“This plan builds on traditional Medicare, which beneficiaries are more satisfied with than private coverage,” Karen Davis, director of the Roger C. Lipitz Center for Integrated Health Care at Johns Hopkins, said in a news release about the study that she co-authored. Davis is also the former president of the Commonwealth Fund. “But Medicare is overly complex, and it fails to protect beneficiaries against high costs unless they buy supplemental coverage. Medicare Essential would simplify and modernize Medicare for beneficiaries and keep premiums and out-of-pocket costs reasonable.”
Under their proposal, Medicare would sponsor a new plan choice starting next year that would include a single deductible of $250 per beneficiary for hospital and physician services. That benefit would fully cover preventive care (exempt from the deductible) and have copayments depending on the service, such as $20 for primary care, $40 for specialists and $50 for emergency department services. And it would set an out-of-pocket maximum for Medicare-covered services of $3,400 a year, including the cost for prescription drugs. According to the article, the design would include prescription medication with no deductible and a single formulary nationwide. The drug benefit would be provided by a nationwide pharmaceutical benefit manager and be selected after a competitive-bidding process.
The savings in this benefit design would come from lower administrative costs and the use of a pharmaceutical benefit manager to negotiate prescription drug costs. “Twenty-eight percent of Medicare beneficiaries now purchase Medigap coverage to go with Medicare—plans that average 20 percent in administrative overhead compared with 2 percent for traditional Medicare,” the authors wrote in their article. “Medicare Essential would also replace the first-dollar supplemental coverage that many beneficiaries buy under Medigap without modest cost-sharing.”
Beneficiaries in the current program would spend about $427 a month on premiums for Medicare parts B (physician services) and D (prescription drugs), supplemental private Medigap plan F coverage and out-of-pocket health costs, the authors noted. Those choosing Medicare Essential would spend about $354 a month for the same services, which reflects about a 17% decrease compared with current Medicare plus private supplemental coverage. And the study describes how beneficiaries could save even more if they chose to receive care from preferred providers and take advantage of incentives offered to them in the new option.
The authors estimate that assuming a 10% “efficiency gain” by 2023 that accounts for changes to Medicare payment policy that are currently being tested—such as accountable care organizations—out-of-pocket expenses could be reduced by an additional 28% by beneficiaries for an average cost of $254 a month.
“Given its potential, such an alternative should be part of the debate over the future of Medicare,” the authors wrote in the article. “The nation needs a unified patient-centered strategy to preserve access while securing a high-quality more affordable healthcare system.”
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