Brief Adding an Out-of-Pocket Spending Limit to Traditional Medicare
Anuj Gangopadhyaya, John Holahan, Bowen Garrett, Adele Shartzer
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Medicare beneficiaries can receive services through traditional Medicare (TM) or through Medicare Advantage (MA), in which private plans contract with Medicare to provide covered services. Unlike in most commercial plans, including MA, TM lacks a cap on out-of-pocket spending. This brief analyzes the implications of introducing a $5,000 spending cap on overall spending by TM enrollees and Medicare, beneficiary out-of-pocket, supplementary coverage plan, and Medicaid spending. We estimate that in 2023, about 4.5 million TM enrollees will incur more than $5,000 in cost-sharing expenses. These enrollees average about $10,500 in cost-sharing expenses (paid by Medicaid, by supplementary plans, and out of pocket by beneficiaries), and thus a $5,000 cap is expected to reduce per capita cost-sharing payments by about $5,500. The $5,000 cap would reduce these beneficiaries’ out-of-pocket expenses by about $1,300. The spending cap is estimated to reduce total supplementary plan spending by $12.3 billion and could apply downward pressure on Medigap premiums, potentially benefitting many enrollees with existing Medigap coverage and others currently unable to afford it. Finally, the spending cap would increase Medicare spending by about $39 billion in 2023 and would likely require an increase in Parts B and D premiums to help finance the new policy.

Research Areas Health and health care Social safety net
Tags Health care delivery and payment Health insurance
Policy Centers Health Policy Center
Research Methods Microsimulation modeling