Expanding Medicare Supplemental Benefits to Benefit Seniors

July 31, 2019 - Expanding supplement benefits within the Medicare program could help underinsured seniors who see gaps in care now that they lack employer-sponsored plans, the Commonwealth Fund reported.

 “In the past, large employers often provided supplemental coverage for their retirees,” Commonwealth Fund’s researchers explain in the study. “However, because of economic pressure on employers, fewer are now offering such benefits. Particularly for adults with limited incomes, the erosion of employer-sponsored retiree health insurance means that more Medicare beneficiaries are on their own to obtain supplemental coverage to protect against high out-of-pocket costs.”

Between 2010 and 2016, the number of Medicare beneficiaries with employer-sponsored supplemental coverage dropped by ten percent.

While this drop hits middle- and low-wage individuals the hardest, the effects are felt at every income level. In the highest income group of beneficiaries, the number of those with employer-sponsored insurance in addition to Medicare dove 25 percent between 2010 and 2016.

As a result, Medicare beneficiaries may turn to Medicaid or Medicare Advantage to fill coverage gaps.

Medicare Advantage plans saw an uptick in enrollment of five percent, making them the most common form of supplemental coverage, after employer-sponsored insurance. Medigap coverage hit 17 percent. In 2016, 20 percent of Medicare beneficiaries also received supplemental coverage through Medicaid.

With this additional coverage, beneficiaries shoulder a high cost-sharing burden.

Of the five types of supplemental coverage—Medicare, Medicaid, employer-sponsored insurance, Medicare Advantage, and Medigap—Medicare Advantage was the only plan that saw its premiums decrease, dropping $143 over the six-year study period.

However, for Medicare Advantage enrollees, premiums in 2016 were not low. The average cost was $508.

Six percent of senior beneficiaries utilized Private Medigap with Medicare Advantage, which by 2016 cost them four times the average Medicare Advantage plan premium.

These premiums for supplemental coverage are in addition to the $1,626 in standard Part B annual premiums beneficiaries must pay.

The study points to four policies that could lighten beneficiaries’ healthcare spending.

Congress could impose a ceiling on out-of-pocket expenses. Medicare Advantage enrollees in particular would benefit from such a policy as beneficiaries with private health plans are susceptible to frequent out-of-pocket costs.

The Part A deductible could be replaced with a $100 to $300 copayment per hospital admission, for example.

Commonwealth Fund studied the feasibility of such a plan in October 2018. The researchers analyzed a $3,500 ceiling for annual out-of-pocket expenses on Parts A and B benefits and explored replacing the deductible with a copayment as described above.

The report found that these changes would increase the availability of affordable plans, decrease Medicaid costs, reduce premiums for Medigap enrollees, and increase access to traditional Medicare for those younger than 65.

The reforms would be financed, the report suggested, through a $9 to $11 premium hike and a 0.3 to 0.4 percent rise in the Medicare payroll tax shared by employers and employees.

A bipartisan drug pricing bill passed by the Senate Finance Committee follows a similar capitation model, which would cap beneficiaries’ Part D expenses at $3,100.

Policymakers may also consider expanding Medicare’s benefits to include essential health benefits such as dental, vision, and hearing, the writers say. Not only would this reduce the financial pressure, but it would also increase access to care for these services.

The researchers suggest a home- and community-based benefit. This would serve the physically or cognitively impaired populations on Medicare.

Lastly, the authors recommend a sliding scale of premium and cost-sharing assistance for impoverished beneficiaries.

“Medicare has served its 59 million beneficiaries well for more than 50 years, meeting its goal of ensuring access to care and essential financial protection,” the report concludes. “Now Medicare will serve a generation that has experienced little or no growth in real wages, a reduction of assets and savings through economic crises, and loss of employer-provided pensions and retiree health benefits. It is an urgent priority that policymakers reexamine the program’s benefits and financing to meet the needs of older adults.”