That last one, the coinsurance, is particularly important to understand, since coinsurance is based on a percentage of what Medicare pays, not a defined dollar amount, when you use a medical service. Many people misunderstand the difference between these two methods of cost-sharing, and a percentage of the bill can result in a very large and unexpected medical expense. This is very unlike a co-payment, which is a set amount you know in advance.
Here’s what Corker has in mind:
All people on Medicare would pay what’s called a “unified deductible”—the amount a patient pays before insurance kicks in—of $550 instead of a the current separate hospital deductible ($1,184 this year) and a separate medical deductible (now $147). The new deductible would mean that people using medical services—which most do—will be exposed to an out-of-pocket cost four times higher than they have now before Medicare pays for their care.
What about having your Medigap policy cover these gaps, as they have been doing? Not under Corker’s plan they won’t. His bill prohibits any Medigap from paying this new unified deductible. More “skin in the game.” And in future years Corker would like to prohibit seniors from buying Medigap insurance altogether, exposing them to the full cost of coinsurance as well as the deductible.
Seniors would face additional out-of-pocket costs once they satisfy the unified deductible, too, under Corker. They would then pay 20 percent of all Medicare-covered services, including home healthcare and the first 60 days of a hospital stay that are not now subject to any coinsurance—in effect expanding the services subject to cost-sharing.
After seniors pay all of the deductible and the amount of coinsurance they’ve paid hits $5,500, Corker would allow the amount of the coinsurance to drop to five percent for any of the remaining bills, until they’ve reached the yearly maximum—$7,500. Corker then restricts Medigap payment to half of the 20 percent coinsurance amount (50% of $4,950). (The bill is unclear about coverage for the 5 percent co-insurance between $5,500 and $7,500.)
It’s complicated, but the takeaway is that it is expensive. A senior would be faced with paying the first $550 of their medical expenses, $2,250 of their coinsurance, plus the premium for their Medigap policy. A couple without a Medigap policy would pay all of those out of pocket costs —$15,000. That could be quite tough for many seniors, especially those whose only income is from Social Security.
Consider: since half of all Medicare beneficiaries have incomes of $24,000 or less, those with even moderate medical expenses might have to tap assets to cover the higher costs, apply for Medicaid, or choose another option for getting Medicare benefits. Corker and others have proposals for new options, which I’ll discuss in a future column.
Reporters wading into the weeds here will have to look beyond the carefully crafted press release language, which won’t fully describe the impact of the proposed changes—whether Corker’s or anyone else’s. His bill summary that says the legislation would “update cost-sharing requirements to reflect 21st century health insurance practices” sounds benign enough, but it hardly begins to tell the whole story.
Medicare Uncovered: Corker and his bill