How Much Is Enough? Out-of-Pocket Spending Among Medicare Beneficiaries: A Chartbook
The analysis in this chartbook is based on data from the Centers for Medicare & Medicaid Services (CMS) Medicare Current Beneficiary Survey (MCBS) Cost and Use file, 2000-2010 (the most recent year available). The MCBS is a survey of a nationally-representative sample of the Medicare population, including both aged and disabled enrollees who are living in the community as well as facility residents. The Cost and Use file integrates survey information reported directly by beneficiaries with Medicare administrative data. Survey-reported data includes the demographics of respondents, such as sex, age, race, living arrangements, income, health status, and physical functioning, the use and costs of health care services, and supplementary health insurance arrangements. The survey also collects information on inpatient and outpatient hospital care, physician and other medical provider services, home health services, durable medical equipment, long-term and skilled nursing facility services, hospice services, dental services, and prescription drugs. Survey-reported information is matched to and supplemented by administrative records and billing and claims-level data when possible. Extensive efforts are made to verify the accuracy of survey reports and to reconcile discrepancies using administrative bill data to produce a more complete and reliable dataset.
At present, however, this reconciliation process is not possible for beneficiaries enrolled in Medicare Advantage plans, because Medicare Advantage plans were not required to report encounter data to CMS until recently. Because the 2010 MCBS does not include reliable utilization and out-of-pocket spending data for beneficiaries in Medicare Advantage plans, to include this population would introduce significant bias associated with underreporting of events and spending for Medicare Advantage enrollees. Therefore, our analysis excludes these beneficiaries, totaling 10.8 million or 22 percent of the 48.4 million Medicare beneficiaries represented in the 2010 MCBS. Our analysis is limited to beneficiaries enrolled in traditional Medicare only, representing 78 percent of all Medicare beneficiaries in 2010.
Out-of-pocket spending for medical and long-term care services reported in the MCBS is not the same as beneficiary liability or the Medicare cost-sharing amount for services used. Instead, out-of-pocket spending amounts are net of payments by any third-party payers, such as payments by Medicaid, Medigap, or employer-sponsored insurance. Survey-reported out-of-pocket payments are those payments made by the beneficiary or their family, including direct cash payments or in the form of Social Security or Supplemental Security Income (SSI) checks to a nursing home. Out-of-pocket spending on premiums is derived from administrative data on Medicare Part A and Part B premiums paid by each sample person along with survey-reported estimates of premium spending for other types of health insurance beneficiaries may have (including Medigap, employer-sponsored insurance, and other public and private sources).
To estimate total out-of-pocket spending per beneficiary in traditional Medicare, we calculate for each sample person aggregate estimates of out-of-pocket spending on both insurance premiums for Medicare Parts A and B and supplemental insurance coverage and medical and long-term care services reported in the MCBS. These amounts are averaged across the entire sample of traditional Medicare beneficiaries and weighted to be representative of the traditional Medicare beneficiary population or specific subgroups of beneficiaries. For analysis of high out-of-pocket spending, we divide total out-of-pocket spending by traditional Medicare beneficiaries into quartiles and deciles, and estimate the share of beneficiaries overall and by subgroup who have spending in the top quartile and top decile of total out-of-pocket spending.
The medical and long-term care services included in this analysis are:
- Dental services: Includes cleaning, x-rays, repair, purchase or repair of dentures, and orthodontic procedures. The basic unit measuring use of these services is a single visit to the dentist, where a variety of services might be rendered.
- Home health: Includes home health visits by professionals (nurses, doctors, social workers, therapists, and hospice workers) or friends (persons who do not live with the beneficiary, but help the beneficiary at home with personal care or other daily needs; these persons may be home health aides, homemakers, friends, neighbors or relatives).
- Inpatient hospital services: Includes inpatient hospital stays, including emergency room visits which result in an inpatient admission. The basic unit measuring use of inpatient hospital services is a single admission.
- Long-term care facility services: Includes individual long-term care facility events; a long-term care facility is defined as having three or more beds and providing long-term care services throughout the facility or in a separately identifiable unit. Types of facilities participating in the survey include nursing homes, retirement homes, domiciliary or personal care facilities, distinct long-term units in a hospital complex, mental health facilities and centers, assisted and foster care homes, and institutions for the mentally retarded and developmentally disabled. The basic unit measuring use of long-term care facility services is a “stay” in a nursing home or other long-term care facility. Stays are measured in terms of days of residence in that facility.
- Medical providers/supplies: Includes medical doctor and practitioner visits; diagnostic laboratory and radiology; medical and surgical services; and durable medical equipment and non-durable supplies, such as eyeglasses or contact lenses and hearing aids, orthopedic items such as canes, walkers, wheelchairs and corrective shoes, diabetic supplies, oxygen supplies and equipment. Types of practitioners include chiropractors, podiatrists, audiologists and optometrists; mental health professionals such as psychiatrists, psychologists and clinical social workers; therapists such as physical therapists, speech therapists, occupational therapists, and intravenous and respiratory therapists; other medical practitioners such as nurses and paramedics; and other places offering medical care, such as clinics, neighborhood health centers, infirmaries and urgent care centers. The basic unit measuring use of these services is a separate visit, procedure, service, or a supplied item for a survey reported event.
- Outpatient hospital services: Includes outpatient visits to the outpatient department or outpatient clinic of a hospital, as well as emergency room visits that do not result in a hospital admission. The basic unit measuring use of outpatient services is a separate visit to any part of the outpatient department for a survey-reported event.
- Prescription drugs: Includes individual outpatient prescribed medicine events, including drugs provided to enrollees in Medicare Part D drug plans; excludes prescription medicines provided by the doctor or practitioner as samples and those provided in an inpatient setting. The basic unit measuring use of prescription drugs is a single purchase of a single drug in a single container.
- Skilled nursing facility services: Includes short-term institutional stays, such as skilled nursing home stays or rehabilitation hospital stays; excludes inpatient hospital admissions and long-term care facility stays. The basic unit measuring use of these services is an admission.
There is one important limitation in the data related to home health care. The home health use and payment records in the MCBS Cost and Use file are designed to represent events where medical care, as opposed to personal care and support, was furnished to the sample person. This exclusion of personal care services and supports is deliberate, since the MCBS is intended to capture medical service use and spending of Medicare covered and non-covered services. Therefore, any out-of-pocket spending on personal care and support delivered in the home or the value of unpaid personal care and support services is not included in the out-of-pocket spending estimate for home health services. For some beneficiaries, this would produce a lower estimate of their total out-of-pocket spending for home-based care, but we are not able to estimate the magnitude of this effect.