Out-of-pocket costs for Medicare+Choice skyrocket

Sunday, August 10, 2003

August 11 , 2003

WASHINGTON - Out-of-pocket costs for Medicare beneficiaries enrolled in Medicare+Choice plans will increase 10% in 2003 to nearly $2,000, more than double the average costs in 1999, according to a study being released today by the Commonwealth Fund, the Detroit News reports.

Study authors Marsha Gold and Lori Achman of Mathematica Policy Research analyzed beneficiary spending in the M+C program beginning in 1999 and estimated that Medicare HMO enrollees in 2003 will pay an average of $1,964 out of pocket, compared with an average of $967 in out-of-pocket costs in 1999. Out-of-pocket costs for M+C consist of the HMO premiums, Medicare Part B premiums, physician and hospital cost sharing and prescription drugs.

The study reports the following:

- Average out-of-pocket spending for M+C beneficiaries in poor health increased from $2,211 in 1999 to $5,305 in 2003.

- Average out-of-pocket spending for M+C beneficiaries in good health rose from $836 to $1,564.

- The $704 annual premium for Medicare Part B, which covers outpatient care, makes up 36% of M+C beneficiaries' total out-of-pocket spending.

- Prescription drugs makes up 26% of out-of-pocket costs, or $512 per year.

- Doctor and hospital copays makes up 15% of out-of-pocket costs, or $301 per year.

- M+C premiums makes up 22% of out-of-pocket costs, or $447 per year. The HMO premium increases marked the largest rise in M+C enrollees' out-of-pocket spending, up 18% since 1999.

The report also examined out-of-pocket spending for Medicare beneficiaries enrolled in preferred provider organization demonstration plans and found that out-of-pocket costs for PPO enrollees were nearly 50% higher than for beneficiaries enrolled in Medicare HMOs, according to the Detroit News. Beneficiaries enrolled in PPO demonstration projects - implemented by CMS in 2003 to provide more options for beneficiaries - will spend on average $2,884 out-of-pocket in 2003, the report said

The report "raises questions" about whether private plans under Medicare can protect beneficiaries from higher out-of-pocket costs and whether such plans can attract enrollees, the New York Times reports.

House and Senate Medicare bills (HR 1 and S 1) currently being considered in conference committee in large part rely on private plans to provide the proposal's drug benefit. Gold said joining a PPO under Medicare would cost a beneficiary about $1,000 more than joining a M+C HMO. Further, beneficiaries of traditional Medicare who purchase supplemental coverage may not spend "much more" than beneficiaries choosing a Medicare PPO, the Times reports. "The question is whether it will be attractive enough for plans and for people to enroll," Gold told The New York Times. Gold added, "As Congress debates the role of private plans in the future of the Medicare program, it should consider the eroding financial protection experienced under Medicare+Choice".