WSJ: Lack of Cost Sharing Drives Medicare Utilization

A lack of effective cost sharing is the key reason Medicare utilization soars above private health insurance utilization, even when adjusting for age and health status, according to recent piece in the Wall Street Journal by Merrill Matthews, a resident scholar at the Institute for Policy Innovation, and Mark Litlow, a retired healthcare actuary.

Medicare beneficiaries use 50 percent more care than those covered by private insurance, a disparity the authors largely attribute to the lack of effective cost sharing, which is exacerbated by supplemental insurance that further reduces out-of-pocket costs and free preventative care services brought on by healthcare reform. "When people are insulated from the cost of a desirable product or service, they use more," said the authors.

The authors argue that the current Medicare system needs to be "totally revamped," arguing Medicare cost controls (i.e., government-mandated payment rates), lead to cost shifting to private insurers, increasing the overall cost of healthcare. They recommend allowing beneficiaries to choose private-sector health plans, contending private insurers are better at controlling utilization and combating fraud.

"Seniors need to benefit financially from good choices. Giving them more options and control is the best way to reduce that 50% additional utilization while preserving the program for the future."

Read the Wall Street Journal report on Medicare.

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