A Cost Cap for Nearly 7 Million Medicare Beneficiaries

A Cost Cap for Nearly 7 Million Medicare Beneficiaries

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Takeaways

Nearly 7 million Medicare beneficiaries would have their health care costs capped under legislation introduced by Reps. Andy Kim (D-NJ), Dwight Evans (D-PA), and Lisa Blunt Rochester (D-DE).1

Medicare is supposed to be a safety net, but beneficiaries in the program don’t have a critical protection: a limit on their out-of-pocket costs. It doesn’t have to be this way. After all, Americans under age 65 with coverage through the Affordable Care Act (ACA) exchanges have a cap on their premiums based on their income and an out-of-pocket limit that protects them from high costs. If a Medicare beneficiary making $24,000 a year could get ACA coverage, they would pay a lower premium than they would through Medicare.2

Deductibles and copayments are also a big problem for seniors and people with disabilities who have Medicare coverage. Average out-of-pocket costs for Medicare beneficiaries were over $2,100 in 2016. If you add that cost to a beneficiary’s monthly premium, the individual is paying close to $4,500 a year in health care costs.3 For a beneficiary making $24,000 a year, that’s more than 18% of their annual income. More than 18 million Medicare beneficiaries have incomes of less than $24,000 a year.4

A federal program, the Medicare Savings Program (MSP), is supposed to provide financial assistance for premiums and out-of-pocket health costs for low-income Medicare beneficiaries. But it has major gaps. At least half a million people who were eligible for the program were not enrolled in 2017. Additionally, the program doesn’t provide any guaranteed assistance to Medicare beneficiaries with incomes greater than $16,700.5

The Kim-Evans-Blunt Rochester legislation addresses those gaps and cap costs for low-to-moderate income Medicare beneficiaries.6 The bill proposes to raise income eligibility for the MSP and encourage states to enroll more beneficiaries.7 According to our analysis, it would cap the costs for 6.8 million beneficiaries.8  

The Kim-Evans-Blunt Rochester bill would provide financial protection to 6.8 million low-to-moderate income Medicare beneficiaries.

Specifically, the bill aims to do the following:

  • Eliminate premium and out-of-pocket costs for beneficiaries with incomes under $16,700, which is 135% of the federal poverty level (FPL). This provision would help more than 2 million low-income seniors.
  • Eliminate premium costs for the 4.4 million eligible beneficiaries making less than $24,280, which is 200% of FPL.
  • Ease restrictions on the amounts of assets a Medicare beneficiary can keep and still qualify for assistance through MSP.
  • Provide funding to states to make MSP enrollment automatic through a program call Fast Lane Eligibility.

 

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Methodology

To get the total number of beneficiaries who would benefit from this bill, we calculated three asset and income-adjusted population groups, added them together, and adjusted for growth in Medicare enrollment.

The first group is the number of eligible beneficiaries who were not enrolled in the MSP program in 2017, the second group is the number of income-eligible beneficiaries who would become eligible upon passage of HR 4761 through increased asset requirements, and the third group is the number of newly eligible people when both income and assets are increased.

The first income and asset-adjusted group was calculated in the following ways: Medicare enrollment for below 100%, and between 100% and 137% of FPL were asset adjusted based on Exhibit 3 of the Urban-Kaiser study (2002) by adding the asset scenarios shaded black and white to get 74% and 54%, respectively. We used those asset scenarios because they most closely matched CPI-adjusted asset levels in 2019. Medicare enrollment for the 100%-137% FPL population was adjusted from 137% of FPL to 135% of FPL to match the eligibility for the MSP program. States, where asset levels are higher than the federal floor, were adjusted based on that state’s asset limit. Those two categories were added and adjusted for states in the few cases where income limits were higher than the federal floor (note: Alaska and Hawaii have higher FPLs but were not adjusted in any way in our data analysis; enrollment in these states would likely be higher than our analysis predicts). We then found the total number of income and asset eligible people who were not enrolled in MSP. Due to the lack of data for calculating an asset adjustment by income level, there are several states that had MSP enrollment numbers that appeared higher than the total eligible populations for those states. Those states were excluded when calculating the total number of eligible beneficiaries who were not enrolled in 2017.

