Don't abandon Medicare; fix it
The Henry J. Kaiser Family Foundation
January 2003
Paying for Choice:
The Cost Implications of Health Plan Options for People on Medicare
By Rani E. Snyder, Thomas Rice, and Michelle Kitchman
Medicare coverage alone does not provide sufficient financial protection for many program beneficiaries. Thus, the vast majority obtains supplemental coverage from four main sources: former employers, individual "Medigap" insurance policies, Medicaid, and Medicare+Choice plans.
This report examines the financial implications associated with these different choices by calculating how much people on Medicare would spend annually out-of-pocket on costs including-premiums, cost-sharing requirements, and spending for uncovered services-under different supplemental insurance arrangements.
Findings from this report show that the insurance choices that Medicare beneficiaries make have substantial and often dramatic effects on their out-of-pocket medical spending. We found that a number of factors affect how much a person on Medicare would likely spend out-of-pocket.
First, and perhaps not surprisingly, is health status.
Second, type of plan matters in determining beneficiary healthcare costs.
Third, within a particular insurance type, the specific plan chosen affects costs as well.
Fourth, there is a great deal of variation in costs for non-covered services like pharmaceuticals.
Finally, in some instances there are large differences in costs by geographic areas.
Of particular importance is that fact that these costs differences are often hidden because they are not reflected in the premiums paid, but rather through cost-sharing requirements and uncovered services. Thus, when engaging in comparison-shopping, consumers may put too much emphasis on cheaper premiums without considering the more difficult to assess cost-sharing requirements for covered services and costs for other non-covered services.
The supplemental insurance market presents opportunities for Medicare beneficiaries to insure themselves against future health care costs, but the choice is neither easy nor risk-free - particularly for those living on fixed incomes. There are no steadfast rules for beneficiaries to make the "right" choice in selecting a supplemental insurance plan.
http://www.kff.org/content/2003/6060/6060.pdf
Comment: The traditional Medicare program fails to provide sufficient financial protection. Most Medicare beneficiaries who have significant health care needs must rely on supplemental plans to reduce financial barriers to care. This report makes it clear that, in spite of efforts to regulate the supplemental market, beneficiaries are exposed to risk, especially through uncertainties in cost-sharing and in services covered. And current trends are further increasing risk through greater cost-sharing and through a reduction in benefits.
Current political efforts are aimed at preventing any improvement in the traditional Medicare program. The most visible effort is to continue to prohibit pharmaceutical coverage, but to offer this benefit only in the private health plan marketplace. Our politicians wish to use drug coverage as a lure to entice individuals to leave the traditional Medicare program.
Shoving Medicare beneficiaries into the private marketplace can only compound the problems presented in this report. Uncertainties and risk will only increase as the market experiments with variations in premiums, cost-sharing and benefits covered.
Instead of compounding the deficiencies in the Medicare program, let's fix them. In the traditional Medicare program, let's provide comprehensive benefits and eliminate financial barriers to care. Then we can also eliminate the supplemental market that has been increasing costs, but without a commensurate increase in financial and health security.