Kaiser Family Foundation Report Explores Effects of Medicare Redesign Proposals

Last week, the Kaiser Family Foundation (KFF) released a report examining the anticipated effects of four options to modify Medicare’s benefit and cost-sharing design. The proposals include changes to the Medicare Part A and Part B deductible and cost-sharing amounts, as well as further restrictions to Medigap coverage. Each of the proposals are derived from policies proposed in recent years by the Congressional Budget Office (CBO), the Medicare Payment Advisory Commission (MedPAC), and other organizations.

For each option, the report examines the expected effects on out-of-pocket spending for beneficiaries and assesses how it is expected to affect spending by the federal government, states, employers, and other payers.

The options include:

1. Establishing a single $650 deductible for Medicare Part A and Part B services, modifying cost-sharing requirements, adding an annual $6,700 cost-sharing limit, and limiting the extent to which Medigap plans could cover the deductible.
2. Making the same changes outlined in option one but reducing the spending burden on beneficiaries by decreasing the deductible to $400 and the cost-sharing limit to $4,000.
3. Making the same changes outlined in option one but providing additional financial protection to some low-income beneficiaries by establishing full Medicare cost-sharing subsidies under the modified benefit design.
4. Making the same changes outlined in option one but making the benefit design more progressive by income-relating the deductible and cost-sharing limit.

The report finds that “proposals to modify the benefit design of traditional Medicare have the potential to decrease—or increase—federal spending and beneficiaries’ out-of-pocket spending, depending upon the specific features of each option. These options can be designed to maximize federal savings, limit the financial exposure of beneficiaries, or target relief to beneficiaries with low-incomes, but not simultaneously.”

Among the variations the report examines, option one is expected to produce the greatest federal savings but minimal savings for beneficiaries. This option would also expose more than three million low-income beneficiaries to higher out-of-pocket costs compared to current law. On the contrary, option two would provide greater financial protections and savings for many beneficiaries, but result in a substantial increase in federal spending.

Under each of the four options, KFF found that some beneficiaries would be better off relative to current benefit design, while others would not fare as well.

Read the report.