Traditional Medicare Beneficiary Out-of-Pocket Costs

Background

Beneficiaries enrolled in traditional fee-for-service Medicare are exposed to significant out-of-pocket expenses. They are responsible for monthly Part B premiums, deductibles, and coinsurance, as well as for the costs of any services and products that Medicare does not cover (Figure 7-2). The Part B premium is $134 in 2018, with beneficiaries with higher incomes paying more. Because Part B premiums and coinsurance payments are determined by Part B spending, annual increases in program spending also increase premiums and coinsurance. Some beneficiaries have faced steep increases in Part B premiums in recent years. The Part B deductible also increases annually by the same rate as growth in Part B costs; it stands at $183 in 2018.

Some researchers and policymakers have proposed increasing beneficiary cost-sharing to save Medicare money and encourage beneficiaries to use fewer services. These proposals typically assume that Medicare 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—Medicare 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 85 and older. These amounts include Medicare cost-sharing 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 Medicare 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 Medicaid. Those with supplemental insurance coverage typically purchased private insurance, 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 Medicare premiums. But even with supplemental insurance coverage to help pay for Medicare’s cost-sharing, some beneficiaries spend a significant amount on health care expenses. In 2013, Medicare beneficiaries with Medigap supplemental insurance coverage spent an average of $7,046 out of pocket.

Some Medicare beneficiaries are eligible for partial Medicaid benefits through the Qualified Medicare Beneficiary program or the Specified Low-Income Medicare Beneficiary program (see also this chapter’s section on Health Care Coverage: Medicaid—Medicaid Assistance for Medicare Beneficiaries with Low Incomes Section for more information about these programs). In addition, eligibility for full Medicaid 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 poverty level actually receive Medicaid assistance. Those who do not receive it exceed state income and asset requirements or do not meet certain federal requirements; others may not realize they are eligible for benefits or decline to participate. Even with such financial assistance, some Medicare beneficiaries may still face substantial expenses.

Those without supplemental coverage who are not eligible for Medicaid are fully responsible for all their Medicare cost-sharing responsibilities unless they obtain assistance through a charitable organization or other public programs.

Beneficiaries in Medicare Advantage (MA) 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 MA 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 7-2

        Medicare Parts A and B Deductibles, Coinsurance, and Premium Amounts, 2018

                                                    (See Figure 7-1 for Part D Information)

subsection traditional medicare beneficiary out of pocket costs aarp

 

Sources: Centers for Medicare & Medicaid Services - Part B CostsCosts at a GlanceSkilled-Nursing Facility Care

 

TRADITIONAL MEDICARE BENEFICIARY OUT-OF-POCKET COSTS: Policy

Making Medicare More Affordable

In this policy: Federal

Congress should close Medicare coverage gaps that lead to burdensome out-of-pocket expenses; limit increases in out-of-pocket costs, including increases in Medicare’s overall cost-sharing requirements and premiums for current benefits; and ensure that beneficiaries with low incomes are protected against high out-of-pocket expenses.

When considering program changes (e.g., cost-sharing or provider-reimbursement reforms), Congress should explicitly analyze and report on the direct and indirect effects on beneficiaries’ out-of-pocket spending.

CMS should monitor the effect of increases in Part B and Part D premiums on beneficiaries with high and low incomes, particularly those without Medicaid coverage., And they should determine whether premium costs are a barrier to Part B services and outpatient prescription drugs.

Medicare 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.