Medicare beneficiaries are facing higher out-of-pocket costs that amount to a “substantial” share of their income, according to an issue brief from The Commonwealth Fund, “Medicare Beneficiaries’ High Out-of -Pocket Costs: Cost Burdens by Income and Health Status.” There are 56 million people, or 17 percent of the U.S. population, who rely on Medicare, according to the report. By 2024, one-fifth of the population will have Medicare coverage. The benefits exclude dental, vision, hearing and long-term services coverage, and there is no limit on out-of-pocket costs for the covered services, it states.
As more consumers become eligible for Medicare, The Commonwealth Fund reports they will find the need to supplement their coverage, “since the program has relatively high cost-sharing and no limit on patient liability for covered benefits.” Research on beneficiaries’ financial burdens for the brief is based on the 2012 Medicare Current Beneficiary Survey, with 11,299 responses and population and spending data projected to 2016. The respondents shared their experiences with access to care, medical services and spending activity, including costs for services not covered by Medicare.
Overall, the survey shows beneficiaries spent an average of $3,024 in out-of-pocket costs each year, according to the report. Findings also include that 15 million Medicare beneficiaries spent 20 percent or more of their income on healthcare premiums plus medical care, including cost-sharing and services that are not covered, it states. Medicare beneficiaries also face costs from a separate private plan for prescription drugs.
“If they want to buy private Medigap supplemental coverage for cost-sharing, they incur significant additional premiums,” according to the report. “Even after they pay for supplemental drug and Medigap plans, beneficiaries face the cost of dental, hearing, vision, and long-term services—all excluded from Medicare. For beneficiaries with multiple illnesses or serious functional limitations, out-of-pocket costs can easily add up to thousands of dollars per year.” Findings on costs for Medicare beneficiaries also include:
-Hospitalization costs for beneficiaries are $1,300 and they pay 20 percent of bills for physician care.
-They also pay a $1,600 annual premium for Medicare Part B medical services.
-Annual Medigap, the supplemental coverage for Medicare cost sharing, premiums are $2,000 per beneficiary, but can be significantly higher in some states. “Medigap has notably high overhead costs: administrative costs and profits absorb 20 percent of premiums on average.”
-Private Medicare Advantage plans are available for beneficiaries interested in opting out of traditional Medicare plans. While those plans have lower cost-sharing in general, it has increased significantly in recent years.
Overall, the report shows that 5.4 million beneficiaries with only Medicare and no supplemental coverage are subject to higher healthcare costs. “These beneficiaries spent an estimated $5,374 on out-of-pocket costs in 2016 compared to $2,587 for beneficiaries who received supplemental coverage from Medicaid. With incomes too high to qualify for Medicaid but too low to afford supplemental coverage, 32 percent of Medicare-only beneficiaries spent 10 percent or more of their income on health care,” according to the report.
Financial burdens and unmet needs from Medicare leave beneficiaries at risk. As Medicare enters its sixth decade and the Baby Boom population becomes eligible, the costs of the program will increase, likely placing it on the policy agenda,” the report concludes. “Financial burdens and access gaps highlight the need to approach reform with caution. Already-high burdens suggest restructuring cost-sharing to ensure affordability and to provide relief for low-income beneficiaries,” the report concludes.
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