qotd: Zero-premium Medicare Advantage plans have higher cost sharing

Health Affairs
June 2015
Medicare Advantage Members' Expected Out-Of-Pocket Spending For
Inpatient And Skilled Nursing Facility Services
Laura M. Keohane, Regina C. Grebla, Vincent Mor and Amal N. Trivedi

Abstract

Inpatient and skilled nursing facility (SNF) cost sharing in Medicare
Advantage (MA) plans may reduce unnecessary use of these services.
However, large out-of-pocket expenses potentially limit access to care
and encourage beneficiaries at high risk of needing inpatient and
postacute care to avoid or leave MA plans. In 2011 new federal
regulations restricted inpatient and skilled nursing facility cost
sharing and mandated limits on out-of-pocket spending in MA plans. After
these regulations, MA members in plans with low premiums averaged $1,758
in expected out-of-pocket spending for an episode of seven hospital days
and twenty skilled nursing facility days. Among members with the same
low-premium plan in 2010 and 2011, 36 percent of members belonged to
plans that added an out-of-pocket spending limit in 2011. However, these
members also had a $293 increase in average cost sharing for an
inpatient and skilled nursing facility episode, possibly to offset
plans' expenses in financing out-of-pocket limits. Some MA beneficiaries
may still have difficulty affording acute and postacute care despite
greater regulation of cost sharing.

From the Discussion

MA beneficiaries still pay a great deal for inpatient and SNF services
even after new regulations have gone into effect. We found that these
expenses often exceed what traditional Medicare beneficiaries without
supplemental coverage would pay under the Part A deductible, which
covers hospitalizations and SNF services. The majority of MA
beneficiaries are enrolled in zero-premium plans with higher
cost-sharing expectations. This pattern could reflect other studies'
findings that Medicare beneficiaries are strongly influenced by premium
levels and have trouble selecting plans that will minimize their
out-of-pocket exposure.

http://content.healthaffairs.org/content/34/6/1019.abstract

****


Comment by Don McCanne

The growth in enrollment in private Medicare Advantage (MA) plans has
been largely due to the attraction of not having to pay a premium for
the plans. The trade-off is that the patient is exposed to higher
out-of-pocket expenses.

Many studies have shown that selection of health plans is most heavily
influenced by the premium, since plan purchasers are averse to higher
premiums. For insurers to be able to offer plans with low premiums they
must reduce the coverage, primarily by requiring higher deductibles and
other cost sharing. This study shows that the cost sharing for inpatient
and SNF services may be unaffordable and thereby impair access for those
enrolled in zero-premium MA plans - the plans that the majority select.

In a single payer system, there is no premium. Equitable taxes, based on
ability to pay, fund the universal risk pool. Individuals are not faced
with the temptation of being allowed to keep more money in exchange for
accepting less than adequate coverage. With single payer, everyone would
have adequate coverage, while progressive taxes would would make it
affordable for all of us.