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One Page Summary of "Modernizing the Medicare Benefit"

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Cost-Sharing Reforms Can Improve the Medicare Benefit

  • Compared to other reforms that rely more on cost shifting, cost-sharing reforms achieve savings by changing the incentives and behavior of patients to reduce costs and improve outcomes without increasing overall costs for seniors.
  • Better targeting assistance to seniors by reducing spending on unnecessary care and providing greater protection against catastrophic costs with an out-of-pocket limit where       help is needed most.
  • Lowering premiums resulting from the reduction in the growth of Medicare spending to offset the modest increased out-of-pocket costs for Medicare services for        most seniors.
  • Eliminating the need for seniors to purchase expensive Medigap policies.
    • Roughly 80 percent of Medigap enrollees would see a reduction in out-of-pocket spending under a combination of cost-sharing benefit design and supplemental     coverage reforms, with an average net reduction of $415 per person
  • Providing additional protections for low-income and high-cost beneficiaries through income-related out-of-pocket limits or deductibles.
  • Making Medicare simpler to navigate by establishing uniform cost-sharing rules.

Cost-Sharing Reforms Encourage More Efficient Spending

  • The lack of a coherent cost-sharing system drives over- and mis-utilization of care. Creating uniform rules and giving beneficiaries more “skin in the game” will allow seniors to more clearly understand high-value choices and lead to a more efficient use of resources, which will benefit seniors and society as a whole.
  • Limiting supplemental first-dollar coverage will encourage more efficient use of resources and slow long-term health care spending growth.
    • Medicare spends about 33% more on care for beneficiaries with Medigap plans,  and 17% more on those with retiree health plans due to higher utilization.
  • These reforms can provide significant savings – up to $175 billion over ten years – and extend the life of the Medicare trust fund.

Cost Sharing Reforms Have Broad Bipartisan Support

  • President Obama, Senator Orin Hatch (R-UT), and House Majority Leader Rep. Eric Cantor (R-VA) have all expressed support for reforming cost-sharing rules.
  • Cost-sharing reforms ideas have been included in proposals from: the Fiscal Commission, Bipartisan Policy Center, Gang of Six, Urban Institute, Center for American  Progress, National Coalition on Health Care, Heritage Foundation, American Enterprise Institute, Commonwealth Fund, MedPAC, and in several of the President's budget submissions.

A Bipartisan Path Forward’s Cost Sharing Reform Proposal

In their latest report, A Bipartisan Path Forward to Securing America’s Future, Fiscal Commission co-chairs former Senator Alan Simpson and Erskine Bowles proposed a modified version of the cost sharing reforms in the Fiscal Commission report. The proposal includes:

  • Replacing current Medicare cost-sharing rules with a unified deductible, uniform coinsurance, and an out-of-pocket maximum, while varying the deductible and out-of-pocket limit with income and allowing value-based adjustments in coinsurance for low or high value services.
  • Restricting supplemental “Medigap” plans from covering near first-dollar coverage of cost-sharing liabilities.
  • Limiting near first-dollar coverage of supplemental TRICARE for Life plans
  • Requiring a reformed Federal Employees Health Benefits Program (FEHBP) to subsidize retirees’ premiums rather than their cost-sharing
  • Imposing a surcharge on Medicare premiums for those with employer-sponsored retiree plans while offering an option for seniors to “cash out” and instead use the value to subsidize their Medicare premium.