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| Medicare Reform and Prescription Drugs: Ten Principles | |
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The principal reason why health plans have deductibles and coinsurance is to discourage wasteful overconsumption of medical care. This is especially important for small medical expenditures that are difficult and costly for insurers to monitor. With first-dollar coverage and no out-of-pocket payment, patients may opt for services so long as the smallest probability of medical benefit exists Yet, as noted above, the federal government requires that medigap insurance cover the Part A and Part B deductibles and copayments. This provides medigap-covered seniors with first-dollar coverage for many medical services, even though they may lack catastrophic coverage for drugs. The result is a great deal of waste. Health economists estimate that seniors with both Medicare and medigap insurance spend about 30 percent more on health care than those with Medicare alone. Further, those with medigap insurance do not appear to have greater health needs than do those without the insurance. Rather, they appear to be responding to the economic incentives created by first-dollar coverage.18 As also noted above, some propose creating a third plan with a separate premium to cover drugs. For most seniors, this would mean three premiums for three plans. This would compound the problems of the current system, creating another layer of costly administration and making benefits coordination and information sharing even harder. What is needed is not three premiums for three plans, but one premium for one plan similar to those of most nonseniors. |
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