Medicare

Nancy Ochieng, Juliette Cubanski, and Anthony Damico – Kaiser Family FoundationPublished: Mar 14, 2024

Medicare provides health insurance coverage to 66 million adults, including 59 million adults aged 65 and older and more than 7 million adults under age 65 with disabilities. While the vast majority (91%) of Medicare beneficiaries give their Medicare coverage an overall positive rating, health care cost-related problems are not uncommon. Medicare beneficiaries contribute to the cost of their health care coverage through monthly premium payments, deductibles, and other cost-sharing requirements. Additionally, people on Medicare may face additional premiums for Medicare Part D prescription drug coverage and supplemental insurance. Further, there is no limit on out-of-pocket spending for beneficiaries in traditional Medicare, and beneficiaries often incur out-of-pocket costs for services not covered under traditional Medicare, such as dental, hearing, and vision services. Medicare Advantage plans have a cap on out-of-pocket costs and typically offer reduced cost-sharing for no premium, but enrollees can still have substantial expenses.

In 2022, the Consumer Price Index (CPI) for all Urban Consumers, a closely tracked measure of price inflation, increased to its highest annual rate since 1981, which translated to higher costs for housing, food, transportation, and other household expenditures, including health care costs. The inflation rate has come down since then, but prices for many household expenses are still substantially higher than they were previously. In this analysis, we assess the financial burden of health care spending among households where all members are covered by Medicare (referred to as Medicare households) compared to households where no members are covered by Medicare (referred to as non-Medicare households), based on data from the 2022 Consumer Expenditure Survey. We also assess trends in household spending and the financial burden of health care spending over the 10-year period from 2013 to 2022.

The health spending burden was twice as large among Medicare households than non-Medicare households in 2022.

Average health-related expenses accounted for 13.6% of Medicare households’ total spending in 2022 compared to 6.5% for non-Medicare households.

Medicare households spent more on health care than non-Medicare households in 2022, both as an annual dollar amount and as a share of total household spending. Medicare households spent an average of $7,000 on health care, accounting for 13.6% of their total household spending ($51,800), while non-Medicare households spent $4,900 on their health care, accounting for 6.5% of their total household spending ($74,100). Health care expenses include health insurance premiums, medical services (e.g., hospital and physician services), prescription drugs, and medical supplies (e.g., crutches, eyeglasses, hearing aids).

The larger burden of health care spending among Medicare households than non-Medicare households is a function of both lower average total household spending for Medicare households than non-Medicare households and higher health care use, which results in higher health care spending by Medicare households.

Across all household spending categories, housing accounted for the largest share of total spending for both Medicare and non-Medicare households (35.3% for Medicare households and 32.5% for non-Medicare households). Across other major categories of household spending – transportation, food, and other expenses such as education and clothing – Medicare households devoted a smaller share of their household spending (and less in dollar terms) to these items than non-Medicare households. This may be a function of both smaller average family sizes in Medicare households than non-Medicare households (1.4 vs. 2.6 people), as well as lower median household income ($31,700 vs $76,600).

In 2022, nearly 3 in 10 Medicare households spent 20% or more of their total household spending on health-related expenses, compared to 7% of non-Medicare households.

Consistent with the higher average health care spending burden among Medicare households compared to non-Medicare households, a larger share of Medicare households than non-Medicare households spent 20% or more of their total household spending on health-related expenses than non-Medicare households – nearly 3 in 10 (29%) Medicare households versus 7% of non-Medicare households. Nearly three out of four Medicare households (74%) spent 10% percent or more of their total household spending on health expenses, compared to a quarter (25%) of non-Medicare households.

Health care spending by Medicare households increased by 53% between 2013 and 2022, but health care as a share of total household spending changed very little over these years.

In 2022, Medicare households spent an average of $7,000 on health care – $2,400 or 53% higher than the amount spent on health care in 2013 ($4,600). With total household spending by Medicare households growing at nearly the same rate as the growth in health care spending over these years, health care as a share of total household spending was nearly the same in 2022 (13.6%) as in 2013 (13.5%).

Similarly, non-Medicare households also spent more on health care in 2022 ($4,900) than in 2013 ($2,800), a 71% ($2,100) increase. Health care as a share of total household spending for non-Medicare households was somewhat higher in 2022 (6.5%) than in 2013 (5.4%).

