NCPA - National Center for Policy Analysis

Comprehensive Coverage For Seniors

February 7, 2000

Senior citizens could have access to full prescription drug coverage at no additional cost to the government if they were allowed to combine Medicare funds with the money they currently spend on private insurance and pay premiums into a comprehensive plan instead. This is the conclusion of a study by Milliman & Robertson, Inc., one of the nation's leading actuarial consulting firms on health benefits, published by the National Center for Policy Analysis.

Medicare in its current form only covers nursing home care for 100 days after hospitalization, limits the number of covered hospital days and covers few outpatient prescription drugs. Thus, beneficiaries are exposed to significant out of pocket costs.

  • As many as 360,000 Medicare beneficiaries faced expenses in excess of $5,000 annually.
  • To avoid these high costs, most seniors acquire private insurance, either through a former employer (33 percent) or by purchasing Medigap insurance (36 percent).

Medicare will spend about $5,800 on each beneficiary this year. The most popular Medigap policy costs about $1,611. If beneficiaries were allowed to combine the two sums, the amount should pay for a range of health insurance options.

  • Using this amount and about another $153 out of pocket, seniors could pay premiums for an HMO that included prescription drugs.
  • Seniors should be able to enroll in a fee-for-service plan with a high deductible and a Medical Savings Account -- in many cases for a premium that is considerably less than what they currently pay for Medigap.
  • In many cases, moving to a private plan would not only provide coverage for prescription drugs but would also save money for the beneficiary; for example, the average senior who currently has Medigap insurance would save more than $1,000 a year in lower premiums and out-of-pocket costs.

Source: Mark Litow, "Defined Contributions as an Option in Medicare," February 4, 2000, prepared by Milliman & Robertson, Inc., for the National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, Texas 75251, (972) 386-6272.


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