Congress Increases Out-of-Pocket Costs for Medicare

by Eileen Doherty

Paying for medical costs continues to be one of the most burdensome expenses facing older adults in our country. Monthly Medicare Part B premiums, high out-of-pocket costs for co-pays to cover office visits and other procedures, and high deductibles continue to be burdensome for Medicare beneficiaries.

A University of Michigan study found in 2010 that 32.6% of the bankruptcies filed by older adults were triggered by medical costs. Another study released by the Journal of General Internal Medicine in 2013 suggests that 1 in 4 American seniors declare bankruptcy in the last 5 years of their lives due to high medical costs.

These staggering figures should be cause for concern among Medicare beneficiaries who are facing even higher out-of-pocket medical costs. It is no secret that Medicare beneficiaries use more medical care in the last year of life. The Centers for Medicare and Medicaid Services estimates that more than 25% of Medicare spending goes towards the 5% of beneficiaries who die each year.

Recently Congress passed and the President signed a Medicare bill known as the “doc fix”. This bill has some positive and negative benefits for Medicare beneficiaries. Doctors are reimbursed based on quality of care that is delivered, rather than the number of procedures that are provided to patients. According to Congressional Budget Office studies, Medicare beneficiaries who use Medicare fee-for-service with a Medicare Supplement receive fewer services. Controlling the incentives for physicians to prescribe procedures is believed to be another way to reduce Medicare costs.

As part of the “doc fix”, physicians are reimbursed 0.5% each year for the next 5 years as Medicare moves toward a system of reimbursing for quality of care and changes the formulas for reimbursing care.

Other changes that were included in the legislation are the establishment of a precedent in which beneficiaries face great out-of-pocket expenses to help finance physician reimbursement. Specifically, starting in 2020, “first-dollar” coverage that is currently available to purchasers of MediGap or Medicare Supplements will not cover the Part B deductible for new beneficiaries. In 2015, the deductible is $147 per year.

Starting in 2018, individual Medicare beneficiaries with incomes above $133,500 pay more for Medicare coverage. This affects about 2% of beneficiaries.

Congress is also looking to providers and hospitals to finance the changes starting in 2018.

Low income seniors who currently are receiving support to cover the cost of Medicare Part B premiums through the Qualifying Individual (QI-1) continue to receive those benefits permanently, rather than facing the annual dilemma of continued funding. Individuals whose monthly income from all sources is less than $1345 per month ($1813 for couples) may be eligible to receive assistance with the $104 per month Medicare Part B premium. Individuals must have less than $8780 in resources (couples $13,930) to be eligible for assistance. Medicaid will assist with the monthly Medicare Part B premium.

Medicare continues to cover many costs of health care for older adults. Cost shifting from the government to providers and beneficiaries is not the long term solution to preserving the Medicare Trust funds, especially in light of the number of bankruptcies that are filled annually by Medicare beneficiaries as a result of high medical bills.