Focusing on household spending trends between 2019 and 2022 shows the dual effects of the COVID-19 pandemic and price inflation.

Between 2019 and 2020, spending by Medicare households on food and transportation fell, likely reflecting stay-at-home policies established at the outset of the COVID-19 pandemic, and total household spending declined somewhat. By contrast, between 2021 and 2022, total household spending increased substantially, reflecting increases in all categories of household spending, as price inflation hit its highest level since 1981 in 2022. This was true for both Medicare households and non-Medicare households.

Discussion

The health care spending burden was twice as large for Medicare households than for non-Medicare households in 2022, measured by average health care spending as a share of total household spending, and a larger share of Medicare households spent at least 20% of their household budgets on health care than non-Medicare households. Of note, this analysis underestimates the health care spending burden for households that incur long-term care facility costs because the Consumer Expenditure Survey does not include people who reside in facilities. This exclusion is more likely to affect the spending burden estimates for Medicare households than non-Medicare households since spending on long-term care facilities is a significant share of average out-of-pocket health care costs for people with Medicare.

With health care use increasing with age and with most Medicare beneficiaries living on relatively low incomes and modest financial assets to draw upon in retirement, it’s not unexpected that health care is a bigger cost burden for Medicare households. This cost burden has important implications for policy debates, including the level of cost-sharing and premiums in Medicare. Policies aimed at improving financial protections for Medicare beneficiaries have been proposed in recent years. The Inflation Reduction Act of 2022 includes several provisions that lower prescription drug costs for people with Medicare, including a cap on Medicare beneficiaries’ out-of-pocket spending under the Medicare Part D benefit; a limit on insulin cost sharing to $35 a month in Medicare Part B and Part D; and expanded eligibility for full Part D Low-Income Subsidies. Policy makers have also considered other proposals that would improve the affordability of health care for Medicare beneficiaries, such as expanding income eligibility thresholds for the Medicare Savings Programs to enable more people to qualify for these financial supports and adding an out-of-pocket cap on cost sharing for benefits covered under traditional Medicare. Adopting such changes, however, would require additional federal spending.

Medicare Annual Enrollment Period (AEP) also known as the Medicare Annual Election Period and the Medicare Open Enrollment Period, is a specific fall enrollment period from Oct. 15 through Dec. 7. During this time, Medicare beneficiaries can make changes to their current Medicare plan coverage. All plan and benefit changes become effective on Jan. 1 of the following year.

On Oct. 1 each year – two weeks before Medicare open enrollment starts – health insurance companies release information about their plan benefits for the coming year. These can include premium changes, prescription drug coverage updates and more. This is a great time for Medicare beneficiaries to think about whether their plan will still meet their needs for next year. If not, they can look for a better option during AEP.

You can make these changes without any review of your medical history, as you might need to do when switching Medicare Supplement plans.

What is the Medicare Open Enrollment Period?

Medicare Open Enrollment Period (OEP) can mean different things depending on how you use it. As mentioned above, it is often used to refer to AEP. But there is also a Medicare Advantage Open Enrollment Period (MA OEP). As the name implies, changes during this time – Jan. 1 through March 31 – are limited to Medicare Advantage plans and are only available to those that are currently enrolled in a Medicare Advantage plan.

What is the difference between AEP and OEP?

The biggest difference between AEP and OEP is that AEP offers more options and flexibility than the Medicare Advantage Open Enrollment Period. For example, during the MA OEP, you can join a Part D plan ONLY IF you are dropping a Medicare Advantage plan and returning to Original Medicare. However, during AEP, you can make any necessary changes to your drug coverage as needed.

What changes can you make during AEP?

During the Medicare Annual Enrollment Period, you can make changes to your Medicare Advantage plan and/or Part D prescription drug plan only. Multiple changes and updates are allowed, including:

• Dropping your Medicare Advantage plan and returning to Original Medicare
• Moving from Original Medicare only to a Medicare Advantage plan
• Switching to a different Medicare Advantage plan
• Choosing a new Medicare Part D prescription drug plan
• Adding a Part D prescription drug plan if you don’t have one
• Canceling your current Part D prescription drug plan
  • Note: If you don’t maintain some form of creditable prescription drug coverage and decide to re-enroll in Part D later on, you’ll be subject to a late-enrollment penalty.

