Modernizing the Medicare Benefit

Today, the Moment of Truth Project has released a new report,"Modernizing the Medicare Benefit: A Closer Look at Reforming Medicare Cost-Sharing Rules," along with a one-page summary of the different approaches to reforming Medicare’s complex and disjointed set of cost-sharing rules. The paper provides an explanation and rationale for cost-sharing reforms and outlines the recommendations included in A Bipartisan Path Forward. It also analyzes other recent proposals put forward to reform cost-sharing rules and includes an appendix comparing the cost-sharing reforms in several major proposals.

Currently, Medicare beneficiaries face two separate deductibles – a $1,184 deductible for Medicare Part A (hospital insurance) and a $147 deductible for Medicare Part B (physicians' offices) -- along with a hodge podge of other copays and coinsurance. And with no out-of-pocket spending cap, beneficiaries are exposed to significant cost sharing and therefore purchase private supplemental coverage, known as Medigap, to cover the possibility that they will face huge costs. Due to this extra coverage and complicated benefit structure, beneficiaries do not always make cost-conscious decisions, leading to overutilization and driving up spending. As a result, many health economists and experts have called for modernizing cost-sharing rules by creating a single, combined deductible with a uniform coinsurance and an out-of-pocket cap.

The paper makes the case that modernizing the Medicare benefit and reforming cost-sharing rules would not only strengthen the financial state of Medicare, but would also improve Medicare’s value for beneficiaries and make it easier to navigate and understand. Designed properly, comprehensive cost-sharing reform can achieve significant savings for the Medicare program and reduce Medicare premiums by limiting overutilization of care while providing seniors with greater protection from risk of catastrophic health care costs and reducing total out-of-pocket spending on health care over their lifetime for most seniors.

We’ve discussed before the growing consensus around cost sharing reforms. "Modernizing the Medicare Benefit" further highlights commonalities across proposals and the broad support it has from policymakers on both sides of the aisle. The report includes a comparison chart of proposals from other organizations and lawmakers such as the Bipartisan Policy Center, the Urban Institute, MIT economist Jonathan Gruber, Senators Tom Coburn (R-OK) and Richard Burr (R-NC)’s Seniors’ Choice Act, and President Obama’s FY 2014 budget proposal.


While lawmakers continue to consider options to reduce Medicare spending and bend the health care cost curve, this report can help serve as yet another resource and guide on potential areas for bipartisan support. As the report explains:

By enacting a set of reforms to rationalize Medicare cost-sharing rules and limit supplemental insurance plans, policymakers can improve the Medicare benefit for beneficiaries and lower costs for the Medicare program and beneficiaries by reducing the use of unnecessary care, while providing new catastrophic protections. As growing numbers of baby boomers enter Medicare rolls and federal health spending over the next several decades is projected to increase, reforming Medicare’s cost-sharing rules will be an important part of the discussion on serious entitlement reform that could forge a bipartisan agreement.

To read the full paper click here.

To read the one-page summary click here.