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Type of Resource (primo): technical_reports
Abstract: Importance: Traditional Medicare exposes beneficiaries to substantial financial risk because – unlike Medicare Advantage – there is no out-of-pocket (OOP) maximum for medical spending. Policymakers have proposed introducing an OOP cap, but its fiscal and behavioral effects are uncertain. Objective: To estimate the financial impact of introducing OOP spending caps in TM—set at $3,000, $5,000, or $10,000 annually—on beneficiary costs, enrollment patterns, and Centers for Medicare & Medicaid Services (CMS) expenditures between 2026 and 2033. Design: Microsimulation model projecting enrollment, spending, and utilization outcomes under baseline (no OOP cap) and three alternative cap scenarios. The model incorporated elasticity-based behavioral responses, including beneficiary switching between TM and Medicare Advantage (MA) and changes in service use. Sensitivity analyses varied assumptions about demand elasticity and relative spending between TM and MA. Setting: National analysis using publicly available Medicare and insurance data from 2020–2024 with projections through 2033. Participants: Simulated Medicare population aged ≥65 years across six enrollment segments: TM without supplemental insurance, TM with Medigap, TM with employer-sponsored coverage, dual-eligible TM beneficiaries, individual MA enrollees, and employer-sponsored MA beneficiaries. Exposure: Introduction of annual OOP caps for Parts A and B in TM at $3,000, $5,000, or $10,000. Main Outcomes and Measures: Projected changes in beneficiary enrollment by coverage type, average annual beneficiary out-of-pocket and premium spending, and annual CMS expenditures (total and per beneficiary). Results: Between 2026 and 2033, a $3,000 OOP cap was projected to reduce average annual beneficiary expenditures by $1,198, compared with $888 under a $5,000 cap and $585 under a $10,000 cap. Corresponding increases in annual CMS spending were estimated at $56 billion, $41 billion, and $23 billion, respectively. OOP caps—especially at lower thresholds—would substantially shift beneficiaries from MA to TM. Conclusions and Relevance: Implementing an OOP spending cap in TM would provide meaningful financial protection for beneficiaries but impose substantial fiscal costs on CMS.
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Genre: Working Paper
Access Condition: use and reproduction: All rights reserved
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Identifier: DOI: 10.26300/ws0a-y457