Report: To keep Medicare spending in check, promote price sensitivity

With Medicare spending on the rise, policymakers should work to promote price sensitivity among beneficiaries long after they've met their deductibles, according to the National Center for Policy Analysis (NCPA).

Additionally, the NCPA stresses that both health plans and providers must be rewarded when they implement cost-saving programs that provide high-quality care at a lower cost. For instance, health plans have been experimenting with reference pricing--insurers set a target price for a healthcare service or procedure and if members choose a provider that offers the service for less than the reference price, they pay nothing.

In the report, the NCPA explains the idea of prefunding--which refers to an increase in payroll taxes that could fund a health spending account (HSA) seniors control--to help rein in Medicare expenditures.

Working-age adults--and their employers--could jointly contribute a total of 4 percent of payroll into a type of mutual fund that accumulates and grows at market rates. Once the beneficiaries reach Medicare eligibility, the accumulated funds would be converted into an annuity that provides an annual payment into each individual's Medicare HSA.

NCPA also points out that beneficiaries' cost-sharing could be reduced or bonus deposits made to their Medicare HSA in return for working closely with a Medicare Advantage plan's care coordinator.

What's more, as NCPA points out, changing the design of Medigap supplemental plans to eliminate first-dollar coverage until seniors meet a threshold would save the Medicare program $58 billion over a 10-year period.

However, a past report from the Medicare Rights Center criticized financial remedies for Medicare, including taxing or prohibiting Medigap first-dollar coverage, basing premiums on further means testing, restructuring Medicare cost sharing, increasing drug copayments, adding home health copayments and raising the Medicare eligibility age. 

As the Medicare Rights Center found, proposed Medigap cost sharing increases would cause disproportionate harm to people with the greatest needs, including half of all beneficiaries living on less than $23,500 annually. 

For more:
- here's the report (.pdf)