“Skinning” Medicare Beneficiaries

It is clear from recent events that changing Medicare is no longer a politically dangerous topic. Whether it is members of Congress, Presidential candidates, or the Obama Administration, all want to make beneficiaries pay more for their care as a means of cutting Medicare’s costs. Yet, none of the current proposals address the issue of skyrocketing health care costs. And all of them save Medicare dollars by imposing higher costs on Medicare beneficiaries, or by limiting benefits.

Many in Washington DC believe that Medicare beneficiaries “don’t have enough skin in the game” and need to pay more for their care. Some want to increase the out-of-pocket costs most Medicare beneficiaries have to pay despite the fact that half of all Medicare beneficiaries have annual incomes of $22,000 or less. Others propose creating a voucher system that would give new beneficiaries a fixed amount to buy medical insurance in the private market, sending the current program into what the insurance world calls a “death spiral” as current beneficiaries get older and sicker.

Many in Washington DC believe that Medicare beneficiaries “don’t have enough skin in the game” and need to pay more for their care.

Small but significant changes to Medicare have already taken place over the last decade, such as imposing means testing on Medicare beneficiaries with incomes above $85,000 for individuals and $170,000 for couples who must pay higher Medicare and prescription drug premiums based on the amount of their income(note 1). The President’s budget recently sent to Congress proposes to increase both premiums by 15% for these higher income beneficiaries. It proposes to increase the annual Part B deductible by $25 for new beneficiaries, and charge a 15% excise tax for certain Medicare supplement insurance benefits, increasing those annual premiums by about $400.

Over the last decade Medicare spending has increased as medical costs have gone up, but at a slower pace than health care costs for younger people(note 2). While it is clear that Medicare costs will continue to increase, if for no other reason that an influx of baby boomers becoming eligible for the program, many of the proposed changes could have a dramatic effect on the out-of-pocket expenses beneficiaries pay, and their ability to get timely medical care. Beneficiaries today spend an average of 16% of their income on medical expenses, some not covered by Medicare. Those with chronic health care conditions often spend much more. As out-of-pocket costs increase, care is often delayed or deferred resulting in the need for higher cost hospital or nursing home care.

While CHA supports changes to Medicare that result in better health care for beneficiaries we oppose changes that result in higher out-of-pocket costs for an already vulnerable population, and reductions in Medicare covered benefits and services.

Note 1: Since 2007, higher-income beneficiaries pay a larger Part B premium based on the income they reported to the IRS in the previous year.  Part D premiums are deducted from an individual’s Social Security benefits and the increased premium amount is based on the average national cost of a Part D premium, not on an individual’s own premium amount. (See: SSA Rules for Higher Income Beneficiaries).

Note 2: Medicare per capita spending has grown at a slightly lower rate, on average, than private health insurance spending, at about 6.8 vs. 7.1% per year respectively between 1998 and 2008. See: http://www.kaiseredu.org/Issue-Modules/US-Health-Care-Costs/Background-Brief.aspx.

Karen Joy Fletcher

Our blogger Karen Joy Fletcher is CHA’s Communications Director. With a Masters in Public Health from UC Berkeley, she is the online “public face” of the organization, provides technical expertise, writing and research on Medicare and other health care issues. She is responsible for digital content creation, management of CHA’s editorial calendar, and managing all aspects of CHA’s social media presence. She loves being a “communicator” and enjoys networking and collaborating with the passionate people and agencies in the health advocacy field. See her current articles.