on out-of-pocket costs.
--Combining deductibles for in-patient and outpatient services.
--Creating flat rate “copayments” for certain services, instead of a percentage of the cost of care called “coinsurance.”
--Charging supplemental insurance plans.
These changes are aimed at saving money for the government and patients who have fee-for-service plans.
But Bonnie Burns, a consultant to California Health Advocates, cautions that nothing’s free, that “somebody has to pay more somewhere.”
She says while the government covers the majority of Medicare patient’s costs, increasingly seniors are being asked to pick up more of the tab.
Burns says this is where a cap on out-of-pocket expenses could bring some relief.
At first blush this sounds like a good deal for seniors, right? Well, yes, says Burns. But, she says there’s already something in place to help offset these costs –supplemental insurance plans. A common one is a Medigap policy.
Burns explains that a lot of people enrolled in Medicare already purchase supplemental coverage plans for an additional monthly premium of less than $2,000 a year so they can avoid dipping into a savings account to pay for medical care.
MedPAC is proposing to cap out-of-pocket costs at $5,000 a year per person. If you do the math, Burns says, it looks like patients are being asked to actually pay more out of pocket. And this is particularly difficult for seniors to do.
“They aren’t working, they have no way to replace the money they’ve spent,” Burns says. “If they can’t pay it from the fixed income then the next reach is to the assets” such as home equity or savings accounts. This is a particular burden to low-income seniors as I reported in a previous blog post.
Critics of supplemental plans say that seniors over utilize services because somebody else pays for most of the bill. MedPAC has argued one way to change this is to charge people with supplemental plans more.
Under the MedPAC proposal people who choose to stick with their supplemental coverage could have to pay up to 20 percent more. Or, the insurers offering the product will be taxed and likely pass along those costs to policyholders.
Burns says it’s questionable if the changes to the out-of-pocket costs would achieve any notable savings. According to a MedPAC presentation, she says maximum savings would reach 4 percent, and that’s only in the unlikely event that everyone would drop their current supplemental plans.
But an article in CQ HealthBeat highlighted how MedPAC commissioners said that changing the structure could save money by changing behaviors.
“The plan is intended to discourage seniors and other beneficiaries from getting unneeded or inefficient care…Commissioners said that some of the plans, particularly those that give beneficiaries low cost-sharing, are driving up overall Medicare spending in part because the patients are not careful about limiting their use of services.” –CQ HealthBeat
There’s another thing that has Burns concerned about this proposal.
“The issue here is that nobody that has these benefits knows this is going on and if anybody thinks there won’t be a reaction to this they’re crazy,” Burns says.