Posted on August 24, 2011 16:12
Categories: Medicare
Topics: Medicare | Out-of-Pocket
On July 20, the Kaiser Family Foundation (KFF) released a report examining three proposals to prohibit Medicare supplemental insurance policies, known as “Medigap” policies, from covering 100 percent of beneficiaries’ out-of-pocket (OOP) costs. Several recent proposals to reform Medicare and reduce federal spending have included such measures on the grounds that allowing Medigap plans to cover all OOP costs increases service utilization and Medicare spending. Based on the numerous OOP spending requirements that the proposals would impose on Medigap beneficiaries, the authors estimate that implementing the policy change in FY2011 would save Medicare between $1.5 and $4.6 billion. However, the report cautions that it does not account for the negative effects of the reduced utilization of needed care, which could negatively affect future spending in addition to adversely affecting outcomes.
From the report:
Medicare beneficiaries are subject to cost sharing—deductibles or coinsurance payments—for most covered services, but unlike most private insurance plans for the nonelderly, Medicare does not have an “out‐of‐pocket limit.” Under typical employer plans, once the enrollee’ cost‐sharing liability has exceeded a specified threshold, the plan usually pays the full cost of covered services. Medicare beneficiaries have no such protection; if they have a costly medical problem, they can be exposed to very large out‐of‐pocket expenditures. In 2008, six percent of Medicare beneficiaries incurred cost sharing of $5,000 or more for their Medicare‐covered services.
Full report: Medigap Reforms Potential Effects of Benefit Restrictions on Medicare Spending and Beneficiary Costs (PDF | 5.2 MB) 
The Kaiser Family Foundation. (2011). Medigap reforms potential effects of benefit restrictions on Medicare spending and beneficiary costs. Merlis, Mark.
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