Blog »

+A -A
Miller on Medicare: Daring to be Cautious March 29, 2013

by Thomas P. Miller

Finding economically feasible and politically safe options for cutting costs in Medicare has proven to be no easy task. A variety of government organizations, including the Congressional Budget Office and Medicare Payment Advisory Commission, and health policy researchers, such as MIT economist Jonathan Gruber, have put forth plans to improve the program, but they often diminish potential savings by playing it too safe.

The best option for sustainable reform appears to be a major-risk approach toward restructuring cost-sharing requirements. This involves a higher coinsurance rate and an income-related stop-loss cap on participants’ annual cost-sharing liabilities. An additional key to subsidizing high-income seniors less is by restricting their use of supplemental insurance such as Medigap for early-dollar spending, rather than taxing the coverage itself.

Key points in this Outlook:

  • Reforming Medicare cost-sharing requirements is an important option for reducing program spending levels.
  • A major-risk approach to cost sharing, with higher coinsurance and annual caps tied to income level, could provide the fairest and most effective avenue toward the best results.
  • Taxes on Medigap coverage just complicate the tax code more without much precision in retargeting Medicare spending incentives; instead, higher-income seniors should be subsidized less and lower-income seniors subsidized more.

Continue reading…