Traditional Medicare Beneficiary Out-of-Pocket Costs

Background

Beneficiaries enrolled in Traditional fee-for-service MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). are exposed to significant out-of-pocket expenses. They are responsible for monthly Part B premiums, deductibles, and coinsuranceA form of health care cost sharing in which a percentage of covered expenses must be paid by the insured. In contrast, a copayment is a specific dollar amount that must be paid for a specific service. , as well as for the costs of any services and products that MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). does not cover. The Part B premium is $148.50 in 2021. Beneficiaries with higher incomes pay more. Because Part B premiums and coinsuranceA form of health care cost sharing in which a percentage of covered expenses must be paid by the insured. In contrast, a copayment is a specific dollar amount that must be paid for a specific service. payments are determined by Part B spending, annual increases in program spending also increase premiums and coinsuranceA form of health care cost sharing in which a percentage of covered expenses must be paid by the insured. In contrast, a copayment is a specific dollar amount that must be paid for a specific service. . Some beneficiaries have faced steep increases in Part B premiums in recent years. The Part B deductibleThe amount that individuals must pay for services covered under an insurance plan before the insurer pays benefits. Not all out-of-pocket spending counts toward the deductible. also increases annually by the same rate as growth in Part B costs: it stands at $203 in 2021.

Some researchers and policymakers have proposed increasing beneficiary cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. to save MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). money and encourage beneficiaries to use fewer services. These proposals typically assume that MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). beneficiaries pay very little toward the cost of their care when in fact, the opposite is true.

In 2013—the most recent year for which personal spending figures are available— MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). beneficiaries spent an average of $5,680 out of pocket. Average spending ranged from $3,570 for those younger than 65 to $10,963 for those age 85 and older. These amounts include MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. payments and premiums, private insurance premiums (including Medigap), and payments for medical goods and services not covered by the program. In the same year, half of MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). beneficiaries spent 17 percent or more of their income on health care expenses.

Because Traditional MedicareTraditional Medicare, also known as Original or Fee-For-Service Medicare, works on a fee-for-service basis. This means that you can go to any doctor or hospital that accepts Medicare, anywhere in the United States, and Medicare will pay its share of the bill for any Medicare-covered service it… does not cap out-of-pocket spending, beneficiaries with serious medical problems may face very high expenses. Most beneficiaries in Traditional MedicareTraditional Medicare, also known as Original or Fee-For-Service Medicare, works on a fee-for-service basis. This means that you can go to any doctor or hospital that accepts Medicare, anywhere in the United States, and Medicare will pay its share of the bill for any Medicare-covered service it… (87 percent in 2013) have some kind of supplemental coverage or MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. . Those with supplemental insurance coverage typically purchase it from a private insurance company, such as an individual Medigap plan. But some had coverage through a former employer. Beneficiaries with such coverage must pay monthly premiums, in addition to any MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). premiums. But even with supplemental insurance coverage to help pay for MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). ’s cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. , some beneficiaries spend a significant amount on health care expenses. In 2013, MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). beneficiaries with Medigap supplemental insurance coverage spent an average of $7,046 out of pocket.

Some MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). beneficiaries are eligible for partial MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. benefits through the Qualified MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). Beneficiary program or the Specified Low-Income MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). Beneficiary program (see also Medicaid Assistance for Medicare Beneficiaries with Low Incomes for more information about these programs)

In addition, eligibility for full MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. benefits protects some of the poorest beneficiaries from high health care costs. Yet, experts estimate that only about half of beneficiaries age 65 and older with incomes below the povertyThe federal government defines “poverty” as income below specific thresholds. These thresholds are adjusted annually for inflation and vary according to family size and the age of the head of the family. level actually receive MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. assistance. Reasons they may not receive it include exceeding state income and asset requirements or not meeting certain federal requirements. Others may not realize they are eligible for benefits or decline to participate. Even with such financial assistance, some MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). beneficiaries may still face substantial expenses.

Those without supplemental coverage who are not eligible for MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. are fully responsible for all their MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. responsibilities unless they obtain assistance through a charitable organization or other public programs.

Beneficiaries in Medicare AdvantageMedicare Advantage (MA) health plans are offered by private Medicare approved companies as an alternative to Original Medicare. Medicare pays these companies a fixed amount per enrollee per month to provide benefits for Parts A, B, and (usually) D. ( MAMedicare Advantage (MA) health plans are offered by private Medicare approved companies as an alternative to Original Medicare. Medicare pays these companies a fixed amount per enrollee per month to provide benefits for Parts A, B, and (usually) D. ) plans have an out-of-pocket cost cap. Although capping beneficiary spending in Traditional MedicareTraditional Medicare, also known as Original or Fee-For-Service Medicare, works on a fee-for-service basis. This means that you can go to any doctor or hospital that accepts Medicare, anywhere in the United States, and Medicare will pay its share of the bill for any Medicare-covered service it… would increase program costs, it would align Traditional MedicareTraditional Medicare, also known as Original or Fee-For-Service Medicare, works on a fee-for-service basis. This means that you can go to any doctor or hospital that accepts Medicare, anywhere in the United States, and Medicare will pay its share of the bill for any Medicare-covered service it… with MAMedicare Advantage (MA) health plans are offered by private Medicare approved companies as an alternative to Original Medicare. Medicare pays these companies a fixed amount per enrollee per month to provide benefits for Parts A, B, and (usually) D. plans and other private health plans (all of which cap out-of-pocket spending). It would also protect beneficiaries from high out-of-pocket costs.

Figure 7-1

MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). Parts A and B Deductibles, CoinsuranceA form of health care cost sharing in which a percentage of covered expenses must be paid by the insured. In contrast, a copayment is a specific dollar amount that must be paid for a specific service. , and Premium Amounts, 2018

Figure 7-1 MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). out-of-pocket costs

Medicare Parts A and B Deductibles, Coinsurance, and Premium Amounts, 2018
Sources: The Centers for Medicare & Medicaid Services - Part B CostsCosts at a GlanceSkilled- Nursing Facility Care.

 

TRADITIONAL MEDICARE BENEFICIARY OUT-OF-POCKET COSTS: Policy

TRADITIONAL MEDICARE BENEFICIARY OUT-OF-POCKET COSTS: Policy

Medicare affordability

Congress should close MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). coverage gaps that lead to burdensome out-of-pocket expenses. It should also limit increases in out-of-pocket costs, including increases in MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). ’s overall cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. requirements and premiums for current benefits. In particular, beneficiaries with low incomes should be protected against high out-of-pocket expenses.

When considering program changes (e.g., cost-sharingThe share of insurance-covered costs that a person pays out of pocket, including deductibles, coinsurance, and copayments. It does not include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. or provider-reimbursement reforms), Congress should explicitly analyze and report on the direct and indirect effects on beneficiaries’ out-of-pocket spending.

The Centers for MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). & MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. Services should monitor the effect of increases in Part B and Part D premiums on beneficiaries with high and low incomes, particularly those without MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. coverage. And they should determine whether premium costs are a barrier to Part B services and outpatient prescription drugs.

MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). reforms should explicitly recognize the special health care and economic needs of beneficiaries with low incomes, the vast majority of whom are women, and protect them from bearing undue out-of-pocket health costs.