Analysis Of Medicare

Medicare Background

In Fiscal Year 2013, the federal government spent $498 billion, or roughly 14 percent of the federal budget, on Medicare (Center on Budget, 2014). Policy experts only expect that number to increase as the Baby Boom generation continues to age and enter onto the Medicare rolls. In 2010, there were approximately 47.7 million Americans enrolled in Medicare. By 2050, the Kaiser Family Foundation projects that number to almost double to 92.4 million (Kaiser Family Foundation, 2013). While there has been a recent slowdown in health care and thus Medicare spending over the last decade, there was an acceleration in health spending growth during 2013 which suggests that the long, slow, downward effects of the recession on health spending may have finally bottomed out (Schwartz, 2014). Taken together, increased enrollment and increasing health care spending growth is a great concern to policy makers. Not only are Medicare expenditures projected to double to more than $1 trillion by 2023 (Kaiser Family Foundation, 2013), but at this level of growth, there is broad concern that Medicare spending will crowd out spending on investments like education, research and development, and infrastructure. As such, policy makers are looking for ways to lower per-capita Medicare costs and save money.

Policy Solution

One such solution that has been proposed to create savings within Medicare is to impose limits on “Medigap.” Medigap is the supplemental coverage that provides Medicare beneficiaries with financial protection for the things that Medicare doesn’t pay for, like the Medicare deductibles and copayments that beneficiaries would otherwise pay out of pocket. In 2010, 23 percent of Medicare enrollees, or roughly 1 in 4 ...

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...e, 90 percent of beneficiaries have supplemental coverage through an employer, Medigap, Medicaid, Medicare Advantage, or another plan that reduces their risks and makes health coverage more predictable and affordable.

Private insurance companies sell Medigap plans based on a system developed by the National Association of Insurance Commisioners. These plans are offered in 10 standard packages of benefits, identified by the letters A through D, F, G, and K through N (Cassidy, 2011). Medigap plans are required to cover the following basic benefits: coinsurance for extended hospital stays, total costs for 365 hospital days once enrollees have used up all their Medicare hospital benefits, payment for all cost-sharing amounts after enrollees meet their annual Part B deductible, and the first three pints of any blood that enrollees may need in the course of their care.