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Medicare Private Health Plans vs. Medicare Savings Programs: Which Is the Better Way to Help People with Low Incomes Afford Health Care?

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Publication Date: September 2007

Publisher(s): Medicare Rights Center

Topic: Health (Health care financing)

Type: Report

Coverage: New York


As Congress debates whether to cut the extra payments Medicare makes to private health plans, the insurance companies offering these plans have argued that the overpayments they receive help lower the out-of-pocket costs (premiums, copayments and deductibles) for low-income people with Medicare, especially African Americans and Latinos.

But an analysis by the Medicare Rights Center of Medicare private fee-for-service plans reveals that often people with low incomes and minority communities pay more compared to their wealthier neighbors and get fewer benefits when they join these private plans.

A far better health care deal for low-income people with Medicare is the Medicare Savings Programs, which subsidize premiums, copayments and other out-of-pocket expenses. In addition, no private health plan alone matches what the federal low income assistance program "Extra Help" offers: copayments of $5.35 of less for each prescription, no monthly premiums, no deductible and no gap in coverage. People enrolled in a Medicare Savings Program automatically get Extra Help.

A better way to spend the $65 billion in overpayments the insurance companies will be getting over the next five years would be to expand enrollment in the Medicare Savings Programs (MSPs). Income and asset eligibility criteria for MSPs should be raised to match those of the Extra Help program. In this way lawmakers can target financial assistance to those who need it most.