New Data: Medicare Spends $2,266 Less per Senior Without Medigap Coverage

The last post to this blog was about the 2003 data showing that those seniors without Medigap supplemental coverage cost Medicare $1,628 per yer less, than those seniors with Medigap supplemental coverage.

More recent data from MedPAC, in their report titled, A Data Book: Healthcare spending and the Medicare program, June 2007, on page 65 gives us even more up-to-date figures.

It turns out that the most recent data on the difference between what it costs Medicare for those seniors without Medigap supplemental coverage, vs. what it costs Medicare for seniors with Medigap supplemental coverage is $2,266. In other words, those seniors who buy Medigap supplemental coverage (90% of them) cost the U.S. Treasury $2,266 more money per year than those seniors who do not buy Medicare supplemental policies.

In fact, having a Medigap supplemental increases the cost to Medicare by 59 percent for each of those seniors with a Medigap policy, as this chart shows. The chart is from the book America’s Health Care Crisis Solved.

One adult solution to the run-away obligations Medicare is imposing on the U.S. taxpayer and the U.S. government is to install mandatory $500 dollar deductibles for every Medigap policy sold to those seniors who are not low income or on Medicaid.

If Congress mandated, for example, that every Medigap policy must have a $500 deductible, Medicare would save, easily, $800 per senior, per year.

If you excluded those seniors who were low income and on Medicaid, and applied this to 25 million seniors (out of the 32 million in Medicare) the savings to Medicare would be on the order of $800 x 25 million seniors equals $18,400,000,000.

Just a simple $500 deductible, for the seniors that can afford it, will save the Medicare system $92 billion over five years and extend the live of a system that seniors depend on.

J. Patrick Rooney, the former CEO of Golden Rule Insurance, which was the first insurance company in the United States to institute a $25 dollar deductible on individual health insurance, said the savings to Medicare (above) from a $500 deductible are about right: “When you talk about deductibles, the first $500 is much more powerful in cutting back over-utlization than the last $500. My opinion is that a $500 deductible will likely save $800 to $1,000 in Medicare claim costs.” Pat Rooney is also the first insurance executive to offer Medical Savings Accounts (the precursor to Health Savings Accounts) to his employees and the first insurance executive to sell them to the general public, so when it comes to deductibles, Pat Rooney has decades of knowledge on the subject.

Furthermore, this is the direction that Medicare must go in, setting a line below which seniors pay out of their pocket, and above which Medicare or supplemental pays. It is the only way Medicare will be financially stable and be able to provide the care to seniors they need.

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