From MedicareRights.org

MedPAC Report Examines Controversial Cost-Containment Proposals

This week, the Medicare Payment Advisory Commission (MedPAC) released its June 2011 report to Congress, which addresses potential changes to the Medicare program and health care delivery system. The report focuses on changes in provider payments and benefit structures that MedPAC believes would reduce the growth of Medicare spending. MedPAC investigated different ways to change the current incentives in the Medicare program to encourage both providers and patients to use high-value services. The current fee-for-service (FFS) structure of the program has come under fire because many believe that paying providers per service encourages over-utilization. MedPAC recommends changing payments to providers to promote primary care, early intervention and care coordination, which would help achieve savings by preventing the need for more expensive acute care, such as hospitalizations, over time.

Some of the proposals discussed in the report are controversial because advocates and providers believe they may result in increased costs and decreased access to care for people with Medicare. One such proposal is the restructuring of the Medicare benefit coupled with a reduction in coverage provided by Medigap plans, which cover cost-sharing that is not covered by Original Medicare. One incarnation of this proposal, which was also included in recommendations from the National Commission on Fiscal Responsibility and Reform, would create a combined deductible and a universal coinsurance for Part A and Part B services, as well as an out-of-pocket limit. In addition, the proposal would create a Medigap deductible of sorts, with Medigap coverage not beginning until beneficiaries spent a certain amount out of pocket, and would reduce the percentage of out-of-pocket costs Medigap plans could pay once coverage began. 

Unfortunately, these proposals would likely increase out-of-pocket costs for most people with Medicare, who on average already spend 15 percent of their household incomes on health costs, and half of whom have incomes below $22,000 per year. Also, due the high out-of-pocket limit included in these types of proposals, most people with Medicare would never benefit from such protections. For example, an option proposed by the Fiscal Commission and discussed in the MedPAC report sets an annual out-of-pocket limit of $7,500. On average, people with Medicare pay about $5,000 out of pocket per year.