To promote health and racial equity in Medicare, Congress must limit out-of-pocket costs

President Biden and Democrats in Congress intend to improve benefits for Americans with Medicare. Lowering drug costs and adding vision, hearing and dental benefits, as planned, would be a tremendous help. To ensure everyone with Medicare benefits from these improvements, Congress also needs to limit their out-of-pocket costs.

Medicare already gets high marks for guaranteeing coverage to virtually everyone 65 and older and people with disabilities. Unlike employer coverage, which comes and goes when people move in and out of work, Medicare is always there. It provides health security.

The true test of good health insurance is how well it works when people most need it. Do out-of-pocket costs keep people — especially poor and sick people — from getting necessary care? On that metric, Medicare fails its most vulnerable members.

Traditional Medicare, government-administered public health insurance, places no maximum on out-of-pocket spending. In this regard, it is an outlier, putting our nation’s parents and grandparents at extreme financial risk if they develop a costly condition and don’t have supplemental coverage that limits their costs. Medicare Advantage, private health plans for people with Medicare, employer coverage, and health plans offered in the state exchanges all have an out-of-pocket cap.

People tend not to think about their costs once they have health insurance, but financial barriers kill. They can create a roadblock to life-saving care. They also promote inequities, jeopardizing access to care for people who can’t afford deductibles and co-pays.  

Limiting people’s inpatient and outpatient health care costs in traditional Medicare would go a long way to ensuring everyone with Medicare can get the care they need. Congress recognizes the need for legislation that would cap out-of-pocket drug costs for people with Medicare. Why not out-of-pocket medical and hospital costs as well?

A new report from the Kaiser Family Foundation finds that people in fair or poor health and people with modest annual incomes face cost-related issues getting health care with Medicare. They delay or forgo care because of the cost, or they face challenges paying medical bills. This should come as no surprise. Half of people with Medicare have annual incomes under $30,000.

To be clear, for people who also have supplemental insurance, which fills gaps in coverage, traditional Medicare works better than Medicare Advantage and other private insurance. They have virtually all of their costs covered. They are never forced to choose between their health care and their rent.

But, at $200 a month or more, many people find premiums for supplemental insurance prohibitive. Moreover, affordable supplemental insurance is often not available when people want it. Congress only requires insurers to sell it in limited situations.

People with traditional Medicare who don’t have supplemental coverage assume potentially huge financial liability. They can face high cost-sharing and no annual out-of-pocket limit. Every time they need medical services, they are responsible for 20 percent of Medicare’s approved charge. This year, the deductible for a hospital visit is almost $1,500.

Nearly six million people with traditional Medicare lack supplemental coverage. These Americans — disproportionately people with low incomes who are not enrolled in Medicaid — risk impoverishment if they receive costly care. Many opt against receiving treatment because of the cost. Lord knows how many older Americans die for lack of care. Based on the latest research looking at how health care costs in Medicare affect mortality, easily tens of thousands.

An out-of-pocket cap in traditional Medicare would give people for whom supplemental insurance is unaffordable or unavailable the freedom to enroll in traditional Medicare. They would no longer fear accruing tens or even hundreds of thousands of dollars in medical debt.

This cap should be part of any package of new Medicare benefits that Congress enacts. And, it should be as low as possible to promote easy access to care. The Kaiser study found that people in Medicare Advantage are more likely to face cost-related problems than people in traditional Medicare with supplemental coverage, especially the most vulnerable individuals. Their costs are too high because their out-of-pocket cap is too high.

The health care affordability challenge for people with Medicare is only worsening. Whether they are in traditional Medicare without supplemental coverage or in Medicare Advantage, their costs can create a substantial barrier to care when they most need it. Limiting people’s costs and adding dental, vision and hearing benefits would go a long way to ensuring everyone with Medicare can get the care they need.

Diane Archer is senior advisor on Medicare at Social Security Works.