Money-Saving Medicare Reforms Could Cost Some Elders Their Coverage


The most often-cited Medicare reforms—raising the program's eligibility age to 67, enacting a means-based premium payment for Medicare Part A (hospital insurance), and adopting a "premium support" method of purchasing health insurance—could cut government spending, but might also have the undesirable side-effect of causing certain seniors to lose coverage, according to a recent analysis.

To determine how much money each plan could potentially save, researchers from the RAND Corporation, a nationwide nonprofit policy and research organization, ran simulations to determine whether or not each proposed solution would save money, and how they might affect Medicare's senior beneficiaries.

The best method for slashing spending turned out to be the adoption of a "premium support" Medicare system. Also known as a "voucher plan," this proposal would offer elders a fixed amount of money with which to go out and buy a health insurance plan from a private company, based on their individual needs and financial resources.

RAND researchers found that a switch to premium support could slice as much as 24 percent off the current amount spent on Medicare. However, it might also cause somewhere between four and 13 percent of elderly beneficiaries to drop out of the Medicare program entirely, due to increased out-of-pocket costs and difficulty finding healthcare providers.

A 2012 study, conducted by the Kaiser Family Foundation, found that turning Medicare into a premium support program could potentially increase out-of-pocket costs for 59 percent of seniors automatically, if they neglected to switch to a cheaper health insurance plan. This means that around 29 million Medicare beneficiaries could potentially have to shell out anywhere from $80 to nearly $500 more, per month, for medical insurance coverage.

Propositions that were less effective at cutting spending—means-testing Part A premiums and increasing the eligibility age to 67—would decrease government spending by a lesser amount (two and 14 percent, respectively) but would be less onerous for elderly beneficiaries, according to RAND analysts.

Study author, Christine Eibner, feels that the findings illustrate the Catch-22 inherent in Medicare reform. "Each of these policies can save money," she says, in a press release, "The question is what to do about those people who lose Medicare as the cost rises, or they are excluded."

The nation's economic crisis has highlighted the need to pass reforms to curb government spending. It's clear that, over the next few years, significant changes will be made to the programs that many seniors rely on for financial assistance, including not only Medicare, but Medicaid and Social Security as well.

Here are a few resources to help you make sense of these recent changes, as well as strategies for keeping your loved one's Medicare out-of-pocket costs in check:

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