Congressional testimony on Medicare cost sharing
House of Representatives
Committee on Ways and Means Subcommittee on Health
May 1, 2003
Hearing on Medicare Cost-Sharing and Medigap
Statement of Patricia Neuman, Sc.D., Vice President and Director, Medicare Policy Project, Kaiser Medicare Policy Project, Henry J. Kaiser Family Foundation:
I am testifying today on behalf of myself and Thomas Rice, Ph.D., Professor and Vice Chair of the Department of Health Services at the UCLA School of Public Health. This testimony reviews the evidence on the effects of cost-sharing on health-care utilization, and the implications for proposals that would modify Medicare’s cost-sharing structure.
Medicare plays a critical role in the lives of 41 million elderly and disabled Americans, offering a reliable source of health insurance at a time in their lives when they are most likely to need medical care. Medicare pays for much-needed basic medical services, such as physician and hospital care. However, with high cost-sharing requirements and no outpatient prescription drug coverage, Medicare is substantially less generous than plans typically offered by large employers.
Gaps in Medicare’s benefit package are increasingly problematic for beneficiaries given that many have relatively modest incomes and limited assets, and face declining access to affordable supplemental coverage. Four in ten Medicare beneficiaries live on incomes below twice the federal poverty level - about $18,000 per person and $24,000 per couple in 2003, and the same number have less than $12,000 in countable assets, leaving them with little capacity to pay for unexpected medical expenses. On average, Medicare beneficiaries spend more than a fifth of their income on health expenses, including Part B premiums; Medicare cost-sharing; non-covered services, such as prescription drugs; and premiums for supplemental insurance.
The evidence now suggests that access to supplemental coverage is on the decline… Between 1996 and 1999, while the share of beneficiaries with supplemental coverage remained stable due to the increase in Medicare+Choice enrollment, the number of beneficiaries with Medigap policies declined by 1.5 million, bringing the share of all Medicare beneficiaries with Medigap coverage from 29% to 24%. Since then, enrollment in Medicare+Choice plans has also dropped by roughly the same number.
In addition, results from several surveys point to an erosion of employer-sponsored retiree health benefits.
One key consideration in redesigning Medicare’s benefit package is an understanding of the effects of cost-sharing on beneficiaries’ access to care. Some have suggested, for example, that beneficiaries should bear a greater share of their health-care costs to deter use of non-essential services. A review of the literature, however, identifies several concerns associated with proposals that would raise cost-sharing under Medicare: (1) higher cost-sharing requirements are likely to lower use of medically necessary services and may have a negative impact on beneficiaries’ health status; (2) higher cost-sharing is inequitable, hitting the most financially vulnerable beneficiaries the hardest; and (3) many if not most seniors do not appear to have sufficient information and knowledge to navigate the health-care system and assess their options when faced with high cost-sharing requirements.
Increased cost-sharing can therefore be viewed, colloquially speaking, as a “triple jeopardy” for elderly and disabled beneficiaries with modest incomes:
- Those with low incomes are more likely to be without any form of supplemental insurance that covers Medicare’s cost-sharing requirements; * Since those with low incomes also tend to be in poorer health and need more medical services, Medicare’s cost-sharing requirements will account for a greater portion of their limited incomes if they use the necessary additional services; and * If they do not use the additional services they need, their health is likely to suffer as a result.
In summary, there is substantial evidence showing that cost-sharing leads to lower utilization of health-care services - both necessary and potentially non-essential services. A number of studies show that cost-sharing (or lack of supplemental coverage) deters people from seeking diagnostic and preventive services, as well as services that are often used to treat chronic illness. Lower utilization may reduce health-care spending in the short term, but could ultimately result in poorer health outcomes for seniors and younger beneficiaries with disabilities.
http://waysandmeans.house.gov/hearings.asp?formmode=view&id=338
Comment: This important report should be downloaded. It contains an excellent discussion of the impact of cost-sharing on the use of services, and it explains why proposals to shift more of the burden of funding Medicare to the beneficiaries would result in impaired medical outcomes for many Medicare beneficiaries. The discussion is supported by solid data and informative charts and graphs.
It is much more important to understand the actual impact of policy decisions than it is to listen to advocates of “consumer sensitive” cost sharing state how they “wish” it would work, as if health policy science had confirmed that simply decreasing utilization improves the functioning of our health care system. It doesn’t. Let’s end “wishing” and instead deal with reality. Let’s move forward with reform that really benefits patients.