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SCALING MEDICARE BENEFITS TO INCOME
 
 
May 1983
 
 
Prepared at the Request of
Senator Pete V. Domenici
and Senator Ernest F. Hollings

   

This study was prepared by the staff of the Human Resources and Community Development Division of the Congressional Budget Office under the supervision of Nancy M. Gordon, Assistant Director for HRCD. Questions regarding the analysis may be addressed to Marilyn Moon.


Scaling Medicare benefits to income--often described as "means-testing"--implemented through increased cost-sharing for higher-income individuals could reduce federal outlays while protecting elderly and disabled enrollees who are least able to afford increased medical costs.1 Since Medicare benefits are currently available to all enrollees regardless of income level, increased cost-sharing without means-testing would affect those at all income levels.

Medicare currently requires beneficiaries to contribute to the costs of covered services through premiums for Supplementary Medical Insurance (SMI), and through coinsurance (a percentage of each charge) and deductibles under both SMI and Hospital Insurance (HI). SMI coinsurance applies to all covered physician and other provider charges (except home health). HI assesses coinsurance only after 60 days of short-stay hospitalization or 20 days in a skilled nursing facility. Costs of the premiums, coinsurance, and deductibles for an average elderly Medicare enrollee are expected to be $505 in 1984. These costs represent less than one-third of all out-of-pocket costs for elderly Medicare enrollees, however, since a large portion of medical expenses--outpatient drugs and much nursing home care, for example--are not covered by Medicare. Moreover, Medicare-related cost-sharing can be very high for those in poor health. For example, the approximately 11 percent of beneficiaries with Medicare reimbursements in excess of $5,000 are expected to have Medicare cost-sharing expenses averaging $1,675 in 1984.

Relief from these costs is available to many low-income Medicare beneficiaries who also participate in Medicaid. For the low-income en-rollees outside that program and for moderate-income enrollees, however, increases in Medicare-related cost-sharing might be burdensome.

This document is available in its entirety in PDF.

1. Means-tests often are applied to other resources in addition to income. The terms "means testing" and "income testing" will be used interchangeably.