MedPAC Report Examines Controversial Cost-Containment Proposals
This week, the Medicare Payment Advisory Commission (MedPAC) released its June 2011 report to Congress, which addresses potential changes to the Medicare program and health care delivery system. The report focuses on changes in provider payments and benefit structures that MedPAC believes would reduce the growth of Medicare spending. MedPAC investigated different ways to change the current incentives in the Medicare program to encourage both providers and patients to use high-value services. The current fee-for-service (FFS) structure of the program has come under fire because many believe that paying providers per service encourages over-utilization. MedPAC recommends changing payments to providers to promote primary care, early intervention and care coordination, which would help achieve savings by preventing the need for more expensive acute care, such as hospitalizations, over time.
Some of the proposals discussed in the report are controversial because advocates and providers believe they may result in increased costs and decreased access to care for people with Medicare. One such proposal is the restructuring of the Medicare benefit coupled with a reduction in coverage provided by Medigap plans, which cover cost-sharing that is not covered by Original Medicare. One incarnation of this proposal, which was also included in recommendations from the National Commission on Fiscal Responsibility and Reform, would create a combined deductible and a universal coinsurance for Part A and Part B services, as well as an out-of-pocket limit. In addition, the proposal would create a Medigap deductible of sorts, with Medigap coverage not beginning until beneficiaries spent a certain amount out of pocket, and would reduce the percentage of out-of-pocket costs Medigap plans could pay once coverage began.
Unfortunately, these proposals would likely increase out-of-pocket costs for most people with Medicare, who on average already spend 15 percent of their household incomes on health costs, and half of whom have incomes below $22,000 per year. Also, due the high out-of-pocket limit included in these types of proposals, most people with Medicare would never benefit from such protections. For example, an option proposed by the Fiscal Commission and discussed in the MedPAC report sets an annual out-of-pocket limit of $7,500.
Read MedPAC’s June 2011 report to Congress.
Read Medicare Rights Center President Joe Baker’s statement on proposals that would shift costs to people with Medicare.
People with Medicare Spend Significant Percentage of Income on Health Costs
The Kaiser Family Foundation has released several data spotlights that highlight the burden of health care costs on people with Medicare. Specifically, the data spotlights discuss out-of-pocket spending as a share of income for the Medicare population. The analysis found that median out-of-pocket health costs as a share of income rose 4 percent in just under ten years. In addition, 1 in 4 individuals with Medicare spends 30 percent of income on health care, and 1 in 10 spends over 50 percent. In addition, health care costs as a percentage of income tend to be higher among Medicare beneficiaries 85 and older, people in poor health, and people with comparatively lower incomes.
In addition, health costs account for 15 percent of household budgets for people with Medicare, 10 percent more than in non-Medicare households. Premiums account for two-thirds of overall spending, the largest share of average health care spending in Medicare households. Generally, households with incomes just above the poverty level tend to spend a higher percentage of income on health costs because Medicaid helps to offset high out-of-pocket costs for those with Medicare who have the lowest incomes.
Lastly, many in the next generation of Medicare beneficiaries will not be in a much better position than the current Medicare population. It is projected that in 2030, 25 percent of Medicare beneficiaries will have incomes below $15,000 and will have household incomes below $27,000, though those with higher incomes may see a more substantial percentage increase. In addition, half of all people with Medicare have less than $2,100 in retirement account savings and less than $31,000 in other financial assets.
Read Kaiser Family Foundation’s data spotlight “Health Care on a Budget: The Financial Burden of Health Spending by Medicare Households.”
Read Kaiser Family Foundation’s data spotlight “How Much ‘Skin in the Game’ is Enough? The Financial Burden of Health Spending for People on Medicare.”
Read Kaiser Family Foundation’s data spotlight “Projecting Income and Assets: What Might the Future Hold for the Next Generation of Medicare Beneficiaries?”
If you have a Medicare Advantage plan (also known as a Medicare private health plan), your plan may not cover your care while you travel in the United States. What kind of Medicare Advantage plan you have, how long you travel for, where you travel, and the kind of care you need will affect whether your plan will cover your care while traveling.
If you travel outside of your Medicare Advantage plan’s service area continuously for more than six months, you will be automatically disenrolled from most plans. If you are traveling in the United States for six months or less, how your plan will cover your care depends on the kind of care you need and what type of plan you have.
Regardless of what type of plan you have, if you need emergency or urgent care, your plan must cover it. Your charges for emergency room services that are out-of-network will be no more than $50 or whatever you would have paid for emergency services in-network.
Learn more about traveling with a Medicare private health plan at www.medicareinteractive.org.
In a joint letter sent this week to the editor of The Washington Post, Medicare Rights Center President Joe Baker and Center for Medicare Advocacy Executive Director Judith Stein outlined their opposition to a Medicare reform proposal by Senator Joseph Lieberman that would shift greater costs to people with Medicare.
Read the letter.