Out-of-Pocket Costs for M+C Beneficiaries Rose Almost 50% Over Last Three Years, Study Says

Out-of-pocket costs for Medicare+Choice beneficiaries increased almost 50% from 1999 to 2001, while average monthly premiums rose and prescription drug coverage declined during the same period, according to two reports released on Feb. 14 by The Commonwealth Fund, the Las Vegas Sun reports (Las Vegas Sun, 2/13). The studies, Out-of-Pocket Health Care Expenses for Medicare HMO Beneficiaries: Estimates by Health Status, 1999-2001 and Medicare+Choice 1999-2001: An Analysis of Managed Care Plan Withdrawals and Trends in Benefits and Premiums, were conducted by Washington, D.C.-based Mathematica Policy Research Inc. and identified "weaknesses" in the Medicare+Choice program that disproportionately impact sick, and often low-income, beneficiaries. Medicare+Choice beneficiaries in "poor health" saw an average increase of 62% in out-of-pocket costs from 1999 to 2001, according to the first report, while beneficiaries in "good health" saw a 43% increase. Out-of-pocket prescription drug costs for those in poor health increased 56% from 1999 to 2001, while drug costs for those in good health increased 47%. The second report found that average monthly premiums for Medicare+Choice beneficiaries increased from $14.43 in 2000 to $22.94 in 2001, while the percentage of beneficiaries with prescription drug coverage decreased from 78% to 70% over the same period (The Commonwealth Fund release, 2/14). The reports reveal, however, that Medicare HMOs "still provided more, on average, than traditional Medicare," according to Marsha Gold, one of the authors of the reports. Previous research has estimated the total out-of-pocket costs for traditional fee-for-service Medicare at an average of $3,142 while the same costs for Medicare+Choice beneficiaries averaged only $1,438 in 2001. Although the study did not examine out-of-pocket costs for people with Medigap, supplemental Medicare insurance plans that may provide similar beneits to those offered by Medicare HMOs, Gold said the average costs for those plans were also higher than for Medicare+Choice (Freudenheim, New York Times, 2/14). The reports conclude that although Medicare+Choice "provides affordable supplemental coverage ... it is not the only solution to Medicare's problems" (The Commonwealth Fund release, 2/14).

Surprising Results?
Marilyn Moon, a Medicare policy expert at the Urban Institute, called the reports' findings "stunning," saying, "With costs rising rapidly, this will make people think twice about the value of these health plans." However, CMS Administrator Thomas Scully said the findings were "predictable" given five years of 2% increases in government reimbursements to Medicare+Choice while costs for HMOs rose at "close to double-digit rates." In his fiscal year 2003 budget proposal, President Bush calls for a 6.5% increase in Medicare+Choice spending, which Scully said could end the exodus of health plans from the program (New York Times, 2/14). Over the past four years, 374 health plans have withdrawn from the program, according to CMS (Kaiser Daily Health Policy Report, 2/11). The Bush administration also is seeking to raise reimbursement rates to Medicare+Choice HMOs to 100% instead of the current 95% in "high-cost areas" such as New York, Florida and Southern California. But Gold said increases in Medicare+Choice out-of-pocket costs could be "even steeper" in 2002, as some HMOs have stopped paying for prescription drugs and many only cover generics (New York Times, 2/14).