By Mary Johnson
Will 2013 be the year that Congress tells us to hold our nose and take our medicine? Because healthcare costs remain the primary driver of future government deficits. Medicare remains a target of deficit plans.
The most widely-debated plan during the recent elections would fundamentally change Medicare — from a system that guarantees coverage for a fixed set of benefits, to a “premium support” system that would guarantee a fixed federal payment to cover a portion of beneficiaries’ healthcare expenses. A number of national polls, including one conducted by TSCL, found little support for the plan among seniors. Seventy percent of those who participated in an online TSCL poll opposed it.
Despite support for keeping Medicare a system that guarantees coverage for a fixed set of benefits, Medicare’s spiraling costs remain a critical issue. What happens next?
To get an idea where we may be headed, let’s take a look at the options that both Democrats and Republicans have tended to agree on:
- Raising Medicare’s eligibility age from 65 to 67: If the eligibility age is raised above 65, the Congressional Budget Office (CBO) estimates that change would reduce Medicare spending by about $148 billion over ten years, about 5 percent below what it otherwise would be. The CBO estimates that most people affected by the change would obtain health insurance from other sources, like employers, but that some would have no health insurance. Many would face higher premiums for health insurance, higher out-of-pocket costs for healthcare, or both. The change itself would do nothing to address the actual cause of rising costs.
- Increasing Medicare cost-sharing — higher deductibles: Studies indicate that when people have to pay more up front, they don’t use as many healthcare services. A widely-discussed proposal to change Medicare would impose a new annual “combined” (Part A and Part B) deductible of at least $550. Under current law the Part A hospital deductible is $1,184 in 2013, and that’s fully covered by Medigap and some Medicare Advantage plans. The Part B deductible in 2013 is $147. The proposed $550 deductible would cost the majority of seniors more every year because about 80% don’t require inpatient hospitalizations. In addition, some proponents of this proposal would prohibit Medigap plans from covering the new deductible.
- Increasing Medicare cost-sharing — new co-insurance: This option would impose co-insurance for all Medicare services. Currently there are a few services, like home healthcare and skilled nursing facilities, in which Medicare charges none. For example, Medicare currently covers up to 100 days of care in a skilled nursing facility for each episode of care at no deductible and no co-payment for the first 20 days. The CBO estimates that such a change would cut government spending on skilled nursing facilities by $21 billion over ten years. The CBO also says that most Medigap policies include full payment of skilled nursing facility cost sharing, so beneficiaries would be insulated from the higher co-insurance, but would face higher Medigap premiums to reflect the average cost of those payments.
What do you think of these options to cut Medicare spending? Take TSCL’s 2013 Senior Survey!
Sources: Comparison of Medicare Provisions in Deficit and Debt Reduction Proposals, Kaiser Family Foundation, September 23, 2011.