There isn’t any special flexibility to add or adjust your Medicare Supplement (Medigap) plan during AEP. If you choose to change your Supplement plan during AEP, the same rules apply as they would during the rest of the year.

What changes can you make during OEP?

It depends on the context. If you are talking about the Medicare Annual Enrollment Period covered earlier, then you can make updates to your Medicare Advantage and Part D prescription drug plans.

If you are talking about the Medicare Advantage Open Enrollment Period, then you can make these changes related to your current Medicare Advantage plan only:

• Switching to a different Medicare Advantage plan
• Dropping your Medicare Advantage plan and returning to Original Medicare
• Adding a standalone Part D plan – only if you dropped your Medicare Advantage plan and returned to Original Medicare

The MA OEP happens annually from Jan. 1 through March 31 and only applies to people who have coverage under a Medicare Advantage plan. Also, enrollees can only make one plan change during this annual window, in contrast to the fall annual enrollment period when enrollees can change their minds multiple times.

How do you change your Medicare plan during open enrollment?

If you’re switching plans during the AEP, simply join your new plan by contacting the insurance provider, a local health insurance broker, or enroll online if available. Then, you will automatically be disenrolled from your current plan on Dec. 31. Your new plan coverage will begin on Jan. 1.

If you’re switching plans during the MA OEP, simply join your new plan by contacting the insurance provider, a local health insurance broker, or enroll online if available. Then, contact your current plan provider to find out how to disenroll from your current plan. Your new plan coverage will begin on the first of the following month. For example, if you enroll on Feb. 18, your new plan will be effective on March 1.

What happens if you miss Medicare Open Enrollment?

If you miss the opportunity to change your plan during the AEP or MA OEP, you’ll need to keep your current plan for one more year, until the next open enrollment period.

However, you may still be able to make changes to your Medicare coverage if you qualify for a special enrollment period. An example of this could be if you move out of the service area of your Medicare Advantage plan.

If you don’t qualify for a Medicare special enrollment period, you’ll need to wait for the next relevant Medicare open enrollment period to make changes to your Medicare health or prescription drug plan.

Do you have to re-enroll in Medicare every year?

No. You don’t have to re-enroll in Medicare every year and you don’t have to renew your Medicare Advantage, Medicare Supplement or prescription drug plan either. You only need to act if you’re notified to do so, for example, if your plan is discontinued or if there is a reduction in your service area.

Can you enroll in Medicare for the first-time during Medicare Open Enrollment?

If you’re enrolling in a Medicare plan for the first time, you can do so during your Medicare Initial Enrollment Period (IEP). If your IEP happens to overlap with the Oct. 15 – Dec. 7 Medicare Open Enrollment Period, you may enroll for the first time.

Contributions to health savings accounts can trip up enrollment after the age of 65.

INVESTMENT NEWS November 9, 2021

By Mary Beth Franklin

A friend contacted me the other day with questions about enrolling in Medicare now that their youngest child has aged out of their employer-based group health insurance plan. She figured she and her husband could save a lot of money on health insurance premiums by switching from family coverage to Medicare, since they are both over 65.

I hated to break the bad news to her, but in their case, enrolling in Medicare now may not generate the savings she had envisioned. There were lots of questions to answer and numbers to crunch.

Consider the facts. Two spouses, both over 65, want to continue seeing their current doctors and enroll in original Medicare, which is accepted anywhere in the country, rather than a private Medicare Advantage plan that can limit coverage to in-network providers.

Medicare Part A hospital insurance is premium-free to anyone who has paid FICA payroll taxes for at least 10 years (or is married to someone who did). Medicare Part B, which pays for doctors’ fees and outpatient services, has a monthly premium, plus additional surcharges for higher-income beneficiaries.

In 2022, the standard monthly Part B premium is $170.10 per month. In addition, individuals with incomes over $91,000 and married couples with joint incomes over $182,000 pay an income-related monthly adjustment amount, or IRMAA, surcharge ranging from an extra $68 per month to an extra $408.20 per month per person, depending on their income.

Optional Part D prescription drug policies are also subject to high-income surcharges. And the couple would still need to buy two supplemental Medigap policies to cover their out-of-pocket costs.

Suddenly, Medicare wasn’t looking like the bargain my friend had hoped for.

But wait, there’s more.

