Medicare Benefit Redesign: Enhancing Affordability for Beneficiaries While Promoting Choice and Competition.

Issue: Out-of-pocket expenses are capped for enrollees in Medicare Advantage (MA) plans but not for beneficiaries in traditional Medicare, which also requires a high deductible for hospital care. The need for supplemental Medigap coverage adds to traditional Medicare's complexity and administrative costs. Shortfalls in financial protection also make it difficult to offer traditional Medicare as a choice for people under age 65, as some have proposed. Goals: Describe alternative benefit designs that would limit out-of-pocket costs for traditional Medicare's core services, assess their cost, and illustrate financing mechanisms. Methods: Analysis of a $3,500 ceiling on annual out-of-pocket expenses for Parts A and B benefits and options for replacing Part A hospital cost-sharing with a $350 or $100 copayment per admission. Key Findings: Estimates of the costs of the reforms are $36­$44 per beneficiary per month, assuming no behavioral or supplemental coverage changes. This could be financed by a $9­$11 increase in premiums combined with a 0.3-to-0.4-percentage-point increase in the Medicare payroll tax (split between employer and employees). Medicaid costs would decrease, while employers, retirees, and Medigap enrollees would see reduced premiums. Conclusion: The reforms would improve affordability and put traditional Medicare on a more equal footing with MA plans. They would also make it easier to open traditional Medicare to people under age 65.

A Policy Option to Enhance Access and Affordability for Medicare's Low-Income Beneficiaries.

Issue: An estimated 40 percent of low-income Medicare beneficiaries spend 20 percent or more of their incomes on premiums and health care costs. Low-income beneficiaries with multiple chronic conditions or high need are at particular risk of financial hardship. High cost burdens reflect Medicare premiums and cost-sharing, gaps in benefits, and limited assistance. Existing policies to help people with low incomes are fragmented ­ meaning that beneficiaries apply separately, sometimes to different offices ­ and require Medicare beneficiaries to navigate complex applications. Goals: With the goal of enhancing access and affordability for people vulnerable due to low incomes and poor health, this issue brief proposes a policy that would reduce Medicare's cost-sharing and premiums for beneficiaries with incomes below 150 percent of the federal poverty level. Methods: Profile current cost burdens by income groups and assess the potential impact of a policy to expand cost-sharing and premium assistance using the 2012 Medicare Current Beneficiary Survey projected to 2016. Results and Conclusion: The policy described could help 8.1 million low-income beneficiaries, significantly lowering their risk of high cost burdens. It also could simplify the administration of assistance provided to these enrollees.