Total Cost Savings

If all retirees covered by Medicare chose the private options, Milliman & Robertson calculated that the total cost savings for Medicare over seven years would be more than $195 billion. If the 11.7 percent of Medicare beneficiaries who are the nonelderly disabled chose the private options as well, then the additional savings to Medicare would be $15 billion greater. [See Table V.]

The savings are achieved entirely through the limits on the amounts that could be withdrawn from Medicare for the private options. No other changes in Medicare are assumed.

Of course, some may choose to stay in the current Medicare program. To the extent this occurs, the savings would be less, unless further changes were made in Medicare. The budget savings would be assured, however, if the amount spent per beneficiary, on the average, were the same for those who stayed in the program as for those who opted out. Making that change also would eliminate bias against the private options.

Milliman & Robertson calculated that the following changes in Medicare would be needed to provide the same average spending per remaining beneficiary as for those who chose a private option:

• The current Part B deductible would be increased from $100 today to an average of $750 over the next seven years.

• The Part B coinsurance fees would be increased from 20 percent today to an average of 24.5 percent over the next seven years.

• This means an additional $133 would be added in 2002 to the Part A deductible, which is estimated to grow under current law from $716 today to $1,267 in 2002.