Sen. Ron Wyden and 14 Democratic cosponsors plan to introduce legislation Thursday to limit consumers’ potential out-of-pocket costs in traditional Medicare, resurfacing a long-running debate over why the program doesn’t cap beneficiaries’ spending.
Even supporters of the bill say getting it passed this year is a long shot. But the effort is one more opportunity for Democrats to highlight voter frustration over health care costs ahead of the November elections.
Polls show that Americans are very concerned about affordability; A recent Gallup poll found that less than half of Americans say they can afford health care on a consistent basis.
Wyden’s bill would focus on what many consider a critical out-of-pocket issue in traditional Medicare: there is no limit on what a beneficiary could pay in cost-sharing.
“Everyone else in the health insurance industry has one: employer coverage, the Affordable Care Act, they all have a limit,” the Oregon Democrat told KFF Health News. “There is no good, common-sense reason why the flagship health program should not have the same protection.”
Meanwhile, critics of a cap will likely pounce on the cost to the federal budget, which could be significant.
Wyden, who had already made the battle lines clear, added: “I suspect that on the Senate floor it will emerge that Democrats want to give a fair deal to people who receive traditional Medicare and Republicans want to help billionaires.”
Politics, political dynamics in action
The underlying problem is the 20% share of Medicare costs that enrollees have to pay for medical services after they have met deductibles. Without a cap, an expensive condition like cancer or a prolonged hospital stay could cause beneficiaries to pay thousands of dollars in costs.
That concern leads about 43% of people enrolled in traditional Medicare to purchase separate insurance, often called Medigap. (Others get such coverage through employment-based retiree plans.)
Medigap insurance plans have seen rapid increases in premiums and can cost thousands of dollars a year, especially for couples. That price may be unaffordable for some beneficiaries, who may instead turn to or go without private sector Medicare Advantage plans offered by commercial insurers.
Wyden’s proposal would set a $5,000 cap on traditional Medicare. Any amount paid by a Medigap plan or retiree health plan for beneficiary care would count toward that limit. It also includes other provisions to help lower-income seniors, including eliminating an asset test to qualify for special programs that help reduce costs.
Medicare would pick up any amount above that $5,000 limit, which is less than what Congress set for rival Advantage plans (currently $9,250), although insurers can set smaller amounts.
Proponents argue that capping the traditional program would help level the playing field between traditional Medicare and Advantage plans, which often cost consumers much less than traditional Medicare with a Medigap supplement. Premiums for these policies would likely be lower, they say, because insurers’ financial exposure would be limited.
The Medicare Advantage program has historically had strong support from Republicans, who like its private-sector aspect and point out that it can potentially do more to control costs, such as using specific networks of doctors and hospitals, or requiring prior approval for some services, something the traditional program cannot do.
The plans also offer enrollees additional benefits, such as glasses, hearing aids, and prescription drug coverage, and have now attracted more than half of all Medicare enrollees.
However, along with that growth has also come increased scrutiny over concerns about patients being denied services and the challenges some consumers face if they want to return to the traditional program. Recently, some health systems have abandoned Medicare Advantage contracts, citing concerns about late payments or prior authorization requirements, while insurers are also reducing where they offer Advantage coverage.
The bill has not yet been analyzed by the Congressional Budget Office, so there is no official estimate of the increase in Medicare costs for taxpayers. Still, it would increase those costs, at a time when other health programs are being cut, the Medicare trust fund is projected to begin running out of funding in 2033 and the nation’s debt is growing.
This is likely to draw harsh rebukes from fiscal hawks and other conservatives who question whether billions of tax dollars should be used to cover costs that would otherwise be paid by enrollees or by the supplemental insurance plans that many buy to do so. They will likely find that beneficiaries could also choose to join private-sector Advantage plans, which eliminate the need for supplemental insurance coverage like Medigap.
Key questions: Who benefits? Who pays?
The cost to taxpayers of a cap, although not yet officially assessed, is likely significant, although adding it could also save individual consumers money. A recent study from Brown University gives some clues.
A $5,000 cap could save enrollees an average of about $1,200 a year, the study found, both in direct savings and reductions in their supplemental Medigap premiums. Just over 11% of traditional Medicare beneficiaries, about 3.2 million, would directly benefit from that cap if it were implemented in 2028, according to the study, which received no outside funding.
It is estimated that in the next 10 years just over 52% of all traditional beneficiaries would exceed the $5,000 limit at least once.
Still, lead author Andrew Ryan, a professor at the Brown School of Public Health, said analysts estimated that such a cap “could cost more than $50 billion a year, which is a lot of money” to add to the federal balance sheet.
Critics are likely to focus on the cap’s spending and the number of people who could benefit.
“How many people are reaching a level of cost they can’t afford in Medicare?” asked Jackson Hammond, senior political analyst at the Paragon Health Institute, a conservative think tank influential in the Republican Party.
Any cap “will generally increase program expenses without adding many benefits to enrollees,” said Hammond, who spoke with KFF Health News before the legislation was introduced.
Supporters, however, have a different opinion.
Certainly, with “any policy that is going to cost money, there will be an argument about where the money is coming from,” said Brian Keyser, a research associate at the liberal Center for American Progress who also spoke to KFF Health News before the Wyden measure was introduced.
Keyser co-authored a paper on Medicare that suggested lawmakers could pay for changes to traditional Medicare, such as an out-of-pocket limit, by reducing the amount the government pays Medicare Advantage insurers, pointing to government estimates that Advantage would cost the government $76 billion more this year than if the same number of people were in the traditional program.
Finding a way to add a cap “is right and fair because without it, people who become seriously ill may spend their entire life savings on Medicare cost sharing,” Keyser said.
However, this idea has been debated on and off for years. Knowing this, supporters of the bill acknowledge that it is unlikely to pass, but say they are playing the long game for now.
“We’re going to push it in the next Congress, when we think we’ll be in the majority,” Wyden said.
