Cost-Shifting to Medicare
Beneficiaries:
A Route to Decreased Access
and Increased Cost
Jeanne L. Rupert DO PhD
Medicare Pressure on the
Federal Budget
Medicare is a large basket which holds
almost all Americans age 65+
Aging of Baby Boomer demographic will
increase total Medicare expenses
Controlling Medicare expenses is a major
Medicare Pressure on the Federal
Budget
Vulnerability of Medicare
Beneficiaries
Chronic health conditions
69% have 2 or more
1
Lack of financial resources
50% have income under $22,500 per yr
2
Gender and race
43% of Black & Hispanic women over 65
Income and Wealth Disparities
among Medicare Beneficiaries
Medicare
Beneficiary
Groups
Average
Income per
year per
individual
Average
Wealth (all
assets)
Those with
no savings
(% of
individuals)
White
$24,800 $85,950 5%
Black
$15,250 $11,650 20%
Hispanic
$13,800 $12,050 20%
Source: Jacobson G, Huang J, Neuman T and Smith K. “Wide Disparities in the Income and Assets of
People on Medicare by Race and Ethnicity: Now and in the Future”. Menlo Park, CA: Kaiser Family
Foundation, September 2013.
Seniors’ Health Expenses
Average out-of-pocket in 2012 was $4722, or
13.9% of annual budget
Health insurance premiums 2/3 of total
Households between 100% and 200% of the
Federal Poverty Level spent 15.7% of income
on health care, highest of any group
41/3 of all Medicare beneficiaries in this
Seniors’ Health Expenses
Medicare covers about 62% of seniors’
health care costs, excluding long-term
care, per Employee Benefits Research
Institute study
6
Only 28% of U.S. employers offer retiree
health benefits
7
For 25% of seniors, final expenses exceed
the total value of their remaining assets
8
In 2012, 43% of those over 65 delayed
Impact of Increased Cost-sharing
Robert Wood Johnson Foundation study
(2010) found that:
Patients are not able to discern which
choices in their care are inappropriate
Vulnerable populations shift types of
services used, which increases overall
expenditures
Increases in cost-sharing for elderly
may result in higher Medicare program
costs
10
Vulnerability in the Federal
Health Care budget
Seniors who are impoverished qualify for
Medicaid assistance
Dual eligibles were 14% of all Medicare
beneficiaries in 2010, and accounted for
approximately 1/3 of all Medicaid &
Stakeholders in Medicare revision
proposals
Current and soon-to-be seniors, and their families
Federal budget officials, both elected and
employed
Hospitals and nursing homes
All health care providers
Senior advocacy organizations
Organizations concerned with social and economic
equity
Organizations concerned with fiscal stability of the
federal budget
President’s 2015 Medicare Budget Proposals
12
Key changes
Impact on
access/
affordability
Opponents
Supporters
Increase part B
and part D
premiums for
top 25% of
income
Likely small to
none
AARP; National
Committee to
Protect Social
Security and
Medicare;
Medicare Rights
Center; National
Association of
Insurance
Commissioners;
Center for
Medicare
Advocacy
Bipartisan Policy
Center; Center
for American
Progress;
Moment of Truth
Project
Increase part B
premiums for
new
beneficiaries
starting in 2018
Potential
decrease
Raise co-pays
for name brand
drugs for
low-income seniors
Likely decrease
Home health
co-payment
Likely decrease
Tax on Medigap
Sen. Paul Ryan’s Budget Proposal
Voucher support for Medicare
Very likely decrease access and
affordability for vulnerable beneficiaries
Supported by fiscal conservatives
Opposed by broad base of consumer and
Re-framing the Discussion
Current strategies do not address the fundamental
structural problem of Medicare insurance, which is
its exposure to socioeconomic externalities
Externality is a consequence not captured by usual
pricing mechanisms
14
Medicare absorbs:
income and wealth differences
race and gender differences
prior health status differences
prior health care access differences
disconnect between pre-65 and post-65
Ways to Recapture Externalities
Rebate system aimed at states and/or insurers who
deliver healthier people to Medicare at age 65
o
allows for innovation of care models
o
fits with ACO structures
Reward individuals for better choices
o
rebates for achieving health targets
o
premium credits for community support
Income-related deductibles
o
reward those who use fewer resources
o
subsidize those who need more care
Recommendations
The multitude of proposals presently
focus on costs and deficits
Shifting the focus to health outcomes will
have beneficial fiscal effects
Incentives should be designed to match
desired outcomes
Putting health first will protect the
Notes
1. http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Chronic-Conditions/Downloads/2012Chartbook.pdf
2. Jacobson G, Huang J, Neuman T and Smith K. “Wide Disparities in the Income and Assets of People on Medicare by Race and Ethnicity: Now and in the Future”. Menlo Park, CA: Kaiser Family Foundation, September 2013.
3. “Many Older Women on Medicare are Impoverished”, Kaiser Family Foundation slide based on the Medicare Current Beneficiary Survey Access to Care file, 2006. Accessed at: http://kff.org/womens-health-policy/slide/many-older-women-on-medicare-are-impoverished/
4. Cubanski, J., T. Neuman, G. Jacobson, and K. Smith, “Raising Medicare Premiums for Higher-Income Beneficiaries: Assessing the Implications”. Menlo Park, CA: Kaiser Family Foundation, January 2014.
5. Umans B and Nonnemaker K. “The Medicare Beneficiary Population.” Washington: AARP Public Policy Institute, 2009. Accessed at
http://assets.aarp.org/rgcenter/health/fs149_medicare.pdf
6. Fronstin, P., D. Salisbury, and J. VanDerhei, “Amount of Savings Needed for Health Expenses for People Eligible for Medicare: More Rare Good News.” EBRI Notes, Vol. 34 No. 10. Washington DC: Employee Benefit Research Institute, October 2013.
7. McArdle, F., T. Neuman and J. Huang, “Retiree Health Benefits at the Crossroads”. Menlo Park, CA: Kaiser Family Foundation, April 2014.
8. Graham, J. (2012, September 21). The High Cost of Out-of-Pocket Expenses. New
York Times. Accessed at:
Notes (continued)
9. Kaiser Family Foundation poll, conducted May 2012. Data accessed at:
http://kaiserfamilyfoundation.files.wordpress.com/2013/05/8322_hsw-may2012-update.pdf
10. Swartz, K. “Cost Sharing: Effects on Spending and Outcomes”. Research Synthesis Report No. 20. Princeton, NJ: Robert Wood Johnson Foundation, Dec. 2010.
11. Jacobson, G., T. Neuman and A. Damico. “Medicare’s Role for Dual Eligible Beneficiaries”. Menlo Park, CA: Kaiser Family Foundation, April 2012.
12. http://states.aarp.org/aarp-responds-to-presidents-fy2015-budget-proposal;
http://www.medicareadvocacy.org/the-presidents-proposed-fy-2015-budget-the-impact-on-medicare/
13. Van de Water, P. “Medicare in Ryan’s 2014 Budget” Washington: The Center on Budget and Policy Priorities, March 15, 2013.