Those high-income surcharges for Medicare Parts B and D are based on the last available tax returns. So if she and her husband enrolled in Medicare to begin in 2022, their 2022 premiums and surcharges would be based on the 2020 tax returns that they filed in 2021. With both spouses still working, they would definitely be hit with monthly IRMAA surcharges.

IRMAA surcharges can be appealed if the income used to determine the surcharge has declined due to a life-changing event, such as marriage, divorce, widowhood or retirement. But since this couple is still working, there would be no immediate escape from any high-income surcharge imposed in 2022.

Then there’s the issue of health savings accounts. HSAs offer a triple tax break when paired with a high-deductible health insurance plan. Contributions are tax-deductible, savings grow tax-free, and distributions are tax-free when used to pay for qualified medical expenses during your working years and beyond.

Both my friend and her husband make annual contributions to their individual health savings accounts. But once they enroll in Medicare –  even if it’s just in premium-free Medicare Part A – they can no longer make contributions to an HSA, although they could continue to take tax-free distributions from an HSA to pay for qualified medical expenses.

And here’s the kicker: If you have a health savings account, you and your employer should stop contributing to it six months before you sign up for Medicare Part A to avoid a tax penalty.

I told my friend that they either needed to withdraw their HSA contributions for the last six months of 2021 if they plan to enroll in Medicare as of January, or they should stop funding their HSAs starting in the new year and delay signing up for Medicare until July, after the six-month look-back period has elapsed.

To make sure my advice was on point, I check in with my favorite Medicare expert, Dr. Katy Votava, author of “Making the Most of Medicare: A Guide for Baby Boomers,” and president of Goodcare.com, a company that assists consumers and financial advisers with health insurance, Medicare and long-term care decisions.

Dr. Katy agreed with my advice but raised some additional points.

“You are on point with the HSA withdrawal and timing issue,” she wrote in an email. “In addition, I suggest they do the math of what the cost difference would be to enroll in Medicare Jan. 1 versus July 1, accounting for not only the cost of the IRMAA but other coverages such as Medigap, Medicare Part D, or Medicare Advantage.”

If the couple wanted to sign up for Medicare beginning in January, they could withdraw any excess contributions from their HSA penalty-free by using the “mistaken contribution” form, Votava explained.

In the end, my friend decided they would stick with their employer-provided group health insurance until her husband retires and their health insurance ends. That will create a new “special enrollment period” for them when they can sign up for Medicare penalty-free within eight months of losing their employer health insurance. But they’ll only have 63 days to sign up for a Part D prescription drug plan penalty-free.

More rules. More deadlines. It doesn’t get any easier. But ignoring them can be a costly mistake.

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Greg Says advises that people facing decisions such as the one described in the article, should seek the advice of a licensed and certified health insurance advisor who specializes in Medicare.

By RICARDO ALONSO-ZALDIVAR  Nov. 12, 2021

WASHINGTON (AP) — Medicare’s “Part B” outpatient premium will jump by $21.60 a month in 2022, one of the largest increases ever. Officials said Friday a new Alzheimer’s drug is responsible for about half of that.

The increase guarantees that health care will gobble up a big chunk of the recently announced Social Security cost-of-living allowance, a boost that had worked out to $92 a month for the average retired worker, intended to help cover rising prices for gas and food that are pinching seniors.

Medicare officials told reporters that about half the increase is due to contingency planning if the program ultimately has to cover Aduhelm, the new $56,000-a-year medication for Alzheimer’s disease from pharmaceutical company Biogen. The medication would add to the cost of outpatient coverage because it’s administered intravenously in a doctor’s office and paid for under Part B.

The issue is turning into a case study of how one pricey medication for a condition afflicting millions of people can swing the needle on government spending and impact household budgets. People who don’t have Alzheimer’s would not be shielded from the cost of Aduhelm, since it’s big enough to affect their premiums.

The new Part B premium will be $170.10 a month for 2022, officials said. The jump of $21.60 is the biggest increase ever in dollar terms, although not percentage-wise. As recently as August, the Medicare Trustees’ report had projected a smaller increase of $10 from the current $148.50.

“The increase in the Part B premium for 2022 is continued evidence that rising drug costs threaten the affordability and sustainability of the Medicare program,” said Medicare chief Chiquita Brooks-LaSure in a statement. Officials said the other half of the premium increase is due to the natural growth of the program and adjustments made by Congress last year as the coronavirus pandemic hit.

