Senate Democrats introduce bill to limit out-of-pocket costs in traditional Medicare

Back in March, 35 policy experts and advocacy organizations wrote a letter to every member of Congress explaining why an out-of-pocket limit in traditional Medicare should be Congress’ top Medicare reform priority. Last week, 15 Democratic Senators, led by Senate Finance Minority Leader, Ron Wyden, introduced a bill that would limit out-of-pocket costs in traditional Medicare to $5,000. In short, the bill gives everyone with Medicare a meaniingful choice between traditional Medicare and Medicare Advantage.

The cap on out-of-pocket costs in traditional Medicare is critical for two reasons. It allows people to enroll in traditional Medicare without the need to buy supplemental coverage, which is too often unaffordable or unavailable. Insurers have the right not to sell it to people under 65 and are, with some exceptions, only required to sell it to people over 65 when they first become eligible for Medicare.

People under 65 with Medicare do not have the right to buy supplemental coverage, even if they can afford it, under federal law. People over 65 have the right to buy supplemental coverage when they first enroll in Medicare, if they can afford it. But, they lose that right under federal law after one year, except in special circumstances.

An out-of-pocket cap also would allow people to disenroll from Medicare Advantage and switch to traditional Medicare without fear of uncapped out-of-pocket costs. Millions of people in Medicare Advantage are currently locked into Medicare Advantage; traditional Medicare supplemental coverage is unavailable or unaffordable. People in rural communities and people with complex conditions are especially at risk if they can’t access the care they need in Medicare Advantage.

A recent Gallup poll reveals that 51 percent of Americans say that they cannot access the health care they need because they cannot afford it. A cap on out-of-pocket costs in traditional Medicare would make it a meaningful affordable alternative to Medicare Advantage. Every other health insurance comes with a cap, Medicare should as well.

Today, about 43 percent of people in traditional Medicare buy supplemental coverage to limit their out-of-pocket costs. Others get coverage through a former job or Medicaid. The Wyden bill requires people or their supplemental coverage to spend $5,000 before the government would pay for people’s care.

The $5,000 cap is projected to provide savings to more than half of people in traditional Medicare over the next ten years. Their health expenses would exceed the cap at least once. On average they would save about $1,200 a year. They would not need to buy Medigap.

Republicans could oppose this bill on the ground that it adds to Medicare’s costs. But, the money is there. It’s just a question of what policymakers prioritize. Medicare Advantage is estimated to cost $76 billion more than traditional Medicare this year alone, driving up Medicare spending. Republicans have had no desire to eliminate those overpayments.

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