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Abstract

This study estimated the effect of Medicare supplemental insurance plans on Medicare expenditures, controlling for unobserved selection. For employer-sponsored policies, there was significant unobserved favorable selection into plans with and without prescription drug coverage. For individual plans, there was unobserved adverse selection into plans with drug benefits and unobserved favorable selection into plans without. Individual supplemental plans without prescription drugs increased Medicare expenditures by $914 annually, while those with drugs increased Medicare expenditures by $491. Employer policies also significantly increased Medicare expenditures ($207 without drug coverage and $447 with drug coverage), but the increase was less than that associated with individual policies.

Nothing for something? Estimating cost and value for beneficiaries from recent medicare spending increases on HMO payments and drug benefits

“…The most important of these additional benefits are reduced cost-sharing for outpatient medical care and coverage for outpatient prescription drugs. These benefits also have been available from Medicare supplement insurance policies (also known as Medigap), but when purchased without the assistance of a former employer these policies are substantially more expensive than coverage through Medicare HMOs (Atherly 2002). Detractors argue that Medicare HMOs attract disproportionately healthy enrollees and therefore are overpaid, increasing costs to the government compared with providing the same coverage through traditional Medicare (Mello et al 2003;Medicare Payment Advisory Commission (MedPAC) 2007).…”