The second income and asset adjusted group was calculated in the following way: The legislation increases asset limits from $7,800 to more than $25,000. In order to model this, we assumed this corresponded to a tripling of our base scenario’s asset test (“black and white” above $4,000 to $12,000). In order to do this, we doubled the enrollment increase for the scenario shaded dark grey, which has an asset limit of $8,000. This resulted in asset adjustments of 14% fewer beneficiaries for under 100% FPL and 18% fewer for 100%-135% FPL. States with higher asset tests were excluded from this calculation, as we assumed all individuals were asset eligible in the first calculated value.

The final income and asset adjusted group was calculated in the following way: These are the added values for 137%-200% of FPL from the Census Bureau data, with states that had higher income levels either excluded (Connecticut and DC) or raised accordingly (Indiana and Maine). The asset adjustment was calculated in a similar fashion to the previous asset adjustments (black, white, and dark grey scenarios for the 136-175% data assuming similar asset rates up to 200% FPL). These three totals were added and the total possible enrollment data in MSP was adjusted from 2017 numbers to 2019 numbers using the growth in Medicare enrollment of 5.2% (CBO May 2019) to get the total number of Medicare beneficiaries who could currently benefit from the legislation. Numbers were then rounded to the nearest 100. Full calculations available upon request.

Topics
  • Health Care Costs55

Endnotes

  1. United States, Congress, House. Helping Seniors Afford Health Care Act. Congress.gov, https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/HR4671ih_10.15.2019.pdf. 116th Congress, 2nd session. 

  2. ACA premium cap for 200% of FPL is $1,588 in 2019. Medicare Part B premiums are $1,626 for 2019.

  3. Cubanski, Juliette, Wyatt Koma, Anthony Damico, and Tricia Neuman. “How Much Do Medicare Beneficiaries Spend Out of Pocket on Health Care?” Kaiser Family Foundation, 2019, https://www.kff.org/medicare/issue-brief/how-much-do-medicare-beneficiaries-spend-out-of-pocket-on-health-care/. Accessed 13 Nov. 2019.

  4. “Health Insurance Coverage Status and Type By Ratio of Income to Poverty Level in the Past 12 Months By Age.” United States Census Bureau, American Community Survey, 2017, https://data.census.gov/cedsci/table?q=B27016&table=B27016&tid=ACSDT1Y2018.B27016&lastDisplayedRow=29. Accessed 30 Oct. 2019.

  5. “Eligibility for Medicare Savings Programs for Qualified Individuals (QIs).” Kaiser Family Foundation, 2018, https://www.kff.org/other/state-indicator/eligibility-for-medicare-savings-programs-for-qualified-individuals-qis/. Accessed 30 Oct. 2019.

  6. United States, Congress, House. Helping Seniors Afford Health Care Act. Congress.gov, https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/HR4671ih_10.15.2019.pdf. 116th Congress, 2nd session. 

  7. Kendall, David and Kaitlin Hunter. “A Cost Cap for Medicare Beneficiaries.” Third Way, 15 Oct. 2019, https://www.thirdway.org/memo/a-cost-cap-for-medicare-beneficiaries. Accessed 30 Oct. 2019.

  8. “Health Insurance Coverage Status and Type By Ratio of Income to Poverty Level in the Past 12 Months By Age.” United States Census Bureau, American Community Survey, 2017. https://data.census.gov/cedsci/table?q=B27016&table=B27016&tid=ACSDT1Y2018.B27016&lastDisplayedRow=29. Accessed 30 Oct. 2019; “Eligibility for Medicare Savings Programs for Qualified Individuals (QIs).” Kaiser Family Foundation, 2018, https://www.kff.org/other/state-indicator/eligibility-for-medicare-savings-programs-for-qualified-individuals-qis/. Accessed 30 Oct. 2019; Moon, Marilyn, Friedland, Robert, and Lee Shirey. “Medicare Beneficiaries and Their Assets: Implications for Low-Income Programs.” The Urban Institute, Center on Aging Society, and Kaiser Family Foundation, June 2002, Exhibit 3, https://www.urban.org/sites/default/files/publication/59826/1000249-Medicare-Beneficiaries-and-Their-Assets.PDF. Accessed 6 Nov. 2019; “State-Level Dual Status Codes, December 2017.” Centers for Medicare and Medicaid Services, Dec. 2017, https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/Medicare-Medicaid-Coordination-Office/DataStatisticalResources/Downloads/MMEnrolleeStateandCountyEnrollmentSnapshotsQuarterly122018Data.xlsx. Accessed 30 Oct. 2019.