The late Friday afternoon announcement – in a time slot government agencies use to drop bad news – comes as Congress is considering Democratic legislation backed by President Joe Biden that would restrain what Medicare pays for drugs. However, under the latest compromise, Medicare would not be able to negotiate prices for newly launched drugs. The news on Medicare premiums could reopen that debate internally among Democrats.

“Today’s announcement … confirms the need for Congress to finally give Medicare the ability to negotiate lower prescription drug costs,” Rep. Frank Pallone, D-N.J., said in a statement. “We simply cannot wait any longer to provide real relief to seniors.” Pallone has been a proponent of the original House version of the legislation, which took a tougher approach toward the pharmaceutical industry.

Alzheimer’s is a progressive neurological disease with no known cure, affecting about 6 million Americans, the vast majority old enough to qualify for Medicare.

Aduhelm is the first Alzheimer’s medication in nearly 20 years. It doesn’t cure the life-sapping condition, but the Food and Drug Administration determined that its ability to reduce clumps of plaque in the brain is likely to slow dementia. However, many experts say that benefit has not been clearly demonstrated.

Medicare has begun a formal assessment to determine whether it should cover the drug, and a final decision isn’t likely until at least the spring. For now, Medicare is deciding on a case-by-case basis whether to pay for Aduhelm.

Cost traditionally does not enter into Medicare’s coverage determinations. But in this case there is also plenty of debate about the effectiveness of Aduhelm. Last November, an FDA advisory panel voted nearly unanimously against recommending its approval, citing flaws in company studies. Several members of the panel resigned after the FDA approved the drug anyway over their objections.

A nonprofit think tank focused on drug pricing pegged Adulhelm’s actual value at between $3,000 and $8,400 per year – not $56,000 – based on its unproven benefits.

But Biogen has defended its pricing, saying it looked carefully at costs of advanced medications to treat cancer and other conditions. The company also says it expects a gradual uptake of the Alzheimer’s drug, and not a “hockey-stick” scenario in which costs take off. Nonetheless Medicare officials told reporters they have to plan for contingencies.

Two House committees are investigating the development of Aduhelm, including contacts between company executives and FDA regulators.

Medicare covers more than 60 million people, including those 65 and older, as well as people who are disabled or have serious kidney disease. Program spending is approaching $1 trillion a year.

By Carmen Heredia Rodriguez, Kaiser Health News

JUNE 9, 2020

Pneumonia. Heart problems. High cholesterol. Betsy Carrier, 71, and her husband, Don Resnikoff, 79, relied on their primary care doctor in Montgomery County, Maryland, for help managing their ailments. But after seven years, the couple was surprised when the doctor informed them she was opting out of Medicare, the couple’s insurer. “It’s a serious loss,” Resnikoff said of their doctor.

Patients can lose doctors for a variety of reasons, including a physician’s retirement or when either patient or doctor moves away. But economic forces are also at play. Many primary care doctors have long argued that Medicare, the federal health insurance program for seniors and people with disabilities, doesn’t reimburse them adequately and requires too much paperwork to get paid.

These frustrations have prompted some physicians to experiment with converting their practices to more lucrative payment models, such as concierge medicine, in which patients pay a fee upfront to retain the doctor. Patients who cannot afford that arrangement may have to search for a new physician. The exact number of physicians with concierge practices is unknown, health care experts said. One physician consulting company, Concierge Choice Physicians, estimates that roughly 10,000 doctors practice some form of membership medicine, although it may not strictly apply to Medicare patients.

Shawn Martin, senior vice president of the American Academy of Family Physicians, estimated that fewer than 3% of their 134,000 members use this model but the number is slowly growing. The move to concierge medicine may be more prevalent in wealthier areas.

Travis Singleton, executive vice president for the medical staffing company Merritt Hawkins, said doctors switching to other payment systems or those charging Medicare patients a higher price for care are likely “in more affluent, well-to-do areas where, frankly, they can get fees.”

It is far easier for physicians than hospitals to opt out of taking Medicare patients. Most hospitals have to accept them since they rely on Medicare payments to fund inpatient stays, doctor training and other functions.

