10. Redesign Medicare’s Copays and Deductibles
Medicare Part A pays for inpatient hospital, skilled nursing facility, hospice and home health care. Part B pays for physician and outpatient services (excluding prescription drugs). Part A and Part B have different cost-sharing and deductibles. Under Part A, beneficiaries who receive inpatient hospital services pay a deductible ($1,156 in 2012) in each benefit period, and there is no initial cost-sharing for hospital stays under 60 days. In contrast, the annual deductible for Part B services is $140, and beneficiaries must pay 20 percent of their costs after meeting their deductible. Some proposals would combine the Part A and Part B programs to have only one deductible (for example, $550) and one coinsurance (for example, 20 percent) for all Part A and Part B services. Currently, there is no annual upper limit on out-of-pocket expenses for Part A or Part B. Some proposals would set an out-of-pocket limit.
PRO: Redesigning Medicare copayments and deductibles could simplify and streamline benefits for beneficiaries. If an annual out-of-pocket spending cap were included in this redesign, Medicare beneficiaries — particularly those with high utilization — would have more financial protection from expenses caused by severe and often unexpected illnesses. This could also reduce the need for supplemental insurance, such as Medigap. While most beneficiaries likely will not reach the out-of-pocket limit in a given year, knowing that the limit exists could give them a greater sense of financial security. Redesigning Medicare cost-sharing could also create savings for the federal government by making beneficiaries more price-sensitive in using health care services, resulting in lower utilization and greater Medicare savings. (Avalere Health)
CON: Many Medicare beneficiaries would end up paying more out of their own pocket if Medicare cost-sharing is combined across parts A and B. Seniors with higher hospital utilization could be adversely affected by proposals that apply coinsurance to the first 60 days of a hospital stay. In addition, Medicare beneficiaries with modest incomes or no supplemental coverage could find it difficult to afford these cost-sharing requirements. These seniors may decide not to get the medical care they need in order to avoid paying coinsurance or deductible amounts, which could lead to poorer health outcomes and, in the long run, higher Medicare costs. (Avalere Health)