Cost Sharing in Medicare
The Alliance for Health Reform held a meeting on “Streamlining Cost Sharing in Medicare: The Impact on Beneficiaries” on July 22, 2013 which focused on a number of proposals to modernize Medicare benefits. The Medicare benefit package has not been updated since 1965 and it needs streamlining and improving. Medicare Advantage has already updated many cost sharing features, for example charging co-payments rather than coinsurance for many services and charging a single predictable premium that covers Medicare cost sharing for Parts A, B, and D and supplemental coverage. Medicare Advantage plans also have an out of pocket maximum that protects beneficiaries from catastrophic costs. My colleague Bill McBain recently discussed “Medicare Essential” which was developed by the Commonwealth Fund and would combine Medicare Parts A, B and D into a single premium plan run by the government unlike Medicare Advantage which is offered by private plans. The Bipartisan Policy Center (BPC) has developed its own proposal to modernize Medicare Fee For Service benefits beginning in 2016. The BPC proposal would build on some of the reforms already offered by MA plans and recommended by CBO and MedPAC including a unified Part A and B deductible and an out of pocket spending cap. The BPC proposal includes a catastrophic cap of $5,300, a single $500 deductible and a simplified copayment structure. To provide incentives for primary care, the BPC proposal would not apply the deductible to physician office visits. The BPC proposal would also provide new federal subsidies for beneficiaries between 100 — 150 percent of the FPL. The BPC plan would prohibit all supplemental plans including Medigap, employer coverage, FEHBP and Tricare for Life from providing first dollar coverage.
All of the proposals under discussion would cause major restructuring in the Medigap industry. The impact on Medicare Advantage would depend on the details. MA plans have successfully competed against high cost Medigap policies because beneficiaries realize significant cost savings and have greater protection from catastrophic costs. The BPC proposal is not that different from the cost sharing structures that many MA plans offer today. It is hard to imagine that the BPC’s proposed new subsidies for low income beneficiaries would not be extended to low income beneficiaries enrolled in MA plans. MA’s value proposition compared to Medigap might not be as strong if the expensive first dollar coverage Medigap policies were eliminated but MA delivery system reforms should continue to give MA plans a competitive advantage.
Resources
Join us on August 8 to get practical advice on the best ways of getting into the MA market from GHG’s Chief Development Officer, Aaron Eaton, Senior Vice President of Finance, William A. MacBain, and Senior Director of Compliance Solutions, Regan Pennypacker.
On June 14th at the 2013 GHG Forum, William MacBain presented on the future of Medicare and ways to combat its projected increase in per capita spending in the next two decades. View the recording here.