The majority of physicians do still accept Medicare, and most people insured by the federal program for seniors and people with disabilities have no problem finding another healthcare provider. But that transition can be tough, particularly for older adults with multiple medical conditions.

A study of at least 2,200 older adults published in 2016 found that nearly 4 in 10 were taking at least five medications at the same time. Fifteen percent of them were at risk of drug-to-drug interaction. Primary care providers mitigate this risk by coordinating among doctors on behalf of the patient, said Dr. Kellie Flood, a geriatrician at the University of Alabama-Birmingham. “You really need the primary care physicians to serve as the quarterback of the health care team,” said Flood. “If that’s suddenly lost, there’s really not a written document that can sum all that up and just be sent” to the new doctor.

Finding a physician who accepts Medicare depends partly on workforce demographics. From 2010 to 2017, doctors providing primary care services to Medicare beneficiaries increased by 13%, according to the Medicare Payment Advisory Commission (MedPAC), a nonpartisan group that advises Congress. However, the swell of seniors who qualify for Medicare has outpaced the number of doctors available to treat them. Every day, an estimated 10,000 Americans turn 65 and become eligible for the government program, the Census Bureau reported. The impact: In 2010, MedPAC reported, there were 3.8 primary care doctors for every 1,000 Medicare enrollees. In 2017, it was 3.5.

Authors of a MedPAC report out last June suggested that the number of available primary care providers could be an overestimate. Their calculation assumed all internal medicine doctors provided these services when, in reality, many specialize in certain medical conditions, or accept only a limited number of Medicare patients into their practices.

But MedPAC concluded seniors are not at a disadvantage finding a doctor. “We found that beneficiaries have access to clinician services that is largely comparable with (or in some cases better) access than for privately insured individuals, although a small number of beneficiaries report problems finding a new primary care doctor,” the MedPAC researchers wrote.

The coronavirus outbreak has complicated the ability for many Americans to access care, regardless of their insurer. However, many older patients now have an opportunity to connect with their doctors virtually after the Centers for Medicare & Medicaid Services (CMS) broadened access to telemedicine services under Medicare.

Experts said the long-term effects of the virus on doctors and Medicare remain unknown. But Martin said the shortage of cash that many doctors are experiencing because of the coronavirus epidemic has revealed the shortcomings of how primary care doctors are paid. “The COVID crisis really brought to life the challenges of fee for service,” said Martin.

Despite these challenges, the number of doctors choosing to opt out of Medicare has been on the decline, according to data from CMS. Singleton, of Merritt Hawkins, said concern about doctors leaving the Medicare system is part of larger workforce issues. Those include the need to recruit more medical students to concentrate on primary care.

One estimate predicts the nation will face a shortage of 23,600 primary care physicians by 2025. The majority of residents in internal medicine ― those who care for adults — are choosing a subspecialty such as cardiac care or gastroenterology, MedPAC reported.

In 2017, MedPAC reported, the median compensation for all doctors was $300,000 a year. Among primary care doctors, it was $242,000. Creative business models can make up that difference. Under the concierge model, the doctor charges patients an annual fee — akin to a gym membership ― to access their practice. The provider still bills the insurer ― including Medicare — for all patient care.

Another model ― called direct primary care — charges the patient an annual fee for access and care; doctors do not bill health insurance plans. Proponents say that the model enables them to take more time with their patients without dealing with the bureaucracy of getting paid by health insurers. “I think what is most attractive to direct primary care is that they just practice medicine,” Martin said.

The size of a physician practice can also determine whether it accepts Medicare. Large practices can better offset the lower Medicare payment rates by leveraging their influence with private insurers to raise those reimbursements, said Paul Ginsburg, director of the USC-Brookings Schaeffer Initiative for Health Policy. But small, independent clinics may not have the same clout.

“If you’re a large primary care practice, private insurers are really going to want to have you in their network,” he said. “And they’re willing to pay more than they might pay an individual solo practitioner who they’re not as concerned with because it’s only one physician.”

Luckily, after more than a dozen calls to physicians, Carrier and Resnikoff said they found another primary care doctor. They said she accepts Medicare and impressed them during their meet-and-greet with her knowledge of their medical history. She also met their criteria for age and expertise. “At this point in our lives, I’d be eager to find somebody who’s young enough that they might be in practice for the next 10 years,” Carrier said.